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SINGAPORE: Transportation of COVID-19 vaccines will increase freight revenue for airlines and airports globally, but this will not be enough to make Singapore’s aviation industry profitable again.
The cold chain facilities at Singapore Changi Airport are state-of-the-art and allow for the handling, storage and transshipment of vaccines.
They are also large enough to allow Changi to serve as a regional vaccine distribution center.
However, the proportion of COVID-19 vaccines landing in Singapore and using the cold chain equipment of Changi’s two cargo handlers, dnata and SATS, may ultimately be very small.
Based on an estimated two doses per person, Singapore’s small population means that only around 10 million doses will be needed for local use compared to more than 8 billion doses required to immunize all of Asia Pacific.
WILL SINGAPORE BE THE VACCINE TRANSSHIPMENT CENTER?
Therefore, Singapore needs to attract vaccine shipments heading to other countries to achieve significant market share, but most Asia-Pacific countries are eager to transport the vaccines they have purchased directly to their own international airports. , preferably using their own flag carriers.
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Singapore’s Transport Minister Ong Ye Kung acknowledged during a CNA interview on December 11:
I think for many countries they will prefer a direct flight for faster delivery.
However, Mr. Ong added: “There is a limit to that. At some point, you’ll need a hub and radio distribution system. “
In theory, Singapore could be well positioned to handle vaccines that are heading to emerging markets in Southeast Asia, such as Cambodia, Indonesia, Myanmar, the Philippines and Vietnam.
However, these countries are likely to get mostly vaccines from nearby countries, namely China and India, making a stop in Singapore unnecessary.
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Chinese airlines are particularly well placed to transport Chinese-made vaccines with direct flights from China to primary, secondary and even tertiary cities in Southeast Asia without the need for an intermediate stop.
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Although distribution will be challenging in many areas of Southeast Asia, given the geography and remote location of the villages, which in many cases are several hours from the nearest airport, this complex logistical issue will be addressed locally with transportation. Of surface.
Workers unload a container containing experimental coronavirus vaccines made by the Chinese company Sinovac from the cargo bay of a Garuda Indonesia aircraft at Soekarno-Hatta International Airport in Tangerang, Indonesia, on December 6, 2020 (Presidential Palace from Indonesia via AP).
For other regions for which Changi has traditionally served as a hub, such as Australasia, vaccines can also be transported directly by air and are likely to be transported by domestic carriers from these countries.
Major airlines and airports around the world have been preparing for COVID-19 vaccine shipments for several months and are as ready as SIA and Changi to face the biggest logistical challenge in decades.
Also, for any market where transshipment is necessary, Changi is not the only center that is ready and able to serve as a vaccine distribution center should the need arise.
For example, Dubai also has state-of-the-art cold chain infrastructure and has a potential geographic advantage given its proximity to Africa, a vast, incredibly challenging region that could require more of a transshipment hub than Southeast Asia.
Hear from the infectious disease expert describe what it takes to make, ship, and deliver a vaccine on our Heart of the Matter podcast:
THE VACCINE WILL HAVE MORE IMPACT THAN TRANSPORTING IT
It is certainly important that Singapore is ready to handle COVID-19 vaccines and serve as a distribution center if necessary, but the big picture, that the region is successfully inoculated as quickly and efficiently as possible, is one of major importance.
That will help open borders and resume travel within the region at pre-pandemic levels, or as close as possible, which will ultimately benefit the aviation industry and all economies in the region.
It is also important to recognize that a relatively small role in vaccine transportation does not mean that Changi Airport or the SIA Group would lose out in terms of enjoying a buoyant 2021 in terms of cargo traffic and revenue.
All airlines will give the highest priority to COVID-19 vaccines, which will make less space available for other types of cargo, as a large part of the global cargo fleet is reserved to transport vaccines.
There has already been a shortage of air cargo capacity since the pandemic began in March due to the huge reduction in international passenger flights, which in normal years account for about half of all air cargo.
READ: Singapore May Be Air Freight Hub for COVID-19 Vaccines – Changi Airport, CAAS
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Air cargo rates have skyrocketed due to lack of capacity, resulting in more than double the cargo throughput for many airlines.
For example, SIA reported a 137% increase in cargo throughput for the six months ending September at S $ 0.70 per tonne of cargo per kilometer.
Air cargo rates will remain high in 2021 and could rise as the need to transport vaccines leads to an even more pronounced gap between supply and demand.
IMPACT ON THE CARGO OF THE AIRLINES
For the supply to increase, international passenger flights must resume, but ironically, a significant increase in passenger flights is unlikely until most of the vaccines have been shipped and a large portion of the population is vaccinated. .
For those airlines that do not transport significant volumes of vaccines, there will be a greater indirect impact of vaccine shipments, as transporting other types of cargo will be more lucrative.
Portable refrigerators are seen at KLM Cargo at Amsterdam Schiphol Airport
In theory, vaccines could have a much higher rate or yield than other types of cargo, but airlines are unlikely to abuse their pricing power for humanitarian reasons, resulting in vaccine shipping rates that they are only modestly higher than normal charging rates.
Therefore, the vaccine surcharge may not translate into more profit for airlines and cargo handling companies given the additional costs and complexity of maintaining an extremely cold temperature.
SIA will be one of many airline groups that will benefit from very strong overall cargo rates in 2021, but the increase in revenue per cargo will not be enough to make SIA profitable again or even approach breakeven.
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Cargo is simply not a big enough business for SIA, which has a less than 2 percent share of the global air cargo market, to make up for the huge decline in passenger traffic.
This was evident in SIA’s first fiscal half-year ending September 30, when the group incurred an operating loss of S $ 1.86 billion despite a 28% increase in freight revenue to S $ 1.24 billion. .
Over the six months, cargo accounted for 76 percent of the SIA Group’s total revenue compared to just 12 percent in the same period in 2019.
THE CARGO DOESN’T MATTER SO MUCH
Airline groups generally don’t have a large enough cargo business to make up for the huge decline in passengers due to border closures, but there are notable exceptions in South Korea and Taiwan, where four airlines have made modest profits during the pandemic. .
These four airlines, Asiana, China Airlines, EVA Air and Korean Air, relied on cargo for 20 to 30 percent of total revenue before COVID-19.
They have been able to carry more cargo during the pandemic than before and have been able to more than double their revenue per cargo on an already high base.
SIA Group’s cargo revenue has increased more modestly on a smaller basis, while its cargo traffic has decreased by 47 percent during the first eight months of the crisis, from April to November, to 440,600 tonnes.
(Photo: Singapore Airlines Cargo)
The decline in cargo traffic was inevitable due to the huge drop in passenger flights, even with the SIA Group using more than 30 of its passenger aircraft for cargo flights only, including four aircraft in which the seats have been temporarily removed, to supplement his seven freighters.
Changi has also seen a significant decrease in cargo traffic with the airport handling 804,000 tons of cargo in the first seven months of the crisis from April to October, a decrease of 31% compared to the previous year.
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SIA and Changi should make headlines when the first shipment of the Pfizer-BioNTech COVID-19 vaccine arrives in Singapore later this month and this moment will be an important symbolic milestone as it represents the beginning of the end of a pandemic that has decimated the aviation and the global economy.
However, vaccines should not be seen as a financial panacea for Singapore’s battered aviation industry.
Brendan Sobie is the founder of the Singapore-based independent aviation consulting and analysis company, Sobie Aviation. Previously, he was chief analyst at CAPA – Center for Aviation.
