INTERNATIONAL EDITION
DECEMBER 2009
December, 2009 Volumecontents 12 Number 11
EDITOR Simon Keeble [email protected] • (704) 237-3317 ASSOCIATE EDITOR Trish Williams Air Cargo 2020 [email protected]• (301) 312-6810 OAG Makes A New Forecast CONTRIBUTING EDITORS 20 Roger Turney, Ian Putzger CONTRIBUTORS Douglas Nelms, Peter Conway COLUMNISTS China’s All Cargo Gateway Paul Forster, Brandon Fried Is Tianjin Back In The Air? PRODUCTION DIRECTOR 30 Ed Calahan [email protected]
CIRCULATION MANAGER Nicola Stewart Is The Employee Just A Commodity? [email protected] Why Act For the Good Of All? ART DIRECTOR 43 CENTRAL COMMUNICATIONS GROUP [email protected] PUBLISHER Steve Prince [email protected] The Global Forwarders ASSISTANT TO PUBLISHER What Does The Future Look Like? Susan Addy 46 [email protected] • (770) 642-9170 DISPLAY ADVERTISING TRAFFIC COORDINATOR Linda Noga [email protected] WORLD NEWS AIR CARGO WORLD HEADQUARTERS 1080 Holcomb Bridge Rd., Roswell Summit 4 Europe Building 200, Suite 255, Roswell, GA 30076 (770) 642-9170 • Fax: (770) 642-9982
WORLDWIDE SALES 8 Middle East
U.S. Sales Thailand Associate Publisher Chower Narula 12 Asia Pam Latty [email protected] (678) 775-3565 +66-2-641-26938 [email protected] Taiwan 16 Americas Europe, United Kingdom, Ye Chang Middle East [email protected] 30 David Collison +886 2-2378-2471 +44 192-381-7731 [email protected] Australia, New Zealand Fergus Maclagan Hong Kong, Malaysia, [email protected] DEPARTMENTS Singapore +61-2-9460-4560 Joseph Yap +65-6-337-6996 Korea [email protected] Mr. Jung-Won Suh 2 Editorial 52 People/Events 56 Fortser’s Focus +82-2785-8222 Japan [email protected] Masami Shimazaki 3 Viewpoint 54 Profile [email protected] +81-42-372-2769 55 Bottom Line CUSTOMER SERVICE OR TO SUBSCRIBE:?? (866)624-4457 Air Cargo World (ISSN 1933-1614) is published monthly by UBM Aviation. Editorial and production offices are at 1270 National Press Building, Washington, DC, 20045. Telephone: (202) 355-1172. Air Cargo World is a registered trademark of UBM Avia- tion©2009. Periodicals postage paid at Downers Grove, IL and at additional mailing offices. Subscription rates: 1 year, $58; 2 year $92; outside USA surface mail/1 year $78; 2 year $132; outside US air mail/1 year $118; 2 year $212. Single copies $10. Express Delivery Guide, Carrier Guide, Freight Forwarder Directory and Airport Direc tory single copies $14.95 domestic; $21.95 overseas. Microfilm copies are available from University Microfilms, 300 North Zeeb Road, Ann Arbor, MI 48106. Opinions expressed by authors and contributors are not necessarily those of the editors or publisher. Articles may not be reproduced in whole or part without the express written permission of the publisher. Air Cargo World is not responsible for unsolicited manuscripts, photographs or artwork. Please enclose a self-addressed envelope to guarantee that materials will be returned. Authorization to photocopy items for internal or personal use is granted by Air Cargo World, provided the base fee of $3 per page is POSTMASTER: Send address change to: paid directly to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, and provided the number of copies is less than 100. For Air Cargo World 3025 Highland Pky Ste 200 authorization, contact CCC at (508) 750-8400. The Transactional Reporting Service fee code is: 0745-5100/96/$3.00. For those seeking 100 or Downers Grove, IL 60515 more copies, please contact the magazine directly. POSTMASTER and subscriber services: Call or write to Air Cargo World, 3025 Highland Parkway Suite 200, Downers Grove, IL 60515; telephone For more information visit our website at 866-624-4457. www.aircargoworld.com ACW DECEMBER 2009 1 editorial Doing God’s Work?
