Hong Kong Appetite for $100 Mangoes Boosts ANA Cargo: Freight
Stock Chart for ANA Holdings Inc (9202)
ANA Holdings Inc. (9202), Japan’s largest airline, is targeting Hong Kong’s appetite for next-day delivery of $100 mangoes and other food to boost its cargo as shipments of Panasonic Corp. (6752) and Sony Corp. televisions slump.
Hong Kong, the biggest destination for food and live animals exported by air from Japan, is buying more Japanese beef, oranges, cherries and other premium items as the number of rich in the city increases. Expanding demand is prompting the airline to add more cargo flights in the region.
ANA is speeding up the transportation of farm goods by avoiding Tokyo and using its cargo hub in Okinawa in southern Japan. Rising exports of food and other perishables is helping the carrier withstand a slump in the shipment of electronics as Sony (6758) and other Japanese companies pare domestic manufacturing.
“Japanese seasonal fruits have a reputation for high quality in Asian countries,”Akira Okada, ANA’s cargo head, said in an interview in Tokyo. “In the future we want to be able to provide next-day delivery to the Chinese mainland as well. There are a lot of rich people in China.”
The nation’s exports of food and live animals by planes almost doubled in value in the past decade to 36 billion yen ($360 million) last year, from 19 billion yen in 2002, according to figures from Japan Customs. Hong Kong is the biggest importer, with 20 billion yen in purchases last year.
In comparison, television shipments by air have slumped, with about 661,000 units sent overseas last year from 2.5 million in 2002, according to Japan Customs. Japanese companies have reduced or stopped TV production in the country as they strive to cut costs and stem losses amid increasing competition.
In 2009, Sony closed a factory that made monitors and projectors in Ichinomiya while Panasonic cut its investment in two flat-panel factories at home. Hitachi Ltd. ended its television manufacturing last year and Toshiba Corp. has also stopped domestic TV production.
Oranges from Ehime prefecture, western Japan, sell for HK$338 ($44) for 1.2 kilograms (2.6 pounds) on Yahoo! Hong Kong Ltd.’s website, while up to 700 grams of grapes from Kagawa prefecture, western Japan, are priced at HK$458. Customers are also paying up to 10,000 yen each for mangoes from Kyushu, southern Japan, Okada said.
Miyazaki prefecture, in southern Japan, started growing mangoes in 1985 when a group of eight farmers got together to try and grow the fruit outside of Okinawa for the first time, according to the local government.
They have since expanded production to more than 1,000 tons annually, according to the Bank of Japan. The most expensive variety called “Egg of the Sun” has sugar levels of 15 percent or higher and weighs 350 grams or more, according to Miyazaki City’s website.
“ANA is doing a good job in trying to add value to its cargo service by using its Okinawa hub,” said Ryota Himeno, an analyst at Barclays Securities Japan Ltd. “It’s a tough market for air freight.”
The Asia Pacific region has had the sharpest decline in air freight this year, with volumes down 3.2 percent in the year through May, according to the International Air Transport Association. That compares with a 0.5 percent drop globally. In Japan’s air cargo market, goods worth 16 trillion yen are shipped overseas annually, according to Japan Customs.
ANA, based in Tokyo, opened its cargo hub in Naha, Okinawa in 2009, putting it two hours closer to Hong Kong by plane than Tokyo. Demand is getting a boost after the number of millionaires in Hong Kong jumped 36 percent to 114,000 last year.
“What used to take two or three days, we can now do in one,” Okada said on July 4. “Professionals are able to spot the fruits that will ripen the next day and send them straight to consumer.”
Since ANA’s hub opened, Naha, Japan’s fourth-biggest cargo airport, has experienced a surge in air freight. Cargo passing through the facility rose 57 percent to almost 360,000 tons in the year ended March 2012, from about 230,000 tons three years earlier, according to the nation’s transport ministry.
The amount of international cargo that ANA handles at the airport is about equal to the total overseas freight passing through Naha, said Megumi Tezuka, a spokeswoman at ANA. She declined to give a breakdown or costs for building the hub.
The carrier also serves Seoul, Shanghai, Taipei and Bangkok with direct cargo flights from the Okinawa hub. It will start flights to Qingdao, China, in August and may add flights to Vietnam, Indonesia or the Philippines when it gets its 10th cargo plane by the end of the March, Okada said.
Eventually, ANA plans to increase its fleet of cargo-only planes to 13, Okada said, declining to specify a timeframe. The carrier currently operates Boeing Co. 767 freighters.
Nippon Cargo flies to North America and Europe, as well as other Asian cities from Tokyo and Osaka and Kitakyushu in western Japan, according to its website. The carrier doesn’t have a hub in Okinawa. The main area of sales for the company is North America, said Kana Tsuchida, a spokeswoman.
Japan Airlines Co. (9201), the nation’s second-largest airline, closed down its freighter-only cargo business in 2010, when it was going through bankruptcy restructuring. The carrier now transports cargo in the bellies of passenger planes.
ANA’s cargo unit had 119 billion yen in sales in the 12 months ended March 2013, compared with 121 billion yen a year earlier, according to the company. Freight accounted for 8 percent of its sales in the period.
“Japan’s manufacturers have already moved overseas,” Okada said. “We want to see agriculture become a new manufacturing industry.”
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