AIR TRAVEL OUTLOOK 2012

OSK maintains ‘overweight’ call on aviation, logistics sectors
 Posted on 29 December 2011 - 05:41am

PETALING JAYA: Global air travel growth for 2012 is likely to moderate amid economic uncertainties over Europe’s sovereign debt crisis and the US’s anaemic economy, says OSK Research.

Its transport analyst Ahmad Maghfur Usman expects passenger growth for 2011 to come in at 10-12%.

“However, we see Malaysia as being insulated from a cyclical downturn in passenger travel given our expectations of a stronger GDP growth of 5.2% on the roll-out of more Economic Transformation Plan projects. The surprise Q3 GDP numbers were driven by strong private consumption growth.

“This, and the fact that Malaysia has a high penetration of low-cost carrier (LCC) travel, reinforces our view that air travel will remain resilient and benefit both AirAsia Bhd and Malaysia Airports Holdings Bhd (MAHB),” said Ahmad in a report on Wednesday.

“With AirAsia reaping more profit from lower jet fuel prices and MAHB seeing an upside from a recent tariff hike, we also see both companies gaining from down-trading when cheaper fares stimulate spending on ancillaries and at airports.

“However, we are sceptical of Malaysia Airlines (MAS) as we feel that AirAsia stands to gain more from the (MAS-AirAsia) tie-up in the immediate term,” he added, reiterating an “overweight” call on the aviation sector.

Ahmad is maintaining his “neutral” stance on the shipping sector, as the global vessel supply glut could worsen with the upcoming economic woes.

“We hold to our view that the worst is not over and a first step towards solving a long-term problem is desperately needed. Our head of regional research for transport opines that there must be a resolution to the industry’s long-term problems arising from overcapacity, over-ordering and over-production of ships despite the short-term recovery in the Baltic Dry Index.

“Ironically, we still think that any rebound now could be negative for the main shipping sub-sectors (bulk, tanker or container) as this can create a false sense of security for owners and operators, who could be tempted to postpone any decisive action needed to improve profitability. On this space we are more positive on MISC Bhd, which will see losses to be confined to the petroleum tanker segment after exiting from the liner business,” said Ahmad.

Meanwhile, Ahmad has an “overweight” call on the logistics sector as he believes that local freight forwarders will continue to perform well going into 2012, bolstered by new MNC contracts and healthy economic developments on the home front.

“Recently secured contracts from well-established consumer companies such as F&N, Coca-Cola Inc, British American Tobacco, Nestle and Pepsi.Co ensure that the freight forwarders’ sales volume would not be significantly affected by poor economic conditions as well as secure their earnings going forward.

SENAI AIRPORT FEEDER SERVICE

Strong demand for Senai airport feeder serviceBy S C Chan , Senai, Johor 

Senai Airport Terminal Services (SATS), the operator of Senai International Airport (SIA) in the Malaysian peninsula's southernmost state of Johor, has launched a Singapore-Malaysia road feeder service aimed at helping to transform the airport into a leading cargo and logistics hub in the region.

Called SATS Express, the service operates to and from Singapore's PSA port and Changi airport to Johor. Northbound, the service operates to and from Johor Bharu to Pasir Gudang, Port of Tanjung Pelepas, Kuala Lumpur International Airport (KLIA), Subang Airport and Port Klang. The trucks carry 20 and 40-ft containers and 20-ft reefers. 

There are also northbound services to and from Malacca to KLIA, Subang Airport, Port Klang and Kuala Lumpur and southbound services to and from Malacca to Johor.

The northbound service to and from Johor Bahru covers 16 designated drop-off/pick-up points falling under zones one and two and including Gelang Patah, Larkin, Pandan, Skudai, Tampoi, Tebrau, Pontian, Kota Tinggi, Kulai, Masai, Pasir Gudang, Senai, Ulu Tiram, Taman Johor Jaya and Taman Desa Jaya. Similarly, the southbound Kuala Lumpur service covers designated points under zones 1 and 2 that include Batu Tiga, Petaling Jaya, Shah Alam, Subang, Sungai Way, Ampang, Bangi, Banting, Batu Caves and Cheras.

SATS land logistics manager David Govind told Cargonews Asia the Singapore-Johor Bharu service onward to PTP and Pasir Gudang launched on April 18 had received "overwhelming response'' from both sides of the Johor Causeway.

"We are committed to providing the most efficient, reliable and economical choice [to companies] for cargo transportation [by land],'' he said, adding that the SATS road feeder service offers a combination of facilities and services for organisations to remain competitive in the ever evolving and demanding industry.

