For European and U.S. companies, investing in Asia can be a tricky proposition, with risk identification difficult and numerous ethical issues to consider alongside the usual investment criteria.
     Any perusal of figures from Transparency International or the World Bank’s Ease of Doing Business survey quickly illustrates the challenges. Legislation and regulations are often opaque and subject to unexpected modifications at little notice, government can lack openness, and democracy is either very new, barely functions or, like in China, is non-existent. Corruption is another major issue, not least with Western executives potentially facing jail time at home if they are found to have broken the law abroad. Market access, and permitting and licensing requirements can change rapidly, especially if operations are deemed a threat to companies linked to the state or powerful political or business leaders. All of this hugely increases risk for overseas investors looking to tap into fast-growing markets.
     For those in the transport sector where the rapid movement of freight is often critical and delays can be hugely expensive, the risks are magnified, not least because in many jurisdictions customs authorities are renowned for being ‘difficult,’ or they are simply rampantly corrupt. This creates huge corporate social responsibility, and personal and financial risks in places where graft is often the only way to smooth cargo flows and is, in fact, viewed as a fact of daily life rather than a serious crime.
     When FlyingTypers asked some leading executives to comment on the difficulties of investing in Asian airport-linked businesses, most refused to respond, or at least not on the record. One consultant said entering a tender process in many South East Asian countries in competition with companies owned by nationals was often pointless. He added,
   “It’s like playing a game but you’re the only one that doesn’t know the rules and you’re wearing a blindfold. Forget it.”
     Another said the terms and conditions of tenders were often almost deliberately vague. “Even if you win, there is often no way of enforcing contracts—it’s fraught with risk,” he said.
     But amid the Asian gloom on airport investment, a more positive view was given by Barry Nassberg, the affable Chief Operating Officer of Worldwide Flight Services, the global airport services giant which now handles more than 4.0 million tons of cargo globally each year for over 300 airlines. Unlike many of its peers, WFS has a good record of investing successfully in Asia.
     The company has had a strong presence at Hong Kong International Airport since its 1998 opening and recently won a contract to operate the new passenger cruise terminal in the city to add to its wide-ranging transport portfolio. 2004 saw WFS enter cargo and ground handling services in Bangkok in a joint venture called Bangkok Flight Services. And in 2009 WFS India started offering ramp and passenger handling services in Delhi and Cochin in India. The company also has premium services, lounge and VIP handling operations at Changi in Singapore.
     Clearly, WFS is not afraid of taking on a challenge. Nassberg explained that WFS looks at a combination of factors when deciding whether a market opportunity is viable or not. Chief among them is the competitive environment—whether the country is protectionist about its state-owned companies such as its national carrier or airline, and how that translates into market-limiting policies such as exclusive rights for those national champions. “In general, though, more markets are opening up, and that’s what we look for,” he added. “We normally do this in partnership with a local company. The partner is important. It needs to be a viable company we can work with.

     “After that we need the right infrastructure, or infrastructure we can improve.”
     He said WFS was continuing to eye a number of cargo specific opportunities in Asia. “Asia is very attractive to us and we view it as one of our core cargo markets.
     “We’ve also been very successful in Asia and the Middle East offering premium services to passengers, effectively offering a private terminal to users or meet and greet. These small opportunities are often good ways of getting a foothold in a new location.”
     The pitfalls, though, are many. “At the top of the list are markets where there isn’t transparency when you enter the market,” he said. “There are lots of countries where entering the market requires business practices we don’t subscribe to. That would be at the top of the list in terms of a no-no.”
     Turning to specific markets, he said WFS had looked at opportunities in Vietnam and concluded it was not viable in the short term but could be in the medium-term.
     “We do have an interest in Indonesia and we have had talks on the cargo side,” he said. “This is still being discussed. We’re waiting for a clearer picture of what the infrastructure is going to look like at Jakarta, for example.”
     He said the opening up of ASEAN markets with the launch of the ASEAN Economic Community next year would not specifically change WFS’ approach. “The issues we take into account are fairly basic,” he said. “We look at markets where there is a change of mindset and a willingness to open up infrastructure opportunities to outside players. Countries reach this conclusion at their own stage of development.”
     India, where WFS already has two footholds, remains a challenging market. “There are opportunities there for outside players but the bureaucracy and legislative environment are issues,” he said. “Our objective is to be a significant player there on the cargo side and we would be prepared to invest in infrastructure, but so far we’re only active in a small way. But it is changing. Airline ownership is changing so there can be minority foreign ownership of Indian carriers, which is a giant leap.
     “I think that now there’s no turning back if you look at how quickly investment is moving in. Airports are open to foreign investment and outside provision of services.
     “I think in India there is more opportunity for overseas investors than in any other single country.”
SkyKing

