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DECEMBER 2006 INTERNATIONAL EDITION

Review/Outlook Staged for Expansion 2006/2007

Latin America • Security • Air France-KLM Project1 10/10/06 11:54 AM Page 1

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INTERNATIONAL EDITION

December 2006 CONTENTS Volume 9, Number 10 COLUMNS 10 North America 2006 In The TSA extended its com- pliance deadlines for portions of Review the cargo security rule and the The air cargo industry industry is grateful, if still con- had a far better year in 2006 fused on what’s expected of it than it did the previous year and 2007 is expected to be even better. 14 Europe The Air France-KLM partner- ship is on track, but the cargo- carrying couple continues to fret over market share

16 Pacific Airlines are looking for joint ventures to tap into China’s lu- crative cargo market but finding 22 the right partner is not easy

Slowing the Fleet Latin America may not be the next great air cargo DEPARTMENTS market, but air carriers’ slow growth approach seems to 2 Edit Note work for now. 4 News Updates 35 Events 36 People 38 The Bottom Line 40 Forwarder’s Forum 40 Cover photo by WWW.aircargoworld.com Air Cargo World

Air Cargo World (ISSN 0745-5100) is published monthly by Commonwealth Business Media. Editorial and production offices are at 1270 National Press Building, Washington, DC, 20045, USA. Telephone: (202) 355-1172. Air Cargo World is a registered trademark of Commonwealth Business Media. ©2006. Periodicals postage paid at Newark, NJ and at additional mailing offices. Subscription rates: 1 year, $58; 2 year $92; outside USA surface mail/1 year $78; 2 year $132; outside US air mail/1 year $118; 2 year $212. Single copies $10. Express Delivery Guide, Carrier Guide, Freight Forwarder Directory and Airport Directory single copies $14.95 domestic; $21.95 overseas. Microfilm copies are available from University Microfilms, 300 North Zeeb Road, Ann Arbor, MI 48106, USA. 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, USA, 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, Customer Care Department, 400 Windsor Corporate Park, 50 Millstone Rd., Suite 200, East Windsor, NJ 08520-1415, USA; telephone (888) 215-6084

December 2006 AirCargoWorld 1 02EditorialINT 11/22/06 2:31 PM Page 2

Editor’s Note International Trends & Analysis Editor Paul Page • [email protected] Managing Editor Robert Moorman • [email protected] Contributing Editors Roger Turney, Ian Putzger Mike Seemuth Art & Production Director Jay Sevidal • [email protected] Editorial Offices 1270 National Press Bldg., Washington, DC 20045 Double or Nothing (202) 355-1170 • Fax: (202) 355-1171 PUBLISHER Steve Prince • (770) 642-9170 • [email protected] S Airways CEO Doug Parker is a skilled and unpredictable Advertising/Business Office gambler. The acquisition in 2005 of the tired and broke US 1080 Holcomb Bridge Rd. • Roswell Summit Building 200, Suite 255 • Roswell, GA 30076 UAirways by the significantly smaller America West, the air- (770) 642-9170 • Fax: (770) 642-9982 line Parker has led since late 2001, certainly demonstrates his Assistant to Publisher playing ability. Susan Addy • [email protected] International Advertising Offices Parker is now betting US Airways $8.7 billion hostile bid to take over bank- Europe, United Kingdom, Middle East David Collison • +44 192-381-7731 rupt Delta Air Lines will make the combined airlines a global competitive [email protected] Japan force. The acquisition could also trigger the long-predicted wave of U.S. airline Masami Shimazaki • +81-3-5456-8230 [email protected] consolidations, perhaps even taking in some all-cargo carriers. Thailand Chower Narula • +66-2-641-26938 Many industry analysts believe Parker’s bold move will succeed; the timing is [email protected] Taiwan right, they say. But Parker may have dealt himself a hand he not only can’t win, Ye Chang • +886 2-2378-2471 [email protected] but also could damage the ongoing integration of America West and US Airways, Australia, New Zealand Fergus Maclagan • +61-2-9460-4560 which won’t be completed until the second quarter of 2007. [email protected] Sri Lanka There are numerous hurdles over which Parker must leap Jaiza Razik • +94-133-3424 [email protected] before he gets to again rename the airline, this time to Delta, Korea Mr. Jung-won Suh • +82-2-3275-5969 from US Airways, which used to be America West. Got that? [email protected] Unlike the old US Airways, which was begging to be Classified Advertising and Reprints Tamara Rodrigues • [email protected] bought, Delta Chief Executive Gerald Grinstein is strongly op- (770) 642-8036 posed to the idea and could team up with the unionized Delta Display Advertising Traffic Coordinator pilots to fight the takeover. Tracey Fiuza • [email protected] (973) 848-7106 The strong opposition to US Airways’ offer by Delta manage- Electronic Rights and Syndication ment and various labor groups is only part of the problem for Barbara Ross • [email protected] (973) 848-7186 Parker and Co. In addition, there are serious anti-competitive CUSTOMER SERVICE OR TO SUBSCRIBE: ( concerns about such a merger. 888) 215-6084 Consider what Parker is proposing. The merger of US Airways, America West and Delta will create the largest U.S. airline, controlling 26.5 percent of all U.S. domestic seats, according to BACK Aviation Solutions. Parker needs to finish one hand before the other is dealt. The integration of America West and US Airways – two carriers with vastly different operating 400 Windsor Corporate Park 50 Millstone Rd., Suite 200 methodologies and cultures — is far from complete. Yet, Parker wants to East Windsor, NJ 08520-1415 (609) 371-7700 • (800) 221-5488 march through Atlanta and take over another airline with a different culture, President and CEO Alan Glass fleet type and operating philosophy. Senior Vice President, CFO Dana Price The complexity and difficulty of combining three carriers, coupled with reg- Vice President, Magazine Group Peter Tirschwell Group Publisher Noreen Murray ulatory and political issues to consider should prompt the gambler to take his President, PIERS Brendan McCahill winnings and walk away. Vice President, Directory Databases Amy Middlebrook For the cargo industry, the belly cargo contribution that both US Airways Vice President, Human Resources Kenneth P. Slivken Vice President, and Delta provide to the bottom line will remain about the same combined as Production & Manufacturing Meg Palladino before, say analysts. Yet this proposal could be a seminal event in the develop- Director of Circulation John Wengler ment of air transportation in the near future. And that will have a large im- Director of Creative Services John White President, BACK Aviation Steven G. Casley pact on the cargo industry. POSTMASTER: Send address change to: Air Cargo World, 400 Windsor Corporate Park, 50 Millstone Road, Suite 200, East Windsor, NJ 08520-1415.© 2006 Commonwealth Business Media Inc. — All Rights Reserved For more information visit our website at www.aircargoworld.com

2 AirCargoWorld December 2006 Project1 11/10/06 10:37 AM Page 1 04NewsUpdateINT 11/22/06 3:06 PM Page 4

UpdatesNews

straw poll of customers that could presage a shutdown. “We’re still go- ing ahead. The freighter program hasn’t been cancelled,” said Airbus spokesman Justin Dubon in Toulouse. The FedEx move on the A380-800 will reverberate in the plans for the passenger editions because, industry officials say, Airbus was using the freighter as the base for its follow-on A380-900. Airbus may be wondering if the plane gets that far. Emirates last month canceled its orders for 10 A340-600 passenger aircraft and going with Boeing aircraft instead, a move seen across the industry as a warning that Emirates’ patience on its order for 45 A380 passenger Airbus Has Superjumbo Problems planes is limited. FedEx’s order for the 777s, mean- he landing of an Airbus A380 in the Chinese city of time, gives a glimpse of FedEx’s long- Guangzhou last month on a test flight had all the trappings term plans for international express of gala event. But it came a full month after Airbus was service. “Ordering the 777 freighter Toriginally going to deliver a fully tested and ready to fly says that range still matters, but huge A380 to Singapore Airlines. And the test plane’s path on landing capacity may not in the express busi- took it past a starker reminder of Airbus’ troubles, the site of the ness,” said Hamlin. future FedEx Asia air hub right there at Guangzho Baiyun Interna- tional Airport. Korean Orders FedEx Express dealt Airbus its strongest blow yet on the troubled A380 program, canceling its 10 firm orders and 10 options for A380 freighters orean Air clearly is not prepared in exasperation over the latest delays that have undercut the future of Kto cede its position as the top in- the freighter program and even sent the passenger edition into stronger ternational cargo airline in the world. turbulence. Included in the airline’s $5.5 bil- UPS, which also has a 10 plus 10 order and option package for the A380 lion order last month for 25 new air- freighter, had no immediate decision on its orders but industry sources said craft are five 747-8 freighters and cancellation was a prominent possibility. “We continue to evaluate the air- five 777-200 freighters, adding still craft and the options we have,” said UPS Airlines spokesman Mark Giuffre. more bulk to a fleet plan that al- FedEx instead placed a $3.5 billion order for 15 new 777 freighters, adding ready includes healthy maindeck lift to Boeing’s strong winning streak in the all-cargo business, and with prob- and an ongoing conversion program lems still buffeting the A380 the future of at least the freighter version was a for 747-400s. serious question. The order, the largest airplane “This looks like the end of the line for the A380 freighter,” said George commitment in Korean history, in- Hamlin of the Morten, Beyer & Agnew an aviation consultancy. “This is a sig- cludes 10 777-300 extended-range nificant customer desertion.” and options for 10 more aircraft. EADS, the parent of Airbus, said customers of the 15 remaining A380 “Korean Air is a world class air- freighters would have to “reconfirm” their orders, creating something of a line and we value our long relation-

