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Northeast Asia's cargo airlines re-fleet. But SIA has no plans, MAS weighs future & Thai exits

Northeast Asia's combination passenger-freight airlines are re-fleeting their main deck cargo operations. EVA Air is the latest, announcing at the Paris Air Show its intent to acquire five 777Fs. The 777F has also been used to re-fleet the cargo units affiliated mainland China's big three airlines: Air China, China Eastern and China Southern. The largest in-service 777F fleet in the world is with China Southern, with 10. Korean Air has taken 777Fs in addition to 747-8Fs, which only Cathay in Asia has been the other combination airline to use. There are no known re-fleeting plans from Asiana and China Airlines.

The airlines that have re-fleeted have been optimistic about acquisition costs being offset by operating efficiencies.

Southeast Asia has a different outlook. Thai Airways has exited the main deck freight business and Malaysia Airlines may do the same, although both were small players. Singapore Airlines Cargo is the largest in Southeast Asia but with only eight in-service 747Fs and no plans to re-fleet. As with the passenger business, Southeast Asian carriers are disadvantaged in serving North America, the main freight route for Northeast Asian carriers. To Europe there is large competition, including from Gulf carriers. 

EVA is the latest airline in Northeast Asia to re-fleet

At the 2015 Paris Air Show, EVA Air announced its intent to acquire five 777Fs, after years of saying it may do so. The 777Fs will join EVA's passenger 777s (20 in service and 12 on order, all -300ERs). Taiwanese peer China Airlines has not re-fleeted, and nor has Asiana. Mainland China's three big cargo carriers have re-fleeted, as have Korean Air and Cathay Pacific. ANA's freighter network is confined to intra-Asia, where it uses 767s.

Northeast and Southeast Asian combination carriers widebody freighter re-fleeting: Jun-2015

Airline Re-Fleeting In-service Fleet
Air China  6x 777Fs in service and 2x on order  1x 747-400BCF in service, 3x 747-400Fs in service, 6x 777Fs in service with 2x on order
All Nippon Airways  None 7x 767-300ER BCFs in service, 1x 767-300ERF in storage, 3x 767-300Fs in service 
Asiana Airlines  None planned  6x 747-400SFs in service, 4x 747-400Fs in service, 2x 747 Combis in service
Cathay Pacific  13x 747-8Fs in service and 1x on order  4x 747-400Fs in service and 3x in storage, 1x 747-400BCF in storage, 6x 747-400ERFs in service, 3x 747-400Fs in service and 2x in storage, 13 747-8Fs in service and 1x on order
China Airlines  None planned  18x 747-400Fs in service and 3x in storage
China Eastern (China Cargo)  6x 777Fs in service with no more on order  2x 747-400ERFs, 1x 747-400F in service and 1x parked, 6x 777Fs
China Southern 10x 777Fs in service with 2x on order   1x 747-400F returned to service and 1x still in storage, 10x 777Fs in service and 2x on order
EVA Air  5x 777Fs on order  5x 747-400SFs in service, 3x 747-400Fs in service, 2x 747-400 Combis in storage, 5x MD-11Fs in storage, 5x 777Fs on order
Hong Kong Airlines  5x A330s in service with no more on order  5x A330Fs
Korean Air 5x 747-8Fs in service and 2x on order, 5x 777Fs in service and 5x on order  2x A300-600Fs in storage, 8x 747-400ERFs in service, 9x 747-400Fs in service, 5x 747-8Fs in service and 2x on order, 5x 777Fs in service and 5x on order
Malaysia Airlines None planned 4x A330Fs, 2x 747-400Fs 
Singapore Airlines None planned 8x 747-400s in service, 2x 747-400Fs parked
Thai Airways Exited main deck freighter business  Last freighter aircraft, 2x 747-400Fs, removed in Mar-2015
Yangtze River Express None planned 3x 747-400SFs in service 

EVA's 777F acquisition will give it a new medium-size freighter option after recently phasing out its remaining MD-11Fs. EVA’s all cargo fleet currently consist of eight 747-400F, including three production freighters and five converted freighters. This represents a significant reduction compared to the fleet of 18 freighters, including nine 747-400Fs and nine MD-11s, from a few years ago. EVA expects to maintain a 747F fleet of between five and eight aircraft. It so far sees freight performing better in 2015 than 2014.

EVA has always relied heavily on air cargo, which prior to the downturn accounted for nearly half of its overall business. While EVA has shrunk its freighter fleet and network in recent years this has been partially offset by more belly capacity, particularly in the North American market as its 777-300ER passenger fleet has expanded.

