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Sea-air freight model an opportunity to uplift Singapore as a transport hub: Experts

Sea-air freight model an opportunity to uplift Singapore as a transport hub: Experts

A tugboat pulls a container vessel out of a port in Singapore on Aug 17, 2020. (Photo: AFP/Roslan Rahman)

SINGAPORE: The aviation and maritime industries in Singapore are looking to develop their sea-air transshipment abilities, in order to capitalise on growth areas that have emerged from the global pandemic. 

This method of shipping is a multimodal approach, where part of the journey is undertaken by sea, and the other by air.

Industry players say it may be an opportunity for Singapore to retain its hub status, which has taken a massive hit with the COVID-19 pandemic closing international borders.

Minister for Transport Ong Ye Kung said in late July that the country cannot take “for granted” that Singapore will remain an aviation hub when COVID-19 is over. 

In his ministry's addendum to the President’s Address on Aug 27, Mr Ong said that while the maritime sector has stayed “relatively resilient” during the pandemic, air travel has been “decimated”.

READ: Reviving Singapore's air hub safely is transport ministry's 'top and immediate priority'

CLOSED BORDERS, HIGH-PRIORITY CARGO

With international borders closed, passenger movements at Changi Airport fell drastically. In February, passenger movements fell 32.8 per cent from a year earlier. By April, the drop had increased to 99.5 per cent and latest figures in July put it at 98.5 per cent lower than the same period last year.

Air freight movements have also taken a hit. Latest data for July by Changi Airport put it at 30.1 per cent lower than the same month last year.

Before the COVID-19 pandemic struck, half the world's air freight was carried in the bellies of passenger planes. With fewer passenger flights in the air, and only about 2,000 dedicated freighters in the world, less cargo can be moved around. 

The air cargo capacity constraint means there has been a shift toward high-priority cargo, said airport ground handler SATS.

SATS president and CEO Alex Hungate said that delivery of perishable food items have remained resilient, but the two categories that have grown most are e-commerce and medical supplies.

“E-commerce has grown about 20 per cent since last year, as a category, and then medical supplies including pharmaceuticals has grown about 16 per cent,” said Mr Hungate. 

“We’re all now wearing face masks and other protective equipment if we’re in the front line jobs.”

READ: Scoot modifies A320 aircraft, removing passenger seats to double cargo capacity

SPECIAL HANDLING OF COVID-19 VACCINES

One medical supply Mr Hungate is looking forward to moving in future is a COVID-19 vaccine - when it is ready.

SATS has a temperature-controlled facility called Coolport, which allows for temperature-sensitive products - such as vaccines - to be moved by sea and air, making Singapore one of the few places in the world ready to handle the vaccine. 

“Some vaccines are highly temperature sensitive, so they only live if they stay between about 8 degrees Celsius to 12 degrees Celsius. So that four degree range means that you’ve got to have the highest standards of handling,” said Mr Hungate. 

Mr Hungate added that SATS Coolport was certified as the world's first Centre of Excellence in Pharmaceutical Handling by the International Air Transport Association (IATA).

"That means we’ve managed to attract a lot of those medical, temperature-sensitive cargo through into Singapore from other potential hubs that compete with Singapore,” he added.

In addition to medical cargo, SATS Coolport is also equipped to handle other temperature-sensitive products.

In 2017, it became the first in the world to receive approval from the European Union to break down and handle meat from New Zealand on its way to Europe.

“If you were shipping meat from New Zealand to Europe, you would either have to go entirely by air or entirely by sea, because the European Union would not allow the meat to be unpacked and repacked anywhere except in New Zealand itself and upon arrival in Europe,” said Mr Hungate.

The stamp of approval is a recognition of high standards of handling. “They recognise that it’s done with the right quality standards (such) that they allow the breakdown of the cargo to occur outside of either New Zealand or Europe,” said Mr Hungate.

Sea-air transshipment is also particularly suited for micro-electronics and advanced manufacturing products, said SATS.

(Photo: Singapore Airlines Cargo)

BUILDING ON ADVANTAGES

Ms Ngai Simin of travel data and analytics firm Cirium Dashboard said that the aviation industry should look into ways to ride on Singapore’s maritime reputation.

“The reputation Singapore has when it comes to being a transshipment hub and having the world class kind of efficiency that always delivers … We have a very well-developed and large port in terms of handling capacity,” said Ms Ngai. 

“What will really tie sea freight and air freight for Singapore is (that) we are a very developed nation with very good road networks," she added.