4 AirCargoWorld December 2006 04NewsUpdateINT 11/22/06 3:06 PM Page 5

News Updates

ship with this important customer,” have an advanced technology airfoil how quickly it must be screened. said Boeing Vice President of Sales and raked wing tip. The tests are going on as a Larry Dickenson. The freighter will use four fuel-effi- change in political power in Wash- The 777-300s will replace the cient General Electric GEnx-2B67 en- ington has freight industry officials 747-400 passenger airliners KAL is gines, the same powerplant on the bracing for tougher air cargo securi- converting to freighters while the widebody 787 Dreamliner. ty rules. 747-8 freighters and 777-200 The program was launched in No- Democrats, who took control of freighters will add capacity and op- vember 2005 with orders from Car- the U.S. House and Senate, have erational efficiency. golux and Nippon Cargo Airlines. In made cargo security a key issue in September, Atlas Air joined the cus- their political positioning against the Completed 747-8 tomer list with 12 747-8 freighter Bush administration. worth $3.4 billion. Other customers The Republican-controlled Con- oeing completed the basic de- include: Emirates SkyCargo, 10; gress rejected attempts over the last Bsign configuration of the 747-8 Guggenheim Aviation Partners, four; two years to require 100 percent freighter, an aircraft that is supposed Nippon Cargo Airlines, eight and physical screening of all cargo that to have lower operating costs and Cargolux with 10, bringing to 44 the travels on passenger planes. Many more cargo volume than the 747- number of firm orders for the 747-8 cargo industry officials say that 400 Freighter. Freighter. In late 2009,Boeing will de- would sharply cut back or even elim- Achieving the milestone allows liver the first 747-8 Freighter to Car- inate belly cargo. Boeing and its suppliers to begin de- golux Airlines. Meantime, DHS is funding the de- tailed design of parts, assemblies and velopment of new systems that can other systems for the freighter, Boe- Cargo Screened screen entire pallets for explosives. ing’s all-cargo response to the Airbus DHS is currently evaluating eight dif- A380 triple-decker. Once completed, ith the prospects growing for ferent cargo screening technologies the detailed designs will be released Wgreater air cargo screening re- at the Transportation Security Labo- to Boeing suppliers and factories to quirements, the U.S. Department of ratory near Atlantic City, N.J. begin production of the aircraft. Final Homeland Security is expanding its design will be completed in the first $30 million air cargo explosives de- Selling TNT half of 2008. tection program to Seattle. Dan Mooney, 747/747-8 program The DHS and the Transportation NT is out from under govern- vice president, said the plane is de- Security Administration started Tment ownership and that may signed to deliver 14 percent lower working with the Lawrence Liver- put the world’s No. 4 air express op- ton-mile costs and provide 16 percent more Laboratory on the research erator in play for a takeover. more revenue cargo volume than its project at the San Francisco Interna- The Dutch government sold its predecessor. The additional 4, 225 cu- tional Airport in June. At SFO, the 10.9 percent stake in TNT, which bic feet of volume means the aircraft project has been aimed at research- operates the Netherlands postal sys- can accommodate four additional ing ongoing cargo handling process- tem, for $1.9 billion. But the most maindeck pallets and three additional es and how use of existing screening important piece is a single, separate lower-hold pallets. technology may affect the move- share the government said it will The next generation freighter will ment of goods. transfer over to TNT “at no cost.” be 18.3 feet longer than the 747-400 In Seattle, which is part of a larg- The so-called “golden share” gives freighter and has a maximum pay- er, multi-segmented program, DHS the government ultimate veto power load capability of 154 tons with a will test devices designed to detect over TNT decisions and actions, an range of 4, 475 nautical miles. a heartbeat and excess carbon diox- element that has blocked other op- The 747-8 will have a new wing ide, indicating possibly the pres- erators from buying up a carrier design to provide better perfor- ence of a stowaway or terrorist on with a major piece of the European mance, lower noise and reduce an all-cargo flight. Tests will also express market. maintenance costs. The wing will determine the flow of air cargo and Industry sources, speaking on con-

December 2006 AirCargoWorld 5 04NewsUpdateINT 11/22/06 3:07 PM Page 6

News Updates

dition of anonymity, have said UPS ABC’s revenue of $158.8 million approved by the Indian govern- and FedEx both looked at a possible was up 134 percent over the first ment, extends FedEx’s position in purchase of TNT in recent years but nine months of 2005. With a new Air East Asia and is FedEx’s response to backed away, at least partly because Operators Certificate from the Russ- DHL’s buy two years ago of Blue of the ownership structure. ian government, the 747 operator is Dart, the leading Indian domestic The ownership change caps a year on track to operate “two core busi- express operator. in which TNT has overhauled its nesses, each with its own business “This acquisition will solidify the structure to focus more closely on model, dedicated management team FedEx leadership position within In- what it sees as its core mail and ex- and transparent P-and-L,” said Stan dia,” said Robert W. Elliott, president press divisions. Wraight, the head of ABC. of FedEx Express, Europe, Middle Directly the expansive one-stop- ABC began operations in May East, Africa and Indian subcontinent. shop strategy of many other large 2004, serving Europe and Asia “Bringing PAFEX operations within competitors, TNT sold its logistics through its hub in the Central Russia the company is the next logical step business in the fall to a private equi- city of Krasnoyarsk. The airline plans in the ongoing development of our ty firm. Then it completed the to branch out and to North and Indian business.” move out of third-party logistics by South America as it adds to its fleet Privately-held PAFEX is one of the selling TNT Freight Management, its of 10 747-200s next year. The airline larger domestic express operations in basic forwarding operations, to will take three -200 freighters and India’s burgeoning doemestic mar- French logistics giant Geodis last then a 747-400 extended-range ket, with more than 384 offices serv- month for $588 million. freighter in time for the winter 2007 ing nearly 4,400 destinations. “We studied the relationship to our schedule and a second -400 in 2008. FedEx Express began operating in express and mail delivery networks Volga-Dnepr, meantime, will take Indian in 1984 and started direct and decided that selling the freight delivery of a second IL-76TD-90VD flights there in 1997. management business is the best way freighter in next year’s third quarter “As one of the fastest growing forward,” said TNT CEO Peter Bakker. and expects a demand for at least 17 economies in the world, India pre- more of this type by 2011. sents enormous opportunities for Russian Premier our customers,” said Michael L. FedEx India Ducker, president of FedEx Express ussia’s AirBridge Cargo more International. Rthan doubled its revenue in the edEx Express is joining the rush to first nine months of 2006 and the FIndia with the purchase of its ser- National Buys scheduled freighter venture of the vice partner in the country, Prakash Volga-Dnepr has a license to do even Air Freight. ational Air Cargo may have more next year. The acquisition, which must be Nturned its business model in-

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side out in recent years but it’s pur- determined whether the operations and international air express ship- chase of DC-8 freighter operator will merge, said Mick Cihak, execu- ping was the company’s largest in Murray Air Cargo lsuggests bigger tive vice president at National. 10 years and along with the compa- changes are underway for the air for- National President and CEO Chris ny’s decision to use dimensional warder based outside Buffalo, N.Y. Alf said Preston Murray would re- weight pricing in its domestic The buy last month brings Nation- main as president and COO of the ground business marks an aggressive al, once a distinctly domestic U.S. Murray operation. attempt to scale up pricing for pre- forwarder that has used military mium services. business to build an international Hiking Rates FedEx and UPS actually raised profile, the freighter assets of a Ypsi- their list rates 5.5 percent and 6.9 lanti, Mich.-based operator that flies edEx may be looking for a percent, respectively, but the carriers auto parts and on-demand passen- Fhealthy price increase in 2007 cut their fuel surcharges for express ger service for the U.S. military. but UPS wants to be even healthier. business by two percentage points, That likely will bring National still UPS trumped FedEx’s 3.5 percent leaving the impact at 3.5 percent more military traffic even as the effective increase in list rates for 2007 and 4.9 percent. company navigates the territory be- with a 4.9 percent price hike that The increases come as ocean carri- tween airline operations and its for- runs against broader trends for softer ers are seeing rates pulling back warding business. Both companies prices in many transport markets. sharply in the wake of large new ca- will operate independently until it’s The UPS increase for domestic pacity in maritime markets. ■

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NORTH AMERICA Extra Time The air cargo industry said it can’t meet deadlines for parts of the new security rule, and TSA finally agrees

produce the specific instructions by which the security training and as- sessments would be conducted for seven industry groups. TSA says the training curriculum for indirect air carriers, or forwarders, was issued in October and expects the detailed guidance to be submitted soon. Reality Shows

More challenging is the loss of key TSA personnel to ensure this rule is carried out. The departure of Pamela Hamilton, TSA’s acting assistant general manag- er for air cargo programs, who was in- strumental in crafting the rule, and other managers has doubled the he U.S. air cargo industry got some very good news in late workload of Edward J. Kelly, the new October. After extensive review of comments, and serious general manager for cargo and John talks with industry officials, the Transportation Security Beckius, TSA’s assistant director of air TAdministration extended the compliance dates for five key cargo, according to air cargo officials. provisions of the Air Cargo Security Final Rule, now given a name TSA says it’s in the process of filling only a bureaucrat could love: the Interim Final Rule. the slots. The extension is an admission of sorts by TSA that it underestimated the But the cargo industry praised TSA time needed to bring the entire air cargo industry under one for extending the By Robert W. Moorman security umbrella. TSA realizes now what a massive – some compliance sched- say unwieldy – task it has undertaken in drafting and enforcing a rule that will ule. “I was encouraged by the deci- dictate how a large and fast-moving industry behaves. sion. It shows that TSA is willing to Thousands of employees and independent contractors must be trained and do a reality check of what is possi- screened, according to industry groups. Airports, airlines and cargo-related busi- ble,” said Stephen Alterman, presi- nesses are affected. Millions of dollars must be coughed up by the private sector. dent of the Cargo Airline Association. The “large number of employees and agents” that must undergo criminal “The old compliance dates simply history record checks, security threat assessments and receive security training weren’t going to work.” make the extensions necessary, said TSA in its public notice. To some, the extension has broad- Not stated, but factored heavily into the extensions, was TSA’s inability to er meaning, suggesting the TSA these

