PETALING JAYA: Transmile Group Bhd is a step closer to enhancing its earnings stream after securing a contract to lease aircraft to Air Hong Kong.
Sources in the cargo service industry said Transmile clinched the contract recently and some of its Boeing 727 planes had already started serving the route between Hong Kong and Beijing daily.
The contract is like an outsourcing activity. Transmile was leasing its aircraft and crew to Air Hong Kong to help the latter transport cargo between Hong Kong and Beijing, and vice versa, industry sources told StarBiz.
They said this was a lucrative part of the air cargo business for those with idle capacity, given the shortage of cargo planes worldwide. Also, aircraft owners need not worry about load factors.
The only dedicated freighter airline in Hong Kong, Air Hong Kong is 60:40 joint venture between Cathay Pacific and DHL Express.
Air Hong Kong is the only dedicated freighter airline in the territory
Air Hong Kong serves Bangkok, Penang, Singapore, Taipei, Narita, Kansai, Nagoya, Incheon, Shanghai and Beijing. DHL Express is Transmile's anchor customer, accounting for over 30% of its total cargo volume.
StarBiz learnt that China would be another major landing base for Transmile, besides Bangkok and Kuala Lumpur.
The company has the fifth freedom traffic rights between Shanghai and the United States as well as several cities in central and western China, such as Chongqing.
The landing rights in China, however, are still under-utilised, although they are expected to have huge potential given the ballooning export volume in the mainland.
Capacity restraint was indeed a hurdle that Transmile might have to overcome to ply between China and the United States, analysts said.
Transmile needs three of its four wide-body MD-11 aircraft to serve the KL-Hong Kong and Los Angeles route. Thus, it does not have extra capacity to start the long-haul flight from Shanghai to the United States and vice versa.
Analysts said one way to solve the problem was to lease aircraft from a third party or cut its not-so-profitable routes to free up capacity for the Shanghai-US sector.
Besides the MD-11, Transmile has nine Boeing 727s, three Boeing 737s and one Cessna Grand Caravan.
StarBiz also learnt that to turn the loss-making entity around, Transmile was trying to lease out space in its aircraft, which are usually not full on their return trip from the United States.
Industry players said it was common for air cargo carriers to return with half-empty aircraft from the United States.
Transmile’s newly appointed management is working out a roadmap to revive the company's earnings. Its share price tanked after the discovery of accounting irregularities in May.
The company had overstated its profit by a total RM662mil for the past three financial years.
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