June, 2009 Volume 12, Number 5

INTERNATIONAL EDITION

JUNE 2009

Japan’s Gateway Challenges Leading Lights Revealed The EU’s New Keystone Project5 6/9/06 9:08 AM Page 1 editorial Face Time With A PDA?

espite the CFO arguing that cell phones, PDAs, email and teleconferencing (with or without Skype), are a great way to build relationships at little or not cost, apparently we still want to meet face to face. D Of course if you work for an airline or freight forwarder, chances are you won’t have to sit in Economy, let alone pay for the dubious prospect. So that’s an incen- tive to take your shoes off for the TSA or its local counterpart. With 47,500 visitors to Transport Logistic 2009 in Munich last month, the organizers Messe München International must have wondered: what recession? While the majority of attendees were able to Autobahn it to the vast trade halls or hop a U Bahn ride from Munich’s train station, 32 percent actually arrived from outside the country. Slightly more than in the “logistics boom year” of 2007. Simon Keeble The multilingual buzz from the rotating snack and chat of 1,760 exhibitors from 55 coun- [email protected] tries was not lost on Lufthansa Cargo’s Product & Sales Director Dr. Andreas Otto, ““When I see how many customers are here and above all who is here, and how much positive energy there is around, then I am already certain that this has been a worthwhile investment.” And while Lufthansa had a sizeable stand well located in the Air Cargo Hall, it was dwarfed by a two-storey DHL erection some 60 meters away that was large “there’s nothing enough to support a tropical rain forest in the middle of quite like human it — complete with a ‘Go Green’ logo. And over the way in yet another emporium were intercourse” admirably huge Kuehne + Nagel and Panalpina exhibits that competed with a host of other German logistics providers including Dachser, Hellmann and Rhenus — whose Chairman Klemens Rethmann summed up the argument against doing it by video saying, “We really enjoyed the time at Transport Logistic because for a change, we heard nothing about the crisis here. The trade fair is a great platform for intensifying con- tacts, forging new ones and getting to know new customers. And very productive business can result from that.” Well the Russians should know. Since the breakup of Aeroflot, newly minted operators of AN 124s and IL 76s have been ubiquitous suppliers of outsize ad hoc capacity to and from emerging markets worldwide. So this year’s Transport Logistic was an easy “must attend” decision. Just about anybody and everybody from the world’s multimodal logistics supply side seemed, in Munich, to have ignored the blandishments of their budget watchdogs and decided that there’s nothing quite like human intercourse to develop trust.

Try doing that with a PDA.

ACW JUNE 2009 1 viewpoint

Navigating Troubled Economic Waters

eing of Portuguese descent, I recently asked our employees for suggestions am always proud of my legacy on how we could better control cost, improve as some of history’s greatest service and increase revenue. From the many navigators (Ferdinand Magellan, great suggestions submitted, several have Bartholomeu Dias and Vasco da been implemented - giving our employees a Gama to name a few). direct hand in our continued success. BThese great navigators were also great leaders and understood that to be success- Internal Business Process: Monitor- ful in their quest they needed to know where ing enables us to know how well we’re doing. they were and where they were going. With a slow economy, it is not only important They also understood that to be successful to continue to monitor process metrics, but they must balance the needs of their crew, change them as warranted to be efficient, in- maintain the performance of their ship and novative and relevant to customer needs. deliver results to the people that invested in their mission. Maintaining this balance and Customers: It is critical to continuously staying focused on where they were going survey customer satisfaction and use the Paul Martins is Senior could often be difficult when facing unchar- results to improve customer relations. We Vice President, Sales and tered or turbulent waters. constantly look to create and grow true part- Marketing for Towne Air Our situation in today’s economy is very nerships and adopt products and services Freight. A 25-year industry similar to that of history’s great navigators that will take the relationship from one based veteran and former Direc- as we face unprecedented challenges to our solely on price, to one of customer intimacy. tor of UPS Air Cargo and UPS Air Charter Service, he business. is a graduate of the New It’s easy to lose focus and deviate from a Financial: In dire economic times, it England Conservatory in course we know to be our true North. is necessary to maintain the confidence of Boston, MA. How many companies are quick to slash shareholders by practicing conservative personnel, forego operational process im- financial management and maintaining a provements or just cut prices to maintain philosophy of continued growth. Economic customers and provide their shareholders downturns have occurred before and will with some level of revenue growth - even if it occur again, but successful companies un- is only top line revenue growth? derstand the need to diversify, invest in new I believe the key to business success lies in technology and add capabilities to grow their keeping four critical elements in balance — revenue. People Development, Internal Business Pro- cess, Customers and Financial. With so much to distract our attention in today’s troubled waters, it is up to us as lead- People Development: Communication ers to keep a watchful eye over the scorecard is essential. Employees are scared, but more in its entirety and serve as modern-day navi- importantly, they are eager to know what they gators within our organizations. can do to help the company succeed. We must continue to seek our true North, Keeping them abreast of how the company to challenge our crews to right the ship when is doing, detailing specific expectations and it becomes unbalanced, and guide our mission encouraging positive attitudes is crucial. We successfully to shore. ACW

2 JUNE 2009 ACW June, 2009 Volume 12, Number 5

ontents EDITOR Simon Keeble [email protected]

TEL: (704) 237-3317 High Performance ASSOCIATE EDITOR Trish Williams 16Indicators [email protected] Tel: (301) 312-6810 Seabury survey highlights keys to CONTRIBUTING EDITORS success. Roger Turney, Ian Putzger CONTRIBUTORS Douglas Nelms, Peter Conway COLUMNISTS Leadership Profiles Paul Forster, Brandon Fried 16 24Trish Williams talks to some industry ART & PRODUCTION DIRECTOR Central Communications Group names. [email protected] PUBLISHER Steve Prince Turkey Takes A Turn [email protected] ASSISTANT TO PUBLISHER 29 As the country bridges an energy divide. Susan Addy 29 [email protected] • (770) 642-9170 DISPLAY ADVERTISING TRAFFIC COORDINATOR Linda Noga Japan’s Gateways [email protected] ADVERTISING/BUSINESS OFFICE 32Struggle to survive against declining 1080 Holcomb Bridge Rd., Roswell Summit Building 200, Suite 255, Roswell, GA 30076 volumes. (770) 642-9170 • Fax: (770) 642-9982 WORLDWIDE SALES U.S. Sales Hong Kong, Malaysia, Associate Publisher Singapore Pam Latty Joseph Yap (678) 775-3565 +65-6-337-6996 [email protected] [email protected] Europe, United Kingdom, Japan WORLD NEWS Middle East Masami Shimazaki David Collison [email protected] +44 192-381-7731 +81-42-372-2769 4 Americas [email protected] Thailand China Chower Narula Beijing Office| [email protected] 8 Europe Nancy Sun (Sun Junqin) +66-2-641-26938 [email protected] Taiwan ++86 10 5879 5885 Ye Chang 11 Middle East Shanghai Office [email protected] Isabella Hou (Hou Ying) +886 2-2378-2471 [email protected] Australia, New Zealand 12 Asia ++86 (21) 5116 8877 Fergus Maclagan Guangzhou/South China [email protected] Sherry Yuan +61-2-9460-4560 32 [email protected] Korea ++86 10-5879-5885, ext. 601 Mr. Jung-Won Suh +82-2785-8222 DEPARTMENTS [email protected]

1 Editorial 36 Bottom Line 37 Classifieds CUSTOMER SERVICE OR TO SUBSCRIBE:(866)624-4457 2 Viewpoint 38 People/Events 40 Forster’s Focus POSTMASTER: Send address change to: Air Cargo World 3025 Highland Pky Ste 200 Air Cargo World (ISSN 1933-1614) is published monthly by UBM Aviation. Editorial and production offices are at 1270 National Press Build- Downers Grove, IL 60515 ing, Washington, DC, 20045. Telephone: (202) 355-1172. Air Cargo World is a registered trademark of UBM Aviation©2009. Periodicals postage paid at Downers Grove, IL and at additional mailing offices. Subscription rates: 1 year, $58; 2 year $92; outside USA surface mail/1 year $78; 2 year For more information visit our website at $132; outside US air mail/1 year $118; 2 year $212. Single copies $10. Express Delivery Guide, Carrier Guide, Freight Forwarder Directory and Airport Direc www.aircargoworld.com tory single copies $14.95 domestic; $21.95 overseas. Microfilm copies are available from University Microfilms, 300 North Zeeb Road, Ann Arbor, MI 48106. Opinions expressed by authors and contributors are not necessarily those of the editors or publisher. Articles may not be reproduced in whole or part without the express written permission of the publisher. Air Cargo World is not responsible for unsolicited manuscripts, photographs or artwork. Please enclose a self-addressed envelope to guarantee that materials will be returned. Authorization to photocopy items for internal or personal use is granted by Air Cargo World, provided the base fee of $3 per page is paid directly to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, and provided the number of copies is less than 100. For authorization, contact CCC at (508) 750-8400. The Transactional Reporting Service fee code is: 0745-5100/96/$3.00. For those seeking 100 or more copies, please contact the magazine directly. POSTMASTER and subscriber services: Call or write to Air Cargo World, 3025 Highland Parkway Suite 200, Downers Grove, IL 60515; telephone 866-624-4457. ACW JUNE 2009 3 worldAMERICAS EUROPEnewsEUROPE ASIA MIDDLE EAST AFRICA

U.S. Transportation Policy Scheme Canada Deal To Open Up Gains Traction Americas? he drumbeat grew louder for a cohe- Tsive U.S. policy on transportation issues with Senate lawmakers introducing legislation that would make sweeping changes in surface transportation as a colleague made the case at a separate forum for a national transportation policy. “We need to look at a fundamental re- organization of how we address transportation issues,” Sen. Mark Warner (D-Va.) told a recent conference on infrastructure strategies sponsored by the US Depart- ment of Commerce and the US Depart- ment of Transportation. Calling the move “essential from a policy perspective,” Warner complained that the U.S. “simply cannot continue forward” under the current system where more than 100 federal transportation programs are he new air services agreement that came into effect in 2008. governed by a range of Congressional ment signed in Prague last Subsequent phases of the Cana- oversight. month between the EU and dian deal, however, go much further. Warner, a member of the Commerce, TCanada will allow European Unlike the current U.S. limit of 25 Science and Transportation Committee, cargo airlines to operate percent foreign ownership, Canada told the conference that he has a fuller from Canada to the U.S. or another initially will match the EU limit and appreciation for why members of Congress third country without restriction. allow 49 percent stakes. Eventually it cannot produce a national transporta- Equally, a Canadian airline will be will abolish the restriction for inves- tion policy. So many different lawmakers able to fly from Brussels to Brazil, tors completely. and Congressional panels have a say on Bangkok – or Birmingham, UK. In March this year, Canada enabled transportation policies it is difficult to have This may or may not be good news legislation to allow the 49 percent for- a unified position, said Warner, a former for Air Canada that reported a net loss eign ownership of Canadian airlines. business executive who also served as gov- of $400 million in the first quarter of According to the EU, this milestone ernor of Virginia. 2009 and a pension-funding deficit of triggers the possibility of EU Member Meanwhile, two Senate colleagues $2.8 billion. airlines operating cargo services from moved to introduce a national surface On the other side of the Atlantic, points within Canada to any point in transportation policy bill. They were Sen. Association of European Airlines the Americas. John D. Rockefeller, a Democrat from West (AEA) Secretary General Ulrich The EU estimates the new agree- Virginia, and Sen. Frank Lautenberg, a Schulte-Strathaus had no such wor- ment will earn airlines an additional Democrat from New Jersey. ries saying, “This is truly a ground- $98 million and provide more than In introducing the bill, Rockefeller said, breaking agreement. Recent develop- 1,000 extra jobs in the first year alone. “The United States’ population is projected ments have shown that you can have Schulte-Strathaus thinks the EU- to rise to 420 million people by 2050, a 50 a successful national identity without Canada deal will spotlight negotia- percent increase from the year 2000. This national ownership. In Canada, the EU tions on the current EU/U.S. air ac- growth will only exacerbate the conges- has found a partner that shares the cord. “The US call their agreement tion and mobility challenges that plague same confidence.” with the EU ‘Open Skies’”, he said, our national surface transportation system In the first phase, EU and Canadian “but the deal with Canada will rede- today. We need to establish a blueprint airlines will have unrestricted access fine what Open Skies really should be for a 21st century surface transportation to EU-Canada routes, with full pricing — a blueprint system.” ACW freedom, mirroring the EU-US agree- for air transport in a modern, con-