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Extension of Compliance Dates Security Threat Assessment Air Cargo Final Rule Amended days is less dogmatic and more flexi- Training & Other Requirements Compliance Dates Compliance Dates ble when dealing with the industry. Security Threat Assessment for Dec. 1, 2006 March 15, 2007 “It’s a positive statement that TSA employees of aircraft operators, foreign air carriers and indirect air carriers acted the way it did,” said Charles Chambers, senior vice president for se- STAs for agents of aircraft operators, Dec. 1, 2006 June 15, 2007 foreign air carriers and IACs curity and economic affairs for Airports Council International – North Ameri- STAs for IAC proprietors, general partners, Dec. 1, 2006 March 15, 2007 officers, directors and certain owners ca. “Once TSA saw this was not going to be easy, it extended the deadline.” Training of IAC Nov. 22, 2006 Same employees Among the changes: TSA extended the compliance dates for agents of in- Training of IAC agents Nov. 22, 2006 June 15, 2007 direct air carriers in security-related jobs that must undergo an STA and Establishing the boundaries of Security Oct. 23, 2006 Same Identification Display Areas for air cargo receive proper security training. TSA areas also gave airport operators more time Criminal History Records Check, training, Oct. 23, 2006 January 22, 2007 to ensure individuals with unescorted name-based STAs, and ID requirements access to Security Identification Dis- for individuals with unescorted play Areas are subjected to criminal access to expanded SIDA checks, STAs, and training. (See box) Source: Transportation Security Administration Industry officials hoped for more extensions for some deadlines, but work management. tween TSA, the U.K. and the Euro- TSA officials said that was unlikely. Sammon’s interpretation of this pean Union are part of “continuous segment of the enhanced known discussions” on passenger require- Security/Trade shipper program differs significantly ments and banned substances, not air from what some industry groups be- cargo shipment requirements, specifi- Industry groups hint of modifica- lieve. One high level industry offi- cally. “We have talked to them about tion to the enhanced “known ship- cial, speaking on condition of cargo shipment harmonization, but per” program. anonymity, said TSA was consider- these aren’t active negotiations,” he The present rule says non-U.S. ing “security directives” to toughen said. “Harmonization is a much shippers operating in the U.S. — or standards for cargo coming into the longer process and we’re not thinking from the U.S. to another country — U.S. But those standards would not of amending the air cargo rule” to aren’t allowed to ship cargo in the fall under the rubric of the domestic- achieve that aim. belly of U.S. airliners unless they’re based known shipper program. One way to resolve the issue, ac- part of TSA’s known shipper pro- Some non-U.S. airlines and govern- cording to industry observers, is gram or a recognized program of an- ments are concerned about changed through reciprocity, whereby the U.S. other country. requirements for air cargo shipments certifies known shipper programs and The Interim Final Rule does not al- changing. “Whatever conditions or vice versa. ter the requirements of cargo coming programs that are going on now will TSA “fully supports” the develop- into the United States, said TSA. But continue after the rule’s full imple- ment of an internationally shared the rule cal for certain cargo ship- mentation,” said Sammon. shipper database “if such a system ments to undergo added inspection. Sammon’s assurances have not meets TSA’s stringent security stan- “The known shipper program has calmed concerns in the United King- dards,” said TSA spokeswoman An- applications to domestic shipments dom, which has its own known ship- drea McCauley. within the U.S. In terms of foreign per program. Not helping matters is shipments coming here, the world the confusion about whether other … Briefly doesn’t change [under this rule],” said countries’ known shipper programs John Sammon, TSA’s assistant admin- will be acceptable. Guggenheim Aviation Part- istrator for transportation sector net- Sammon said reported talks be- ners, a U.S. based aviation invest-

December 2006 AirCargoWorld 11 10RegionalsINT 11/22/06 2:40 PM Page 12

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ment concern, ordered four 747-8 sales. … KLM is adding five daily named ALM International its car- freighters with an option for two 777 passenger flights between Ams- go general sales agent for its flights more aircraft. Potential value of the terdam and Los Angeles in addition between the United Kingdom and order is around $1.2 billion at list to its daily 747-400 combi flights. … New York, Washington and Las Ve- prices and deliveries will begin in American Airlines Cargo intro- gas. … Utah-based regional cargo air- 2009. … Forwarder Pilot Air duced AA Cool PerishablesSM, a ser- line Alpine Air Express posted a Freight’s revenue grew 5.3 percent vice which provides pre-cooling and net profit of $295,903 for the three in the third quarter over the same expedited agriculture and customs months ended July 31 after losing period the year before, reaching a clearances for fresh shipments before $809,480 in the year-earlier quarter record $83.9 million. International delivery. … Cargo Management even though tonnage fell by more revenue grew 15 percent to $16.9 International, a division of U.K.- than half from last year to 2,745 million. … Boeing’s third quarter based cargo general sales agent Pe- tonnes. … Forwarder SEKO opened net profit fell 31 percent as a result of nauille Servisair Cargo, set up its Seko-Canada, solidifying its long- a $280 million one-time charge to second office in the United States, a standing relationship with the Cole jettison its in-flight Internet service. Houston station that will be man- Group, a logistics provider and cus- Revenues for third quarter rose to aged by aviation industry veteran toms broker, and adding 11 offices to $14.7 billion from $12.4 billion for Eleanor Moore. … MaxJet, a 767- the company’s network. Seko also the year earlier period, due primarily 200 passenger operator with flights opened SEKO-Brazil in São Paulo, to a 45 percent jump in new aircraft in all-business class configuration, Brazil. ■

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12 AirCargoWorld December 2006 10RegionalsINT 11/22/06 2:40 PM Page 13

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EUROPE Combi Carriers Air France-KLM says its combination is on track, but is defending home markets all there is to it?

he problem about being the leader in any field is the nervous and coun- Tterproductive tendency of looking over your shoulder to see what’s behind you, rather than focusing on what’s ahead. It is a trap into which the Air France-KLM Cargo joint venture is in danger of falling. According to Michael Wisbrun, the Dutchman charged with welding the two carriers’ cargo operations togeth- er, there are demons lurking in every shadow, apparently. “We not only have to compete in a fiercely competitive European market, but we have to protect that market from both the United States and Asian sides, added to which we have aggres- in their market share, says Wisbrun. “It is the Middle East and newly emerging sive competition from Middle East car- Asian players, for which we have to watch out.” riers,” says Wisbrun, chairman of the Wisbrun insists he’s not paranoid about retaining its lead position. “It is not joint cargo management committee. about being No.1, but what we see as establishing the carrier as a European For the first nine months of 2006, champion able to firmly defend our position in our home markets.” AF-KLM Cargo claims it retained a 7.2 percent market share among all carri- Les Musketeers ers, based on international FTKs, a clear percentage point ahead of its Some comfort, says Wisbrun, can be derived the position of the carriers as nearest rivals, Korean Air Cargo, the leaders at Paris and Amsterdam. Lufthansa Cargo and Singa- The combined airline has already invested over $15 million in By Roger Turney pore Airlines Cargo. Wis- new cargo facilities at Paris Charles de Gaulle Airport. Amsterdam brun is confident of maintaining that Schiphol will be next when the KLM Cargo operation moves out of the central margin, but far from relaxed about the area of the airport to a new cargo zone to the southeast. “It is hoped at this growth rates of some other airlines. time that we will be able to create an exclusive cargo area at the airport which “You only have to look at carriers will be ring-fenced with its own security environment,” said Wisbrun. like Emirates, who in this same nine The integration of the Air France and KLM cargo operations remains on track. months has seen a 25 percent growth The partners suffered a significant loss in September when Bram Graber, senior

December 2006 AirCargoWorld 13 10RegionalsINT 11/22/06 2:40 PM Page 14

ReportsRegional

vice president marketing and network can generate due to the sheer size ing even by ocean. for the joint operation, departed to and scale of its’ combined operation. “We’re assuming a growth rate of head up KLM’s passenger operations “In the first year of our joint opera- around 5 percent in the air cargo in the Benelux countries. Graber is tion those synergies were put at just market over the next few years, but credited as the architect of the master $15 million, but in this current finan- we cannot ignore what will become a plan and timeline to pull the two op- cial year they will climb to a figure growing competitive threat from sea erations together. near $64 million,” says Wisbrun. By freight,” says Wisbrun. Arend de Jong, former senior vice merging cargo handling in Hong president network for KLM’s passenger Kong, for instance, the airline … Briefly division, replaces him. The integration achieved savings or synergies of over team still has its three French muske- $1.3 million. Freight traffic for European airlines teers on board: Jean Charles Foucault, “There is no reason why the over- grew 3.8 percent in September, the heading sales and distribution; Pascal all figure will not climb to something sharpest rate since the first quarter, as Morvan, responsible for operations like $140 million over the next few trans-Atlantic traffic grew 6.7 percent, and logistics; and Claude Sereno, over- years,” Wisbrun says. ”This is an in- according to figures from the Associ- seeing strategy and development. disputable benefit of the merger.” ation of European Airlines. The According to Foucault, it’s time to According to de Jong, China pre- increase followed a small decline in accelerate the integration process. sents the greatest challenge. “This is August, and included a 5.1 percent “We’re confident that our customers the obvious battleground, with emerg- gain in the North Atlantic trade that recognize that they’re talking to one ing Chinese cargo carriers and other marks European carriers’ second- carrier, with one point of contact, airlines vying for position in this im- largest overall freight market. … TNT with one sales organization, one key portant market. This will certainly be took its business restructuring to its account team and for the most part the focus for us,“ says de Jong. next step, announcing it will sell its one handling operation.” There is speculation the focus may freight forwarding TNT Freight Man- Foucault’s comments suggest the include China Southern Airlines, agement business now that it has time may be right for the slick brand- which has signed to join the sold off its logistics operation. The ing of the AF-KLM Cargo partnership, Skyteam alliance next year and may company is refocusing on its asset- which will include a new, “one” cor- be working on a joint venture with based express and postal delivery porate logo for AF-KLM Cargo. the Air France-KLM group, also part businesses. … The European Com- But the process of merging the var- of Skyteam. “We are obviously aware mission banned Das Air Cargo and ious cargo handling operations of a suggested tie-up between the Dairo Air Services, Ugandan around the globe is proving a tough two carriers, but it is too early to freighter operators, from flying into nut to crack, says one top official. speculate,” says de Jong. “But we will Europe. Airline and Ugandan govern- The so-called, “one roof “ han- certainly be keen to increase our pen- ment officials were meeting with Eu- dling concept has been rolled out to etration of the China market in any ropean authorities to restore the op- most stations. But, says operations way we can.” erations, which include major trans- expert Morvan, it may be another The tie-up between Air France Car- port of perishables out of the African two years before the process is com- go and KLM Cargo seems to be going nation. ... Cargo volume from plete. And combining handling in well, with executives from both sides freighters at Amsterdam Schiphol some of the more difficult markets, relaxing into their roles. Airport climbed 16.1 percent in such as India and Germany, may not “I think we’re beginning to grow on September compared to the same be possible because of legal con- one another,” says Wisbrun. “On the month last year and was up 8.2 per- straints,” says Morvan. Dutch side we have learned to become cent in the first nine months of 2006. a little less structured, whilst perhaps Overall cargo tonnage grew 11.5 per- Adding China on the French side they have learned cent in September and 5.8 percent to become a little more structured.” through the first three quarters. … Is- The “one” strength AF-KLM Cargo But Wisbrun still chases those rael Aircraft Industries won cer- venture does have are the synergies it demons, seeing some of them com- tification from authorities in the

