Q: How long have you both been in your roles?
Son: I’ve just celebrated my 20th anniversary with Cathay Pacific. When I joined, we didn’t have a cargo team, and the mission from the Vietnam Country Manager at the time was to set up the cargo department. After 19 years, it’s become a very big team in South East Asia and the top team in terms of revenue in the region. The top two ports in the region are always Ho Chi Minh City and Hanoi. We’ve been lucky to have grown along with Vietnam’s economy. When I started the cargo department, our revenue was tiny, but after 19 years Vietnam accounts for more than 40 per cent of the total revenue for South East Asia.
Jason: I have been here for about six months, and I manage around 90 people in both countries including the cargo teams, but I am based in Ho Chi Minh. The team has impressed me from the start – they are really resilient and have a strong urge to learn new and best practices from around the world in terms of cargo.
Q: What are the cultural and economic differences between Vietnam and Cambodia in terms of the business?
Son: I think that the culture here in Vietnam is more influenced by the Chinese mainland, but Cambodia is more influenced by India and Thailand. But I would say that Cambodia’s economy is more influenced by China now – and less so in Vietnam.
Jason: I think Cambodia is at a different stage of its development. It has just started to boom, but it may be around 10 to 15 years behind Vietnam in terms of its development journey. That means at this point that the infrastructure in Cambodia doesn’t support the business as readily as in Vietnam, but that is changing all the time as it catches up. So I would say that at the moment they’re very different countries to operate in, and they’re also not particularly aligned with each other in cultural terms.
Q: What are the main flows and shipments?
Son: North America is our biggest destination market for shipments from Vietnam. It accounts for just over 50 per cent, followed by Europe, and then Japan, Korea and the Chinese mainland. In terms of commodities, the biggest item is mobile phones, followed by general cargo, particularly shoes and garments. One of our big items is shipping garments to Rickenbacker Airport in Columbus, Ohio, for a high-end garment brand in the US.
Generally speaking, Vietnam manufactures shoes for two of the biggest sportswear makers. Samsung also produces around 10 million phones every month in Vietnam.
In terms of perishables, we ship fresh tuna, dragon fruit, lychees and flowers. Our dragon fruit is the best in the world, and this is the sort of niche market we can develop.
For Cambodia, our main shipments are garments and footwear, at around an 80 per cent-20 per cent split. The main destination is Europe, because all products made in Cambodia are exempt on import tax in Europe. So a number of the main high street stores there produce their items in Cambodia.
Q: How is the business going in the light of the macro economic slowdown?
Son: I think in the past 19 years, we have only had one year of negative growth in Vietnam. All the other years usually saw double-digit growth. But the pace is slower because we are at the same capacity, and we can’t expect that yield will grow.
Q: What’s the outlook?
Son: Hopefully we can keep growing in 2020 if we have more capacity. Load factors are now very high, so the only way to increase the revenue is to either increase the yield or increase the tonnage – but the tonnage is reliant on capacity. The yield relies on the market, so the controllable factor is the capacity. Therefore, we want to inject more capacity into the Vietnam market with the expectation that the market is still growing.
Jason: From my perspective, managing capacity is the key for cargo, because unlike the passenger side, you can’t stimulate demand by lowering the price. You don’t ask the factory to produce more just because you are selling space for less. So it’s very important that we’re agile and work with the head office to get extra capacity when the demand is there. We have a mix of passenger aircraft and freighters, and we also have the flexibility with these planes. For example, in Ho Chi Minh we can switch from Airbus A350s and A330s to Boeing 777s on our passenger side, while from Hanoi we can switch from narrow-body to wide-body aircraft. This offers us the flexibility to meet the demand as and when required.
Q: How you keep up with the needs of the local market?
Son: We’re out there all the time speaking to shippers and forwarders. The market changes very quickly and constantly. In the past, we said that it changed every half-year or so – now it’s changing every week. Five years ago, we used historical data to predict future market trends, but that kind of data is almost useless now. That’s just the type of the market we’re in.
Jason: As the country manager, one thing that I see with the Vietnam team, especially on the cargo side, is a lot of ownership on the job. They really take joy and pride in filling the whole freighter, even if that keeps them late in the office. I find that very impressive.
Son: We have very interesting practices in Vietnam. Our sales team work along with the service side, so they actually do some operational work. They need to get the licence and will actually do some shifts on the freight side when they first start working. In Vietnam, we need to know our products before we can sell them. That makes our sales team more professional than other carriers in the country, and that has helped to build our name here.