4 JUNE 2009 ACW AMERICAS EUROPE ASIA MIDDLE EAST AFRICA

nected world”. “Now, we all know that if the Euro- tion only to pull back opportunities, FedEx Corp. President and CEO pean Union pulls back rights, the U.S. “especially if we have essentially Fred Smith agrees saying U.S. and Eu- will do the same - and we will have invited them to do so through preser- ropean officials should press forward an all-out air trade war. That cannot vation of our own market barriers, “ with aviation liberalization and resist benefit anyone, especially not U.S. he adds. “All such barriers should be protectionism driven by the global carriers who provide international ser- torn down once and for all — or the recession. vices,” he said. benefit of all.” “Protectionism is tempting to politi- Mirroring the Canadian agreement, Speaking in Brussels, United’s CEO cal leaders when a market is shrinking the EU is pressing the U.S. to liberal- Glenn Tilton added, “This is hardly and an industry is hurting. Let’s give ize its airline ownership laws which the time for further protectionism” an advantage to our own players” is Schulte-Strathaus believes face “en- — alluding to proposed legislation by the thought. But for a global business trenched opposition” both in Congress U.S. House of Representatives Trans- like aviation, the open skies genie can- and parts of the industry. portation and Infrastructure Chair- not be put back in the bottle, at least Currently the U.S. has so called man James Oberstar that would place not without cost.” “open sky” air service arrangements greater limits on foreign ownership The FedEx chief’s comments take with 93 countries but some are al- and restrict commercial agreements – aim at moves in the U.S. Congress, ready moving to a more general agree- particularly code sharing. Last month where some lawmakers are propos- ment such as India and its all-cargo the EU announced it has begun an in- ing a rollback of liberalization. Such open skies policy. vestigation into the market dominance a retreat is “full of risk,” Smith said, FedEx has long favored a change of such alliances. noting that the Europeans could within air-carrier ownership laws but be- This prompted Virgin Atlantic’s draw provisions they granted in the lieves any market openings should be Chairman Richard Branson to de- first phase of the open skies agree- reciprocal and not unilateral. Smith nounce a proposed American Airlines/ ment if they dislike the level of new thinks the U.S. and its trading part- British Airways tie-up saying it would opportunities. ners have come too far on liberaliza- put his airline out of business. ACW

Cargoitalia To New York By Labor Day

lis-owned Cargoitalia now has its former AAlitalia, AWAS-leased, MD11 freighters on a three-year term. According to Roberto Gilardoni, the airline’s ex-DHL Commercial Director, as soon as the company gets its AOC for the U.S. and Canada it’ll begin twice-weekly rotations between Milan, New York, Toronto and Abu Dhabi. Probably in September because the company is still recruiting pilots and August isn’t far away. Cargolux is probably going to be a long-term player, Luf- Majority owner of Alis is Alcide Leali, part of the family thansa might pull its MD11 freighter out of Italy as soon that owns the Leali steel group. Leali founded regional air as the global market picks up and the carrier needs the carrier Air Dolomiti in 1989 and was so successful Luf- capacity elsewhere. thansa bought the company in 2003. However, with nobody forecasting a sudden surge After setting up Alis in 2007, last year Leali signed an in airfreight in the next three years, coupled with Luf- MOU with Airbus for five A330-200 freighters plus three thansa’s taking delivery of new B777 capacity, Cargoitalia options. At the time no date was given for delivery. Gi- might find the German carrier a permanent part of the lardoni, who hails from Brescia like his boss, suggests Milan landscape. that the three-year lease with AWAS will give Alis and Which may be Leali’s plan: Establish Cargoitalia with the Cargoitalia enough time to establish a market presence to backing of Italian forwarders and then sell out to Lufthansa fund the new Airbus fleet. in time to return the MD11s and for the arrival of the Gilardoni says he’s called on the top ten Italian forward- A330s. Maybe, as in the case of Air Dolomiti, he can even ers to tell them about his plans and ask for their support. get the German carrier to pay for the new equipment. But competition in the form of Cargolux and Lufthansa Meanwhile, The aircraft retain the Alitalia green strip will give the northern Italian market plenty of options both because, Gilardoni says, it would have cost too much in terms of price and service. Gilardoni thinks that while money to take it off. ACW

ACW JUNE 2009 5 AMERICAS EUROPE ASIA MIDDLE EAST AFRICA

Crandall said alliances add overhead to operational warders and logistics companies more infl uence on IN THE NEWS... costs and offer no functionality outside the interline the board and in the cargo security debate. IATA’s The Federal Aviation Administration and the system of years ago… United Airlines Chairman, recent statements in opposition to 100 percent National Air Traffi c Controllers Association President and CEO Glenn Tilton aired an opposing screening have been well-received within the signed an agreement last month aimed at ending view one week later, calling on regulators to industry, Fried said, “and we are looking forward to an ongoing contract dispute through extensive press ahead with liberalization. In a speech to the representing the interests of all air forwarders” in mediation sessions. The pact provides for media- European Aviation Club in Brussels, Tilton declared, preserving a risk-based approach to cargo security tion sessions and for binding resolution of any “this is hardly the time for further protectionism in worldwide… Los Angeles-based Mercury Air unresolved issues, guaranteeing a new collective our industry.” He noted that the airline industry Group Inc. has launched MAC Cargo Handling, bargaining agreement between the parties. “One has systematically failed to earn its cost of capital, LLC, a joint venture between its wholly owned of my highest priorities, since coming to DOT, has yet it is inhibited from managing itself as a true subsidiary, Mercury Air Cargo Inc., and three been to resolve this issue so that we can move global business, thereby unable to leverage costs veteran ground handling executives…Mercury forward to make our commercial aviation system and services. “We are, in fact, hamstrung by rules Air Cargo, the largest third-party cargo handler at even better than it already is,” said Transportation that hang onto inarguable historic misconceptions Los Angeles Airport, will merge its expertise with Secretary Ray LaHood. Jane Garvey, former the know-how of Anthony Bonino, Steve FAA Administrator, was named to lead the Ballard and Philip Scherer, to help airlines mediations…UPS has performed its last improve their bottom line and service DC-8 fl ight — from Philadelphia to Lou- levels, said a statement about the venture. isville. During the fi rst quarter of 2009 the The three men were formerly associated company took a charge of $181 million with Aeroground, Inc., a provider of to park the remaining aircraft of a once air cargo handling services at airports 44-strong fl eet. The DC-8s will be replaced in the U.S. and Canada that was sold to by the delivery of 27 new 767s in the next Menzies Aviation in May of 2006. MAC four years, as well as by existing 757s and Cargo Handling also plans to explore A300s…The Air Transport Association potential acquisitions and other strategic of America reported that passenger rev- opportunities, according to the company’s enue fell 18 percent in April 2009 versus statement… With the risk of global trade the same month in 2008 — the sixth barriers increasing due to protectionist consecutive month in which passenger revenue that do little but exacerbate industry problems.”… movements cropping up in virtually “all major has fallen from the prior year. Revenue declines The time to invest in people and technology is economies,” airfreight players should consider op- extended beyond the mainland United States to now for small- and medium- sized forwarders portunities in Canada, Mexico and intra-European the trans-Atlantic, trans-Pacifi c and Latin markets. that want to be well positioned in the market markets, one industry analyst says. “There is an Compounding the softening demand for travel, once the global economy rebounds, according to increased risk of protectionism in every major U.S. airlines saw cargo traffi c — as measured Thomas Huchler, vice president, USA Southeast and economy. We’re seeing it in the United States, in by revenue ton miles — decline 21 percent year Southwest, Emo Trans Inc. “Right now is the time Europe and Asia,” Benjamin Gordon, founder and over year in March 2009, matching the decline to penetrate the market,” Huchler told industry of- managing director of BG Strategic Advisors, measured in January and February and marking fi cials at the CNS Partnership Conference. Huchler told air cargo offi cials at the CNS Conference. But the eighth consecutive month of declining cargo said one way his company is taking advantage of while trade drops off in some regions, he said, traffi c, ATA said. Notably, cargo traffi c in the Pacifi c the downturn is by securing talent that would not that could be good news for “short tail supply” region fell 28 percent. “The latest reports show the be on hand in a more robust market. “There are between the United States and Canada and the scope and depth of the recession’s continued toll a lot of good people out on the street that have United States and Mexico. But even with a rising on commercial aviation. The industry is seeing less been let go by competitors,” he said, noting that tide of protectionism, “it doesn’t have to be all bad demand in the cabin, as well as in the cargo holds the New York-based freight forwarder’s strategy news if you are a couple of steps ahead.”… Wal- — clear signs of the widespread slowdown in is to ensure “we have our wings and people out Mart Canada announced will invest $115 million global economic activity,” said ATA President and there” to exploit any and all opportunities during to build a distribution center in Balzac, Alberta. CEO James C. May… Former American Airlines the decline. “My growth opportunities in this The company said that the center will be 400,000 leader Robert Crandall ruled out consolidation and market are enormous,” he said. Huchler said his square feet and serve as a distribution hub for international alliances as fi xes for the problems company is also taking steps to slash costs includ- fresh food destined for Wal-Mart stores in western facing many U.S. carriers, saying U.S. policy makers ing salary freezes and lease renegotiations…The Canada. Construction of the Balzac distribution should instead take steps to ensure the health of Airforwarders Association has been selected center will begin immediately. It is set to open the domestic airline industry. “These days, the solu- by Cargo Network Services, the Miami-based cargo in late 2010 and will be operated by Canadian tion de jure seems to be consolidation, via either subsidiary of IATA, as the newest member of the logistics fi rm Centric Retail Logistics…Atlas mergers or international alliances. Many voices CNS Advisory Board. Brandon Fried, executive Air, Inc. said it has completed cargo charters for clamor that it is both inevitable and imperative,” director of the Washington-based Airforwarders F1, the global motorsport championship, in support the former chief executive of American Airlines told Association, will serve on the CNS Advisory Board. of the Australian, Malaysian, Chinese and Bahrain the CNS Partnership Conference in California. But The move will give small and medium-sized for- Grand Prix. ACW

