Translogistics

Garuda Indonesia appears to be developing an appetite for cargo. In a fairly short period, the Indonesian carrier’s ambitions have advanced from a desire to augment belly-hold revenue to a plan for full freighter flights to take off before 2013.

In early April, Garuda CEO Emirsyah Satar announced his decision to boost cargo capacity on passenger aircraft; Satar wanted to take advantage of rising airfreight volumes in various regions of Indonesia and mounting investment in the country. By the end of the month, he declared that the airline would get its first freighter by the end of this year. He has said that Garuda will have one A330-200F in service by January and two more joining the fleet in later in 2013.

This is not the first time Garuda has shown freighter ambitions. In 2010, there was talk of converting up to seven of its B737-400s into all-cargo configurations. This never materialized, although the concept has found favor with other carriers in Indonesia. Jakarta-based Airmark Indonesia Aviation obtained a 737-300F from GECAS in April, following a similar deal in February involving GECAS and Cardig Air. April saw Garuda sign an order for 11 A330-300 passenger planes, but the carrier has not given any details on its A330 freighter plans. Observers are confident, though, that the carrier will forge ahead with its cargo ambitions this time.

“I think they will bring in the freighters,” said Ionut Mares, general manager for airfreight at DHL Global Forwarding Indonesia. He pointed to recent enhancements of the carrier’s cargo facility at its Jakarta hub and the construction of a terminal for domestic freight, which will free up space at the existing facility to accommodate freighter operations, as proof of the rumors.

Garuda’s freighter plans may have gained further impetus from domestic rival Lion Air’s plans to develop cargo. Last year, the regional carrier made headlines with a record order for 230 B737 planes, but this has apparently not impacted its appetite for freight. Lion Air recently appointed a new cargo manager, who has signaled his intention of bringing in freighters next year. At this point, no decisions have been made regarding the aircraft type or the routes under consideration.

The Indonesian carriers are lagging behind international rivals, who poured main-deck capacity into the market in the latter half of last year. Airlines that launched or boosted freighter flights to Jakarta included Singapore Airlines, Korean Air, EVA Air and Malaysian Airlines. However, this push ran out of steam in April because of a marked slowdown in Indonesian air exports after the first quarter of 2012.

Epson was a large bellwether in the recent airfreight slowdown. Last year, the company saw a huge surge in traffic out of Indonesia, which has been largely attributed to the impact of the natural disasters in Japan and Thailand. In November alone, this led to 18 dedicated charters. However, since April, Epson’s airfreight volumes have come down significantly.

Airlines have reacted to the slump with cuts in their freighter activities. Instead of upping its frequency from two to three weekly freighters, as previously planned, SIA cut back to one flight per week. KAL, which added two frequencies late last year, has trimmed one and is now flying three times a week.

Despite the cuts, there is still sufficient lift out of Jakarta, largely due to ample belly capacity, said Franky Frans, managing director of forwarder Dian Mulia Freightravel. However, forwarders may face challenges securing lift on connecting flights to long-haul destinations, as most services are indirect. This, in conjunction with the stubbornly high fuel prices, has kept rates up.

Whereas exports have flagged, imports into Indonesia have kept their growth momentum. As these  outstrip exports by a ratio of about 3:1, obtaining capacity on inbound sectors has been challenging. Forwarders are also not able to leverage export volumes to secure inbound space, as exports are largely managed by the handlers in Jakarta, DHL’s Mares observed. He said exports will return to growth by July.

Ten years ago, perishables accounted for most of Indonesia’s export volume; now, only a little more than 50 percent of this traffic comes from perishable freight. Several sectors, including garments and electronics, have done well since. Mares is particularly bullish on pharmaceuticals. During the past two years, this segment has shown growth rates of 30 percent to 50 percent, year-over-year, he noted.

The government has been eager to develop trade out of points other than Jakarta and is designating a number of regional airports as international gateways. To date, only Garuda and Singapore Airlines have taken the bait, besides the established international flights serving Denpasar for the tourist traffic in Bali. For their part, forwarders are moving to build up their footprint in the regions. “There is more potential for exports from other parts of Indonesia. Over the next two years, we plan to open at least three new offices,” Frans said. In Sulawesi, he is looking to seafood and nascent electronics production, while Kalimantan offers opportunities with project cargo, thanks to oil and mining interests.

DHL Global Forwarding opened a branch in Medan last year and intends to set up one in Makassar this year. Denpasar is another candidate. “We will see if there is an opportunity in forwarding; we know there is for express,” Mares said.