14 AirCargoWorld December 2006 10RegionalsINT 11/22/06 2:41 PM Page 15

ReportsRegional

United States and Europe for a 747- tics opened an office in Glasgow, the Nairobi. … Lufthansa Cargo start- 400 freighter conversion for an air- latest expansion in an ongoing effort ed winter MD-11 freighter service be- craft purchased by the Netherlands to build up its operations in the Unit- tween Frankfurt and Los Angeles Rabobank Group to be operated by ed Kingdom. … Coyne Airways be- through Chicago. … Cargolux is the Air Atlanta Icelandic. … France- gan operating a 747 freighter twice new exclusive general cargo sales based forwarder Geodis saw revenue weekly from Liege, Belgium, to Al- agent of new-start Oasis Hong grow 3.7 percent in its third quarter maty, Kazahkstan. … TESIS, a Russ- Kong Airlines, an operator of two ending Sept. 30, to $1.14 billion. For ian startup operating a 747-200 747-400 passenger aircraft. … Frank- the first nine months of 2006, Geodis freighter between Moscow and furt Airport broke ground on a revenue was up 6.1 percent to $3.5 Leipzig, named EasternAirCargo 250,000-square-foot animal station to billion, with business in Asia and the its cargo general sales agent on traffic be managed by Lufthansa Cargo; the rest of the world outside Europe up out of Germany. … Brussels-based station is slated for completion in 28 percent. … Allied Air will use a Silverfleet Airlines, Interstate early 2008. … U.K.-based ANA Avia- DC-10-30 freighter wet-leased from Airlines, a Netherlands air cargo car- tion Services is the new cargo sales Gemini Air Cargo for twice-weekly rier, and Evergreen International agent for Florida West Interna- flights between Ostend Airport and Airlines, which will supply a 747 tional Airways, and ANA’s Euro- Lagos, with trucking service available freighter, signed a long-term agree- pean partner, NAS Network Air- out of major European gateways. … ment for four weekly rotations be- lines Services is the new sales agent Dubai-based forwarder GAC Logis- tween Brussels, West Africa and for France. ■

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December 2006 AirCargoWorld 15 10RegionalsINT 11/22/06 2:41 PM Page 16

ReportsRegional

PACIFIC Courtship Rites Airlines are looking for joint ventures to tap into China’s air freight market, but romance and reality don’t always coincide

Seoul Cooking

KAL management was not im- pressed with the launch of cargo flights between Seoul and Beijing in August. It was the first international route of China Postal Airlines, a joint ven- ture between China Post and China Southern. For the postal authority, the venture is an effort to fight back, having lost a large chunk of the do- mestic express market to the integra- tors, who now control about 60 per- cent of the business. Likewise, Sinotrans has also seen its share of the Chinese express cake dwindle, as former partners TNT and UPS walked away to pursue plans he Great Wall hit by one cargo airline venture in China with other local partners. The compa- does not deter others from taking shape, but there’s still ny’s efforts to establish itself as the ample mileage in more basic fifth freedom deals. China leading express operator in China last TSouthern Airlines isn’t given to moping over lost suitors. Jilted by year were thwarted when three Chi- Korean Air in favor of government-owned logistics giant Sinotrans, the Chi- nese airlines rebuffed overtures to set nese carrier is now involved in some heavy wooing from Air By Ian Putzger up a cargo airline. France KLM. At the same, some gen- Spokesmen for both parties declined comment on the issue, but it’s com- eral cargo sales agents that have mon knowledge the airlines are considering a joint venture cargo airline, the worked with big international Chi- latest preferred method for foreign airlines to tap into the China export mar- nese carriers are frustrated by the ar- ket and for Chinese businesses to get the Western capital and expertise for cane business structures and some- long-haul expansion. times-contradictory cargo policies. According to sources, the talks have been going on for months, suggest- In combination with the dissatis- ing the Chinese carrier was already flirting with the European outfit when faction over the China Postal Airlines it was still dating Korean Air. There were early signs the Sino-Korean airline venture, these issues may well have axis was headed for failure, despite China Southern’s entry into the dissuaded KAL from pursuing a joint SkyTeam this summer, just ahead of the announced romance between venture with China Southern, partic- KAL-Sinotrans. ularly after its previous efforts with

16 AirCargoWorld December 2006 Project1 10/27/06 8:40 AM Page 1 10RegionalsINT 11/22/06 2:41 PM Page 18

ReportsRegional

Okay Airlines failed. Sinotrans seems freighter flights across the Pacific via for delivery between this month and a more congenial partner with less China on the same principle. 2008. The first was converted in Xia- potential conflict of interest. The Chinese authorities don’t men and work on the second, to be Like the aborted project with seem to tire of the idea of openness. delivered this month, was done in Okay, KAL’s new China cargo ven- They recently granted MASkargo Singapore. Dragonair’s freight traffic ture will also be based in Tianjin, a fifth freedom rights through slowed to 2 percent growth in Octo- market that has received some gov- Hangzhou and Shanghai to points in ber and was up 8.4 percent in the ernment backing for ambitious logis- Northern Asia. The carrier is looking first 10 months of 2006. … DHL tics development. Another plus is to fly from Kuala Lumpur to Shang- boosted its capacity between Hong that Tianjin is not plagued by over- hai and on to Russia, said J.J. Ong, se- Kong and Central Japan Interna- capacity like Shanghai. nior general manager of cargo, tional Airport in Nagoya 40 per- KAL’s focus this time will be differ- adding that he hopes to mount the cent, switching from A330-200 pas- ent, reflecting the desires of the new operation next March. senger flights to an A300-600 partner. “We can’t expand aggressively in freighter operated by Air Hong Whereas the Okay project followed China because we haven’t got Kong. … Malaysian all-cargo airline the standard China joint venture par- enough aircraft,” Ong said. MAS is Transmile was in talks to add two adigm of concentrating on interna- not due to add cargo planes to its MD-11 freighters to its fleet of four tional cargo — like the Lufthansa- fleet in 2007. Efforts to lease A300 widebodies and plans to add two 727 backed Jade Cargo International and freighters have been hampered by a freighters by the middle of next year. Singapore Airlines-supported Great lack of available aircraft and high … Air Madrid started daily A340 Wall enterprises — the new partner- leasing rates, said Ong. flights between Hong Kong and ship intends to operate both domes- Madrid. … Singapore Airlines car- tic and international flights after its … Briefly go traffic edged up 1.2 percent in Au- launch next summer. gust over the same month last year The first service will go to Europe, Freight traffic growth for Asia-Pa- on a 1.4 percent gain in capacity. It most likely Frankfurt, with a 747-400 cific airlines accelerated in Septem- was the fourth straight month SIA’s freighter, said KAL Cargo president ber, advancing 6.2 percent over the cargo growth was under 4 percent. ... Ken Choi. KAL is also thinking of same month a year ago on a 3.9 per- Hong Kong-based Trans Global Lo- placing two soon-to-be-reconfigured cent gain in capacity. Traffic grew 5.1 gistics opened its 13th office in Chi- A300 freighters this winter with the percent in the first nine months of na, in Hangzhou. … Korean Air joint venture airline. The aircraft the year, according to the Associa- saw cargo revenue grow 4.5 percent could serve intra-China routes as well tion of Asia-Pacific Airlines. … in the second quarter and the world’s as some sectors within Asia. Singapore’s prime minister proposed top international freight airline says an open skies aviation agreement be- revenue grew 5.5 percent in the first Open Skies tween the Association of South half of 2006 over the same period last East Asia Nations and China by year. … Schenker took over opera- While the venture takes shape, 2010 and China said it supported tions of Philippine forwarder CPI KAL is expanding service out of Chi- “fully liberalized air services” with Transport, its longtime partner in na in another way that has been Southeast Asia. ... With new hard- the country, and will integrate BAX popular with numerous internation- won approval from China, Cathay Global operations into that business. al operators. Pacific last month launched twice- Schenker … DHL opened a ware- KAL plans to establish 747-400 weekly 747-200 flights between Hong house in Shanghai’s Waigaoqiao freighter service from Seoul to Kong and Beijing and said it expected Bonded Logistics Zone. … For- Chengdu and on to Europe — most transshipment traffic connected to warder Schenker began operations likely Frankfurt or Vienna — taking Taiwan to make up much of the busi- at its Korea Logistics Center, a advantage of fifth freedom rights in ness. … Dragonair took its first 30,000-square-foot site in the In- Chengdu. Qantas and Singapore Air- converted 747-400 freighters from cheon International Airport free lines have mounted a number of Boeing and has four more scheduled trade zone. ■

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&KDQFKDL6LQJWRURMLQGG&KDQFKDL6LQJWRURMLQGGGG  30 3030 20,21:SHIPMaster 11/20/06 11:23 PM Page 1 20,21:SHIPMaster 11/20/06 11:24 PM Page 2

www.boeing.com

THE NEW BOEING 747-8 FREIGHTER.

It’s great news for freight operators and their customers. With its expanded capacity and the most fuel-efficient commercial airplane engines in the world, the new 747-8F carries more volume on every flight while significantly reducing costs. An enormous advantage, no matter what the route or load. 22F1-ReviewINT 11/22/06 12:19 PM Page 22

Feature Focus: Year End Review

There’s guarded optimism that 2006 will give the air freight i Cargo’s Steady by Marty Graham • Manager, Consulting Services • BACK Aviation Solutions

22 AirCargoWorld December 2006 22F1-ReviewINT 11/22/06 12:19 PM Page 23

lthough not out of the woods entirely, the air car- go industry had a far bet- ter year in 2006 than it Adid the year before, and 2007 is expected to continue that upward trend. Revenue and traffic growth is expected to be mod- erate overall but potentially industry- crippling fuel prices have stabilized, giv- ing the aircraft operators a bit of breath- ing room, and the larger world economy more room to grow. Orders for new widebody freighters are giving rise to expansion plans in interna- tional service, particularly in Asia-Pacific corridors, giving shippers and carriers hope for new capacity in some markets. The remaining unknown is how new air cargo security rules in the United States t industry something to grow on in 2007 will affect business. Entering 2006, the air freight indus- try was cautiously optimistic for a strong year. After experiencing tepid growth of only 3.2 percent in total traffic in 2005 and weathering a multitude of events, from natural disasters to rising energy prices, y that were outside the industry’s control but dampened demand, many in the air freight industry held a guarded outlook Ascent for 2006.