6 JUNE 2009 ACW

worldEUROPE ASIAnews MIDDLE EAST AFRICA AMERICAS Asset Light, Tricky African Market Partnership Heavy, Says Panalpina Beckons European Players peaking at the Transport Logistic Air Cargo SEurope conference in Munich last month, Panalpina CEO Monika Ribar admitted’ “I’m very happy we don’t have to make investments based on IATA statistics.” She acknowledged that the depth of the global economic decline means her company is now basing its performance on traffic volumes of five years ago. As a result, Panalpina has been forced to reduce its staff worldwide. “This is not an easy thing to do,” she told her audience. “Fortu- nately there are some countries where there are social networks to support this. “ Dr. Andreas Otto, a member of Lufthansa Cargo’s executive board, said his company had laid off people for the first time – in this case enetrating the inner recess- market. “Air France Cargo has started 15-20 people outside Germany. es of the African market has direct service to Lagos, is also about “At the moment it is all about day to day never been easy and even to start flying to Port Harcourt in Ni- operational and asset management.” He added Ptoday it is a market fraught geria and Pointe Noire in the Congo,” that Lufthansa has “no plans to downsize the with hidden dangers for the he says. “Other carriers like CargoB company this year” despite the “crisis” in the unwary. Yet, it is a market that has from Belgium are also trying to estab- market. thus far survived the current global lish a presence in the market.” Ribar noted it was even more important downturn. Good reason then for grow- It is not just from Europe that exist- to remain customer-focused – an “asset light, ing interest from European operators ing African players are beginning to partnership-heavy” strategy. A view echoed by anxious to gain greater access. feel the pressure. Otto despite the fact that his company has the But Africa is not for the faint Avient also operates its DC-!0Fs heavy assets. hearted and it would appear that from Sharjah in the Gulf, carrying “We’re working closer with Panalpina de- knowledge and experience are still mostly sea-air traffic. spite the 25 percent overall drop in business,” paramount. “Now Jade Cargo International has he added. British-based Avient operates regu- started flying from China to Lagos via “Deutsche Post and Deutsche Bahn have lar scheduled cargo services from Par- Sharjah providing us with direct com- taken advantage of the opportunity of being is-Vatry airport to points in West and petition,” says Clarke. “We have also government supported to grow,” Ribar pointed Central Africa, with a fleet of three heard that Singapore Airlines Cargo out. “We have grown organically and haven’t Zimbabwe-registered DC-10Fs. has been looking at serving the Nige- managed badly. We’re No.3 in airfreight and Simon Clarke, the airline’s chief op- rian market.” No.4 in ocean from a volume perspective. It erating officer, says volumes to Africa Avient operates its services on what has never been our strategy to grow volumes are holding up but rates are under Clarke describes as a “virtual hub” through acquisitions.” extreme pressure. “It has suddenly concept. Asked whether the Mid-East carriers are the become extremely competitive with “All of our flights operate through “winners” in the current economic downturn, rates being pushed down by existing one key point such as Lagos and then Otto acknowledged the question was a good players and new entrants to the mar- on to one or more beyond points,” he one: “ You’d expect (those) airlines to do the ket,” he says. explains. “In this way, we can trans- same us and reduce capacity by 20 percent. The Nigerian market “has seen ship and interchange pallets over It’s going to be a terrible year in terms of the rates tumble by more than 30 percent Lagos for other points in Africa. It also bottom line.” in the last four months.” means that by operating to a combina- Ribar added, “I’m not clear where the win- Clarke says that major European tion of points we are never exposed to ners and losers are. We are lucky we have near- players, like Air France Cargo, are a single market.” ly no debt, so we don’t have to borrow.” ACW now forcing themselves on the African Curiously, Avient has debt-ridden

8 JUNE 2009 ACW AMERICASAMERICAS EUROPE AFRICA ASIA MIDDLE EAST MIDDLE EAST ASIA AFRICA EUROPE

Zimbabwe on its schedule. tered carrier based in West Africa. the company has been seeing in intra- “There is virtually no traffic at the Today, it operates a twice weekly African traffic. moment,” says Clarke. “But we feel B747-200F service from Brussels “It is becoming easier to do busi- it is important to establish a presence to Lome in Togo. It also operates a ness between states in Africa and we for when the market does return.” weekly B747-200F service from Dubai are now seeing strong growth in local French based GSA, European Cargo to Lome. traffic moving on our feeder services.” Services, has taken what it describes Out of Lome, ECS says, through According to Thominet, the days as a unique approach to gaining great- its tie-up with Africa West, it is able of the AN-12 in Africa are numbered, er access to the African market. Three to provide connection to 14 beyond with a total ban expected by the end years ago it acquired a 60 percent destinations using a mix of AN-12 and of the year. Even in a continent noto- stake in Africa West, a Togo-regis- A300F capacity. Points served include rious for its appalling aviation safety destinations Nigeria, Niger, Camer- record, the AN-12 has been involved oon, Ghana and the Congo. in too many accidents. According to Adrien Thominet, “The aircraft has already been ECS vice president marketing and banned from flying in East Africa One Location. sales, base loads for the ex-Europe and soon we will have to look for flights are made up of oilfield equip- alternative lift in West Africa,” says ment, with freshly printed banknotes Thominet. “We will very likely acquire One Show. also a frequent mover. Out of Dubai B737F equipment, but in terms of the traffic is predominantly sea-air operating ability, the AN-12 is irre- One Entire business moving from India. placeable.” “We are also seeing good growth Lufthansa Cargo, at least, appears Industry. in consumer goods and electronics to have taken heed of the advice that moving from Europe, with no sign yet it is better to develop the African mar- of any real downturn in the African ket with a hub and spoke operation, market.” rather than with direct service. But Thominet cautions that Africa It has recently signed an agreement usually lags about six months behind with local cargo carrier, Astral Avia- global downturns and so expects an tion, in Kenya to provide beyond feed impact later this year. He also points over Nairobi. to the fickle nature of the African According to Hermann Zunker, LH market. Cargo director sales Africa, this will “You can have strong growth in allow the German carrier to transship one particular country for a couple traffic to five neighboring states using Munich Trade Fair, of months and then it falls away, Astral’s mix of DC9F, Fokker-27 and Germany with then a sudden growth spurt in a AN-12 freighters. neighboring market.” “We have served Nairobi for many 6-7-8-9 October 2009 He points to the example of Nigeria, years, but to date have focused mainly where traffic growth has been less on outbound flower and perishable than two percent in the first quar- demand,” says Zunker. ter, yet in neighboring Niger, ECS is “Now many of our customers want coping with a 200 percent growth in to feed these internal markets with in-

17TH INTERNATIONAL EXHIBITION FOR AIRPORT demand. bound traffic, mainly for infrastructure EQUIPMENT,TECHNOLOGY,DESIGN & SERVICES “This is why it is very dangerous projects such as telecom equipment for European carriers like Air France and power generating machinery.” Cargo who are starting to provide ser- Points served will include Dar Es vice to more direct points in Africa,” Salaam, Mwanza and Zanzibar in says Thominet. Tanzania, Juba in Sudan, Bujumbura “They can easily be caught out in Burundi, Entebbe in Uganda and by sudden downturns in the single Kigali in Rwanda. destination they are serving, whilst a Although the AN-12 has already neighboring market may be experi- been banned from flying in East Africa encing a boom.” apparently Astral Aviation continues www.interairport.com What has been particularly reward- to operate its AN-12 equipment under /europe ing for the ECS type of operation, says the terms of a month-by-month ex- Thominet, has been the recent growth emption notice. ACW

ACW JUNE 2009 9 AMERICAS EUROPE ASIA MIDDLE EAST AFRICA

had consolidated revenue of over $193 million in expenditure plan to enhance customer facilities, IN THE NEWS... 2008. UPS, the owner of MBE since 2001, will and will also provide the long-term, 30-year Turkish Airlines made a profi t of $94 million continue as the preferred carrier…Deutsche plus commitment that Gatwick badly needs”… for the fi rst three months of 2009 – a drop of Post DHL has sold 25 million shares in Deutsche Lufthansa AG has received the go-ahead from 24 percent over the same period last year. The Bank for a net gain of $136 million. The shares the EU to acquire British Midland Airways. The company cites a decline in fuel prices that reduced were part of an eight percent stake in Deutsche European Commission is also studying Lufthansa’s overall costs by 10 percent and helped produce Bank acquired by Deutsche Post when it sold off plans to acquire Brussels Airlines…Lufthansa a net margin of 12 percent. Revenue increased part of its stake in Deutsche Postbank earlier this Cargo’s freight traffi c dropped 26.7 percent in 18 percent to $1.81 billion — 78 percent from year. Earlier this month, the company withdrew April over last year as lower German exports led to international services. Cargo and mail traffi c rose its interest in acquiring 30 percent of Britain’s continued declines on its Asia Pacifi c and Americas seven percent to 48,000 tonnes… Royal Mail which had reported a profi t of $487 routes. The German carrier’s cargo volume slid to TNT Post says it is talking with the German million for the year ending in April 2009.Berlin’s 113,000 tonnes compared to 154,000 tonnes Georg von Holtzbrinck publishing group about new Brandenburg International airport (BBI) during the same month one year ago…DHL is a possible distribution partnership. The the offi cial provider of carbon neutral Dutch mail and express company says logistics services for the UN Climate that despite “no level playing fi eld in Conference (COP 15) in Copenhagen the German postal market, due to the from 7-18 December 2009…The ongoing uncertainties regarding minimum Association of European Airlines wage and VAT, TNT remains interested to (AEA) has welcomed the European strengthen its current position as the lead- Union’s decision to waive the ‘use ing alternative provider of mail services it or lose it’ airport slot rule for the in Germany.” TNT has been operating in summer…OAG Cargo Solutions has the German postal market for nearly ten signed an agreement with IBS Software years…Worldwide Flight Services Services to develop its next generation (WFS) has won a three-year contract airfreight rates application, AFRA-2. from LTU to provide cargo warehousing, AFRA is an online, real-time rate distri- customer service and customs clear- bution and management application. ance in Miami and trucking between the It enables airlines to distribute their airport and Fort Meyers to connect with rates electronically and forwarders to the airline’s additional service to Florida’s Lufthansa Cargo and DB Schenker delivered a compressor and relief manage airfreight rates and optimize west coast. Last year the German airline supplies to Mali last month via the airline’s MD 11 freighter service the selection of carriers…Traxon has carried over 4.5 million kilos on its A330 to Dakar, Senegal. The Mannheim construction group Bilfinger Berg- introduced Air Cargo Customs (ACC) passenger services linking Dusseldorf er donated the compressor in order to help bore wells in the African Europe service to provide shippers with and Miami…Globe Air Cargo, part of country prior to the next rainy season. NGO HelpAlliance, which is a simple and effi cient method of clear- European Cargo Services (ECS), has been supported by LH employees, organized the shipment. ing EU export customs via a single elec- appointed the cargo GSA in the UK for tronic gateway. ACC Europe enables the Nigeria-based airline, Arik Air. Arik the creation and transmission of the operates daily A340 fl ights with up to 12 tonnes has been given the go-ahead by the European duty export declaration to Customs and provision of cargo between London Heathrow and Lagos, Commission to get a 100 percent German Federal of manifest data to the Offi ce of Exit. Other key Nigeria…Hans-Joerg Hager has been elected government loan guarantee of up to $3.2 billion. features of the new solution are alerts to ensure to the Board of Directors of Kuehne + Nagel The European Investment Bank (EIB) and Berlin Customs compliance…Swissport International International for a one-year term. From 1996 to Airports have already signed a loan agreement has signed several new cargo handling contracts. 2008 Hager was a member of the management worth $539 million and will now sign a further It now handles for FedEx at Osaka, Japan and boards of Schenker Deutschland AG as well as deal worth $809 million. When it opens in 2011, Seoul, South Korea; in Athens, it will take over the of the worldwide Schenker AG and is a reputed BBI will consolidate the air traffi c of three airports cargo handling for Etihad; in Geneva, it now han- expert in the logistics and transport industry… in the Berlin area. Tegel and Tempelhof airports dles AirBridge Cargo; at London’s Heathrow, it Scandinavia-based handling company Spirit has will be closed…A consortium led by Citigroup’s will responsible for all cargo and trucking services opened a new terminal in Gothenburg, Sweden — infrastructure fund has been eliminated by the of South African Airways from August 2009; doubling its handling capacity from 70,000 tonnes British Airports Authority from the bidding and in Brazil, it is providing cargo handling for to 170,000 annually. Spirit handles inbound process for London’s Gatwick Airport. Citi Infra- Air France/KLM at Sao Paulo...Prime Cargo in and outbound cargo for more than 30 airlines structure Partners, Vancouver Airport Services and the Netherlands has selected the Four Soft inte- including SAS, Emirates, Lufthansa, Asiana and John Hancock Life Insurance Co. had bid as team grated freight forwarding solution 4S eTrans SME Finnair… MBE Worldwide, a newly formed affi li- under the name Lysander Gatwick Investment to enhance collaboration between customers and ate of Italy’s Fineffe Group, has acquired the Mail Group. “It is bizarre in the extreme,” Lysander agents, minimize transaction costs and improve Boxes Etc. (MBE) international franchise network said in a statement. “It is the only one that is fully visibility and monitoring of goods throughout the outside the U.S., Canada and India. The company funded, will deliver the airport’s promised capital entire export and import processes. ACW

