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Air Macau Cargo

Air Macau Cargo. The Challenges a Regional Air Cargo Faces. The Crew on Broad. Our Captain Shwu-Min Horng, Ph.D. 洪叔民博士 Expertise: Supply Chain Management, Operations Research Applications, Production Management, Systems Simulation and Analysis Our Crew Betty Wu 94933001

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Air Macau Cargo

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  1. Air Macau Cargo The Challenges a Regional Air Cargo Faces

  2. The Crew on Broad • Our Captain • Shwu-Min Horng, Ph.D.洪叔民博士 • Expertise: Supply Chain Management, Operations Research Applications, Production Management, Systems Simulation and Analysis • Our Crew • Betty Wu 94933001 • Charles Ok 94933027 • Cathy Chan 94933015 • Dennis Lin 94933023 • Joyce Liu 94933013 • Misha Lin 94933018 -1-

  3. Flying Route of Today • Air Cargo Industry • Air Macau's Overview and History • Cross Straight Air Cargo • Competition • Action to Launch and Challenges and Options • Implementation and Conclusion -2-

  4. Air Cargo Industry BackgroundIndustry History • Debut: November 1910, a department store shipped a bolt of silk by air from Dayton to Columbus, Ohio. • The advantage of air cargo never changed: Quickest means of goods transporting & fewest goods on hand. • Air cargo industry blossomed from 1927 (45,859 pounds) to 1931 (1 million pounds). • 1st all-cargo flight: United Airlines, December 23, 1940. • 1st dedicated air cargo company: Air Cargo, Inc, March 14, 1941. -3-

  5. Air Cargo Industry BackgroundIndustry History • Federal Express, founded April 1973,started making air cargo a professional and profitable industry. • Players nowadays: • International cargo integrated companies, FedEx… • Small regional operators, OCS Air Cargo… • Passenger airlines’ independent cargo divisions. Air Macau… -4-

  6. Air Cargo Industry Background2004 Industry Outlook • Air cargo: The early indicator of economic recovery and rise. • 2 engines of 2004 and beyond: • Asian air cargo traffic: a growth of 4.3% in 2003 and 14.6% for the first six months of 2004. • Latin American traffic: nearly 20% growth for the first half of 2004. • China’s rise as a high-tech goods’ world factory • Air cargo’s superior advantage to high-tech sector. • Raw material in, finished goods out. • Cargo operations reported positive results in 2003, continued into 2004. -5-

  7. Air Cargo Industry BackgroundSupply Chain • Customers • Forwarder, Shipper, Consignee, Government, Company Cargo, Mail Expresser • Suppliers • Freighter and crew members • Boeing, Airbus, brokers • Leasing company: Wet Lease, Dry Lease • Fuel suppliers: Not cost concern predominant • Ground operation: Self-trained or outsourced -6-

  8. 脣齒相依 Lip and Teeth can’t live without each other Air Cargo Industry BackgroundBusiness Process • Forwarders to carriers: Not only customer, more like partner together to make business happen. -7-

  9. Air Cargo Industry BackgroundAir Cargo Success Factors • External Factors • Fuel Price: Break-even point at US$60/barrel crude oil. • Macroeconomics, government regulation, global security, global politics, and industry migrations • Bad news: Carriers can do very limited about the external factors. • Good news: Everybody’s the same • Internal Factors • Customer relationship • Product differentiation • Route design • Transit capability • Time slot • Service excellence -8-

  10. Air Macau Overview Company Background • Formed in November, 1995 with a formal registration capital of $400M Macau dollars ( around USD$50M ) • Complex Shareholder Structure – -9-

  11. Air Macau OverviewThe Cargo Business • Started on December, 1995 the first cargo transportation from Macau to Taipei • Before year 2002, using belly cargo to leverage its cargo business with limited capacity ( one ton only ) • Oct, 2002, first 727 flight with 20 tons capacity started cargo service from Taipei to Shenzhen via Macau • In 2004, the first AB4 freighter was leased and added into service as a replacement of the 727 -10-

  12. U-Freight Air Macau OverviewCustomer Distribution -11-

  13. Air Macau OverviewMajor Suppliers • Freighter leasing company • Adopt wet-lease ACMI model ( Aircraft, crew, maintenance and insurance ) • Fuel and ground operation provider • Fuel supplier in Taiwan is Chinese Petroleum Corp. at $40+ per barrel • Ground operation service is Tao Yuan International Airport Service and China Airlines Service -12-

  14. CEO Cargo VP (Macau HQ) Reservation -Manager- (Macau HQ) Cargo Service -Manager- (Macau HQ) Marketing & Sales -Manager- (Macau HQ) Branch Cargo Operations -GM- (TPE, MFM, PVG) Air Macau OverviewThe Team: Taipei Branch • Organization • David Fei on board as Air Macau CEO on Oct. 2003. • Developed TPE to PVG cargo business route aim at IT industry • William Teng joined Taiwan Air Macau Cargo Division on May 2004 -13-

  15. Cross Strait Air Cargo MarketTaiwan’s Air Cargo Market • 1970s~1980s • Golden days of Taiwan’s air cargo business. Taiwan exported loads of fresh foods to Japan, OEM goods to US & Europe. • 1990 onward • Due to the rise of China, Taiwan began to ship high-valued electronic components to Chinese factories for assembly. -14-

  16. Cross Strait Air Cargo MarketTaiwanese Ventures in China • Major clusters of Taiwanese ventures in China • Yangtze River Delta: hub of IT industries • Pearl River Delta: center of labor-intensive industries, e.g. shoe, textile, furniture manufacturers -15-

  17. Cross Strait Air Cargo MarketTaiwan Import/Export Ranking 2003 • China and Hong Kong markets ranked No.3 & No. 4 in Taiwan -16-

  18. Cross Strait Air Cargo MarketRestrictions for Air Cargo in Taiwan • Despite the huge demand for air cargo across the strait, no direct links are allowed due to Taiwanese government regulations • All flights across Taiwan Strait must bypass a third destination, either Hong Kong or Macau • Transit via Hong Kong • China Airlines, Cathay Pacific Airways, EVA Air, Dragonair • Transit via Macau • Air Macau only -17-

  19. CompetitionCompetitors • Direct Competitors • China Airlines, Cathay Pacific Airways, EVA Air • Fiercest – Dragonair • Indirect Competitors • DHL, FedEx, UPS, forwarder, and Sea Cargo (EVA) Similar flying distance Both long/ short haul service -18-

  20. CompetitionMain Competitive Advantages • Time • Earliest landing time slot in Shanghai Pudong Airport • A latter cut off time for customers • Price • Medium to low pricing strategy • Service • One plane with 30-minute stop time (for focus on regional service) • Short term hard-block strategy -19-

  21. Challenges and OptionsChallenges • Direct flight between Taiwan and mainland may reduce the current merits of Air Macau • Merge and cooperation of competitors may increase threat to current market share of Air Macau • High end and high value products (relatively light weight) by aircargo , and bulky cargo by sea. Thus, growth of air cargo is slowing down -20-

  22. Challenges and OptionsChallenges • Growth and Profit of Air Macau are constrained by talent shortage as well as forwarder’s own chartering freighter Forwarder’s big power, to charter own freighter Forwarder Slim budget for recruiting talents Growth and Profit Time -21-

  23. Challenges and OptionsOptions for Future • What is best strategy for Air Macau in 2005 ? • Current Strategy ? • Combination? • Totally different • from the left ? -22-

  24. Teaching Notes for Air Macau Case -24-

  25. Thank You!

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