When will aviation logistics take off?

When the leaders of Vietjet Air and Bamboo Airways signed contracts worth billions of dollars for aircraft purchase during the recent U.S. President Donald Trump’s visit to Vietnam, many logistics experts expect freighters are among the aircraft ordered. No information is available up to the moment of speaking, but according to sources familiar with the matter, there is no freighter on the list.

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So far, goods transported by air are mostly packed in the baggage hold of passenger aircraft

Freighters are considered a development symbol of aviation logistics. It is not sound to consider a logistics company a big name, or on a broader scale, a nation developed when it comes to aviation logistics if it has no freighter.

In Vietnam, goods transported by air are loaded in the baggage hold of passenger planes. In such tiny space, which is mainly reserved for passengers’ luggage, the volume of commercial goods carried per flight is insignificant.

Vietnam’s logistics market is said to be dynamic and growing fast. Aviation logistics is also on that track. Compared to other modes of transport, air transport has the advantages of speed and time as goods can be delivered around the world within two or three days. Still, such convenience costs an arm and a leg, and therefore only merchandise worth a lot which comes in a small quantity or requires a special transportation need opts for this mode of transport.

In Vietnam, goods often carried by air are phones, tablets, electronics, cosmetics, textiles and some agricultural products such as seafood, flowers and fruits. Air transport takes care of only a small portion of Vietnam’s total cargo volume, but it accounts for 25% of the country’s total export value.

Along with the boom of e-commerce, customers of aviation logistics are increasingly diverse. Since many products sold online are small-sized and lightweight, gathering multiple items into a single flight can help bring down their shipping cost to an acceptable level, an average of VND30,000-50,000 each. Many young customers, who seek to possess one-of-a-kind products, often buy them from foreign sites, creating hectic cross-border e-commerce. Experts believe in the coming years, e-commerce will be the key to the phenomenal growth of logistics.

The volume of goods through Vietnamese airports is 1.13 million tons in 2017, and expected to rise to 2.5 million tons by 2020. Of that 1.13 million tons, only 230,000 tons were delivered within Vietnam, while the rest were international shipments. The three domestic air carriers (Vietnam Airlines, Vietjet Air and Jetstar Pacific) hold a combined share of only 12% of the international cargo transport market. The remaining 88% is in the hands of 64 foreign airlines with services to Vietnam. As for domestic freight, Vietnam Airlines is the leader with 68% market share.

China and South Korea are the top two countries when it comes to the transport of cargo into Vietnam by air, with a respective volume of 74,000 and 57,000 tons in 2016. This is understandable as goods imported from these two countries are mainly phone components and electronic components that serve assembly and production plants in Vietnam. Meanwhile, the U.S. is the destination of most air freight from Vietnam, with a volume of 99,000 tons.

Much work left to do

In terms of ground infrastructure, only Noi Bai and Tan Son Nhat have specialized cargo terminals. These facilities are running at their maximum capacity, while the search for more land to expand their operations is never easy. Aviation Logistics Corporation (ALS) at Noi Bai has pioneered the model of extended aviation warehouse that takes advantage of areas far from the airport. The firm also assists its customers in loading and unloading goods. This can be considered an instant solution to the urgent need for air cargo transportation.

At other airports, there are virtually no specialized areas for handling cargo, let alone an aviation logistics center. To catch up with the growing demand for air cargo transportation in the Mekong Delta, Vietnam Airlines is conceiving a project to develop an aviation logistics center next to Can Tho International Airport, but the unstable volume of goods will probably make this air carrier reconsider the scale of that center.

Aiming to transform themselves into air transport hubs of Southeast Asia, Hanoi and HCMC still have much work to do to upgrade their infrastructure to meet the demand for quantity, speed of cargo handling and multimodal transport which connects air with rail, road and maritime transport. Hanoi looks to set up a logistics center in Soc Son, near Noi Bai International Airport, but this project is still grappling with many troubles. Meanwhile, in the south, Long Thanh International Airport is scheduled to getting off the ground. It is thus necessary to start planning the logistics network associated with this airport now to meet the demand in the future.

Air transport is a very specific industry, requiring skilled and experienced human resources. Well-trained staff in this field, however, remains rare. Therefore, it is crucial that enterprises train their own staff, and aggressively hunt for highly-qualified and experienced personnel.

That the U.S. has approved direct flights to Vietnam is good news for logistics enterprises. The U.S. is a huge market, and is currently Vietnam’s largest export partner. Yet if airlines and aviation logistics companies in Vietnam are not well prepared for the opportunity, only U.S. enterprises will reap the benefit.

Vietnam is said to have an aviation logistics market with great potential and high growth. Nonetheless, to develop aviation logistics in an advanced and organized way, it is necessary to have an effective and coherent strategy, and the determination to turn that strategy into concrete actions. Otherwise, aviation logistics will seemingly continue to gather momentum, but it will never really take off.


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