Govind described SATS Express' rates as "the most competitive'' in the market.

Among its existing clientele are leading logistics companies such as Maersk Logistics, Kuehne + Nagel, Schenker, ABX Logistics, TNT Express, Yamato Transport, SM Freight, Pro Logistics and Eastern Cargo.

On the refrigerated truck service, Govind said SATS Express is negotiating with Penang-based Dimerco Express and Alfro Cargo Express to bring reefers down to Johor Bharu, Pasir Gudang, Senai and PTP.

"We expect this service to commence at the end of the year,'' he said.

Govind said the northbound dry truck service to and from Johor Bahru was the busiest, and the service to and from Singapore was "picking up steadily''.

Meanwhile, Govind said construction work on the cargo complex at Senai airport is nearing completion and is expected to be ready for use by the end of the year. Twenty units of 2,200 sq ft each will be available and another 20 units will be ready possibly by early next year. 

"We will open the units for booking only a few months before the targeted completion date,'' he added.

Behind the cargo complex there will be a two-tier building for general sales agents (GSAs) and airlines and each unit will offer office space of 400 sq ft.

Under Senai International Airport's phase one cargo facility development, a US$3.42 million 3,000 sq m cargo complex became operational in July last year with annual handling capacity of 80,000 tonnes of cargo and capacity to handle B747-F aircraft. The airport aims to handle 50,000 tonnes of cargo this year. In its efforts to boost throughput, SATS recently clinched rights to prvide cargo handling services to no-frills airline AirAsia. 

Govind said the aim in launching the road feeder service was to improve Senai International Airport's connectivity to other airports and seaports as part of SATS' long-term plan to transform Senai airport into a cargo and logistics hub.

LOGISTICS - DIVERSIFICATION

Freight handlers go for specialisation 


Logistics companies around the world are rushing to invest in specialty cargo facilities in search of wider margins and stable growth in an increasingly uncertain outlook for global trade, reported Reuters.

Freight companies can charge higher prices for handling delicate electronic components, vaccines that have to remain chilled or Arabian race horses than for standard cargo.

"Specialty freight always has a higher margin," said Andreas Baader, managing partner at consultancy Barkawi Management Consultants, which focuses on supply chain and after sales services.

Lufthansa Cargo, the freight arm of German carrier Lufthansa , has invested a double-digit million dollar sum in a new "Cargo Cool Centre" in Frankfurt that handles pharmaceuticals and other medical products.

"In the crisis year 2009, cool products declined only marginally," Joerg Bodenroeder, the director of the Cool Centre, said ahead of its inauguration this month.

The global pharmaceutical drug logistics market is estimated at a little more than US$61 billion and is expected to grow at an average rate of 7.6 percent a year through 2015, according to Transport Intelligence.

The market for biotech drugs, which are typically tolerant to a tighter range of temperatures than traditional chemical drugs, is estimated to grow at an annual rate of about 10 percent through 2015.

That is more than twice the expected rate of growth for traditional drugs, creating opportunities for cargo companies that offer temperature-controlled logistics.

According to Barkawi's Baader, trucking companies that invested in specialised equipment to cater to new industries before and during the crisis also weathered the downturn better.

"If you can transport wind turbines, you are doing pretty well. There are only about 10 to 15 companies that are specialised in wind turbines," Baader said.

Overall, the mood in logistic has become more muted lately, with industry bodies and analysts lowering their expectations for growth in 2012 as economic growth looks set to remain slow.

"There have been periods of hope that this was just a soft patch and that run rates would re-accelerate, but as we approach the end of the year and GDP growth forecasts continue to fall, it is clear that 2012 is going to be another difficult year," Nomura analyst Mark McVicar said in a recent note.

Global trade is expected to grow at a pace of only 5.8 percent this year, compared with 14.1 percent in 2010, as the European sovereign debt crisis buffets developed economies, according to the World Trade Organisation (WTO).

That is still better than the 12.1 percent drop in global trade in 2009, during the financial crisis that followed the collapse of investment bank Lehman Brothers, though the WTO said the outlook was increasingly uncertain.

Deutsche Post DHL runs a high-security warehouse for Philips, distributes drugs made by Bristol-Myers Squibb in the United States and delivers cars to dealerships in Scotland for BMW.

Its supply chain business broke ground in September on a new $18 million euro distribution centre at eastern Germany's Leipzig/Halle airport, where medical supplies can be stored at controlled temperatures, and computers arriving by plane for servicing can be repaired on site before being put back on a plane to be returned to their owners.