10 JUNE 2009 ACW ASIA EUROPE AMERICASworld AFRICA news MIDDLE EAST Saudi Cargo Gets Responsibly Competitive workforce that will “push the Arab panies and the correlation to national ccording to Saudi Airlines Cargo World towards sustainable and bal- competitiveness. The top three get Anew Executive Vice President anced development.” the King Khalid Award for Respon- Michael Meagher, the recent privati- One result is the launch this year sible Competitiveness. zation of parts of the airline is a re- of the Saudi Arabia Responsible Com- As he implements his “To Do “ list, flection of an “appetite for change” in petitiveness Index, an initiative that Michael Meagher should be pleased the Kingdom. explores the take-up of sustainability if Saudi Airlines Cargo makes the Five years ago a decision was taken business practices by 40 Saudi com- Index. ACW to introduce private investment in the State-controlled airline. Last Septem- ber, Crown Prince Sultan Bin Abdu- lAziz, Chairman of Saudi Arabian Air- lines, signed a deal selling 30 percent of Saudia’s freight business to Tarabut Air Freight Services — funded by Saudi-based investors. Now the ex-AerLingus cargo executive wants his new company to be viewed “best in class” in the region and acknowledges that the Gulf airlines have set a service standard he’ll be measured against. Meagher suggests the privatization progress is part of a general shift in attitude within Saudia Arabia — a move that is reflected in the country’s participation in the Arab Sustainability Leadership Group (ASLG), founded by Queen Rania Al Abdullah of Jordan. In a report last month entitled “Responsible Competitiveness in the Arab World”, Queen Rania acknowledges “that old systems and behaviors have to change. We need to shake off old habits and find new ways of doing business that include: greater trans- parency, more accountability, better governance, and inspired leadership.” The ASLG brings together businesses, government agencies, and NGOs from a growing number of countries committed to sustainable practices. One of them is logistics group Aramex. Founder and CEO Fadi Ghandour suggests responsible competitiveness is not only the key to the future, but also a solution to the Arab region’s “frightening” unemploy- ment and under-employment rate. Ghandour calls for a public/private partnership and an engaged civil soci- ety in order to create a highly skilled

ACW JUNE 2009 11 worldASIA MIDDLEnews EAST AFRICA AMERICAS EUROPE

Dubai Logistics DHL Express Flexes Muscle Has Asia, CIS in Taiwan Focus

ubai Logistics City, a core component Dof the colossal Dubai World Central development project, has “begun licensing completed warehouses and logistics offices” and “handing over facilities to tenants to begin operations on-site,” according to His Highness Sheikh Ahmed bin Saeed Al Maktoum, chairman of Dubai Aviation City Corporation. “The completion of Dubai World Cen- ter’s first cargo terminal is a significant milestone in the project’s history, said Sheikh Ahmed, who added that the $59.9 billion Dubai World Central project would go live when DWC-Al Maktoum Interna- tional Airport opens in June 2010. The region’s hugely ambitious infrastructure development project is tied to HL is displaying a lot of ties in Taiwan and China permitted government planners’ vision of building optimism about Taiwan. direct scheduled flights, albeit only the world’s largest airport to draw fresh The integrator has in- on a modest basis. Taiwan’s interna- business and trade to the region and Dvested NT $210 million tional carriers, China Airlines and EVA create vast residential and commercial op- (US $6.38 million) in a Air, jumped at the opportunity and portunities. new Taipei gateway located in the Far- launched flights to the mainland as Dubai Logistics City, envisioned as a glory free trade zone of Taoyuan In- soon as they could. key logistics hub, is being designed to ternational Airport. Covering 145,474 At that stage no scheduled all-cargo accommodate some two billion people square feet, it is four times the size of flights were permitted, but they are throughout the Middle East, Indian Sub- the integrator’s previous set-up, while now coming into the picture. In April continent, Africa and the CIS, all within the capacity has tripled to 11,000 the two governments signed an agree- three-to-four hours flying time from Dubai. pieces an hour. ment to expand the number and types Sheikh Ahmed said that construction of Connie Tang, managing director of direct flights permitted. This boost- the first of the airport’s 16 cargo terminals for Hong Kong and Taiwan of DHL ed the number of passenger round has been completed, “well on its way to Express, admitted the expansion goes trips from 108 per week to 270 and achieving the project’s ultimate goal of way beyond current needs. If any- ushered in 28 round trips per week for having an annual cargo capacity of 12 thing, DHL could shrink its capacity at freighters. tonnes.” the moment, as the airfreight and ex- China Airlines and EVA have yet to With a capacity of 200,000 tonnes and press business in Taiwan has declined, unveil their plans for direct freighter spread over 41,000 square meters of built although the company has fared better flights, but they have been itching up area, the terminal’s capacity can be ex- than market, according to Tang. for years to finally direct their cargo panded to 600,000 tonnes, Sheikh Ahmed The downturn hit Taiwan’s export- planes to Shanghai and Beijing, hav- said. He noted that Dubai’s government ers just as the door to the big neighbor ing relied on interline deals over Hong “continues to support DWC’s thrust” to across the Taiwan Straits was finally Kong and Macau respectively. The create a facility “that will not only enable opening a fraction. For years they ramifications for cargo are significant. trade and commerce to continue in these were forced to conduct business with The first wave of scheduled passenger troubled economic times, but also look Mainland China via a third territory, flights did not have much impact on positively at how DWC can support the fu- which produced a steady stream of cargo side, due to the limited number ture of business in the Middle East.” ACW people and products through Hong of frequencies, said Tang. Kong. Last November the authori- With its Asian hub located at Hong

12 JUNE 2009 ACW AMERICAS EUROPE ASIA MIDDLE EAST AFRICA

Kong, DHL continues to move its looks bright. The relationship Taiwan-China express traffic over the between the government on special administrative region at the the mainland and the adminis- mouth of the Pearl River Delta. Over tration of what Beijing regards time, more traffic between China and as a renegade province has im- Taiwan should go on direct flights, but proved considerably over the in light of expected market growth, past year, as the liberalization the cake should be big enough for both of the aviation regime between routings, Tang reckoned. the neighbors shows. Operating out of Taoyuan rather Logistics firms in Taiwan than Taipei’s Chiang Kai Shek Inter- have watched the thaw in national Airport allows DHL to push relations between Beijing and its cut-off time back by two hours, she Taipei with mixed feelings, as claimed. “Quite a few of our custom- this has shifted a good deal of ers are located in the Farglory trade Taiwanese production over zone,” she said, adding that access to the mainland. However, Tang is parcel business. The Taiwanese carri- to CSK airport is rapid, so there is no confident that this will not lead to a ers looking to deploy freighters across problem moving traffic to flights oper- wholesale exodus of electronics firms the Taiwan Straits would find it chal- ated by commercial carriers out of Tai- from the island. lenging to fill their aircraft with this pei’s premier international airport. “A lot of Taiwanese companies type of traffic. For them, this is more How fast the market will grow have moved to China, but they will about feeding China cargo to and from depends only in part on economic only move the low-tech part to China their long-haul routes, so they pray for recovery on both sides of the Taiwan and keep the high-tech part in Taiwan, benign relations of the governments Straits. Tang finds it impossible to pre- especially the research and develop- on both sides as well as a bigger ap- dict how soon DHL’s facility will reach ment activities,” she said. “We move a petite for Chinese products in North capacity, as this hinges largely on lot of sample shipments for research America and Europe. The fact that the developments on the political side, she and development.” latter has shrunk just when the other remarks. At the moment the picture This may work well for the express picked up is a painful irony. ACW No Stopping Qatar Expansion

he financial meltdown will not slow the expansion cam- ponent of the airline’s commitment to long-term growth Tpaign of Qatar Airways, which is pouring more than $1 averaging 35 per cent year on year, he said. billion into facility improvements at Doha International “Our expansion is growing at a remarkable pace,” he Airport to sustain its blistering growth plans pending com- said. “With new aircraft joining our fleet at an incredible pletion of the New Doha International Airport, the airline’s rate of one a month for the foreseeable future, we need chief executive says. the airport infrastructure to be able to cope, hence the Qatar Airways Chief Executive Officer Akbar Al Baker creation of a new transit terminal and more capacity at said his airline would stick to its wildly ambitious growth the Premium Terminal,” he added. plan despite the global recession. Slated to open by 2012, the multi-billion New Doha Destinations served by the flag carrier are set to rise International Airport will initially be able to handle 24 mil- from 84 to more than 120 in the next five years. Qatar lion passengers annually, swelling to 50 million when fully Airways intends to add service to six new routes over operational beyond 2015. the next 10 months, including Goa and Amritsar in India; Plans call for Qatar Airways to operate a fleet of 110 Sydney and Melbourne in Australia; and two more cities in aircraft by 2013, up from the current 68 aircraft. It has Europe. ordered 80 Airbus A350s, 60 Boeing 787s and 32 Boeing Al Baker said, “The state of the global aviation industry 777s. The airline has also ordered five twin-deck Airbus amid the current economic situation and concerns over A380s, which are set for delivery from 2012. Long-term, global health concerns, are understandable.” He added, the airline has placed orders for more than 200 aircraft “But whatever is happening around the world will not af- worth over US$40 billion. fect our growth plans. We are committed and remain com- Meanwhile, Qatar Airways also announced it has be- mitted to growth and all our expansion is pressing ahead come the first and only Middle East carrier to join the on schedule,” he stressed. Aviation Global Deal (AGD) Group – an industry-wide And the infrastructure improvement venture at the body made up of a select-few airlines which aims to help existing Doha airport, Qatar’s main base, is a vital com- develop a global policy for tackling aviation emissions. ACW