December 2006 AirCargoWorld 23 22F1-ReviewINT 11/22/06 12:20 PM Page 24

Feature Focus: Year End Review

Yet, entering what looked to be a Annualized world air cargo growth January-July 2006 over strong peak season, the larger airline the previous year by regional market. industry generally is showing im- proved financial health and the per- formance of the air freight industry this year has calmed concerns of fur- –3.0% ther growth slowdowns and buoyed 2.5% 6.3% 4.6% optimism for the industry heading into 2007. 3.0% –2.3% International air freight traffic 3.5% grow 5.2 percent in the first three 4.4% quarters of the year compared to last 0.5% year, according to the International Air Transport Association. That’s stronger than in most years since 2001 but still behind most long- World Year-Over Comparison Jan.- July 2006 vs. Jan. - July 2005: 3.3% term growth projections for better- than 6 percent average annual Sources: U.S. Department of Commerce, AAPA, AEA, ATA growth. A separate measure by Boe- and the Boeing World Cargo Forecast. ing of overall air freight traffic showed just 3.3 percent expansion and ongoing obstacles that confront 2006 cut deeply into airline profits. in the business over 2005 in the first operators in the air cargo industry. And the rapid march upward in en- seven months of the year. First, because fuel accounts for ergy prices threatened to dampen However, the relatively small shifts over 20 percent of all airline operat- global spending while forcing air- in overall numbers mask undercur- ing costs, the spike in oil prices that lines to further rationalize capacity rents of greater change in the market escalated through the first half of to achieve profits. Amazingly, since 2000, jet fuel prices have averaged 15.5 percent World air cargo monthly year-over-year percent change in compounded annual growth. Fortu- traffic since 2000 and running 12-month average. nately for the industry, the price of 25% jet fuel has stabilized since the sum- Month % change – History mer, declining from record highs 20% 12-month avg. history across the globe, easing pressures on 15% airlines and consumers. ATA Chief Economist John Heim- 10% lich believes the price of oil will stay in the $55-$65 per-barrel range for 5% another 12 to 18 months. Fuel has 0% become the airline industry’s No. 1 cost, he said, remaining around –5% triple the historical price norm.

Monthly Percentage Change Over Prior Year Prior Change Over Monthly Percentage Despite the drop in prices toward 2000 January 2001 January 2002 January 2003 January 2004 January 2005 January 2006 January –10% the end of the year, high fuel costs have resulted in slowing capacity ad- –15% ditions, and putting pressure on air- –20% lines to hike shipping rates. Sources: U.S. Department of Commerce, AAPA, AEA, ATA There also was a significant con- and the Boeing World Cargo Forecast. cern among economists on how the

24 AirCargoWorld December 2006 22F1-ReviewINT 11/22/06 12:20 PM Page 25

Feature Focus: Year End Review

Jet fuel prices at major points in North America, Europe and Asia. (in $US)

U.S. economy would handle the slowdown in the $2.50 housing boom, which has fueled consumer New York Rotterdam spending over the past several years. Many ana- $2.25 lysts worried the housing slowdown would drag Singapore the U.S. economy into a recession as U.S. con- sumers struggled with mounting debt loads. $2.00 However, the housing “bust” has yet to manifest itself, easing concerns of a recession for the U.S. $1.75 economy. The continued U.S. economic growth was also supported by strong corporate profits $1.50 and the related growth in corporate technology 1/06 2/06 3/06 4/06 5/06 6/06 7/06 8/06 9/06 10/06 spending; the rate is expected to grow 4.9 percent Source: U.S. Energy Information Administration through 2009. These two factors combined with the low inventory levels carried into 2006 by U.S. businesses drove strong growth in the high-value products shipped by air. Monthly year-over-year percent change in domestic A few key trade lanes drove air freight traffic and international cargo traffic for U.S. airlines. growth in 2006. 15% Air freight traffic benefited from continued Domestic Chinese strength as well as a recovering Japanese 12% International economy. The 5.3 percent growth in Asia Pacific air freight was buoyed by a strong domestic Chi- 9% nese economy, which experienced a robust 10.6 6% percent year-over-year GDP growth as well as a steady Japanese economic recovery (2.6 percent 3% GDP growth). Next, North American air freight posted a 5.9 0% percent year-over-year growth driven mainly by –3% the U.S. economy. The U.S. continued to be a 1/06 2/06 3/06 4/06 5/06 6/06 7/06 8/06 9/06 major importer of air freight products, shaking Source: Air Transport Association of America off rising interest rates, a cooling housing market and inflationary pressures that dampened dispos- able incomes. Emerging markets, such as the Middle East and Monthly year-over-year percent change in total Africa, posted impressive air freight growth in scheduled international freight traffic and capacity 2006, as traffic increased 16.8 percent and 7.6 per- worldwide.

cent, respectively. However, not all trade regions 8% saw growth return to historical growth rates. Latin 7% America (3 percent) and Europe (2.1 percent) ex- perienced sluggish air freight growth in 2006, 6% which was more a reflection of market maturation 5% rather than any alarming market fundamentals. 4% Traffic Capacity Economic Outlook 3% 2%

lthough BACK expects the strength of 2006 to 1% Acontinue in 2007, with air freight growth 10/05 11/05 12/05 1/06 2/06 3/06 4/06 5/06 6/06 7/06 8/06 9/06 again approaching 6 percent, there are several dri- Source: International Air Transport Association

December 2006 AirCargoWorld 25 22F1-ReviewINT 11/22/06 12:20 PM Page 26

Feature Focus: Year End Review

vers on industry traffic demand and Monthly year-over-year percent change in freight capacity capacity that must be closely ob- and traffic of Asia-Pacific airlines. served. These factors will have an im- 8% portant impact on market pricing, availability of capacity, and overall 7% Capacity industry profits in 2007. 6% Traffic In market regions, BACK expects 5% the air freight industry to continue 4% to benefit from the continued strength of emerging markets, such 3% as the Middle East and Africa. But 2% the United States as the world’s 1% largest economy and largest air 9/05 10/05 11/05 12/05 1/06 2/06 3/06 4/06 5/06 6/06 7/06 8/06 9/06 freight market will continue to drive Source: Association of Asia Pacific Airlines expansion even if much of that comes in the form of demand for 1.6 percent annual rate. That fol- lower long-term interest rates and imports from China. lowed growth of 2.6 percent in the stronger equity valuations, that have Although 2006 proved to be quite second quarter and a robust 5.6 per- occurred as the Federal Reserve Board strong as the U.S. economy cent in the first quarter. kept its policy rate unchanged for shrugged off several fiscal concerns, The lackluster growth late in the the past three quarterly meetings. there remains lingering anxiety that year largely reflects the weak hous- Our forecast expects growth in a U.S. recession is possible in 2007. ing sector, with residential invest- consumer spending to remain rea- The U.S. economy slowed in the ment plunging 17.4 percent at an sonably firm, although slowing on third quarter, expanding at a weak annualized rate during the quarter. the back of lower energy prices as Looking ahead, we well as continued firm growth in expect the economy household incomes as labor markets U.S. air exports in value and weight, to grow at around a 3 remain sturdy. Jan.-Aug. 2005 and 2006. percent annual rate Business investment spending is (value in $millions, weight in millions of kilograms) in the first half of expected to pick up as corporate 2007, and to almost profits remain strong and balance Value 3.25 percent in the sheets are in good shape. Although $192,000 second half. That housing will likely continue to be a would result in real drag on the economy, we think that $190,000 GDP growth of the drag will fade, and then dissipate around 2.7 percent completely by the end of the first $188,000 for the full year of half of next year. 2007, down from a Finally, export growth should be $186,000 forecasted 3.3 per- boosted by the continued robust per- ’05 ’06 cent in 2006. formance of the global economy in Weight 1,800 Apart from the addition to the ongoing lagged com- tailwind of lower en- petitiveness benefits from the dol- 1,780 ergy prices, the mild lar’s prior depreciation. Imports 1,760 acceleration in eco- should slow along with domestic de- 1,740 nomic activity will mand, with the combination adding 1,720 be supported by the modestly to real GDP growth. notable easing of fi- In other regions, the Euro area 1700 ’05 ’06 nancial-market con- growth has surprised on the upside Source: U.S. Department of Commerce ditions, especially all year.

26 AirCargoWorld December 2006 22F1-ReviewINT 11/22/06 12:20 PM Page 27

Feature Focus: Year End Review

Following average quarterly real After growing 10.4 percent year- ing but reaching a still impressive GDP growth of around 3.5 percent in over-year during the third quarter 9.5 percent in 2007. the first half of the year, the second and by around 10.5 percent for 2006 The more positive development for half of 2006 should see average as a whole, growth is seen moderat- air freight development for the air growth of 3.25 percent or a bit better. That would bring full-year economic growth this year to about 2.75 per- cent after just 1.5 percent in 2005. Following years of retrenchment, the corporate sector, benefiting from strong profits and cleaned-up bal- ance sheets, is again in an expansive mode. Initially, this was reflected in a strengthening of investment spending by business, which is con- tinuing. But, more recently, corpo- rations have begun hiring. Further, the rise in employment and reduc- tion in joblessness seems to support an increase in household incomes, which, in terms of purchasing pow- er, is also being augmented by the sharp fall in energy prices in recent months. Domestic demand is dri- ving the economy forward, with the expansion broadening. Tighter fiscal policy can be seen, particularly in Germany in the form of an increase in the VAT tax at the beginning of 2007. For all of 2007, real GDP is forecast to rise some 2.5 percent. Asia will remain fixated on the growth in Chinese exports, as well as China’s burgeoning domestic market as the country’s economy grows. Tentative early signs have ap- peared that earlier various tighten- ing moves by the Chinese authori- ties have succeeded in moderating the growth of investment spending and, with it, overall GDP. That said, China’s economy continues to boom on the back of strong con- sumer spending and robust invest- ment, which in turn is backstopped by solid profit growth and seemingly ever-expanding exports.