"If you look at who sailed through the crisis, it was the big integrators like DHL and Kuehne + Nagel. They are very close to their customers' business," Barkawi's Baader said.

These big companies can handle their customers' entire supply chain if necessary, delivering raw materials and parts to factories, warehousing finished products and distributing them to retail outlets, a bigger job than many companies can do cost-effectively on their own.

Lufthansa Cargo CEO Karl Ulrich Garnadt told Reuters that the whole industry expects 2012 to be a "very strenuous" year, in which it will help to have more than standard shipping containers on offer.

But he said broadening one's product base, for instance into temperature-controlled cargo or animal handling, helps find pockets of growth in a tough economy.

Malaysia Airlines Cut Losses

Malaysian Airline cuts unprofitable routes to stem losses 

Malaysian Airline System will cut several unprofitable routes in a move that could help the national flag carrier save between US$68 million and $94 million in 2012, reported Dow Jones Newswires.

The airline said it would withdraw from routes to and from Surabaya, Johannesburg and Rome, among others, which account for almost 12 percent of passenger capacity, in stages beginning from January 6.

The move is expected to have "minimal impact" on its cargo operations, it said, but didn't elaborate.

"We also hope to return to these markets after we have stabilised our business," said Malaysian Airline chief executive Ahmad Jauhari Yahya.

The move follows last week's cost-cutting measures unveiled by the airline aimed at turning around the company and improving profit by between $350 million and $472 million in 2012.

AIRASIA - Creating Waves Yet Again

Saturday December 10, 2011

Star, AirAsia in content partnership

PETALING JAYA: Star Publications (M) Bhd and AirAsia Bhd are teaming up to bring customers on AirAsia flights content via various distribution channels in the coming months in a partnership for future growth.

The initial collaboration was formalised via a letter of intent signed on behalf of Star Publications by the company’s executive deputy chairman,Datuk Vincent Lee, while group chief executive officer (CEO) Tan Sri Tony Fernandes signed on behalf of AirAsia.

The signing paves the way for an alliance leveraging on the strength of the respective parties in which the first opportunity would be a content-sharing proposition.

AirAsia would distribute the content from Star Publications through the airline’s channels such as in-flight entertainment, online, offline and Tune properties.

Fernandes said following the signing ceremony that there were huge opportunities in providing new forms of entertainment for the airline’s customers and hoped the collaboration would be firmed up by mid-January.

This is funny: (From left) Ho, Lee, Fernandes and Star Publications executive director and group chief editor Datuk Seri Wong Chun Wai with a copy of Star’s coffee table book ‘Hotshots’.

“We’ve a great distribution outlet and, at 36,000 feet, there’s nothing better to do,” he said, adding that this partnership would eventually encompass other content ideas including leveraging on social networking.

Lee said the collaboration brought the two great brands together with opportunities to also explore content distribution via other channels. “We’re not just going to have content in the sky but also in airports through electronic signboards,” he said.

Meanwhile, Star Publications group managing director and CEO Ho Kay Tat said the collaboration was the result of discussions held between the two companies several weeks ago on how best to leverage on each other’s strengths.

“I’m very happy that we’re agreeing to do something together. This partnership will be good for both companies and we’re bringing something good to the table,” he said.

In a statement to Bursa Malaysia, Ho said Star Publications produced quality content on a daily basis which cut across all the platforms and channels that the company offered.

“With this collaboration, the content we offer is able to reach new audiences and enrich the end-user experience for our strategic partners,” he said.

The initial collaboration only touched the surface of the opportunities both companies had with the partnership, Ho said, adding: “From the medium to long-term perspective, we will be looking at a fresh perspective on traditional collaboration models that move beyond information exchange to a more strategic alliance for long-term growth.”

Star Publications recently embarked on an expansion programme with the acquisition of Li TV Asia Sdn Bhd, Capital FM, a 4.99% stake inCatcha Media Bhd and Red Tomato, a free Chinese-language weekly newspaper.

LOGISTICS in POLITICS

Published: Friday November 11, 2011 MYT 8:25:00 PM

PM: Issue of logistics in overseas Malaysians vote

By JOSEPH SIPALAN and YUEN MEI KENG

KUALA LUMPUR: The Barisan Nasional is not opposed to overseas Malaysians voting but the issue is more about logistics, said Prime Minister Datuk Seri Najib Tun Razak.

"Just as the MCA president explained, we are not opposed to them voting but we are talking about the logistics, which creates a lot of difficulty.

"The BN's position is that we are not opposed but simply highlighting the difficulties," he told a press conference after chairing the Barisan supreme council meeting Friday.