ACW JUNE 2009 13 AMERICAS EUROPE ASIA MIDDLE EAST AFRICA

nounced in exports, which recorded “a 27 percent March 31, totaled about $18.4 billion (1.83 trillion IN THE NEWS... year-on-year drop, in which cargo volumes to all yen), down 3.8 percent from the previous fi scal CEVA Logistics has partnered with Iqdam major markets experienced a decline,” according year. Nippon Express blamed its weak fi scal 2008 International, the exclusive Middle Eastern agent to a statement from the airport. Imports also fell results on the decline in the international cargo of Crocs shoes, to manage the manufacturer’s 16 percent from the same period last year, with market and downward spiral in the domestic cargo logistics services in the region. CEVA will handle cargo volumes from Southeast Asia and Japan market. Nippon Express is projecting $15.9 billion inbound freight from Asia, product distribution and showing the biggest drops. Transshipment cargo (1.58 trillion yen) in group sales for fi scal 2009, the management of a strategic hub in the Middle dropped around 7 percent year-on-year during down 13.6 percent from fi scal 2008. The company East on behalf of the footwear company. Activities the month, while the corresponding fi gures for also projects drops in both group operating and will be carried out at the CEVA warehouse in the Taiwan and the Mainland experienced double- recurring profi ts… DHL Global Forwarding an- Jafza region of Dubai. As part of its expansion digit declines. The latest traffi c fi gures refl ect the nounced plans to pour more than $100 million HK plans into the Middle East, Crocs required product continued downward trend in global trade and into a new 12,000 square foot offi ce in Kowloon shipment effi ciency and reduced costs across its consumption, said Stanley Hui, the chief executive Commerce Centre and the Fashion Competency supply chain operations. CEVA said it has rede- offi cer of Airport Authority Hong Kong. Hui Center housed there. The global logistics giant said signed Crocs’ entire supply chain and developed added, “Cargo throughput remains the hardest hit the location would serve as its North Asia Pacifi c a bespoke set of Key Performance Indicators to in comparison to passenger volume and aircraft Regional Offi ce and accommodate more than 800 ensure effi ciency in the delivery of products to its movements, refl ecting the continued weakening of employees. “The fashion and apparel industry is network of distributors… global trade and consumption.” … Tokyo-based Hong Kong’s second-largest export commodity Cargo throughput dropped 19.8 percent at Hong Nippon Express Co. Ltd., Japan’s largest freight worth over $26 billion after electronic products. Kong International Airport in April over last forwarder, reported sharply lower profi t and sales The sector comprised 11% of total exports in year as trade continued to shrink and exports to for fi scal 2008, citing the steep decline in air cargo Hong Kong in 2008 and experienced double-digit all major markets slid amid the global economic demand and the global economic crisis. The com- growth in exports to many European countries. We recession. Hong Kong International Airport said pany’s operating profi t fell 30.9 percent to $337 see tremendous opportunity in the coming years. in a statement that it handled 257,000 tonnes of million (33.5 billion yen) and net profi t dropped Despite the economic slowdown, speed to market cargo in April, down 19.8 percent from April 2008. 58.4 percent to $153 million (15.1 billion yen). remains crucial for business to stay competitive,” The reduction in cargo traffi c was most pro- Group sales for fi scal year 2008, which ended on Hermann Ude, Global CEO, DHL Global Forward-

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14 JUNE 2009 ACW AMERICAS EUROPE ASIA MIDDLE EAST AFRICA

ing, said. The new offi ce, which has modern facilities and sustainable features, is also aligned “with our strategy to reduce our carbon footprint,” said Kelvin Leung, CEO, North Asia Pacifi c, DHL Global Forwarding… Japan Airlines reported a net loss of $651.2 million for the fi scal year ended March 31. International cargo revenue dropped 23 percent to ¥152.1 billion. Meanwhile, the carrier reported that international cargo volume fell for the eighth consecutive month in March on a year-on-year basis, dropping 38.1 percent to 40,528 tons. That rate of decline was slightly lower than February’s 38.9 percent and the lowest level in four months. During fi scal 2008, which ended on March 31, JAL transported 627,213 tons of cargo on international routes, down 17.8 percent from fi scal 2007. The decrease followed a 1 percent decline in fi scal 2007. By contrast, JAL’s domestic cargo volume increased 1.3 percent in March from a year earlier to 39,273 tons. For the 2008. NCA operates the only cargo fl ight service back a 20 billion yen stake from Macquarie Air- entire 2008 fi scal year, JAL transported 500,779 between Japan and New York; fl ights now depart ports and Macquarie Bank Ltd. Approximately tons of cargo on domestic routes, up 11.2 percent twice a week (Wednesdays and Saturdays). NCA 20 million shares would be bought back from the from fi scal 2007… Tokoyo-based Nippon Cargo said the service resumption on the route came in Macquarie companies at 1,000 yen each as part of Airlines resumed fl ight operations to and from response to strong demand from customers, both plans to repurchase as much as 21.88 percent of New York last month amid the market meltdown. in Japan and the United States… The operator of outstanding stock, according to a statement from The route was temporarily suspended in August of buildings at Tokyo’s Haneda Airport, will buy Japan Airport. ACW

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Our global network links rail, road, water, and air. We always have the ideal solution. DB Schenker can take on any order for you, economically and eﬃciently, from simple transport services all the way to complex logistical procedures. With more than 91,000 employees in around 130 countries and at approximately 2,000 locations, whatever the customer requires, we can do it. Try us out at www.dbschenker.com Seabury Survey Identifies High Performance managementseries Best Practices

ith glimmers of hope ahead for economic recovery, it is useful to gauge which air cargo players are likely to thrive and which will continue to struggle. A new study of management best practices in the air cargo industry reveals distinctive differences between high and low performers among airlines and forwarders. The study also provides intriguing distinctions between those two links of the air cargo chain.

In any economic chill, it is a given agement, and resource management. that most businesses catch a cold and “Top airlines The aim of the survey was to identify the weaker ones get a fever. But what quickly responded management best practices that truly are the characteristics of the companies distinguish high-performing companies that will quickly shake off their ailments to large drop in from laggards in the air cargo chain. — and what traits are typical of those Alongside the survey, in-depth inter- that will still be aching long after the demand “ views yielded hands-on insights into the global economy recovers? five managerial topics. This article con- To get answers to those questions, airlines and freight forwarders. The centrates on the results that show the Seabury Cargo Advisory recently detailed study tracked five key manage- largest differences between high- and conducted a global survey among air ment themes: senior leadership, strate- low-performing airlines and forwarders. cargo professionals, most of them from gic planning, client focus, process man- Here are the most interesting findings.

SENIOR LEADERSHIP Leadership teams of high-performing forwarders distinguish themselves from their low-performing counterparts by providing firmer direction and alignment (Exhibit 1). There is a striking difference in how the two groups deal with undesirable results. Of the high performers, 63 percent said such results are followed by sanctions; just 30 percent of low performers said so. It is not uncommon for the salaries of forwarders’ senior executives to be 40 percent variable — evidence that forwarders have the financial tools to substantially reward or discourage particular behaviors. Another key differentiator is the

ACW JUNE 2009 17 managementseries Best Practices

“High-performers more likely to expand through organic growth than M&A”

importance, which leaders at the high- weaknesses, only 40 percent of the performing forwarders (29 percent) performing forwarders give to staying in laggards said they make such moves. have a little more appetite for growth touch with all levels of the organization. Equally significant differences are through mergers and acquisitions Fully 68 percent of the top forwarders found when comparing the efforts taken than do high-performing airlines (21 confirmed these efforts; by contrast, to analyze the conduct of clients and percent). But that is not saying much: only 29 percent of the low perform- suppliers in great detail. Only one-fifth Neither group plans to stray far from ers did so. A clear illustration of that of low performers take this seriously, organic growth as the main path for commitment: The leadership team of while 69 percent of the high performers expansion. Furthermore, 32 percent a large forwarder regularly uses video- make it a priority. of high-performing airlines intend to conferencing tools to convey important Moreover, the leading forwarders downsize their networks, while 60 per- messages to all employees. Those com- understand that data is not about aver- cent of the weakest airlines said they munications are complemented with ages –it’s about gathering and dissecting are opting to do so. This raises the large-scale meetings every few months enough rich data on their sectors to be “chicken-and-egg” question of whether at which senior managers meet with able to spot important trends. In one they are performing poorly because groups of their direct reports, and middle managers in turn meet with groups of their employees in open, interactive question-and-answer sessions. Leaders at high-performing airlines do a superior job compared to their industry peers in responding to the economic slump. Close to 80 percent confirmed the use of well-prepared con- tingency plans compared to less than 40 percent of the low performers. One airline executive put it this way: “… if these conditions continue for another few months, we will move to Plan B”. Furthermore, the high-performing airlines were quick to respond to the often case, the forwarder obtains detailed they have cut out desirable routes or 20-30 percent drop in demand. More biweekly financial updates on a com- are cutting out those routes in a bid to than 70 percent said they assemble cri- petitor that might not survive. Others perform better. sis teams quickly, while only 46 percent validate the old story about forwarders High-performing airlines show how it of the worst performers in their sector knowing airlines’ performance bet- should be done when it comes to imple- indicated that they react with such de- ter than the airlines themselves; they mentation of strategy (Exhibit 2). Staff cisiveness. amass and scrutinize volumes of fresh at top airlines is twice as likely to have data on the carriers. Importantly, they a clear understanding of its responsibili- Strategic Planning draw from a wide variety of information ties as are those at the weakest airlines. Top-performing forwarders have a sources, both public and private, and Business leaders of the best-performing large lead over the low performers in free and for-fee, since no single data airlines are also much firmer (68 per- their industry on how to use the best source covering the airfreight sector of- cent vs. 24 percent) about locking in to possible inputs for making strategic fers the total picture. the decisions they make; at one top Eu- decisions. Whereas 88 percent verified Studying the actions planned by air ropean airline, second-guessing is close they develop a realistic and objective cargo companies for the next 12 to 24 to a cardinal sin. However, only 58 per- picture of their own strengths and months, it becomes evident that high- cent of the high-performing airlines in-

18 JUNE 2009 ACW dicated that they have a program (16 percent) performers pay little management office, which means “High-performing airlines attention to canceling contracts they may be underestimating the with less profitable clients. Al- importance of having a structure focus on client profitability, though this characteristic may be in place that supports the timely not just revenue” less relevant in weaker markets, implementation of decisions. it will represent a missed opportunity to increase margins as soon Client Focus Not surprisingly, high-performing as capacity and demand come back in In terms of keeping customers cen- airlines easily outmaneuver low per- alignment. ter-stage, clear traits of high-performing formers when it boils down to extract- airlines versus low performers are: their ing maximum value from their clients. Process Management great cooperation among internal de- Seemingly the largest differentiator is Top airlines more often monitor their day-to-day operational performance in great detail than do low performers (80 percent vs. 50 percent). When asked in more depth (Exhibit 4) about what and how they measure, high performers said they benchmark their performance against their competitors (72 percent) — a sharp contrast to low performers (38 percent). Whereas the latter may be pleased with a 2 percent point increase in ‘flown as booked’ levels, high performers consistently probe further to see how their record stacks up next to that of their main competitors. In the case of one airline, management’s detailed understanding of its operational performance and those of its peers has led it to insource some of its handling. The airline decided that with a revamped product offering, the benefits of outsourcing at the hub in this specific case no longer outweighed those of having the capabilities in-house. partments (75 percent vs. 36 percent) their superior focus on client profitabil- High-performing forwarders differ- and their ability to meet rising client ex- ity. Nearly four-fifths of the high per- entiate themselves from their weaker pectations (83 percent vs. 32 percent) formers have this factor top of mind in peers with their focus on change man- (Exhibit 3). With regard to the latter, contrast to only 32 percent of the low agement. The single largest difference one airline manager mentioned that performers. What’s remarkable, though, between these groups is the level at while five years ago his clients were sat- is that both high (28 percent) and low which they are able to create engage- isfied when their air cargo was simply ‘kept cool,’ nowadays their goods need to be stored between 2 and 6 degrees Celsius. One caveat, though, as mentioned in one of the interviews: “High touch,” if delivered largely through committed and enthusiastic staff, may be greatly appreciated by clients but it does not automatically translate into “high profitability”. It may obscure the need for continued investments in information technology that can handle many manual customer-centric tasks more cost-effectively.

