One of the big issues of the past two years has been the availability of capacity, particularly on transpacific routes. Combined with that is the uncertainty in these pandemic times for cargo agents serving multiple origin ports – can they always fulfil capacity agreements for transpacific shipments at each origin?
Help is now at hand. Cathay Pacific Cargo has introduced a new business model, ‘Merge in Transit’ (MIT). This enables agents to have their cargo from multiple regional origins consolidated in Hong Kong, before having it delivered to their chosen long-haul destination in the form of an entire freighter charter or a guaranteed block space agreement (BSA) on a scheduled flight.
‘The MIT model means that we can merge the cargo from across Asia and the Subcontinent into one flight on a single BSA commitment to one final destination in North America,’ explains Martin Kwok, Cargo Global Partnerships Manager.
‘It means you can shuffle your tonnages from around the region and you only have to meet the overall commitment ex-Hong Kong,’ adds Frank Wu, Cargo Global Partnerships Manager.
Currently, MIT is available for origins in North Asia, South and South East Asia, and it has already been taken up by a select number of global agents, including Kintetsu World Express Inc (KWE) and EFL Global (formerly Expofreight)
EFL GLobal, which has increased its footprint in Asia, has multiple origins in the region. By consolidating their cargo in Hong Kong and by paying only a common rate ex-Hong Kong, they are able to sign a single contract with Cathay Pacific to fulfil an HBA (hard-block agreement ) on a flight from Hong Kong to the US, rather than separate contracts for each point of origin. The Cathay Pacific flights from each origin are included within the single contract price.
‘MIT gives us the flexibility to switch among origins and pre-plan the volumes based on each,’ says Irshad Razack, Global Head – Airfreight at EFL. ‘Swapping capacity within our South East Asian origins allows us to create additional capacity for origins with volume spikes at no extra cost.’
To date, EFL has run a number of HBA flights from Hong Kong to the US, on a fixed all-inclusive price for a year – with a higher than 90 per cent flown as booked rate to date. There are even plans to fill entire flights in the new year. Irshad Razack adds: ‘EFL has always wanted to explore this concept, and we are happy to be the first Cathay Pacific Cargo agent to experience the MIT programme.’
Kintetsu World Express Inc was another early signatory and its participation has helped evolve MIT – it has been able to grow its transpacific business and a new business model as a result. Rather than use HBAs, it extended the programme to use charter freighters from Hong Kong with its shipments from multiple origins under MIT.
This was a departure from the normal business model of point-to-point, single-origin charters. As KWE Hong Kong’s Managing Director Tadashi Akiyama explains, the board in Tokyo took some convincing. ‘Historically, we have never operated charters in this way, so we had to convince our senior management in Tokyo that this new concept would work.’
And work it has. Being able to route shipments from South East Asia, Taiwan China and the Chinese Mainland in dedicated weekly freighters to Los Angeles and Chicago has actually helped grow KWE’s transpacific business significantly – and Hong Kong’s reputation as a consolidation hub has helped too. ‘Hong Kong is flexible, and the relationship with Cathay Pacific Cargo is very good,’ adds Akiyama. ‘It’s a partnership.’
This extends to the operation too. Cargo agents using MIT need to set up a control tower to handle the allotments from across their origin ports. This is matched in kind with a dedicated control tower in Cathay Pacific Cargo’s Singapore and Hong Kong offices. ‘The control tower deals with bookings, swaps, service recovery, and it’s 100 per cent receptive,’ says EFL’s Irshad Razack. ‘It’s a single point of contact, and a simplified process.’
Cathay’s Wu adds: ‘The important thing is that this plays to our network strengths as a carrier, and Hong Kong’s geography. This is the strongest cargo base – so agents have faith, and we have the flights. An added benefit is that it’s a way for agents to develop their secondary ports, so they can build business without risk.’