In the early days there wasn’t much need for a standalone air cargo entity in Japan. The shipping companies were able to meet all the demands to bring the necessary cargo into the country. However, this all changed in the 1960’s, with the introduction of passenger aircraft that could stow away small amounts of cargo under the floors, boosting the air cargo industry the world over.
As with the rest of the world, the Japanese ocean shipping industry took notice and had a keen interest in establishing a more comprehensive cargo system that linked both the sea and sky in Japan. In a mere five years, the amount of cargo carried to and from Japan increased by almost 30,000 tons, further highlighting the industry’s potential.
Thus began plans to create what is now known as Nippon Cargo Airline’s (NCA), the first cargo airline in Japan.
Resilience in the face of adversity
Seven years after its establishment and inaugural flight, NCA found itself operating in what quickly became a stagnant market. There was a sudden rapid decline in demand for cargo, mainly caused by the recession in the United States of America.
Differentiation is a strategy long employed by NCA to meet customer needs, turning negatives into positives. The carrier adopted a company-wide sales strategy to engage forwarders more aggressively and increase customer relationship development. With its flights heading to America leaving Narita International Airport (Narita: NRT) at 8:30 pm, compared to most that departed at 10:30 pm, NCA was able to offer customers earlier arrival, which also meant a higher possibility of same day customs clearance and earlier delivery. “We deliver faster than the competition.” Complemented by the increase in time and attention paid to each shipment resulting from the low volumes, the carrier was able to build a higher degree of trust with its customers.
Today, the carrier still places a very high value on diversifying its product portfolio to meet customer needs. This is but one of the many strategies it has adopted to differentiate itself in the competitive market. “One of NCA’s advantages is that we operate a cutting-edge B747-8F fleet mainly on the transpacific trunk line, in which the biggest demand growth is expected compared to other trades,” explained Ichiro Watanabe, VP and GM Business Planning and Strategy Nippon Cargo Airlines, on one of the carrier’s key components to the carriers’ main differentiation strategy.
NCA currently operates 25 flights per week linking Asian gateways to major gateways in the US; with the plan to increase this to approximately 30 flights per week by the year 2020 in order to keep up with forecasted customer demand. According to Wantabe, NCA plans to be the biggest main deck provider on transpacific routes.
In addition to the transpacific routes, it also operates four transcontinental and round world flights per week, respectively. Maximizing on round world flights, which go from Narita to Ted-Stevens Anchorage International Airport (Anchorage: ANC), to O’Hare International Airport (O’Hare: ORD), to Frankfurt Airport, to Milan-Malpensa Airport and back to Narita; NCA is also able to provide its customers with transatlantic services through the fifth freedom traffic right.
Watanabe went on to add, “We also have a dedicated charter team, providing a combination of both sales and operations, to cater to charter demands and provide tailor-made solutions. Handling more than 150 charters annually, we also provide ground handling such as build-up and breakdown on site. As this is under NCA supervision, we are able to guarantee our customers the NCA value and quality we are renowned for.”
Added Value
The first half of the year has been very upbeat in the air cargo industry, showing steady growth, especially during the month of June. This was no different for NCA who carried 203,000 tonnes during this period. Achieving an increase of 122% compared to the same period in 2016. A major contributing factor to the tonnage growth was attributed to the introduction of three additional long haul flights, specifically two to the US and one to Europe, as well as three short haul flights to Hong Kong, Shanghai and Taipei.
Another key development that has had a significant impact on NCA’s growing network and volumes are the partnerships it has forged within the industry. In October 2015, the carrier started a codeshare partnership with Cargolux Italy, to enhance main deck services between Japan and Italy. And more recently, NCA has entered into a strategic partnership with Atlas Air to boost its activities on transpacific routes.
According to Watanabe, the carrier is very happy with what they have seen from Atlas so far and will be interested in growing the partnership, and possibly exploring new markets through Atlas’s operations and network.
“There are many opportunities that opened up from the partnership we have formed with Atlas Air. An immediate benefit has been derived from Atlas’s flexibility and ability to rapidly change flight routing, which brings additional value to NCA and its customers by allowing us to accommodate demand changes in a timely manner,” he said.
The network flexibility that Atlas has allows them to re-route flights on a short-term basis; flying directly to where there is a need in order to meet demand, fast.
As per the codeshare with NCA, Atlas flies between Narita and O’Hare, but if for instance, there was a sudden seasonal perishable goods demand from Seattle Tacoma International Airport (Seattle/SEA) to Narita; Atlas would be able to change the route to ORD-SEA-NRT from the typical ORD-ANC-NRT route. An option that was not available to the carrier before.
