Why Singapore remains ASEAN’s best business hub?
Improved connectivity gives Singaporean-based businesses greater access to foreign markets, encouraging exports, and at the same time increases competition and choice in the home market from foreign-based producers.
Singapore's extensive network of free trade agreements and pro-business tax and investment policies facilitate a seamless flow of goods and services from the country to markets around the world. Over the next five years, expectations of strong growth in Asia on the back of ASEAN Economic Committee’s (AEC) goal of economic integration by 2015 will potentially spur airfreight demand in the region. Supported by comprehensive air, sea and IT infrastructure, Singapore has successfully attracted leading players across various industries including Pfizer, LVMH, Boeing and Avaya to locate their Regional Distribution Centres (RDC) in the country. Consequently, there is a healthy and reliable supply chain supported by a broad range of local cargo agents at a competitive cost. All these contribute to Singapore's position as a leading air cargo and logistics hub in the world. Singapore’s Changi Airport is amongst the best connected airport with more than 6,600 weekly flights serving close to 300 city links, including 14 freighter airlines serving more than 50 destinations. “Our excellent connectivity means that shippers and forwarders have ample options to get their cargo to their destination through Changi. As the air cargo hub in the region, Changi Airport is well-placed to tap on the growth in intra-Asia airfreight demand with our excellent connectivity, service reliability and efficiency,” said a spokesperson from Changi airport. The Changi Airfreight Centre (CAC) and the Airport Logistics Park of Singapore (ALPS) spanning over 70 hectares is a 24 hour free trade zone where transshipment cargo can be broken down and reconsolidated with minimal customs formalities. Within the CAC, nine airfreight terminals with a combined handling capacity of three million tonnes are equipped with material handling system to ensure the efficient handling of cargo. The two ground handlers operating in the CAC (SATS and dnata) also have specialised facilities to handle temperature sensitive cargo such as perishables and pharmaceuticals. The cargo arm of Singapore Airlines, the country’s flag carrier, offers more than 900 flights a week, linking more than 70 cities in over 35 countries across six continents. The airline operates a fleet of eight dedicated Boeing 747- 400 freighters and manages the bellyhold space of passenger aircraft operated by Singapore Airlines and Scoot. “We focus on the carriage of niche and specialised types of cargo such as time-sensitive pharmaceuticals and jet engines, as well as charters for the transportation of racing cars, horses and specialised equipment. Besides our extensive network, we place great importance on delivering excellent customer service. Our on-time delivery commitments, as measured through the Cargo 2000 industry standards, continue to be among the best in the industry,” said a spokesperson from Singapore Airlines Cargo. The airline manages its network capacity and frequencies by matching capacity with demand, and is always on the lookout for new demand opportunities. In addition, it supplements its own capacity by securing space on partner airlines’ services to further extend its network reach. Meanwhile, the regional wing of Singapore Airlines, SilkAir serves the short-haul destinations in the Singapore Airlines Group network. “With our extensive network of 48 destinations in the region and the added advantage of being able to leverage the networks of Singapore Airlines Cargo, SilkAir is able to cater to the varying needs and requirements of our customers,” said Ryan Pua, vice president-commercial, SilkAir. SilkAir, being primarily a passenger airline, is focused on connecting customers with new destinations in the Asia Pacific. Fleet development, destinations and flight frequencies are thus determined by passenger market and traffic, thus the airline’s strategy is to plan and offer services effectively within the given network, schedule and fleet configurations. However, with the rise of emerging economies in cities such as Chengdu, Phnom Penh, Hyderabad, and Yangon, all of which SilkAir flies to, there are greater opportunities abroad to capture a huge pie of their growing cargo markets, and capitalize on Singapore's highly-efficient and well-developed Changi Airport. Moving forward, SilkAir Cargo’s success will rely on its continued offer of reliable service, continuous engagement of its agents, and an active integrated selling of its connections to local and overseas cargo markets.
Challenges As an island-state with a world-class seaport, air cargo transportation services face the perils of customers switching to shipping companies which offer much lower rates, and now operate ships which move faster than before. Logistics hubs are also being actively developed by Singapore's neighbouring cities such as Jakarta, and Kuala Lumpur, and further north, Shanghai. This has resulted in fierce competition in the APAC cargo industry, with both agents and airlines having to slash rates and offer alternative options in service. However, Singapore Airlines Cargo believes every cloud has a silver lining. “There continues to be overcapacity in the airfreight market, especially in Asia Pacific, amid a slow recovery in airfreight demand. However, there are also demand opportunities in specific business segments (such as express traffic, time-sensitive pharmaceuticals, jet engines and charters) that we will continue to pursue, leveraging on the efficiency of the Singapore hub as a transhipment point.” In the last 12 months, Changi Airport has established two new freighter services and expanded one existing service. Turkish Airlines began its weekly freighter Singapore-Karachi-Istanbul service in September 2013, while ANA Cargo commenced a 6x weekly freighter service serving Okinawa-Singapore-Narita in May 2014. Both Istanbul and Okinawa are new freighter links for Singapore.
Road Ahead The growth of the Asia’s middle class would not only result in a boost in demand for consumer products, but also increase the need for speed as consumer expectations rise. The projected increase in intra-Asia trade will also support the growth of the airfreight industry. “With the capacity and facilities at Changi Airport, we are well positioned to tap on this growth. Our unparalleled connectivity to the region will continue to give us the edge in the global supply chain,” said Changi’s spokesperson. A strong portfolio of airlines with strong collaboration among partners will remain a key strategy to grow Singapore’s air hub.