December 2006 AirCargoWorld 27 22F1-ReviewINT 11/22/06 12:21 PM Page 28

Feature Focus: Year End Review

freight industry is the contin- Monthly year-over-year percent change in freight industry can not only ued focus by the Chinese total scheduled freight traffic for European expect dampened air freight government to increase do- demand, but also upward airlines in 2006 mestic consumption and the pressures on profitability investment in airport and 6% that would lead to increased transportation infrastructure. 5% fuel surcharges. The fear of The big problem of a bal- rising fuel costs will also im- 4% looning Chinese trade sur- pact the decisions of airlines plus, particularly with the 3% as they continue to evolve U.S., will continue to focus 2% their fleet strategies to maxi- attention on the rate of ap- mize efficiency and reduce 1% preciation of the Chinese unit costs. Yuan, especially against the 0% We will continue to see dollar. With the Democrats –1% air carriers shift in capacity Jan. Feb. March April May June July Aug. Sept. taking over both the U.S. over the next year to reap House and Senate, the risk is Source: Association of European Airlines the largest benefit. Mean- for greater calls for protec- ing, the airlines may add tionism and greater pressure on Chi- freight, particularly for westbound more international capacity while na to let the Yuan appreciate further trans-Pacific shipments from the shifting short-haul or domestic ca- and faster. This bears close watch- United States. pacity to smaller jets or regional fly- ing, as risks of a trade war are likely ing partners. This may affect capaci- to increase. Industry Outlook ty on short-haul routes while boost- One of the big stories over the ing it in international markets, lead- past year or so has been that the he industry and consumers alike ing possibly to downward pressure Japanese economy has finally Tfound relief in lower pump on yields. pulled out of its deflationary slump prices for fuel and energy. Yet, we Several prominent airlines have and embarked on a sustainable re- only have to look back less than a announced orders for new or recon- covery as corporate investment and year to understand the severe impact figured freighter equipment. a pickup in household spending the spike in energy prices had on the Consider FedEx’s plan to acquire augmented a solid performance in air freight industry. and convert 90 757-200 and Atlas exports. If fuel prices spike again, the air Air’s $3.4 billion order for 12 747-8s. Although the economy Look to the operators of old- lost momentum in the mid- er 747-200 freighters as the dle two quarters of the year, next customers of the 747-8F. the economic fundamentals International air freight traffic by region With the narrowbody av- for both the consumer and through first nine months of 2006. erage fleet age approaching business point to stronger 30 years of age, and a wide- 20% growth in the coming quar- body market that is con- ters extending into 2007. For stantly seeking reduced unit 15% Traffic this year, real GDP is forecast Capacity costs, BACK expects fleet re- to grow around 2.5 percent newal in the freighter market following 2.6 percent last 10% to continue at a rapid pace. year. Next year, economic Even more interesting is the growth should come in 5% various options being offered around 2.25 percent. to the market. Boeing and The continued improve- Airbus will continue to battle 0% ment of the Japanese econo- Middle Africa North Asia Latin Europe Worldwide for new freighter orders in my bodes well for air East America Pacific America the large widebody market, Source: IATA

28 AirCargoWorld December 2006 22F1-ReviewINT 11/22/06 12:21 PM Page 29

Feature Focus: Year End Review

but Boeing may for now have the slice of the conversion market. Be- pected long-term growth outlook upper hand with the 777 freighter, yond FedEx’s announcement of the for air freight. 747-400 freighter and the 747-8F. 767-200 conversion decision, there Beyond that, 2007 may be the year The A380 freighter may be are the following developments to where we see increased consolidation. doomed as a result of FedEx recent consider: PEMCO delivered the Given that several of the large cancellation of its order for 10 A380s world’s first 737-400 freighter to U.S. legacy carriers have either exit- freighters in favor of 15 777s. Alaska Airlines; Alcoa-SIE received ed or in the final stages of reorganiz- While Boeing can already offer its FAA STC for its’ 757-200 product; ing under bankruptcy, and overall the 767-300BCF in the medium IAI and Mitsui announced their in- global airline profits are expected to widebody freighter market, it re- tentions to form a joint venture turn positive for the first time since mains to be seen how restructuring, aimed at the 767-300 conversion 2000, the time may be right for a A380 delays, and A350 re-engineer- market; and Precision Cargo Con- few of these airlines to consider ing affects Airbus’ anticipated versions has garnered strong interest merging to maintain long-term launch of the A330-200 conversion in its 15-position 757-200 freighter profitability. program as well as the development conversion. We expect this market- Although it is only speculation at of the A320 conversion program. place to remain dynamic over the this point, a wave of consolidation, Beyond the two manufacturers, next year as airlines look to renew if only a few major carriers, would several maintenance and overhaul aging fleets, reduce operating costs, have a ripple effect across the entire companies are aggressively seeking a and add capacity to meet the ex- air freight industry. ■

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December 2006 AirCargoWorld 29 30F2-LatinAmericaINT 11/22/06 12:22 PM Page 30

Region Focus: Latin America

Latin America used to be the next great air cargo market, but carriers now are willing to accept modest growth before they bring in new planes

Slowing theby Mike Seemuth

30 AirCargoWorld December 2006 30F2-LatinAmericaINT 11/22/06 12:22 PM Page 31

ike other air cargo carriers, DHL would like to

pick up more volume before it adds more lift in

Latin America.

“We’ve been stable. I haven’t seen Fleet Lanything dramatic in any direction,” said Carlos Gamundi, Florida-based general manager of the DHL- 30F2-LatinAmericaINT 11/22/06 12:23 PM Page 32

Region Focus: Latin America

Latin Slide Monthly year-over-year percent change in international air affiliated airlines based in Ecuador, freight traffic and capacity in Latin America. Guatemala, Panama and Venezuela. The airline operators were expect- 20% ing to haul 2006 shipments totaling 15% Capacity at least 114,000 tons, matching their 10% Traffic 2005 loads. Their combined 5% freighter fleet of eight 727s and 0% three ATR-42-300s is supplemented –5% –10% by wet-leased capacity from Capital 10/05 11/05 12/05 1/06 2/06 3/06 4/06 5/06 6/06 7/06 8/06 9/06 Cargo International, mainly into Source: IATA Venezuela. But expanding the fleet has been the International Air Transport Asso- merican Airlines, a leading pas- little more than a fleeting thought. ciation. Comparable IATA data for Asenger and cargo carrier in Latin “We’re always analyzing different the nine-month period shows cargo America, also has been a leader in scenarios, but those are just scenar- capacity grew from 3.5 percent in keeping its capacity in the region ios,” Gamundi said. Europe to 12.6 percent in the Middle constrained. Its available seats in His caution is common across a East, with Africa, Asia-Pacific and Latin America, multiplied by miles region once touted for great growth North America bunched in-between. flown, rose 2.2 percent in October af- prospects but more recently falling After rising in Latin America from ter falling in each of the first nine behind as the rest of the world January through May, compared months of 2006, compared with the rushes to Asia. After fighting for with the same months in 2005, car- same months in 2005. market share in the 1990s amid go capacity declined between June Robust growth in international forecasts of growing economies, and September, though at a deceler- aircraft operations has diminished several air freight carriers now are ating rate after July, IATA reported. from Miami, the main U.S. gateway content to keep their capacity be- Air cargo lift in Latin America, for air trade with Latin America. The tween the U.S. and points south of measured by the number of tons of number of international flights was the U.S. border as is. available loading space on all flights, virtually unchanged in the 12 Instead, cargo airlines are sending multiplied by the number of kilome- months ended September 2006, up their largest additional capacity to ters flown, fell 4.5 percent in June, 0.01 percent from the previous year, other parts of the world. 6.7 percent in July, 3.1 percent in Au- and the volume of imports and ex- Air cargo operating capacity in gust, and 0.7 percent in September. ports passing through Miami Inter- Latin America rose 1.2 percent dur- Passenger carriers have restricted national Airport rose only 1.3 per- ing the first nine months of 2006 belly space for cargo by limiting cent during the same period. over the same period in 2005, the flight operations in Latin America. Operating a bigger fleet to build slowest pace in the world, reported Passenger airlift in the region (avail- revenue is anathema to carriers that able seats multiplied focus on building profit margins. by kilometers flown) “Improving yield is the thing we was unchanged in are working on,” said Tom O’Mal- the first nine months ley, vice president, UPS Air Cargo, of 2006, compared Latin America. with the same period Yields in Central America are rich the year before, ac- enough to justify increased lift for at cording to a survey least part of the year. That is how by the Latin Ameri- UPS is serving Nicaragua. can Air Transport As- To support a seven-month expan- sociation of more sion of scheduled flights from Mia- than 30 member-air- mi to Managua, Nicaragua, from five lines based abroad. weekly to six weekly, UPS put an ex-

32 AirCargoWorld December 2006 30F2-LatinAmericaINT 11/22/06 12:23 PM Page 33

Region Focus: Latin America

tra 757 freighter into the region, price wars, O’Malley said. “Competi- region’s slow volume growth. The which increased to 11 the number of tors may see the opportunity to ac- carrier’s scheduled freighter service 757s and 767s the carrier has de- quire market share rather than yield was expected to have “very good ployed for Latin America. improvement,” he said, but “we’re months” during the busy pre-Christ- The UPS expanded Man- mas shipping season, said Clau- agua-Miami service was ex- dio Silva, a senior vice president pected to run from late Octo- Operating a bigger of Lan Cargo. ber to May, high season for ex- fleet to build revenue is Lan’s charter flight business ports of okra and other perish- anathema to carriers is growing, he said, citing solid ables from Nicaragua. After- demand for freighters flown wards, UPS probably will rede- that focus on building from the U.S. to Argentina, ploy a 767 or 757 from to an- profit margins. Brazil and Mexico. “The south- other part of the world. bound market is still very Tough price competition is one better off with improved yields than strong,” Silva said. reason to keep fleet size unchanged. slugging it out over market share.” Lan increased from four to five Many rate-sensitive exporters in Latin weekly scheduled 767-300 freighter America have commanded deep dis- an Airlines is bucking the trend in flights from Los Angeles to Manaus, counted service from accommodat- LLatin America by making more Brazil, starting in September 2006. ing airlines, though UPS has avoided cargo capacity available despite the Silva said the service expansion was a

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December 2006 AirCargoWorld 33 30F2-LatinAmericaINT 11/22/06 12:23 PM Page 34