Belly cargo is expected to be an important contributor in Houston, which is a large cargo market with demand particularly from the energy industry for oil piping and tubing. The belly capacity available to Houston will supplement Dallas, where EVA currently operates freighter services but is not interested in adding passenger services as it is a oneworld rather than Star hub.

Singapore Airlines Cargo: 8 747s in service, two parked and no re-fleeting plans

Singapore Airlines Cargo has a freighter fleet of 10 aircraft, all -400Fs although only eight are in service with the remaining two in storage. As of May-2015 SIA expects to keep its freighter fleet at eight aircraft this year as it sees a surplus in capacity and uncertain economic signs. SIA does not plan to re-fleet its 747-400s as it does not believe fuel savings from new aircraft will offset acquisition costs. SIA's 747 freighters have an average age of 12.8 years, according to CAPA's Fleet Database.

As in the passenger business, Southeast Asian carriers are limited with how extensively they can serve North America, the key freight market for their Northeast Asian airline counterparts. SIA now worries of a slowdown despite good performance at the start of 2015 due to West Coast port closures. "Once upon a time we saw USA as an engine of growth. But there's some tentative signs as well of slowdown," EVP HR and operations Ng Chin Hwee said.

SIA's cargo volume has generally held at the post-GFC 1.1m tonne mark while AFTKs in 2014 reached a new low of 9,989m, the first time in recent history they have dipped below 10,000m. 

Singapore Airlines Cargo annual cargo volume (Tonnes): 2008-2014

Singapore Airlines Cargo annual available freight tonne kilometres (aftks): 2008-2014

Thai Airways ends dedicated freighters while Malaysia Airlines weighs future

Thai Airways in Mar-2015 ended main deck freighter operations as it withdrew its fleet of only two freighters, both converted 747s with an average age of 25 years. Since withdrawing the freighters, Thai's AFTKs have dropped to their lowest level in over a decade. This is also the result of reduced long-haul flying.

Thai Airways monthly available freight tonne kilometres (aftks): 2004-2015

See related report: Thai Airways exit from air freight reflects trends in Asian air cargo

Malaysia Airlines described as speculative a report it was seeking buyers for its main deck freighter fleet of six aircraft: four A330Fs and two 747-400Fs. This was in addition to seeking offers for its A380s and 777-200ERs.

MAS has retired the passenger 747-400 from service, although four remain parked. There is thus almost no scale on operating just two 747Fs. MAS' four A330s are in addition to a passenger fleet of 14 A330-300s. Removing the 747s and keeping the A330s would be logical – if there is demand for A330Fs services, or if the A330Fs cannot be disposed of efficiently. MAS' A330Fs have an average fleet age of 3.6 years. Its 747Fs are relatively young with 9.3 years, but there is a large 747F market.

Southeast Asia's other big heavyweight, Garuda Indonesia, operates no main deck freighters.

Malaysia Airlines average fleet age: Jun-2015

China denies report it will merge its three biggest cargo carriers

One of the biggest potential developments in Asian freight may become a non-event. On 24-Jun-2015 it was reported CAAC deputy director Zhou Laizhen said the regulator planned to merge the freight divisions of China's three biggest carriers: Air China, China Eastern and China Southern. The report was from official news agency Xinhua. Yet the CAAC later said the remarks were not made, while the airlines involved said they had no knowledge of the plans.

The Xinhua report was interpreted to say there would be a merger, but the original report said the plan was not finalised: "Currently, this work (the merger) is being actively pushed." An alternative scenario is that this idea falls under the jurisdiction not of the CAAC but the government body that oversees the airlines, the State-owned Assets Supervision and Administration Commission.

At a theoretical or operational level, merging the cargo operations would be a difficult plan. The three carriers are competitors and the cargo divisions have complex ownerships: Cathay holds a stake in Air China Cargo while COSCO has a stake in China Eastern's China Cargo.

For these combination carriers, freight is carried on both passenger and main deck freighter aircraft. Separating the main deck freighter uplift would be exceptionally difficult. However, the fact that the suggestion is circulating would suggest that those in authority see a need for rationalisation of some kind.

The interchangeability reflects the larger Asian air freight sector as airlines weigh if their passenger cargo business will be negatively impacted by decreased main deck freighter operations. And if main deck freight is to remain, there is then the question of re-fleeting.

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