The transportation of freight to and from Taiwan is performing solidly, against a backdrop of economic instabilities and uncertainties around the world.

“Our overall cargo volume reached approximately 1.7 million TEUs for the first half of this year, which is up 7% year-on-year,” says a spokesperson at Taiwanese shipping line Wan Hai Lines. “Revenue also increased by 7% to NT$33.6 billion (US$1.06 billion) from NT$31.4 billion (US$992 million) 2014. The profit of NT$2.48 billion (US$78.3 million) in Q1 of 2015 has tripled compared to Q1 of 2014, thanks mainly to a 45% year-on-year decline of bunker prices.”

Apart from shipping, the Taiwanese air freight market has been doing well too.

China Airlines Cargo’s performance over the first six months of 2015 improved year-on-year, says Jeremy Chang, vice president of the cargo sales and marketing division at China Airlines.

“International cargo revenue grew by 3% and the volume of international cargo, in terms of revenue cargo tonne kilometres, was up by 6%,” says Chang. “Moreover, due to the US west coast seaport congestion, CI launched more than 15 premium trans-Pacific air freight charters from Asia in the first quarter to provide an alternative solution for retailers who seek delivery of all types of cargo to North America.”

The airline has been adjusting its freight capacity throughout its network and developing niche markets in response to changes in demands and opportunities. In March, it expanded freighter services into southern China by launching a thrice-weekly scheduled service to Shenzhen. It also increased flight frequencies to Tokyo in April, and to Ho Chi Minh City and Hanoi in July.

Additionally, in April, China Airlines relocated its transit hub for Amsterdam, Frankfurt, Luxembourg and Prague from Abu Dhabi to Dubai World Central.

The carrier, according to Chang, has been making an “all-out effort” to improve its product mix by increasing the proportion of higher-yield shipments, such as pharmaceuticals and healthcare products, cargo requiring special handling, express cargo, post and other parcels.

There have been new entrants to the Taipei market in recent months.

On March 31, 2015, Turkish Airlines launched daily flights to the Taiwanese capital using an Airbus A340-300.

“We are very happy with the new online service on the Istanbul-Taipei route,” says Halit Anlatan, vice president of sales and marketing at Turkish Cargo. “Taipei is one of the top five busiest airports by cargo traffic in the Asia Pacific region and this change for us is a positive step forward to further develop in this region.”

Anlatan adds that the Taipei flights mainly carry electronic goods, computer electronics and other high-tech products, with outbound shipments destined for places all across the world.

From October 2015, Turkish’s Taipei flight is scheduled to be operated by the larger Boeing 777-300ER, which represents a significant jump in capacity and volume.

“Taipei has a lot of potential,” says Anlatan. “By introducing the larger aircraft to replace the current A340-300, we will double the cargo capacity we offer each day. We expect there to be a continuous increase in demand of cargo traffic on the Taipei-Istanbul route and on routes from Taipei to the rest of the world.”

China Airlines has also been introducing the 777-300ER to its fleet since September 2014. It now has six in service and another four on order. These are operated on flights from Taipei to Guangzhou, Los Angeles, San Francisco, Shanghai and New York.

“Cargo capacity on passenger flights has been growing as airlines deploy new widebody passenger jets. Transporting shipments using belly space not only helps carriers to save costs but also provides useful cargo capacity if used on regular passenger operations,” says Chang. “That’s the reason why we plan to use the B777-300ER to further strengthen the competitiveness of our freight shipments on trans-Pacific and intra-Asia routes.”

While most Asian airlines have ordered newer freighters as fleet replacements, such as EVA Air’s recent deal for five 777Fs, China Airlines is content with the 18 active 747-400Fs it operates for now.

“CI will operate the cargo business with the B744F fleet in the short term because the average age of our fleet is only about 11.7 years, and the B744F can be operated at similar economics to the B777F when fuel prices remain relatively low,” says Chang. “However, in response to challenging market conditions and the possibility of a sudden surge in fuel prices, we will carry out an ongoing study on the replacement of existing freighters with more advanced and cost-efficient aircraft. In addition, passenger-to-freighter conversion is also one of our options.”

With growing competition from China, Taiwan is intent on making sure that market share doesn’t slip away.

“Taipei still plays an important role in air transhipment as a hub connecting Europe, America, Japan and emerging markets in the Asia-Pacific,” says Chang. “As a Taipei-based carrier, CI has progressively set up an extensive and diversified cargo network on a global basis over the years.”

The airline operates 91 weekly freighter flights to 34 destinations in 16 countries in Northeast Asia, Southeast Asia, the Americas and Europe. Taking passenger flights into account, the cargo network covers 92 destinations in 27 countries.

From Wan Hai’s perspective, a few factors run in Taiwan’s favour.

“With costs surging at ports and terminals in China year by year, we believe that Taiwan, with its unique location, high working efficiency and reasonable cost structure, still has good opportunities to attract certain trades,” says the spokesperson.

Despite that, though, there are other difficulties facing Taiwanese as well as other regional shipping lines.

“Overcoming lower yields remains the biggest challenge for us this year,” says the spokesperson. “It's because the larger players are shifting their eyes to the intra-Asia market with displaced tonnage. This causes overcapacity and rate erosion intra-Asia, which is our main market.”

This is a recurring problem for the air freight industry as well.

“Even if there is a drop in fuel prices, huge competition between airlines for market share leads to bigger price reductions. Airlines carry cargo with lower selling prices and low yields,” says Anlatan. “The biggest challenge at the moment is the economic uncertainties we face in Europe and in South America, and global currency fluctuations which are affecting consumer behaviour.”

But Turkish is confident about Taiwan in the second half of the year.

“Given the fact that Europe, which is a major export market, is in a recession, we do expect lower market conditions,” Anlatan says. “However, we expect that Taipei will return to its bullish market conditions by this winter season.”

Wan Hai, for which 85-86% of total revenue came from intra-Asia routes in the first half of the year, is hoping to maintain that proportion in the short term. While its Europe services will be suspended from August, the company increased its capacity on US routes by 1,400 TEUs a week from May.

“As for the long-term prediction, amid uncertainty in bunker prices and overcapacity in the container shipping industry, it's hard to forecast how this industry will be in the coming three to five years,” says the spokesperson. “However, we will forge ahead and follow our customers’ pace and needs, being a reliable partner to every Wan Hai customer.”

By Jeffrey Lee

Staff Writer | Hong Kong