Vietnam’s air cargo industry on the rise, catches eye of major cargo operators

Tearing through the coronavirus pandemic, and the other headwinds of the global economy, Vietnam’s air cargo industry is accelerating to new highs with the number of flights picking up and a new homegrown freight carrier set to take to the skies.

As per media reports, the air cargo traffic in the Southeast Asian nations is expected to grow by 17% in 2022 from last year to more than 1.52 million tons- an acceleration beyond the average annual expansion of 15% over the last 30 years.

In the last couple of years, many global brands have shifted their operations to Vietnam, owing to the covid outbreak and strict covid regulations in China-making Vietnam the global manufacturing hub. This has helped the nation establish itself in the global supply chain for everything from electronics to clothing, surging demand for domestic and overseas freight from the nation taking its overall export to jump by nearly 20% to about $336 billion in 2021.

Growing appetite has pushed up the cost of exporting by plane, however, with several industry insiders saying such air freight rates are still two to four times higher than pre-COVID levels.

Increasing interest in the nation has been witnessed by major cargo operators such as Germany’s DHL Express and Japan’s ANA Holdings.

IMEX Pan Pacific Group, which is among one of Vietnam’s biggest conglomerates is also looking to land some fresh business through its IPP Air Cargo subsidiary, which is expected to begin operations by year-end as Vietnam’s first company specializing in air freight.

With initial plans to launch with a fleet of five aircraft, the company will double them over the next five years. It will establish routes between local airports and the country’s two largest international airports, one near Hanoi and the other close to Ho Chi Minh City in the south.

Currently, foreign carriers are responsible for under 90% of Vietnam’s air cargo. IPP Air Cargo will consider partnerships with overseas airlines to tap export demand.

“If we don’t enter the market [freight rates will remain high], it will be a serious situation for exporters,” group chairman Johnathan Hanh Nguyen told local media, indicating his intention to focus on lowering freight prices.

Moreover, DHL looks to boost its regular air cargo services between Vietnam and the U.S., taking the company’s cargo handling capacity between Vietnam and the US to grow by 27% from previous levels to a total weekly volume of over 940 tons.

Once a week, a Boeing 777 freighter will fly from Sydney in Australia to Ho Chi Minh, before heading on to Chubu Airport in central Japan and then the state of Ohio in the U.S.

Extra services could help ease pressure on manufacturers, who have sometimes struggled to find spots on planes.

ANA Cargo, which operates under the ANA Holdings umbrella, also commenced its dedicated daily freight route between Vietnam and Narita Airport in March, and increased “passenger-cargo flights” from last fall, utilizing aircraft that usually carry people instead used to transport cargo after COVID decimated travel demand.

Other airlines like the Korean Air, Taiwan’s China Airlines, and EVA Air have also established cargo routes to and from Vietnam. The South Korean carrier handles exports of Samsung Electronics smartphones produced in the country.

The sector has also received a tailwind from the return of “belly” cargo space on passenger flights after Vietnam reopened its doors to foreign tourists in mid-March.

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