The Malay Connection: Is Kuala Lumpur the next e-commerce gateway to China?

Finding capacity

Linking with connoisseurs of edible bird nests in foreign markets is one hurdle to overcome, but getting the product there in a timely, cost-effective matter can be quite another. Forwarders agree that regional intra-Asia freighter and belly capacity is adequate to meet current demand, but groan when it comes to long-distance sectors. “Out of KUL, we see a good balance of both freighter and passenger flights to support the demand in this region. For intra-Asia destinations, there are lots more choices,” said Li Wenjun, senior vice president for Asia-Pacific airfreight at DHL Global Forwarding.

“We have enough capacity for intra-regional, but not long-haul – especially to the U.S., where we still pay a premium rate for urgent cargo,” added Keong. Without a robust fleet of long-haul freighters calling to KUL, Keong says the demand and capacity are mismatched. “We need more long-haul space, but the aircraft are coming from China and not going to the USA and Europe.”

Li agreed that, for long-haul sectors to the U.S. and Europe, capacity is “limited.” Agility’s Strollo maintained that there were still options. “We work with our global airline partners to mitigate customer impacts in this area.”

Gulf carriers with widebody passenger flights into KUL have been able to compensate for KUL’s lack of long-haul capacity. But, moving forward, “trans-shipments through Middle Eastern airports could be a challenge,” said Li, particularly for urgent shipments and when widebody capacity out of SIN is just four hours from KUL by truck.

Freighters on stand by

Cargo carriers, meanwhile, are watching the DFTZ development closely for an inflection point that would warrant the launch of new flights.

Some sectors, particularly between China and KUL, are already showing signs of rapid growth. One relative newcomer to Kuala Lumpur is Wuhan-based Uni-Top Airlines, which serves KUL with weekly frequencies from Macau (MFM) and Shenzhen (SZX) airports in China. “These flights carry 90 percent e-commerce cargo,” said Kian. Uni-Top’s commercial department told Air Cargo World that, during the second half of 2017, cargo volumes carried between Shenzhen and Kuala Lumpur were up 112.5 percent, year-over-year.

David Su, chairman of YTO Express Airlines, said he expects commercial activity related to Kuala Lumpur’s DFTZ to attract new cargo flights. “In this case, importers and exporters will flock to the city, and carriers will follow.” As for whether or not YTO Express has plans to call to Kuala Lumpur, Su said the airline is well-positioned to do so. After all, he said, “Alibaba has 20 percent stake in YTO, so we’re the first choice to fly to KUL.”

As public-private partnerships strive to inject new activity into abandoned areas of Kuala Lumpur Airport through DFTZ initiatives, it remains to be seen if international carriers will respond to tweets and calls from the local logistics industry.

Su said he is convinced the eWTP can reshape Kuala Lumpur into an air cargo nexus. “Maybe Kuala Lumpur will be the e-commerce center of Southeast Asia, and then the financial center, because money flows through.” In time, it’s only natural for Kuala Lumpur to “become the transportation center as well, because that’s where we will fly.”

To this end, the building blocks are already in place, whether the e-commerce is in bird nests or biopharma. “Malaysia is in a good geographical location and would be ideally suited to take advantage of this,” said Strollo. With government support, “I believe these steps will bear fruit and allow Malaysia to move into a leading role in the region.”