READ: COVID-19 grounded thousands of planes. Here’s what happens to them

With such advantages, government agencies are exploring how Singapore can be a hub for perishable items.

A hybrid freight model of air and sea allows for a quick transit time and for the cargo to reach customers in a timely manner, particularly for chilled products, said Ms Tan Beng Tee, assistant chief executive for development at the Maritime and Port Authority of Singapore.

Ms Tan added that various government agencies are working closely together to develop sea-air transshipment.

Enterprise Singapore added that burgeoning business to consumer e-commerce growth has led to higher consumer demand and expectation for more timely, efficient and lower-cost delivery options. 

There could be a trickle-down effect to the rest of the industry, as ESG said logistics companies that can provide end-to-end solutions will be better poised to capture such opportunities.

Companies such as ALEX Fulfilment hope to ride that wave.

The logistics and delivery company said demand for e-commerce warehousing and delivery services has increased by 60 per cent since the start of the pandemic.

“We had a lot of companies that traditionally did not focus a lot on selling their products online, suddenly put a lot of emphasis onto either upgrading their own website, their own marketplace, or getting onto the traditional marketplaces like Lazada, RedMart and all that,” said Mr Rodney Ee, managing director of ALEX Fulfilment. 

“That basically required a lot more logistics services in terms of the deliveries, and also in terms of the warehousing."

READ: Commentary - E-commerce is set to boom, driven by COVID-19​​​​​​​

WHY NOW

Sea-air transshipment has typically not been a common option as the two methods have their own distinct advantages.

Air freight is much faster and direct as planes travel point-to-point, so high-value goods tend to move by air.

Statistics published by the IATA before the pandemic showed that while air cargo accounted for only about 1 per cent of world trade shipments by volume, it represented 35 per cent of global trade in terms of value.

Conversely, sea freight carried 90 per cent of the world’s trade volume, according to the International Chamber of Shipping, with the last 9 per cent carried over land. However, it is a much slower option.

But as a result of global supply chain disruptions due to the pandemic, the demand for multimodal transshipment has increased.

Enterprise Singapore said it is seeing more logistics operators diversify their choice of transport. 

“More industry players have started to leverage on multimodal transshipments (air-sea, sea-air), or alternative trade routes to ensure continued flow of goods,” said a spokesperson.

The gap between air and sea rates has also widened in recent months, providing an opportunity for sea-air shipments.

“In April and May, at the peak of the constraint of flights, the cost for air freight went up 10 times its normal rate," said SATS' Mr Hungate.

"The gap between the air freight cost and the maritime cost can be something like 20 to one, and therefore there’s an enormous opportunity in the middle of the 20-times price for shippers to look at, using a combination of air and sea,” he added.

READ: Commentary: COVID-19 makes waves for international shipping

WHAT NEEDS TO BE DONE

Industry players and government agencies said more needs to be done for the aviation and maritime industries to be able to collaborate seamlessly.

“The transfer between sea and air is not efficient enough. Because they each speak their separate languages – there’s the maritime units, and then there’s the aviation units – and they each have different ways of pricing and charging the shipper,” said Mr Hungate. 

He added that SATS is working on a digital solution with port operator PSA.

“We’re creating interfaces which will allow the shippers to track through the airport to the prime mover on the ground, who will have to truck the goods from Changi down to PSA and then onto the ships. And so, we believe that is an opportunity for Singapore in this disrupted world that we will need to accelerate together.”

Enterprise Singapore said technology has improved supply chain flows and efficiency by optimising the movement of cargo shipments.

But for Singapore to reach its full sea-air transshipment potential, Singapore’s air connectivity must return.

“In the case of sea, we’ve got 200 shipping lines that connects us to 600 ports, that’s a very vast network of connectivity ... If we tie it with air connectivity, that will give us a very comprehensive network,” said MPA’s Ms Tan.

But until passenger flights take off again, said SATS' Mr Hungate, Singapore's maritime and aviation hub status may remain shaky. 

"At these much lower volumes, the connectivity available in Changi is not sufficient to attract the flows. Just as a passenger, you don’t want to have a long layover in a transit point before you have to catch your connecting flight. It’s the same for shippers – they don’t want their cargo to have long layovers,” said Mr Hungate. 

"So we need more flights, we need to get back up to the critical mass of connectivity through the airport that will make this a vibrant hub again," he added.

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Source: CNA/nh/aj

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