Cargo carrier eyes smaller China cities

Air Incheon, Korea’s first cargo-only airline, plans to start services this year to smaller cities in China, where Samsung Electronics and Apple assemblers are increasingly locating their factories.

Air Incheon expects to receive its second leased aircraft in August, said Vice President Kim Gyu-hyeong. The Seoul-based airline, which started operations in March, moves mobile phones, garments and oil drilling equipment to Japan and Russia.

The cargo carrier aims to focus on flights less than four hours with its Boeing 737-400, Kim said. Korea’s dominance in phones, chips and TVs prompted Asia’s fourth-largest economy to issue its first license for a cargo- only airline.

“The strategy of focusing on small Chinese cities could work, considering how companies are moving farther inland,” said Um Kyung-a, an analyst at Shinyoung Securities. “Smaller planes can go into a lot more places.”

The carrier plans to provide feeder services to Incheon airport for Korean Air, which moves goods to long-haul destinations, Kim said.

“We see opportunities in the niche market,” he said. “We want to tap into markets where big planes can’t get into.”

The global airfreight market shrank 2 percent in 2012 for a second consecutive year and airlines were filling less than half of their cargo planes, according to International Air Transport Association. The industry may expand 2.7 percent this year, benefiting Asian carriers the most, IATA has forecast.

Airlines haul about $5 trillion in cargo annually, accounting for a third of the global trade in terms of value, according to the group. Asian airlines are the biggest players in the market.

Mobile phones are one of the top three products moved by air in Korea. A Boeing 747-8 freighter plane carrying nothing else can hold about 1 million phones.

Samsung, LG and other Korean companies are making some of the components that go into mobile phones in China. Samsung said in April last year that it will spend $7 billion to build a semiconductor plant in the western city of Xian in China to meet growing demand for mobile phones.

Foxconn Technology Group, the assembler of Apple iPhones, puts together devices in cities such as Zhengzhou and Taiyuan.

Kim said Air Incheon is also interested in flying to Mongolia and Southeast Asia where economic growth spurs demand for air cargo. “These are the markets we want to tap into,” he said. “Because of the limitation of inland infrastructure, we believe there is demand for our services.”

Bloomberg