ast month Goldman Sach’s Chairman Lloyd Blankfein admitted to “doing God’s work” while getting paid a reported $68 million a year (2007). L By next month an estimated 36 million people in the G7 countries won’t be getting paid to work for God or anyone else. While the Euro zone and the U.S. climb out of a recession, there are few signs of more jobs being created. According to the U.S. Department of Labor, the number of openings has fallen by 2.3 million, or 48 percent, since June 2007. During the third quarter of 2009, 277,924 American workers lost their em- ployment in the largest “mass layoff event” for any third quarter since 1995 when the data was first available. So Blankfein’s recent foot-in-mouth remark is hardly assuaged by a subse- Simon Keeble [email protected] quent PR announcement that his company would find $500 million to kick-start 10,000 small and medium-sized U.S. enterprises. A more attractive number might be the reported $16.7 billion in incentives already earmarked for Goldman employees. At least they have jobs. In mid-November, the Air France-KLM Group said it would implement a vol- untary redundancy program in 2010 to reduce its 100,00-plus payroll by 1,700. British Airways reportedly is not giving that option to several thousand of its employees next year as it tries to position itself for a merger with Iberia. Not for the first time, the British echo an American short-term approach of “hire (and fire) at will.” Only their respective labor laws or the odd union stand in the way of this trend towards human commoditization. Historically KLM and Lufthansa have taken a more sustainable, i.e. long-term, view. Their labor laws help. So do their management philosophies. During the past 12 months Air Cargo World has covered many different as- pects of Sustainability in order to portray the need for a more holistic approach to business responsibility. Next year our management series will endeavor to reflect what makes inspired leadership. The more CEOs just pass the parcel of unwanted employees to the govern- ment dole in order to maintain an investment analyst’s view of ROI, the more a society will be left holding the package. The human and financial costs don’t disappear because a manager can claim “off the payroll, off the books.” They just become somebody else’s problem. Companies (made up of people) create wealth that is re-distributed via taxes to maintain their society. Obviously some cultures, and their respective com- panies, have taken to heart the popular American phrase “what goes around, comes around.” Even if it is “God’s work.”
2 DECEMBER 2009 ACW viewpoint Avoiding Customs Babel?
s the world increasingly recognizes the need for ICS essentially holds the carrier responsible for provid- security in air transportation, one country after ing summary level manifest declarations on all shipments another is reviewing how its processes need to entering the EU. That will mean being able to transmit the change. required data electronically to the relevant national Cus- Less visible — but no less important — than toms body at the first point of entry — even if the goods theA proliferation of X-ray machines, security fences, alarm are only transiting the EU. systems and guards that now feature so prominently in This throws up many problems, and currently no an- any airfreight shipment are IT systems. swers. For example, despite the introduction of standard- Since 1969, when the UK launched the world’s first ized electronic Customs messages, how many carriers ever community computer system specifically to automate have the ability to submit the required information to any (and so speed up) Customs import entries, it has generally foreign Customs body — let alone 27 — all speaking dif- been ahead of the game when it comes to linking carriers, ferent languages, and all with different systems in differ- freight agents, shippers, handlers and the Customs author- ent stages of development? ity to form a single community that shares The UK, faced with a similar scenario, opt- information and ensures compliance without ed to develop a data hub called CCS-UK, which slowing shipments. enables all carriers, freight agents, handlers Just looking at the much-expanded EU, and shippers to link to HM Revenue and Cus- there is already a gross disparity between toms. This data “switch” handles translation leading states and newer members. Some are between different messaging standards, holds still on manual systems and there is no cen- data centrally so that it is accessible to all and tralized system as yet that can handle com- cuts down overall data flows to improve speed. munications and the sophisticated transfer Agents and others are free to choose their own of data on a level that permits audit-based, software and supplier, so long as they work to inventory-linked processing such as we oper- the basic CCS-UK specifications. ate in the UK. CCS-UK’s designer and custodian is British This problem becomes greater when you Telecom, which has now conceived a larger- look outside the EU and find yet more stand- Peter Day scale system called CCS21 that aims to in- alone systems that cannot share or process troduce the same concept as CCS-UK to the information with other countries or outside bodies. So far entire EU community, and any outside party who needs to this has not been a problem, but the relentless move to conduct Customs transactions with it. global security is driving a need for rapid data exchange My own company is currently developing a pan-Euro- between carriers, freight agents, shippers, handlers and pean Customs solution for multi-national forwarders and Customs authorities. CCS21 will certainly make our task much easier. This data is required ever earlier in the supply chain. Al- The progress of airfreight has always been held back by ready the U.S. has introduced AMS that requires key infor- lack of investment in IT and fragmentation by competing mation to be transmitted to achieve pre-clearance before a players who are all trying to sell their own solution. Here shipment can even be loaded on a U.S.-bound flight — with the introduction of ICS in Europe — is an ideal op- This approach will be echoed soon throughout Europe portunity for everyone in this industry to move towards a with the launch of its Import Control System (ICS). And single standard that will work for all. ACW when you consider that Europe is the largest exporter in the world, and the second largest importer, you can gauge Peter Day is the Managing Director of Impatex Com- the potential impact on trade — and airfreight — if all the puter Systems, the UK’s largest provider of Customs required parties cannot comply with its new “permission- processing and forwarding software that handles 50 to-load” regime. percent of all UK airfreight Customs clearances.