Keeping up with the times
In the meantime, NCA is not resting on its laurels and waiting for opportunities, but working to create them. Apart from differentiation, the carrier has a strong culture of embracing innovation and technological advancements. As such, they fully support the idea of introducing and adopting digitization to create a more seamless and transparent air cargo industry for all stakeholders.
The carrier is currently using the first generation of iCargo by IBS Software, specifically tailored to cargo operations, but has plans to upgrade. “We have plans to adopt the latest version of iCargo and implement it in 2018. This new version will greatly improve our accessibility to forwarders electronic data interchange (EDI) systems, which will in turn, allow us to provide accurate and precise cargo movement information to our customers,” said Watanabe.
Apart from enhancing its internal systems, NCA is doing their part to drive change across the entire supply chain when it comes to e-freight. Alongside key stakeholders, the carrier is determined to increase the International Air Transport Association (IATA) e-AWB initiative penetration rate in Japan. Acknowledging that it will take time for the whole industry to adopt the notion, NCA executes shipments via two business processes – both paper and digital. Despite it being twice the workload, it ensures when the whole industry switches over it will already be part and parcel of daily operations for them. The carrier believes that bringing IATA’s e-Freight concept to realization will bring immense value not only to NCA, but also to the whole air cargo industry.
Keeping up with and implementing the latest technology affects the entire supply chain and its capabilities to keep up with customer’s demands. With this ideology in place, NCA is expanding its current pharamaceutical offerings through a new cost-effective product.
Today, Japan’s pharmaceutical industry is worth over $70 billion and is still growing. To increase its piece of market share in the booming industry, NCA is in the process of launching a new product called Cubo. This is one of the carriers very own in-house developed ‘Keep Cool Equipment.’ It is a foldable container, with the concept of being able to provide less than an LD-3 container load. Its size greatly improves space efficiency, allowing for two layers to be stacked and loaded together on the main deck pallet; and for the container to be folded and shipped back easily when it is not in use. Cubo is also capable of maintaining an inside temperature of +5 degrees Celsius for up to 120 hours, utilizing special insulators also in the pipeline.
“We plan to start providing these products as part of NCA Cool and NCA Pharma-Care; in line with the product revision of the NCA Priority Services, from April 2018. We’ve listened to the feedback from our customers, who have occasionally told us they need less-than LD-3 volume and have come up with a solution that will not only solve this issue but also provide other options to the market. This is a very niche market, and with the introduction of NCA CUBO, we will be able to cater to it, and establish ourselves as one of the key players” Watanabe added.
Cubo will also go a long way in boosting e-commerce for the carrier, who has already begun building relationships with express carriers and postal organizations who are showing signs of needing extra capacity to handle the ever-growing volumes. Given Cubo’s size and packing flexibility, the carrier now has more business opportunities to exploit that will cater to numerous e-commerce demands.
Future Outlook and trends
Based on the overall market performance of 2017, analyst reports and murmurs in the industry, Watanabe confidently predicts that the upward trend will continue until the end of the year – at least. As for 2018, he admits that there is a hope that the good fortune will spill on into the new year, especially with the growing demand for e-commerce, but realistically it is difficult to say. “In preparation, all we can do is closely monitor the market, and be prepared to act quickly in light of even the slightest change in the market.”
And with every opportunity for growth, comes the looming possibility of ever present challenges. Not wanting to delve into speculations over market challenges, Watanabe instead talks about the challenges NCA is currently facing. The most pressing being the additional slot constraints in high demand markets such as Hong Kong International Airport and Shanghai Pudong International Airport, due to infrastructure limitations. To overcome this issue, NCA will be increasing flight frequency into Taiwan’s Taoyuan International Airport, especially during the peak periods.
As it stands, there are no plans for fleet expansion in NCA’s foreseeable future. As an alternative, the aim is for higher utilization of the current fleet which comprises of 13 B747F aircraft. Watanabe reiterates the carriers plan to increase transpacific flights by at least 20 per cent taking them from 25 weekly flights to approximately 30 by the year 2020. “We have plans to expand our services and explore new areas, namely in Africa, South America, Middle-East and India. These plans can now become a reality, under our partnership with Atlas,” he added.
It is clear to see that the Japanese carrier has its basis covered and is going into its 33rd year of operations ready to realize its vision of becoming the biggest main deck provider serving the transpacific route.
