Cargo action underlines market future

Seven years after the first direct flight from Frankfurt to Ho Chi Minh City came into operation, German group Lufthansa Cargo has decided to open another cargo route to Hanoi, doubling its capacity to Vietnam with four flights per week.

Some cargo companies see Vietnam as having nothing but strong potential as the world opens back up

Lufthansa Cargo is one of the world’s top enterprises in air freight transport, and currently owns more than 480 aircraft and a route network covering about 300 destinations in more than 100 countries.

Ashwin Bhat, chief commercial officer at Lufthansa Cargo, said that in addition to adding new aircraft, the main reason why the airline decided to open more routes at this time was the future potential that the Vietnamese market can offer.

“We only invest in markets that can generate profits. Lufthansa Cargo believes in the long-term development of the Vietnamese economy, and that is why we want to start early in this market,” said Bhat two weeks ago.

According to Bhat, the plan to open more routes has been discussed with partners since the end of 2021, after a long time observing the Hanoi market and realising that 80 per cent of tech goods produced here are exported to other countries. “We look forward to being a part of shipping these items around the world,” he said.

Doan Bich Thuy, country manager of Lufthansa Cargo in Vietnam, added, “Although the freight market has not recovered like it did before the pandemic, Vietnam is always on the list of concerns and priorities for expansion as soon as possible. We believe that Lufthansa Cargo will raise its presence here for a long time.”

Lufthansa’s decision moved in the opposite direction of another company that has failed to get off the ground.

Just a few days earlier, IPP Air Cargo – hoped to become the country’s first cargo airline – had to suspend its flight licence due to uncertainties in the cargo market. It cited fluctuating fuel prices and the risk of recession.

IPP Air Cargo was founded last year by Johnathan Hanh Nguyen, chairman of IPP Group. The cargo arm had hopes to become the first specialised air cargo project in Vietnam with total investment of about $100 million.

According to the plan, IPP Air Cargo was to operate five cargo aircraft in the first year, then increase to seven aircraft in the second year and 10 after three years. With the licensing process not carried out, IPP Air Cargo will have to re-submit the application from the beginning if there is a desire to return to the aviation market.

Although IPP Air Cargo’s plan to establish itself has not been realised, the air logistics market has still been a fertile ground for some domestic airlines. In 2014, low-cost private airline Vietjet established Vietjet Air Cargo, a subsidiary operating in commercial exploitation of goods throughout Vietjet’s route network.

In September this year, new domestic airline Vietravel Airlines also cooperated with ASEAN Cargo Gateway (ACG) to establish VUAir Cargo.

Dao Trong Khoa, chairman of the board of ACG, said, “VUAir Cargo will focus on exploiting and transporting goods between Vietnam and major factories in Asia such as China, Malaysia, Indonesia, and Thailand with the number of 2-4 units in the first year and is expected to double in the next year.”

According to data from the Vietnam Logistics Business Association, the total volume of goods transported by air in Vietnam has increased 2.5 times over the last decade and is expected to reach 4.1 million tonnes by 2030. The continued expansion of more export markets and taking advantage of free trade agreements will open up great growth opportunities for the air logistics market.

However, Vietnamese airlines hold an international freight forwarding market share of only 12 per cent, while nearly 30 foreign carriers hold the remainder.

Since the beginning of 2022, a series of foreign cargo carriers have been active in the country such as China Central Longhao Airlines, China Southern Cargo Airlines, Air Incheon of South Korea, India’s SpiceJet, and US groups Kalitta Airlines and Western Global Airlines.

Le Duy Hiep, chairman of the Vietnam Logistics Business Association, said that the scale of import-export turnover of Vietnam is set to reach over $700 billion by the end of 2022, of which over half are exported goods.

“Foreign airlines have many advantages in terms of large scale, global system, and a wide network of routes. On the contrary, most domestic airlines face freight transport capacity limitations because they do not have their own fleet of cargo planes, but mainly make use of the baggage compartments of passenger aircraft,” Hiep said.

According to statistics from the General Department of Vietnam Customs in 2021, 17 per cent of export goods from Vietnam are phones, 15 per cent are computers, 11 per cent are machinery and equipment, and 10 per cent involves fashion and apparel.

IPP Air Cargo to bolster Vietnamese logistics growth Forming a specialised freight carrier at this point in time is deemed attuned to the national transport services development strategy to 2020, with a vision towards 2030.

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