Region Focus: Latin America

he growth of light and heavy industries in various parts of Mexi- response to strong Brazilian demand co is prompting air cargo carriers to expand operations there, al- for telephone equipment, plasma beit modestly. gear and other Asian-made goods Take, for example, UPS’ announcement to add an A300 to its transshipped through Los Angeles. Mexican network as part of a commitment to expand delivery But Lan also was hedging on how capabilities in Western Mexico. Using Guadalajara as its base, the much more cargo capacity it really A300 provides nearly 70 percent more cargo space than the 757 it needed. The airline plans to take de- replaces, said UPS. livery of two new 767-300 aircraft in “One of the Mexican economy’s key drivers is the small and mid- 2007. But as 2006 drew to an end, T sized enterprise sector, which demands the most advanced capabilities the combination passenger and all- in order to market goods and services at a global level,” said Jean- cargo carrier was still pondering Robert Covington, commercial director, UPS Mexico. whether to order one or both of its UPS is ramping up operations in Mexico as some shippers say they 767-300s in freighter configuration, are pondering shifting some manufacturing to the country because ris- Silva said. ing costs in Asia and the problems with long supply chains have made While awaiting more lift, Lan up- factories in North America more attractive. graded ground-handling capacity in UPS Americas President Stephen Flowers says the company’s 2006 Miami. Near the end of the summer investment in Mexico will reach $7 million. The investment includes of 2006, Lan finished an extensive remodeling of its cargo warehouse at Miami International Airport, where it ranks as the busiest cargo carrier. Mexico Ramp Up In addition to installing a new rack 10 new facilities, including operating centers in Puerto Vallarta, Coli- system in the warehouse, Lan im- ma and Manzanillo. posed new procedures to minimize The state of Jalisco accounts for 9.7 percent of Mexico’s industrial cargo-handling errors. “It is working output and 9.7 percent of the country’s industrial Gross Domestic well. We have almost no incidences Product. of lost or damaged cargo,” Silva said. Mexico is attracting a lot of attention of OEMs, maintenance “The next step will be to improve providers as well as air freight carriers, which seek new and additional the speed.” operating authority between the U.S. and various points in Mexico, ac- Upgrading ground facilities may cording to the U.S. Department of Transportation. be easier than increasing carrying ca- DOT recently granted Centurion Air Cargo and Florida West Inter- pacity if additional aircraft are unaf- national Airlines rights for scheduled service between certain U.S. fordable or unavailable. points and Mexico City. In addition, DOT awarded authority to Centu- Just ask Fred Jacobsen, chief exec- rion to provide air cargo service between Los Angeles and Guadalajara, utive officer of the Colombia-based Miami-Mexico City and Miami-Guadalajara. Earlier, DOT renewed for cargo airline Tampa Cargo. Tampa two years Gemini Air Cargo operating rights between Miami and has a fleet of four 767 freighters and Quito and Guayaquil, Ecuador. ■ a DC-8. Tampa expects to return the leased DC-8 in 2007, replacing it with a more fuel-efficient 767. But place its DC-8 as a permanent addi- is not possible because “many of “the problem is lack of aircraft,” Ja- tion to its freighter fleet, not a the leasing companies would like to cobsen said. “The passenger airlines bridge to an all-767 fleet in the fu- keep those aircraft in passenger are really tight on capacity, so they ture. The superior fuel efficiency of configuration for at least a couple are using anything they can get, and the 757 could give Tampa a compet- more years,” Jacobsen said. “So we obviously the 767 is a very good air- itive edge in certain Latin markets think that until the 787 enters the craft today.” served by rivals operating 727s and market around 2009, there aren’t In late 2006, Tampa began consid- DC-8s, Jacobsen said. going to be many options to con- ering the acquisition of a 757 to re- Leasing a converted 767 freighter vert aircraft.” ■

34 AirCargoWorld December 2006 35EventsINT 11/22/06 12:24 PM Page 35

Events

Dec. 5-6 March 4-8 and the Hanghzhou Xiaoshan air- port, and official foreign publication New Delhi: Cargo in Emerging Mexico City: IATA World Car- Air Cargo World. For information, call Markets, at the Taj Mahal Hotel, an go Symposium, combining a series +86 21 5237 9998 or visit: www.air- IATA event looking at business plan- of 20 events including IATA’s Cargo cargosummit.org. ning, regulatory issues and market Summit and looking at issues such as opportunities in India. For informa- dangerous goods, technology, mail, April 29 – May 1 tion, call (514) 874-0202 or visit: revenue management, managing www.iata.org/events. ULDs, legal issues, security and oth- San Diego: CNS Partnership ers. With 11 IATA cargo committee Conference 2007, at the Rancho meetings by invitation. For informa- Bernardo Inn, the largest gathering of 2007 tion, call (514) 874-0202 or visit: the international side of North Amer- Feb. 5-7 www.iata.org/events. ica’s air cargo industry meets under new leadership at Cargo Network Ser- Mumbai, India: South Asia Avi- March 11-13 vices. For information, call (516) 747 ation Finance, at the airport Inter- 3312 or visit: www.cnsc.net. Continental Grand, with airlines from Phoenix: Air Cargo 2007, at the Asia and the Indian subcontinent. For Sheraton Wild Horse Pass, the three- May 14-17 information, call +44 1342 324353 or sided annual meeting of the Airfor- e-mail: [email protected]. warders Association, the Air & Expe- Scottsdale, Ariz.: Regional dited Motor Carriers and the Express Air Cargo Carrier Association Feb. 15-17 Delivery && Logistics Association. Spring Conference, at the Dou- For information, call (703) 361-5238 bletree Paradise Resort, the annual Orlando, Fla.: 18th Annual or visit: www.aircargoconference.com gathering for business that props up Women in Aviation Interna- feeders. For information, call (508) tional Conference, at the Disney March 13-15 747-1430 or visit: Coronado Springs Resort, looking at www.raccaonline.org. the theme “Imagining Your Future.” Shanghai: Third China Logis- For information, call (937) 839-4647 tics Summit, at Le Royal Meridien, May 22-23 or visit: www.wai.org. an eyefortransport event. Hyatt Re- gency, with support from the Civil London: World Mail & Ex- Feb. 27-28 Aviation Authority of China and the press, the European conference and Hanghzhou Xiaoshan airport, and of- exhibition at the Novotel Hammer- Dubai: World Mail and Express ficial foreign publication Air Cargo smith, sorting out how deregulation Logistics, the global conference World. For information. For informa- will push the envelope on private brings together the private express and tion, call +44 207 375 7211 or visit: and postal delivery services. For infor- postal world, with support from DHL, www.eyefortransport.com/china. mation, call +44 870 950 7900 or vis- Aramex and Emirates Post. For infor- it: www.triangle.eu.com. mation, call +44 870 950 7900 or e- April 18-20 mail: [email protected]. June 12-15 Hangzhou, China: Fourth Chi- Feb. 27-28 na Air Cargo Summit, at the Hy- Munich: Air Cargo Europe, att Regency, with support from the within the transport logistic Interna- Dubai: World Air Cargo Civil Aviation Authority of China tional Trade Fair for Logistics orga- Event, at the World Trade Center, a nized by Messe Munchen. For infor- Tabmag event. For information, call For more events, visit: mation, call +49 89 949 20270 or +44 1784 255000 or visit: www.air- www.aircargoworld. visit: www.messe-muenchen.de. ■ cargonews.net/wace.asp. com/dept/events.htm

December 2006 AirCargoWorld 35 36PeopleINT 11/22/06 12:24 PM Page 36

People

Airlines regional freighter operator hired ing member rela- John Parry as chief financial officer. tions worldwide, par- Etihad Airways: The United Parry was CFO and treasurer of Em- ticularly North Arab Emirates carrier named airline pire Airlines, which provides air cargo America. A 10-year industry veteran James Hogan chief services to FedEx. He earlier worked as industry veteran, executive officer. Hogan had most re- an accountant for 20 years. Majerus has been at cently been president and CEO of CaribEx Worldwide Gulf Air, where he led a restructuring Integrators in Greensboro, N.C, Majerus of that carrier. An Australian nation- for three years as vice president in al, he worked at forwarder VIP Air- FedEx Express: The carrier charge of Asia route development. He freight and Ansett Airlines and Qan- named Lily Tay managing director will be based in Chicago. tas and also worked outside the air- of customer service operations in the Mach 1 Global Services: The line industry with car rental giant South Pacific, including Hong Kong, global freight forwarder has promoted Hertz and Forte Hotels. He later held Australia, Malaysia, New Zealand, Sin- Bruce Janis to president of Mach 1 senior positions at bmi British Mid- gapore and Thailand. A 13-year com- Global Services, the parent company land, including chief operating offi- pany veteran, she had been managing of Mach 1 Air Services. Janis, the for- cer with oversight for cargo. director of Malaysia and Brunei. mer executive vice president and British Airways chief financial officer, will now lead World Cargo: The air- Third Parties the company’s expansion and carry line named Tristan out the long-term growth plan. Mach Koch sales manager for Kuehne + Nagel: The forwarder 1 Air Services CEO Michael the United Kingdom and named Alexander Schmid-Loss- Entzminger credits Janis with helping Ireland. Koch started at berg to its management board over- increase the company’s annual rev- BAWC as a revenue man- seeing legal affairs and said he will enue to $100 million as well structur- agement analyst and lat- also replace Dieter Pietsch as head of ing a $7 million credit line with Koch er was alliance develop- global human resources next April 1. Chase to finance growth. ment manager. He was most recently Schmid-Lossberg, 46, has broad expe- Aviareps: The a key account manager for the U.K. rience in management and human cargo general sales and Ireland. resources with multinationals, most agent named Nadja Atlas Air: Atlas Air Worldwide recently as a senior vice president at Frank public rela- Holdings named Adam Kokas se- DSM Nutritional Products. tions manager for nior vice president, general counsel AIT Worldwide Germany, where the and secretary at the parent of Logistics: The Illi- company represents freighter operators Atlas Air and Polar nois-based forwarder more than 20 air- Frank Air Cargo. Kokas had been a partner named Dave Buss lines. Frank, who will in the corporate department of the vice president of field be based at Mörfelden-Walldorf near law firm of Ropes & Gray. operations. Buss will Frankfurt, has worked at Fair Frank- Emirates: Emirates SkyCargo continue to manage furt and also at Lufthansa’s Inflight named Therese Puetz, manager car- AIT’s Chicago station Entertainment magazine. Buss go business development and projects, and oversee Summit Penske Logistics: The Pennsylva- and Andreas Boppart, manager car- Expedited Logistics, AIT’s subsidiary nia-based logistics specialist named go global accounts. Puetz worked for specializing in expedited ground Dirk-Jan Zwagerman director of Lufthansa for 18 years before coming transportation. European sales, based at Roosendaal, to Emirates. A 20-year air transport WCA: The WCA Family of Logis- the Netherlands. A 19-year industry veteran, Boppart most recently man- tics Networks, an international al- veteran, he had been with TNT Logis- aged global accounts for Europe, Mid- liance of forwarders, named Brian tics and before that at Vos Logistics. dle East and Africa for British Airways. Majerus vice president with respon- ATC: The Italian cargo general Air T: The North Carolina-based sibilities for developing and promot- sales agent, part of the ACSSys group,

