April 2006

Finnair targets Asian growth

Step by step the European airline is building up its Asian routes, with the region now accounting for more than half of its cargo revenues. Peter Conway reports.

With the start of a three times a week flight to Guangzhou in September and a planned new services to Nagoya and Delhi next June, Finnair is steadily building up its passenger route network into Asia.

Asia is also a key focus of Finnair’s fleet renewal plans, announced in December. The carrier is purchasing three A340-300s, which will arrive in 2007-8 and are specifically aimed at Asian routes, and nine A350-900s which will replace its fleet of longhaul passenger MD-11s from 2012 onwards.

“The decision reflects our confidence and commitment to our Asian growth strategy. It will enable us to open new destinations as well as to increase flight frequencies to destinations where demand is greatest,” says Finnair president and CEO Keijo Suila.

The A340s will initially operate alongside the MD-11s. However, Antero Lahtinen, managing director of Finnair Cargo and a board member of the parent airline, insists they remain “the ideal tool for both passenger and belly cargo traffic”.

Antero Lahtinen

Indeed, Finnair has been prepared to buy MD-11s from other carriers. It added its seventh to the fleet in December, acquiring it from troubled Varig, and has an eighth on the way sometime next year.

On the cargo front, the MD-11s can carry 30 tonnes on shorter routes such as Beijing to Helsinki, but get only 20 tonnes on longer routes such as Guangzhou.

They will almost certainly be snapped up by other carriers for conversions to freighters when they are finally retired from the passenger fleet.

The Guangzhou route was the third Chinese route for Finnair, or the fourth if Hong Kong is counted. The carrier has three passenger flights a week to Hong Kong, daily services to Beijing and five weekly services to Shanghai.

Nagoya, meanwhile, will be its third Japanese routes, joining three to five flights a week depending on season to Osaka, and twice weekly flights to Tokyo. Finnair also serves Bangkok five times a week to double daily, depending on season, and Singapore four times a week.

This capacity is supplemented by two freighter sharing deals. One, started in 2003, sees Finnair taking space on two Emirates B747 freighter flights a week in each direction between Dubai and New York via Gothenburg in Sweden. Finnair feeds cargo by road to these flights.

In 2004, Finnair also started taking space on a weekly Cargolux flight from Luxembourg to Hong Kong, which is routed via Helsinki.

Finnair takes a “significant” share of the capacity on both these routes, according to Timo Riihimaki, the airline’s vice president global sales, and together they account for 10 percent of Finnair Cargo’s revenue.

In November, this was on course to show a steady 10 percent growth over the year, with Lahtinen aiming for even higher growth in 2006. Tonnage growth from January to October was five percent, but Asian traffic grew twice as fast at 10 percent.

Over half of Finnair Cargo’s revenue now comes from the Asian market, and Asian traffic forms an important part of the cargo that Finnair feeds into its European routes, which are mainly operated by A320s and 757s.

On the Guangzhou route in particular, Lahtinen says it is too early to evaluate results, but says he has been “generally pleased with loads in the first two and a half months”. Load factors have not surprisingly been better westbound than eastbound.
He hints at possible further expansion in China. “Since we now operate to four destinations in China, this area remains very promising to us,” he says.

"A lot of manufacturing base is now in China, and therefore the demand will remain high in the forseeable future.”

Finnair will further expand its bellyhold capacity with the Airbus A350-900.

The drift of manufacturing eastwards is something that has affected Finland as much as any other European country. It is something of a double-edged sword for cargo, decreasing export volumes but strengthening ties between Finland and China.

Lahtinen says that there are now 150 Finnish companies operating in China. Less positively for cargo, Finland has also been losing manufacturing to the new Eastern European members of the European Union immediately to its south.

Further expansion to Asia could come from more freighter sharing deals, but if any are in the pipeline, Lahtinen is keeping tight lipped about them.

“We are naturally open to discussions about expanding the present block-space freighter cooperation with existing freighter partners or new ones, and naturally Asia remains the main focus for us and we would like to expand in that direction,” he says.

However, all he will add is that the carrier will “evaluate any new option on its merits”, and that it is not ruling out commercial viable alternatives that come up outside of the Asian region.

The chance of Finnair starting its own freighter operations also seems slight, though has not been ruled out entirely.

“In the long run accessibility to dedicated freighter capacity will become more and more vital, but it is far too early to confirm any plans,” Lahtinen says.

“In the next few years we will follow our main mission of selling the belly capacity of Finnair’s scheduled flights, as well as maintaining our present cooperation with existing cargo airlines.”

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Copyright for texts and pictures: Payload Asia, Singapore. This report is brought to you in partnership with Payload Asia, the air cargo/express magazine for the Asia-Pacific and Middle East regions. To learn more about Payload Asia, please visit their website.