Najib was asked to comment on a memorandum submitted by the MCA to the Parliamentary Select Committee (PSC) on electoral reform earlier in the day, which the party raised concerns over the proposal to extend postal voting to all Malaysians living abroad.

MCA central committee member Datuk Ei Kim Hock, who presented the memorandum, stressed that there are too many issues and loopholes that need to be addressed before the country can implement the proposal to allow overseas Malaysians to vote.

AirAsia-MAHB, Passenger Wants Best of both World

Friday December 9, 2011

AirAsia-MAHB drama aside, passengers want good facilities, low fares

Friday Reflections - By B.K. Sidhu

THE fiery spat between AirAsia Bhd andMalaysia Airports Holdings Bhd (MAHB)over the past two weeks has somewhat turned ugly with each party resorting to showing documents to prove their case.

This is something unseen in the aviation industry and will not be easily forgotten.

But the good thing is that there has been a ceasefire.

The brouhaha stemmed from the fact that Malaysia was going to get a “super class” low-cost air terminal that many have not conditioned their minds to, as they are more used to a low-cost carrier terminal (LCCT) that resembles a “horse stable”.

Low-cost air travel was introduced to us a decade ago.

In fact, yesterday was AirAsia's 10th anniversary.

Low fares good facilities wanted:For the travellers, all the drama does not mean much. They just want good facilities, low taxes and airfares, as well as world-class service. These days the choices are aplenty, such as Changi Airport, SIA, Scoot, Emirates and Qatar Airways. - EPA file pic

Before Dec 8, 2001, most Malaysians had no clue what low-cost or no-frills air travel was.

There was no choice, only premium service provided by Malaysia Airlinesand that meant forking out big bucks for a flight.

The KL-Singapore-KL, a 45 minutes flight then was RM840, and a roundtrip to London cost over RM6,000, but the fares now can be a fraction of that.

This article is not intended to boost the egos for those behind AirAsia, but it's fair to say the airline has changed the aviation industry. AirAsia gave many people a lifetime opportunity to take to the skies.

After Tan Sri Tony Fernandes and his partners famously took over AirAsia (and its losses) for RM1, they started with two aircraft, two destinations and 200 employees.

Today, it is three times bigger and has flown more than 142 million people.

It started at Subang, moved to the KL International Airport, and then a dedicated LCCT was built because its growth was phenomenal and the airline needed to keep its costs down.

At the rate it is growing, the airline will expand four to five times larger than its original size over the next decade. Its growth is unstoppable as the people want a cheap way to travel.

Naturally, a bigger facility is needed and according to its estimates, it would be able to carry 30 million passengers by 2015/16. Being an airport operator, MAHB has to ensure its biggest LCC (low-cost carrier) client had the space it needed to cater for that growth.

MAHB began planning the KLIA2. At one time, AirAsia entertained the idea of building its own terminal in Labu, Negri Sembilan, but that was shot down by the Government.

Initially, the plan was to build a terminal to cater for 30 million passengers. However, after taking into consideration the robust growth AirAsia had targeted, MAHB decided to plan for 45 million passengers and that meant nearly doubling the construction cost to between RM3.6bil and RM3.9bil.

That huge price tag became an issue for Fernandes. His biggest fear was that the cost would translate into higher rental and the likes. At the same time, MAHB got the green light to raise the passenger service tax (PSC).

This was when the real war broke out as Fernandes decided to get the public involved in a campaign against the PSC hike.

His rationale was that travel cost must remain low or no one would fly AirAsia.

These two issues became a hot topic and it was not Fernandes alone fighting the MAHB; his entire team entered the battlefield.

Up to that point, MAHB and its MD Tan Sri Bashir Ahmad had never been confrontational although it was widely known that there had been times when AirAsia has had frosty relations with the airport operator.

Therefore, many were surprised when the docile MAHB finally retaliated and went on the offensive as well. Both parties had to burn the midnight oil to prepare for the onslaught.

But amid the heat of war, it takes an equal amount of courage to lay down arms. Both sides did so because they realised that prolonging the fight would not benefit anybody. MAHB offered the olive branch and Fernandes accepted it, saying “enough is enough.”

Hopefully, this chapter is closed for good.

For the travellers, all the drama does not mean much. They just want good facilities, low taxes and airfares, as well as world-class service. These days the choices are aplenty, such as Changi Airport, SIA, Scoot, Emirates and Qatar Airways.

Deputy news editor B.K. Sidhu hopes for 10 sen fare to Dehli.