36 AirCargoWorld December 2006 36PeopleINT 11/22/06 12:25 PM Page 37

People

named Piero Lapresa sales manager Ground Handling for Northern Italy. Lapresa, 43, had been with British Airways World Car- Worldwide Flight Services: go for 16 years in Italy, most recently WFS named Bob Biggs operations as commericial manager. director in the United Kingdom, with Inter Aviation Services: IAS the responsibility for London named Neville Karai a director at Heathrow buildings 550 and 552. the Amsterdam-based cargo general Biggs had been at British Airways for sales agent’s Dubai office. Karai most 30 years in various cargo operations recently had been with DHL Aviation. and customer service posts, most re- cently as general manager of cus- Technology tomer service delivery at London Gatwick Airport. WFS also named OAG Cargo: The Terry Levett to the new position of The online air cargo infor- manager of health, safety and securi- mation service ty for its U.K. handling facilities. Magazine named Louise Hat- Envirotainer: The Sweden-based field its United King- manufacturer of temperature-con- of Choice dom-based sales man- trolled cargo containers named ager for Europe, the Thomas Persson chief executive of- The only air cargo magazine Middle East and ficer, succeeding Magnus Elander. Pers- with a subscriber circulation Hatfield Africa. Hatfield son was general manager of DPD that is 100% direct request. worked at MSAS Cargo and Exel Nordic, a business-to-business parcel Freight Management and most re- operation at Swedish Post. He started cently was a station manager at DHL his career at SAS Cargo and later QUALITY, QUALIFIED after its acquisition of Exel. worked at TNT Sweden and forwarder AND QUANTIFIABLE SITA: The airline ASG before joining trucking and logis- telecommunications tics operator DFDS and build that busi- The only air cargo provider named ness in the Nordic countries. ■ magazine that is Jean-Pascal Aubert chief information of- Advertiser Index BPA audited ficer. He was most re- AEMCA ...... CV3 cently CIO for French Air Cargo World is the Number One Alitalia...... CV2 telecom operator SFR publication serving the air cargo Aubert APL ...... CV4 industry. Published in 2 editions with a Cegetel and before Austrian...... 27 worldwide audited circulation of more that at Bouygues Telecom. He worked BAX Global ...... 12 than 36,000 business leaders, Air Cargo World delivers the highest quality earlier at Alcatel and with the interna- Boeing...... 20, 21 and most qualified readership of air tional IT group Bull. Canadian Airport Assn...... 12 Cadre Technologies: The Den- cargo decision makers for your Cargolux...... 9 advertising message. ver-based supply chain technology Cologne Airport...... 29 company named Charles Cape, the Ethiopian Airways...... 49 Decision makers who need to know former chief information officer at J.F. Pearson China ...... 3 read Air Cargo World. Reach the best Exel, vice president of professional Lufthansa Cargo...... 8 audience in the world by advertising in services. Cape had been global pro- PONY & NJ ...... 29 Air Cargo World. gram director at DHL Logistics and Skyteam Cargo ...... 7 let the IT integration of DHL and Swiss WorldCargo...... 16 For a free subscription or information on advertising, Exel, the British logistics giant that Thai Airways...... 17, 19 visit www.aircargoworld.com DHL bought in 2005. XTL...... 6

December 2006 AirCargoWorld 37 38BottomLineINT 11/22/06 12:25 PM Page 38

AirCargo theBottom Line

Pricing Atlantic Year-over-year percent change in air freight pricing index for trans-Atlantic shipping.

20%

15%

10%

5% Westbound Eastbound 0%

–5% 1Q’04 2Q’04 3Q’04 4Q’04 1Q’05 2Q’05 3Q’05 4Q’05 1Q’06 2Q’06 3Q’06

Source: Banc of America Securities

Pricing Pacific Year-over-year percent change in air freight pricing index for trans-Pacific shipping.

10% 8% Eastbound Westbound 6% 4% 2% 0% –2% –4% 1Q’04 2Q’04 3Q’04 4Q’04 1Q’05 2Q’05 3Q’05 4Q’05 1Q’06 2Q’06 3Q’06

Source: Banc of America Securities

U.S. Airlines Monthly year-over-year percent change in domestic and international cargo traffic for U.S. airlines. 15%

12% Domestic 9% International 6%

3%

0%

–3%

–6% 1/05 2/05 3/05 4/05 5/05 6/05 7/05 8/05 9/05 10/05 11/05 12/05 1/06 2/06 3/06 4/06 5/06 6/06 7/06 8/06 Source: Air Transport Association of America

38 AirCargoWorld December 2006 38BottomLineINT 11/22/06 12:25 PM Page 39

Rebooting Luft Lift Worldwide shipments of personal Monthly year-over-year percent change computers in the third quarter 2006 and in Lufthansa Cargo trans-Atlantic and third quarter 2005 and percent change. Asia-Pacific markets in 2006, based on (in thousands of units) revenue cargo tonne-kilometers.

COMPANY 2Q05 2Q06 % CHANGE 15% Hewlett-Packard 8,361 9,652 15.4 12% Atlantic Dell 9,210 9,541 3.6 Asia/Pacific 9% Lenovo 4,035 4,444 10.1 6% Acer 2,600 3,468 33.4 3% Toshiba 1,955 2,551 30.5 0% Others 29,256 29,486 0.8 –3% –6% Total 55,417 59,143 6.7 Jan. Feb. March April May June July Aug. Sept. Source: Gartner Source: Company reports

Mail Box Semi Stocks Domestic mail traffic carried by U.S. Value of excess semiconductor inventory airlines through first eight months of in global supply chains. (in US$billions) 2001 through 2006. (in 000s of mail ton miles) 4.0% 1,400,000 3.5% 3.0% 1,200,000 2.5% 1,000,000 2.0% 1.5% 800,000 1.0% 600,000 0.5% 0.0% 400,000 –0.5% –1.0% 200,000 ’01 ’02 ’03 ’04 ’05 ’06 1Q’05 2Q’05 3Q’05 4Q’05 1Q’06 2Q’06 3Q’06* Source: Air Transport Association Source: iSuppli

UPS Quarterly year-over-year percent change in UPS domestic and international package revenue.

25%

20% Intl.

15%

10%

5% Domestic

0% 1Q’03 2Q’03 3Q’03 4Q’03 1Q’04 2Q’04 3Q’04 4Q’04 1Q’05 2Q’05 3Q’05 4Q’05 1Q’06 2Q’06 3Q’06

Source: Company reports

December 2006 AirCargoWorld 39 40ForwardersForumINT 11/22/06 12:26 PM Page 40

ForwardersForum

Macro View Brandon Fried • Executive Director • U.S. Airfowarders Association

wenty-five years in air forwarding taught loomed in Congress, and the TSA issued the highly antici- me to accept the difficult task of accepting pated Air Cargo Final Rule, now dubbed the Interim Final Tresponsibility for situations beyond my con- Rule, to allow TSA to make additional changes, if needed. trol. With all the changes the disciplines of logis- tics management have brought to freight for- hankfully, through intense work with other players in warding, that is one aspect of a forwarder’s job Tthe air cargo supply chain, and educating members of that has been magnified. Congress and their staffers, the industry survived another Air forwarders today deliver much more than freight to year. But the most challenging year is before us. A new the customer. They add value by performing tasks un- Congress is set to begin in January 2007, with new com- heard of years ago, such as storage, packing, purchasing mittee chairmen and different legislative agendas. We and reassuring customers about on-time delivery. They have new members to educate and learn to work with. also deliver the unpleasant news of higher fuel costs, in- Here are some of the challenges we will face in 2007: creasing security threats, smaller aircraft, bumped freight, ● More aggressive legislative measures from Capitol cargo claims and delays. Yet a good forwarder remains a Hill, including a mandate for 100 percent physical inspec- traffic manager’s best friend, and often sees that a com- tion of air cargo; pany’s products gets to market faster than its competitor. ● Greater attention from a mainstream media that will become more vocal in its criticism of the air cargo industry; hen you’re running a business , it’s easy to become ● The Final Air Cargo Rule. Much more work needs to be Wconsumed with what you’re doing. Your priorities are: done as our industry struggles with what could easily be- serve your clients, employees and comply with the rules. Be- come the most significant regulatory shift ever in air cargo; fore you know it, you are working in a vacuum. But my dad ● Rising jet fuel prices that could adversely affect air taught me long ago it was important to look at things from freight shipping volumes; many perspectives, and that is an important lesson today. ● Tighter security regulations will increase the cost of In 2005, I sold my forwarding business and accepted the air cargo as forwarders and airlines incur more personnel position of executive director at the Airforwarders Associa- and facility expense during compliance. tion. For me, working as the freight forwarders representa- tive required an entirely new train of thought and vision. Those are among the challenges, but there also are ex- It was no longer about meeting quarterly earnings targets, citing new developments for forwarders: delivering packages on time, and retaining my clients. ● Expect passenger airlines to become more aggressive My principle goal was to represent and advocate for an in taking back market share lost to truckers within the often misunderstood industry. United States; Before long, I was in legislative meetings with members ● Forwarders will offer additional value added services, of Congress and their staffers. We were part of the Avia- such as packing, storage, fulfillment and purchasing; tion Security Advisory Committee, a working group with- ● The consolidation trend will continue as large trans- in the Transportation Security Administration tasked with portation companies seek to capture the personal client helping to develop new air cargo rules. I was talking to re- relationships that still drive the airforwarding business. porters frequently, only now I had to really think before I spoke. Rather than just my company depending on what Reflecting on the past year, it’s been great to look at our I said, many hundreds of businesses would know what I industry from a different perspective. did and said in the public domain. The coming year will give us all a chance to bring new The contentious political climate put a lot of pressure on perspectives to freight forwarding. For many forwarders, the industry. The ongoing threat of 100 percent inspection that could provide even more opportunity. ■

40 AirCargoWorld December 2006 1136 AirCargo_FullAd.qxd 11/14/06 10:14 AM Page 1

2007

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