ACW JUNE 2009 19

The new 777F and the 747-8F make for an unbeatable combination. Already the most capable and flexible freighters in the industry, together they fulfill virtually any large payload (from 100-135 tonnes), range and market requirement. Add to that industry-leading efficiency and you’ve got the biggest advantage of all—the highest profit potential combination in the business. managementseries Best Practices

“Forwarders place innovation much higher on their agendas than airlines”

ment for specific changes: 89 percent of high performers said they can do that, while only 58 percent of low-performing forwarders indicated they can. One forwarder, eager to become its clients’ preferred vendor, launched a series of tightly defined short-term projects that achieved significant results in aggre- gate. Rather than striving for massive transformational change in one go, the company opted for a disciplined series of quick wins with which it generated widespread enthusiasm for further change. In line with these observations, top forwarders (84 percent) noted that they provide significant support When asked for recent cash improve- ers are looking for concessions from for their staff before, during and after ment actions, high and low performers airlines, and airlines are pressuring these often complex changes. Just 58 gave very different answers. Firstly, their handling and trucking services for percent of low performers said they de- high performers put most attention discounts and other breaks. However, liver those support levels. toward renegotiating supplier contracts most airlines typically still have at least Forwarders tend to have flexible pro- (79 percent), while this was clearly far one-year contracts while forwarders cesses which are very much geared to less important to low performers (43 are constantly renegotiating, often on a meet clients’ individual wishes; just 50 percent). The highest-ranked source per-shipment basis. The consequence: 50 percent of high-performing forward- of additional cash for the weak airlines Forwarders can cut costs faster than ers confirmed to minimize deviations was the reduction of network and ser- airlines can — in some cases to the to their standard processes. Those who vice levels (61 percent). By contrast, point where they extract so much more turn away from standardization could only 29 percent of high-performing value from the carriers that they pass potentially run the risk of creating over- airlines said they are making such cut- along some of the savings as lower ly complicated and costly processes. backs. prices for shippers. Process innovation uncovers big Currently, everybody in the air cargo The adept use of information also differences between top airlines and chain is pushing backward — forward- separates high-performing forwarders top forwarders. When asked whether innovation was high on the leadership agenda and if the essential means to in- novate were available, forwarders gave far higher positive response rates (74 percent) than did airlines (50 percent). That finding is likely a telling indicator about where we can expect truly new developments in the air cargo industry in the years ahead. Resource Management For most airlines, cash is currently a scarce and closely monitored resource.

22 JUNE 2009 ACW from others in their category (Exhibit 5). Just one example of how it plays to advantage: One top forwarder proac- tively pushes analytical data out to its buyers so that when they meet with airlines, they are armed with reams of negotiation data on airline performance, capacity, market yields, industry trends, and much more.

Trends Asked to identify the industry trends that will be most important over the next three years, respondents overall pointed unequivocally to the credit crunch, with security issues and oil price volatility following suit (Exhibit Wrap-up alignment of service offerings with prof- 6). These trends merit attention be- Today’s brutal economy is no place it. Among forwarders, the low perform- cause they influence how top and low for the poorly prepared. Nor is the hy- ers need to strive for firmer leadership performers alike will manage their com- per-competitive world that will emerge and more informed decision-making. panies over the next few years. after the economic slump is over. There are also several insights that The survey found substantial dif- Seabury set out to determine the char- should urge the high performers to stay ferences in the ways that forwarders, acteristics that would comprise what ahead on these managerial topics. High- airlines and integrators view trends that could affect the air cargo industry. A key concern for integrators and “Forwarders can cut costs much faster forwarders is the de-speeding of the supply chain. Apparently the possible than airlines can” drop in share of time-definite services compared to day-definite and the con- it takes to be well prepared to weather performing airlines could benefit by ceivable shift from air to ocean is not today’s storm—and to thrive when the taking firmer actions against clients that registering as a top priority for the upturn comes. do not deliver agreed volumes. Also, airlines. For their part, integrators, with The study’s findings hold much that they should attempt to make more use their large fleets of vehicles and aircraft, will help the low performers. For un- of appropriately staffed program offices seem to be the most sensitive to the derperforming airlines, there is clearly to facilitate large-scale implementations. need to reduce their carbon footprint much room for improvement in the ar- On the forwarding side, high performers over the next few years. eas of strategy implementation and the should be careful with customizing their processes to the point where complex- ity and costs will run too high. What no study can do, though, is transmit all of the urgency necessary for action. That is where true leaders step up. ACW

About the research In April 2009, Seabury surveyed executives, senior managers and middle managers in the air cargo industry on management best practices. Through the respondents’ self-assessments, high and low performers were identiﬁ ed. The online survey drew responses from 373 cargo professionals, largely from airlines and freight forwarders in North America, Europe and Asia Paciﬁ c.

ACW JUNE 2009 23 profiles of

CRANDALL lines. And, he says, the word on the street is that CHARTS cargo unions have not fared any better. DIFFERENT Crandall, whose hard- charging corporate days COURSE IN have given way to extra sailing jaunts and sum- FAMILIAR mer and winter stays in Gloucester, Mass., and WATERS Palm City, Fla., still travels often with seats on several boards. But he nown as the man and his wife of 52 years who changed the no longer travel for plea- way the world flies, sure, he says. “We packed aviation icon Robert the last bag we ever want KCrandall does not to pack.” mince words, especially when it Though he cut an comes to the shape of the U.S. air- interesting path in a busi- line industry or his country. ness full of flamboyant The outspoken and former long- personalities, Crandall has time chairman and chief executive Robert Crandall, Former Chairman and Chief Executive Officer no plans to dish. “Books officer revered for his innovations of American Airlines about business careers are at the helm of American Airlines inevitably tell-all books. I may be out of the fray, as he puts it, airlines have been left hanging by policy don’t do tell-all books.” but he still has plenty to say. makers whose only tenet has been to Indeed, Crandall seems content to Crandall offered a bleak prognosis get the lowest possible fare. share the platform of building American of the U.S. airline industry and an an- “If you have no interest in aviation into one of the world’s leading airline tidote some did not swallow at a lively policy other than forcing carriers to brands with a storied pioneer from the keynote speech at the CNS Partnership compete down to the level of lowest same era, Herb Kelleher, of Southwest Conference in California last month. common denominator, then what you Airlines fame. “The government has lost track of get is a failing industry and that’s what Asked to explain the secret to their the economic impact of the aviation we’ve got,” he says. success, Crandall says: “If you look at industry. And they have lost track of The straight-talker wants oversight American while I was running it and the fact that good jobs and optimal and regulation introduced into com- Southwest while Herb was running it, efficiency and a satisfactory level of mercial aviation. The first sign of inter- (they) were both very innovative carri- service are important values,” Crandall est, he says, is the recent questioning ers. Southwest created a new standard told Air Cargo World in an interview by Rep. James Oberstar about “the — a new package of services if you after the speech. efficacy and efficiency of international will.” The way Crandall sees it; the ideolo- alliances.” American introduced lots of firsts gy of non-intervention that began in the No fan of alliances, Crandall claims too. “We invented super saver fares, we Reagan era during the early 1980’s “has they threaten competition and raise invented the frequent flyer plan, we in- crippled our country.” What’s more, U.S. costs for participating passenger air- vented yield management and we didn’t

24 JUNE 2009 ACW features&trends Leadership profiles

“We invented super invent, but we did perfect, the hub saver fares, we timing. The plan was to use small air- and spoke system. So the fact is we planes to cut the cost of private avia- did a lot of very imaginative, different invented the frequent tion. “There’s a big market out there things,” Crandall says. for what I would call high convenience Asked what people in the industry flyer plan, we invented air transportation.” But Crandall might not know about him apart from yield management. wound up trying to raise money in his reputation as a colorful, tough- New York “the day Bear Sterns went talking guy with vision, Crandall gets So the fact is we down” and the Pogo plan was shelved. a big laugh. Has he quit cussing? “I Assessing the future, Crandall skips haven’t quit cussing and I haven’t did a lot of very the spin. “It’s pretty bleak.” Besides quit smoking,” Crandall says. And imaginative, different inappropriate oversight of the air “I’m actually not very tough…I’m just transport business, the U.S. failed to straightforward.” things.” regulate aspects of its economy and According to Crandall, “If you tell “we have dug ourselves a very deep the truth you’re tough... Not telling ditch.” the truth, it seems to me, is antithetical third of his time on work, he reads a To dig out, he says, “the U.S. must to getting results. So yes, I say what I great deal, plays on the computer and collectively impose rules and regula- think, and since some of those things are even chips in gardening. “My wife is a tions on its citizens, get back its educa- not popular, that is perceived as tough. great gardener and I help her with that tion system and medical system and But that’s a backwards perception.” a bit.” revitalize the economy or its best days Besides sailing, Crandall spends one- A recent business foray met with bad may be behind us.”

FOUNTAIN SPEARHEADS SUPPLY CHAIN TECHNOLOGY STRATEGY

arthco International President and Chief Executive Officer Mick Fountain is an influential player in the global logistics space known for his business savvy and grasp of technology set to transform the in- Bdustry in the next few years. As CEO of the Philadelphia-based freight forwarding company, a unit of Ozburn-Hessey Logistics, Fountain spends roughly 90 percent of his time in Asia and Europe. He works out of Bar- thco’s Philly headquarters when he is in the U.S., where he has lived since 1982. The UK native, who has been honored for his contributions to the air cargo industry, is clearly in the thick of things. Foun- tain serves as chairman of the advisory board at Cargo Net- work Services, the Miami-based arm of IATA. He also chairs the Cargo 2000 initiative, a pillar of IATA’s e-freight program. The Cargo 2000 group, which includes airlines, freight forwarders, ground handlers, trucking and IT companies, plans to imple- ment a new quality management system for the global air cargo Mick Fountain, President and CEO of Barthco International

ACW JUNE 2009 25 features&trends Leadership Profiles

supply chain. TThehe ppeopleeople wwhoho Favorite parts of his position at Bar- From this perch, the forwarding thco are the opportunities and challeng- veteran with more than 35 years in the oownwn tthehe iinformationnformation es that exist in the small and medium- business has a close-up view of the sized environment in freight forwarding. shifting landscape of the industry. “I aandnd tthehe ppeopleeople wwhoho “You can turn quickly, you can make can see how the industry agenda is go- decisions quickly, and you can make ing to be radically changed by e-freight. ccanan lleverageeverage tthathat things happen quickly,” he says. And I can see how Cargo 2000 has a When Fountain is not at business huge place to play in that,” he says. iinformationnformation areare functions or crossing the globe, he stays According to Fountain, a lot of the “active and fit” being “a bit of a fitness work that has been done by industry tthehe oonesnes tthathat wwillill buff.” Apart from that, he says, he groups over the last four years will pprosper.rosper. spends as much time as possible with soon come to fruition “and everyone is his family since he is away a lot of the going to need to be a part of it.” Com- time. panies that fail to embrace informa- Although the airfreight business has tion technology will get shut out of the inbound and outbound consulting ser- been shaken by the global financial game. vices and to bolster its global freight crisis, Fountain sees plenty of reason “Those companies that are prepared management business. He also over- for optimism. First, industry is com- to make investments in IT, and those sees freight management acquisitions ing together on technology initiatives. companies ready to be innovative and continued acquisition and integra- Next up is the flat-out necessity of the around IT are the ones who will suc- tion efforts. transportation and customs brokerage ceed,” Fountain says. This is because Fountain’s forwarding career be- industry. Finally, there are “a lot of very the people who own the information gan at Lep Air Services in the UK. He innovative, creative and smart people and the people who can leverage that joined Jardine Air Cargo in the UK and around.” information are the ones that will pros- then moved to the U.S. to start Jardine Perhaps the biggest wildcard today, per, he explains. operations in America. After Jardine’s he says, is how people and businesses “As we heard today, many, many purchase by MSAS, Fountain held vari- will respond to change. Imminent in- companies including some of the big- ous management positions there. When novation along with “all the talk about ger companies, have challenges on IT,” MSAS merged with Excel, Fountain a migration to a greener environment” Fountain told Air Cargo World in an served as chief executive for global will bring many opportunities. interview at the CNS Conference last freight management and technology, “At the end of the day, world trade month. for the combined operations of MSAS is here to stay and those who come out Barthco tapped Fountain to handle and Excel. Then came the top job at ahead will be the people who are brave its customs brokerage operations, Barthco. in this environment,” Fountain says.