When SriLankan Airlines was inducted as an oneworld member some time ago at Sri Lanka’s second international airport—the $200 million China Exim Bank-funded Mattala Rajapaksa International Airport (MRIA)—there was one person who had more than a smile on his face.
   He was Chamara Ranasinghe, Head of Cargo at SriLankan Airlines. The Mattala airport, named after the Sri Lanka President Mahinda Rajapaksa, not only has SriLankan Cargo but also Air Arabia and flyDubai, and now with the oneworld membership hopes to attract at least some of the other 14 members. While oneworld member British Airways would most likely start services to MRIA, others like Emirates Airlines, Korean Airways, Sichuan Airlines, and Etihad Airways have shown interest.
   Contributing around 13 percent of the airline’s total network revenue through passenger belly capacity, transshipment is a major source of earnings for SriLankan Cargo—hence the large smile on Ranasinghe’s face. He pointed out that almost 90 percent of the transshipments through Colombo hub is handled and moved by SriLankan. In fact, the average handled volume of transshipments per annum is 50,000 metric tonnes, which is approximately 25 percent of the total handled (200,000 mts/annum).
   The MRIA would be an added gateway for SriLankan Cargo. The cargo arm of SriLankan Airlines is responsible for the 5,000-sq. m. cargo facility at Mattala, with a handling capacity of 60,000 metric tonnes. It also has storage facilities for dangerous goods, temperature regulated goods, and valuable cargo.
   At Bandaranaike International Airport, Colombo, SriLankan Cargo uses its unique position in the Indian Ocean by bridging the commercial centers of East and West. In 2013, it saw a hike in both tonnage and revenue. Exports out of Colombo saw an increase of 33 percent in tonnage compared to 2012. That was an achievement indeed, since the competition came from the likes of carriers that operated freighters like Qatar Airways, Etihad, and Cathay Pacific.
   Ranasinghe also pointed out that Sri Lanka, one of the five fastest growing international freight markets over the 2011-2016 period, according to a forecast released by IATA, would see an average growth rate of 8.7 percent. The key markets that SriLankan Cargo would serve would be the USA, UK, Germany, France, and the Middle East. It is to these markets that SriLankan Airlines offers connectivity with direct flights, giving it a strategic advantage.
   However, one of the major challenges that SriLankan faces comes from the payload restrictions on the Europe-bound routes. In fact, Ranasinghe mentioned that the payload problems had been going on for quite a few years, but SriLankan had tied up a number of BSAs (block space agreements) with carriers to Europe and beyond via the Middle East. To overcome the capacity problem, the carrier had employed a dynamic pricing strategy and now with the membership of the oneworld alliance, it would provide ample opportunities for the airline globally. Also, SriLankan had embarked on a re-fleeting program by adding A330-300s and A350-900 aircraft to replace the old A340-300s and A330-200s.Chamara Ranasinghe, Head of Cargo, SriLankan Airlines, spoke about his plans to effectively use Mattala airport for cargo operations.
   “SriLankan Cargo recorded a revenue of USD 96 million in 2013, which is inclusive of PO Mail for the financial year 2013-14. The airline carried 94,410 metric tonnes of cargo for the said year. Indeed, it is a remarkable achievement taking into consideration an overall 82 percent passenger cabin factor and severe market conditions.
   “The main contributory factors for this achievement: customer satisfaction by offering a personalized service and high reliability coupled with aggressive marketing in the niche markets.
   In terms of maximum tonnages, of the 94,410 total carried metric tonnes, “garments accounts for almost 50 per cent of the total tonnage ex-CMB with the rest of tonnage being accounted for by perishables, courier cargo, etc,” said Mr. Ranasinghe.
   In the past, the cargo community spoke about Sri Lanka becoming a full-scale cargo hub, and with Mattala airport having finally become a reality, Chamara Ranasinghe is confident Sri Lanka will fulfill its caro destiny, even if that is in a supporting role.
   “Sri Lanka is already the hub for SriLankan Airlines Cargo. We are yet to see customer airlines making use of this facility in order to make Katunayake (Colombo) a full-scale hub in the region.
   “SriLankan Cargo being the sole ground handler is continuously making preparations to offer more handling facilities with updated equipment and IT systems.
   “Mattala Airport will be mainly focused for cargo freighter operations, in addition to currently belly capacity on the line flights. The Colombo airport will continue to be the main hub with almost 90 percent of the transshipment being moved by SriLankan.”
   Mr. Ranasinghe assures us that, next to China, “India is a key market and revenue contributor for SriLankan Cargo. In the last financial year, India was able to produce a tonnage of 15,000 metric tonnes with planned increase of 20 percent for the current financial year.”
   With several older aircraft scheduled to be phased out during this year and next, and no news of conversions, SriLankan has no plans “for inducting dedicated freighters, we have however tied up with FitsAir for an exclusive MD82 freighter to be dedicated to SriLankan Cargo,” says Mr. Ranasinghe. “With this MD82 freighter operation, we will be expanding current operations to Bangladesh and most parts of India, a noted key sector for SriLankan Cargo.”
   Other technological upgrades, however, are on the menu for SriLankan.
   “Steps have been taken to upgrade the current Skychain system with additional features in order to optimize the cargo revenue and allow for seamless cargo operations. We have also tied up with Techwings to utilize their Revenue Plus Budget tool in order to generate incremental revenue.
   “Currently, SriLankan Cargo has undertaken to launch E-AWBs in Sri Lanka. Already six percent of the shipments on SriLankan Airlines are being electronically handled and we have targeted this to be 25 percent by the end of this year. This will be a huge advantage for all the stakeholders in the air freight business in Sri Lanka.
    “2014 is going to be a much more challenging year for SriLankan, with an 8 percent increase on the revenue budget despite minimal favorable market variances over the previous financial year,” said Mr. Ranasinghe.
Tirthankar Ghosh

    Norwegian will lease three Boeing 787-9 Dreamliner aircraft for 2016/2017 delivery.
    Norwegian currently operates five 787-8 Dreamliners with another three on order, plus six 787-9 Dreamliners on order. By 2018 the operator will have 17 B787s in fleet.
    From mid-September, Norwegian will offer six weekly flights from Gatwick to Warsaw and Berlin.
    The airline also increases the number of flights between London Gatwick and Copenhagen from four to five daily departures.
    Oslo-based LCC Norwegian established its first UK base at Gatwick just a year ago in May 2013. Today, the company operates 375 weekly flights and 33 routes to and from the airport, holding a whopping 10 percent market share.

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