In late 2005 TNT hit upon the idea of developing a road network connecting China with Southeast Asia, creating what was essentially a small scale version of their extensive European road network. Named the Asia Road Network (ARN), the basic pan-Asian land network linking China with Singapore came together last year which coincided with the start of a regular Singapore service with a TNT B747-400ER freighter en route from its European hub at Liege, Belgium to Shanghai, China.
The opening of this integrated hub in Singapore, “crystallises that strategy,” TNT’s CEO Peter Bakker said at the hub’s official opening. Noting that these are “extraordinarily challenging times,” Bakker went on to say that “the hub and the integrated road and air network show the way forward.”
He noted that many have asked why, in the middle of the worst economic downturn in decades, is TNT opening a new hub. “But it is perfect timing to open this hub,” he said. “To be able to offer an integrated road and air network connecting Asia is just what the market needs.”
“This is not a plan that was made for good economic times,” says Bakker. “This is a plan we’ve always seen fit for the Asian market because many of the Southeast Asian countries will be becoming an economic region and more and more cross border flows will emerge between these countries, but yet the purchasing power of both the individuals and the companies within those countries is not always high enough to afford this expensive air freight.
“So our plan was to deliberately develop road freight as well, next to the air freight solution. And I would actually say this current economic trouble is playing into our advantage because the Asian road network provides a true alternative to air fright, its slightly slower than air freight, it’s much faster than sea freight and yet its significantly less costly for our customers than the air solution”.
“So many of our customers who used to be flying stuff around SE Asia now select the road alternative.” This is what is sustaining double digit growth figures he said, adding that without the expansion of the Singapore hub they would not be able to cater for that growth.
Onno Boots, regional managing director for TNT Asia explains: “When we launched our Europe flights into Singapore we basically connected our European network to our Asian network.
“So there are now two sources that make our Asia Road Network grow – one is the multi-modal air to Singapore and then road to final destination and intra-Asia source, where customers compromise speed versus cost and that has really driven a lot of our success in growing our freight business.
This transition to customers we never had before, spurs our growth,” he adds noting that these customers are converting from other air service providers to TNT’s road network.
“This is the first of a kind for us in Asia, but what we’re developing is a standard of how we want to grow the business going forward. In another five years we should have facilities like this all over. This is really a blueprint that we plan on rolling out,” he added.
Last year TNT established an international road hub in Bangkok, Thailand and another in Hanoi, Vietnam and Boots says the intention is to standardise all its hubs based on what they have in Singapore. Once this is complete Boots said TNT will be looking at further investments in Vietnam and also India where the company plans on developing “four or five hubs”.
In terms of its Liege to Shanghai service, Boots said that inbound from Europe the freighter is averaging about 70-75 per cent utilisation, with much of that back loaded to end of week meaning weekend flights are full. Singapore into China has about a 45-50 per cent utilisation and is also slightly back loaded to weekend. “We’re leveraging these volumes off our vast European customer base,” Boots adds.
From Shanghai to Europe the aircraft is 100 per cent full, partly comprised of loads from Southeast Asia combined with loads from China. In order to cope with impact of the economic crisis TNT dramatically reduced its commercial line-haul which has helped sustain the loads on its own freighter.
As for the outlook for the coming months, Bakker noted that February and March appeared to stabilise, “so our view is that the economy is still bad, but there seems to be some stabilisation for the last two months – that’s how we view the situation.”