KRAUSE: FREE TO ROAM SOUTHWEST’S CUSTOMER SERVICE CABIN

s Senior Vice President of Customer Services for Southwest Airlines, Daryl Krause plays a pivotal role at an airline where customer service rules: he plots the strategy and vision for delivering stellar service across all business areas. So it is little surprise the 30-year Southwest veteran with a service-oriented background at the Dallas-based airline ranked tops for customer service time and again, got his start on the ground operations side in 1979. “We have a lot of front-line warriors that have worked their way up through the system,” says the Houston native who now oversees 14,000-plus employees and heads Inflight Services, Provisioning, Fuel Management, Customer Rela- tions/Rapid Rewards and Reservations. Indeed, many Southwest service oriented employees and top managers are Daryl Krause, Southwest Airlines

26 JUNE 2009 ACW “homegrown” and performed the jobs some cases, “I can’t fit in their shoes lenge facing Southwest today is adjust- of the very people they are now leading, because they are so good. I learn more ing to the customer’s behavior and the Krause says. That makes it easy “for from them than they learn from me.” multi-channels in which they choose them and myself” to gain the respect The resident of Dallas, who owns a to communicate, according to Krause. and trust needed to deal with people couple of Harleys, says he “likes a little “Keeping up with technology is certain- successfully. ly a factor as is lining that up with the It is all part of the Southwest culture customer’s preferences,” Krause says. that places a premium on the internal What makes Krause most proud in well being of its employees and where “The goal is a one- the service realm is the empowerment humility and customer service are cor- of Southwest employees to resolve porate values. stop resolution issues on the front line. The goal is a Herb Kelleher, co-founder of South- “one-stop resolution done with care, west and former chairman and chief done with care, compassion and putting the customer’s executive officer of the low-fare, no- needs first,” says Krause. frills carrier where it is OK for work to compassion Because Southwest has been able to be fun, has called profits a by-product and putting the pile up profits over the years as com- of customer service. In Krause’s view, petitors fell by the wayside and others excellent customer service flows from customer’s needs barely survived to battle the next crisis, employees that experience trust and analysts and industry observers are respect. first.” bullish on its future prospects. “I think experiencing our product Krause sees blue skies too. is the key. That’s from the eyes of the Says Krause: “How Southwest views customer, from the eyes of our business wind in his face.” Krause also enjoys its employees reflects on how our cus- partners, and also putting (managers) farming. When not on a John Deere tomers are treated. I just don’t think you in a position to be shoulder to shoulder tractor, he says, he likes to ride. Krause can go add that ingredient to a good air- with the folks that are in the trenches says he travels often, has a significant line and all of a sudden see a different to know what they are dealing with in other, and also has three dogs. result next month or next year.” order to lead them.” Something that might surprise those If Southwest continues to manage its Southwest’s walking the talk ap- who know the Texan is he took tap costs and add value to the travel expe- proach, which has been studied by dance and ballet when he was five rience, its customers will continue to companies of all stripes for years but years old. How did that happen? “I was come back and continue to fly, he says. has yet to enter universal practice, the only male in my class; I think my While the playing field may get brings benefits to employees at both Mom wanted a daughter,” he jokes. smaller, Krause is confident Southwest ends of the spectrum, Krause says. In The biggest customer service chal- will be “one of the last ones standing.”

ACW JUNE 2009 27 features&trends Leadership Profiles

founded the privately held JOHNSON company that offers cargo dimensioning and screening FINDS FUN products for the freight and logistics industry thanks PROMOTING to the global spotlight on security. CARGO Says Johnson: “I’ve been SECURITY in the business barely two years yet have relation- SOLUTIONS ships with top level officials throughout the world at reightScan CEO some of the world’s most Andre Johnson impressive companies.” is used to being Johnson, whose dream Fthe exception. In a is to hit it big and trade his global air cargo busi- leather penny loafers for ness dotted with mostly middle- some sneakers and coach aged white men, Andre is as football while he teaches much the stand out as he was at calculus or economics at the investment banks Merrill Lynch high school or college level, and Wells Fargo. has plenty of scanning eco- “I come from a banking and nomics on his mind. finance background, so I’ve He says he stays up at always been the (big) black guy, night thinking about a com- if you will.” But happily for pany that has not yet made a Andre, there is a big difference splash in the cargo security in the world of air cargo: the business. His main fear? people. “That the biggest competitor “There are a lot more genuine AAndrendre Johnson,Johnson, CChiefhief EExecutivexecutive OOfficer,fficer, FFreightScanreightScan in this business doesn’t know people in the cargo business. that they want to be in it yet.” And you can get to a personal level ing air cargo industry. But Johnson aims to leave a big much faster than you could, if ever, in “We did our first show in November mark. His hope is that people will look other industries,” says the young execu- 2007 in Miami with a staff of four. To- back and say, “Wow, what did this busi- tive whose affable demeanor belies a day, I know all the international heads ness look like before FreightScan?” daily routine that calls for next Asked to name his hero, to no sleep. Johnson doesn’t miss a beat: The self-described kid from “There are a lot more Mom. He says he admires the wrong side of the tracks her pluck, intellect and credits an inner city background genuine people in the cargo resolve – traits she tapped and schooling at a suburban to rear a family of six, put Minnesota high school 40 miles business. And you can get to herself through college, get away for giving him a dual per- a masters and land a senior spective on life. It also taught a personal level much faster management role at a state him valuable lessons on moti- than you could, if ever, in economic assistance agency. vation and “putting himself in To hear Johnson tell it, he someone’s shoes before passing other industries.” has inherited the same drive judgment.” and faith and is just getting A former linebacker whose started. “I don’t think God first plane trip came during his senior of air cargo and the senior people at all gave me this much to do nothing with. year of high school for a football-relat- the airlines. You could never replicate I’ve been given tools and I’m going to ed visit to a college, Andre marvels how that scenario in other industries.” use them.” ACW he came so far so fast in the exhilarat- It’s been a whirlwind since Johnson [email protected]

28 JUNE 2009 ACW regionfocus Turkey

ust as the U.S. remains dependent on Mid-East en- key to a hub point outside Vienna. ergy, every winter the EU is reminded of its reliance Currently the EU imports about one-third of its gas from on Russian oil and gas. Russia. The Nabucco option, coupled with two other pipe- And while President Obama is trying to encour- lines, would reduce its dependence on Russia by at least 10 age an American ‘green economy’ to mitigate oil percent from 2020. imports, the Europeans are busy looking for a secure Blue Stream 2 is a joint venture between Russia’s Gazprom alternative. monopoly and the Italian Eni Group. Enter Turkey. The $12 billion Nabucco project is headed by OMV, the In May, both Russia and the EU reached separate Austrian oil and gas firm plus four national energy agreements with Turkey to construct new gas pipe- corporations — Turkey’s Botas; Bulgargaz, Bulgaria; lines to and through the country. Transgaz of Romania and MOL of Hungary — and In the case of Russia, Prime Minister Vladimir RWE, the German energy group. Putin and Turkey’s counterpart Tayyip Erdogan, Reportedly holding up the gas deal was linkage have agreed to construct a new pipeline under with Turkey’s EU membership negotiations — cur- the Black Sea. Called Blue Stream 2, it will deliver rently blocked by Cyprus because the Turkish oc- an additional 10 billion cubic meters of gas to both cupation of the northern part of the island remains Turkey and significantly, given the proximity to the unresolved. Gulf region, “other countries.” The EU also wants to encourage the construction of an- Meanwhile, the EU and Turkey will sign a deal this month other pipeline under the Caspian Sea connecting Turkmeni- to allow the construction of the Nabucco pipeline bringing stan and central Asia to Azerbaijan. While Nabucco initially natural gas 2,000 miles from the Caspian Sea region via Tur- will need the gas from Azerbaijan’s BP-run Shah Deniz-2 field

ACW JUNE 2009 29 regionfocus Turkey

to supply Europe, Brussels views the the CIS as well as ad hoc charters vast gas deposits of Turkmenistan as worldwide. Asher says the 40-tonnes the key to the project’s long-term vi- capacity A310s now have unlimited ability. operating certificates covering China Not overlooked by Russia or the EU and the U.S. and given the current in this battle for energy influence is global market, are a well-timed re- the common Turkik language shared placement. by Turkey, Turkmenistan and other Germany remains Turkey’s largest former Soviet Union satellites. export trading partner followed by the According to Demir Özerman, UK, Italy, France and Russia. Imports, chairman of Istanbul-based GSA Kar- skewed by gas purchases, puts Rus- gosistem, the linguistic link with the sia ahead of Germany, which, with Caspian region is one reason why both the sudden decline in its export-led Russia and the EU court Turkey. economy, is likely to remain the case With a population of 72 million, in the near-term. Turkey’s historic and literal bridge Russia and Turkey enjoy a spe- between Asia and Europe is under- cial trade agreement that allows for pinned by one of the world’s ten larg- non visa-based travel. This has had est emerging economies. a significant impact on tourism and Since its Customs Union with the encouraged reciprocal investment, EU in 1996, trade has grown to $128 particularly in construction. Özerman billion a year split almost 50:50 imports and exports. By says 50 percent of the construction in Moscow is Turkish- 2007, air cargo volumes had topped 1.4 billion tonnes — with backed. 73 percent via Istanbul; a 46 percent increase in one year. “Russia is now 20 percent of Turkey’s foreign trade. By Turkish Airlines (THY) remains the dominant carrier for contrast the EU, which was 65 percent, has dropped to 40 Turkish O&D traffic. Last month the airline ordered five new percent, ” he adds. B777-300 ERs at a list price of $1.36 billion. Several Turkish- Both Asher and Özerman say this market shift is reflected based carriers, including in air cargo. What used to MNG and Kuzu, add capacity be a traffic staple — textiles to the local market although made in Romania and Bul- MNG, which operates one garia — has now moved to of the largest maintenance Egypt and Jordan. “Imports facilities at Istanbul, places from the EU and the U.S. most of its A300 freighter have dropped off and the fo- capacity outside Turkey ac- cus is now more on the Mid- cording to Özerman whose dle East and Africa, explains company represents DHL, Özerman who, together with American and Continental. his older brother, are the Kuzu Airlines is now ma- EGSAC representatives for jority owned by ULS, a Turk- Turkey. ish/Russian logistics group Featured at last month’s that has funded the recent mammoth Transport Logistic purchase of three ex-Emir- Fair in Munich was Istan- ates Airlines’ A310 freight- bul’s ISG airport — named ers. Says Commercial Vice after famed Turkish aviatrix President Michael Asher, the Sabiha Gökçen. Located 30 new equipment is a much miles to the South, a major more cost-effective replace- terminal expansion is sched- ment to the older A300s that uled for completion in Octo- are either parked for spares ber 2009. or up for sale. Turkish construction com- Backing by a logistics pany Limak, together with group provides Kuzu access Malaysian Airports and Ban- to new business beyond galore-based infrastructure Turkey — specifically within company GMR, has paid $2.6

