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Home > Business/Finance > Diversified Services > Shipping & Logistics
Singapore Freight Transport Report Q1 2008
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After long negotiations, at the beginning of September it was announced that an alliance formed by
Singapore International Airlines (SIA) and its parent Temasek Holdings had acquired a 24% stake in
China Eastern Airlines in a HKD7.2bn (US$923mn) deal. Singapore Airlines chairman Stephen Lee
said he was confident the two airlines could help increase business for each other. The big attraction for
the Singapore-based company is to access China’s large and high-growth air travel market. In the first
half of 2007, Chinese airline passenger traffic grew by 17% and air freight volume was up by 15%. Under
existing Chinese laws, a foreign company like Singapore Airlines cannot hold more than 50% of a
national carrier like China Eastern. Analysts noted that Singapore Airlines must have considered how
much influence it could have on the management of China Eastern through a minority stake. While
Singapore Airlines is one of the world’s most profitable airline operators, its minority stakes in other
companies such as Air New Zealand and Virgin Atlantic have had mixed results. Chairman Lee said
‘the China Eastern investment is different in that we are going to participate in management. That is the
crucial difference’. Singapore Airlines would obtain two seats and Temasek one seat on an expanded 14-
seat China Eastern board. BMI’s newly-released Singapore Freight Transport Report concludes that led
by SIA, the country’s air freight volume will rise by an annual average of 10.4% throughout the five year
2008-2012 forecast period.
Our air-freight forecast is based on a number of factors. Our forecast for economic growth in 2008-2012
now stands at an annual average GDP increase of 4.9%. SIA has established itself as one of the world’s
most profitable airlines, and should benefit from the imminent introduction of the Airbus A380
superjumbo. The strategic move into China opens up new possibilities, while the budget airline sector is
also looking dynamic.
Maritime cargo growth will also be vigorous, expected to average 8.4% per annum in volume terms,
despite a growing competitive challenge from Chinese ports. Overall, we now expect average annual
growth in freight tonnage across all modes to total 5.7% in 2008-2012. With an aggregate score of 47,
Singapore scores well in the BMI freight Business Environment Rating for Asia Pacific, coming out
comfortably above the regional average of 44.5. Its strong points include low long-term political and
economic risk and a strong regulatory environment, as well as a moderate but healthy rate of
infrastructure growth.
For the 2008-2012 forecast period, we expect the transport and communications sector to continue
outpacing the economy as a whole in value terms. It will achieve average annual growth of 5.2%, versus
4.9% for overall GDP. The total value of transport and communications GDP will rise to US$22.9bn in
nominal terms by 2011, representing 12.1% of Singapore’s GDP.
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