30 JUNE 2009 ACW billion for a 20-year license to other way around is chang- operate ISG as well as spend ing. “The population of the a further $337 million im- EU is getting old and is not proving it. being replaced. In Turkey, The object of the new 60 percent of the inhabitants build is to relieve pressure are under thirty. At the mo- on Istanbul’s existing Ataturk ment there are more than airport as well as provide the ten Turks in the European focus for a new industrial Parliament. These numbers center south of the city. GMR will grow as third or fourth notes that improvements generation Turks expand at ISG will serve 20 million their influence in Germany people in the surrounding and other EU countries.” catchment and expects exist- As Germans acknowledge ing carriers including THY, a drop of 3.8 percent in GDP Pegasus, Sun-Express, Easy for the first quarter of 2009, jet and Germanwings to in- the largest decline since re- crease frequencies. cords began in 1970, the Öz- Despite the interest and erman brothers suggest there surrounding infrastructure, is worse to come. “We’re cur- the consortium has no plans rently seeing the second line to improve the current in a recession ‘W’ that will be 90,000 tonnes per annum followed by another drop and cargo capacity at ISG. At then a long, slow rebound.” least for the short-term, Sabi- Demir Özerman thinks the ha Gökçen will cater to many downturn and its impact on German sun-seekers — de- the Turkish air cargo market spite the recession — rather has reached its bottom and than relocating Bulgarian by September there will be textile and electronics manu- an upturn. However, with facturers. relationships with the EU un- He suggests that the tra- likely to improve significant- ditional view of Turkey need- ly, no signs of $100 a barrel ing the EU more than the oil prices plus a slow global economic recovery, he fore- casts the rebound will be tied to an improvement in trade relations between Turkey and the U.S. “France and Germany will worry about this. But the EU will have to choose between Russia and Turkey for its future energy supplies. It certainly won’t be business as usual.” With Istanbul planning to be a new financial capital for the region and a gas pipeline ending near Vienna, an ob- server might suggest a new Ottoman era is emerging. “In five years it will be a very different world,” Özer- man predicts. ACW

ACW JUNE 2009 31 rade Slump Tests Japanese Survival Skills

Nagoya’s Centrair airport finally had cause to celebrate a However, the airport authority’s delight over the new new cargo route launch again on March 31. After a 12-month international cargo link was overshadowed by the termina- hiatus, Nippon Cargo Airlines resumed international flights tion of All Nippon Airways’ passenger flights to Tianjin and out of the airport with the start of regular service to Amster- Guangzhou in April. It was the latest round of cutbacks in dam and Frankfurt. The Japanese all-cargo airline is flying international services out of Nagoya. B747-400 freighters three days a week on the sector. When Centrair opened in February 2005 to replace the “I think that (Nagoya) is a part of Japan that has been city’s old airport, the mood for cargo activities was bull- underserved,” commented Shawn McWhorter, president of ish. The presence of Toyota promised a steady flow of auto NCA for the Americas. parts through the cargo area. Japan Airlines alone was soon featurefocus Gateways

running five freighter flights a week to North “Demand is picking up again, but it is still not America out of Centrair and two weekly inbound satisfactory,” said Shigeo Akiba, president of JAL freighters from Hong Kong. Kansai Aircargo System. Besides its parent airline, NCA also placed freighters at the airport, the company handles a number of other carriers at while ANA designated Centrair a major gateway the airport. A couple of years ago it supplemented for its operations. Singapore Airlines, Cathay Pa- its own capacity through the lease of warehouse cific, Korean Air and FedEx launched freighter space from the Kansai airport authority, but it has service to Nagoya and three U.S. carriers — since returned this in order to bring space in line American, United and Delta — brought in passenger flights. with demand. “They have not found a new user yet,” Akiba As Japan’s exports wilted in the global downturn and said. Asian carriers shrank their fleets, flights in and out of Cen- Last fall Kansai seemed poised to take its push for a role trair were decimated. As in other parts of the world, the as a major airfreight gateway to new heights. In August of retrenchment of freighter activities and reductions in pas- 2007 it opened its second runway, which increased capacity senger flights have affected second-tier gateways in Japan to 230,000 flights a year; a year later it obtained permission more than the major hubs. to extend customs operations to 24 hours a day. Previ- “The export decline has had a huge impact on the net- ously customs had been closed between 5 pm and 8:30 am, works of many carriers. In Nagoya carriers have taken out frustrating Kansai’s ambitions to play a greater role in the more and more frequency to the U.S. and Europe. There has express traffic arena. With 24-hour operation supported by been an increase of cargo trucked to (Tokyo) Narita and two runways, the airport authority’s was projecting cargo Osaka,” observed Charles Kaufmann, chief executive for volumes to reach 2.5 million tons by 2017, more than three North Asia and senior vice president for airfreight, North times the volume handled in 2007. Asia Pacific of DHL Global Forwarding. The push for more express business did bear fruit. Last Osaka’s Kansai International Airport has also suffered October TNT opened a gateway operation at Kansai, a move from the downturn. JAL Kansai Aircargo System, which that cut a day out of transit times from China to the Osaka handles over 50 percent of the tonnage flowing through area and also reduced transit times to and from Vietnam, Kansai, has witnessed a sharp decline in throughput, par- according to the integrator. DHL had already stepped up its ticularly on the export side. In January the tonnage was a presence at Kansai the previous year with a much-expanded mere 40 percent of the volume recorded 12 months earlier, facility — five times bigger than its previous setup — that and in February it stood at 42.2 percent. More recently there can process 7,500 parcels and 2,000 documents in an hour. has been some improvement, with tonnage in April reaching The integrator has a nightly A300-600F coming in from its 59 percent of the volume recorded in April 2008. Imports Asia hub in Hong Kong. FedEx and UPS both operate their fell to 72.3 percent of the previous year’s level in January own flights into Kansai. and sank further to 68.8 percent in March. According to Akiba, Kansai was quite successful in its As in Nagoya, carriers whittled down flights, albeit less effort to attract freighters until last fall, but the downturn drastically. Besides the Japanese airlines, SIA, Cathay and has crimped these ambitions. Worse still, neither Kansai nor Korean Air also cut back their freighter activities at the Centrair can look forward to a resumption of growth when airport. No carrier has added new freighter flights at Kansai the economy turns around. Both stand to be affected by the recently. Still, the airport has fared better than Centrair, opening of Tokyo Haneda airport to international flights which has a smaller industrial base. Kansai can count on a next year and by the completion of the extension of Narita’s large base of users, led by electronics giants like Sanyo and second runway, operators warned. Panasonic. Akiba agreed. “I believe next year will be tough for Kan- “There is a strong intra-Asia business out of Osaka. sai,” he said. “When Narita and Haneda are full it will grow This is also down, but not as much as the North American again.” market,” remarked Kaufmann. “Kansai will always play an Japan’s large carriers are gearing up for Haneda’s bigger important role, although certain carriers are now trucking international role. So far Tokyo’s domestic airport, which is to Tokyo. Trucking is not cheap in Japan.” much closer to the downtown core than Narita, hosts only a The airport authorities have tried to make themselves handful of international flights to China and Korea. JAL in- more attractive through lowering landing fees, but their tends to migrate its 767-300 freighters, which ply intra-Asian overall cost structure remains quite high. By early May traf- routes, to Haneda. ANA has also signaled ambitions to de- fic looked better than in February, but it is doubtful that velop international traffic out of its domestic hub, but it has airport costs were much of a factor behind this. yet to specify what exactly it is planning to do.

ACW JUNE 2009 33 featurefocus Gateway

This is but one of the open questions hovering the downside, we will have two operations in To- over Haneda. “It is still not clear if Haneda will be kyo. With certain hubbing systems we will have to predominantly for intra-Asia traffic or will there review how we are going to continue,” said Kauf- also be long-haul flights?” asked Kaufmann. mann. “We have agreed to have a certain operation If Haneda poses more questions than answers there as soon as the airport is open. How big this at the moment, the picture is even more obscure is going to be has yet to be determined. We have to when it comes to Okinawa. After it had inked see what flights and how many will be there,” he an agreement with Japan Post for the establish- continued. ment of an all-cargo airline a few years back, ANA Faced with these uncertainties, plus question declared that ultimately the venture’s chief hub marks over when business would be on the southern island. In 2007 will pick up again, most it announced an agreement with the gov- forwarders have adopted a “Kansai will ernment of Okinawa to turn the island’s wait and see stance, one car- main airport into a hub for intra-Asian rier executive in Tokyo ob- always play an operations. served. The most tangible re- important role, ANA aims to slot 50 freighters a week sult of this to date has been through the airport, catapulting Okina- the omission of a forwarder although certain wa’s tonnage from a modest 2,400 tons warehouse in the first phase carriers are in 2007 to 420,000 a year. Operations are of the planned new cargo slated to commence next year, and ANA area at Haneda. now trucking to management has indicated that it is The original plans called Tokyo. Trucking progressing as planned. Still, the current for two airline cargo termi- economic climate has raised fresh ques- nals plus a multi-user facil- is not cheap in tions over the venture. In April, ANA ity for cargo agents. Tokyo Japan.” shrank its fleet by terminating a wet- International Air Cargo lease contract for two B767-300 freight- Terminal, which is desig- ers supplied by U.S. ACMI provider Air nated to run the cargo area, has confirmed that it Transport Services Group. is proceeding with the development of the airline Even in more auspicious times some operators facilities, but the forwarder building has been post- had voiced doubts over the viability of a hub in poned due to lack of demand. Okinawa, pointing to the island’s peripheral loca- The large logistics companies already have tion and its exposure to typhoons. cargo facilities in the area, so they do not need a DHL Global Forwarding has no pressing need warehouse in the new cargo section. The forward- for an airfreight operation around an Okinawa hub. er building was supposed to accommodate chiefly “At the moment we have no specific solution how small and mid-sized agents. to use that network. If the transit time is okay and Companies are certainly not looking forward the rate is okay, that’s fine, but I don’t see a great to the cost aspect of a dual airport setup and the advantage for me to be involved in hubbing in Oki- operational complexities associated with this. “On nawa,” Kaufmann commented. ACW

TONNAGE DECLINE AT JAL KANSAI AIRCARGO SYSTEM VS. PREVIOUS 12 MONTHS

Month Export (%) Import (%) October 89.0 92.0 November 70.9 86.8 December 52.9 81.9 January 40.0 72.3 February 42.2 70.2 March 52.4 68.8 April 59.0 78.1

Source: JAL Kansai Aircargo System

34 JUNE 2009 ACW Air Cargo World Invites You to a FFREEREE WWEBINAREBINAR