ACW DECEMBER 2009 3 EUROPEworld ASIAnews MIDDLE EAST AFRICA AMERICAS BAA To Bolster GIP Plans Swift Steps to London Group Overhaul Gatwick Finances
K airport operator British Airports Au- Uthority has announced plans to pump 500 million pounds ($837 million) of new equity into its London airports group. The injection will consist of £200 million ($334.9 million) of equity from shareholders and £300 million ($502.3 million) from BAA Airports Limited and FGP Topco Limited, the ul- timate holding company of BAA, which is jointly owned by BAA’s three controlling shareholders. The funding will be used to pay down debt, strengthen the group’s medium-term financial ratios and facilitate its access to the capital markets, according to a Nov. 13 statement from BAA, which is owned by the Spanish infrastruc- ture company Ferrovial. The £300 million equity injection from BAA Airports Limited and FGP Topco Limited has been approved by the relevant boards, the airport operator said. The £200 million of new equity from shareholders requires the formal ap- urope effectively has a new crown jewel of London Heathrow, but proval of BAA’s three controlling shareholders. international gateway. To along with London Gatwick, the “For BAA said the steps would further its strategy be more precise, it is the Sale” signs are also due to be put up of developing a long-term platform to finance UK that is the beneficiary at London Stansted, although BAA is its rolling program of investment to upgrade its E of this great prize. Add in now appealing the sell-off. London airport facilities and improve service to the fact that the airport in question Global Infrastructure Partners is customers. can attach the moniker of “London” a private equity $5.64 billion invest- The move follows October’s announcement to its title and the significance in- ment fund, with Credit Suisse and of the UK’s Department of Transport’s measures creases notably. General Electric among is founding to strengthen the financial resilience of major The airport in question is London investors. In the UK it already owns airports, which removed key uncertainties for Gatwick, which has a new owner, London City Airport, the capital’s in- BAA and its creditors. They included the sale of Global Infrastructure Partners (GIP). town business airport and the small Gatwick, the net proceeds of which will be used It has bought the piece of English real obscure Port of Yarmouth on the UK’s by BAA to pay down debt and the encouraging estate for $2.5 billion. east coast. improvement in recent passenger traffic figures, The move follows the enforced sale GIP’s chairman, Nigerian-born particularly at Heathrow, BAA said. of the asset by airport operator Brit- Adebayo Ogunlesi, has already been Britain’s Competition Commission issued a ish Airports Authority. Last year, the outlining the strategy which will be ruling in March requiring BAA to sell three of the United Kingdom’s Competition Com- adopted for its latest acquisition. seven airports it operates within the next two mission’s ordered BAA to divest itself “What we will do is apply industrial years because of concerns about competition. of two of the three London gateways best market practices to operating BAA, which had already put Gatwick up it owns and operates. BAA has been London Gatwick, with a team of ex- for sale last year, sold Britain’s second busiest accused of holding a monopoly posi- perts we can access from such com- airport recently to Global Infrastructure Partners tion in the market that has served to panies as General Electric.” for 1.51 billion pounds ($2.5 billion). inhibit competition and restrict de- Most major airports, asserts Ogun- Global Infrastructure, backed by Credit Suisse velopment — not least for cargo. lesi, are by nature monopoly opera- Group AG and General Electric Co., adds Gat- The operator, which is itself owned tions and are therefore unused to di- wick to investments that include London City by the Spanish investment group Fer- rect competition. airport. ACW rovial, has been allowed to retain the “Look at any major industrial com-
4 DECEMBER 2009 ACW AMERICASAMERICAS AFRICA AFRICA MIDDLE MIDDLE EAST EAST ASIAASIA EUROPE EUROPE
pany and they are facing competition January to September 2009, the air- that BIFA welcomes the news that on every front and need to employ port’s throughput declined 40 per GIP says it will invest to upgrade and best practices to stay ahead of the cent compared to 2008. The airport modernize Gatwick. game.” had already witnessed a 20 percent “Having seen a decline in cargo vol- Ogunlesi says that in the near term decline last year reporting tonnages umes through Gatwick in recent years GIP will be drawing on its experience of just 171,000 tonnes. This is com- and in light of the fact that the major- at London City Airport. In the three pared to London Heathrow’s traffic ity of airfreight travels in the holds of years since its purchase in 2006, on figure of 1.3 million tonnes. passenger aircraft, it will be interest- time punctuality has improved dra- The airport and its previous own- ing to hear what GIP has planned in matically and operational delays re- er hardly got a ringing endorsement order to enhance the airport’s status duced significantly. from the UK cargo community. Com- as a viable air cargo gateway alterna- “We believe this business is about ments Peter Quantrill, director gener- tive to Heathrow.” working with the airlines to provide al of the British International Freight Prized asset or not, GIP knows that them with the facilities they need and Association (BIFA): “It is quite obvi- it will now be in toe-to-toe competi- the community with an airport they ous that BAA over the years has not tion with London Heathrow and to will want to use.” given cargo the investment and focus a lesser extent, London Stansted, He thinks GIP can get the job done that it deserves.” whatever the outcome of its proposed at London Gatwick within the next This is all the more apparent, he sell-off. 12-18 months. says, when compared with other ma- In its favor, GIP can develop a for- “We are inheriting an airport that jor European gateways. ward strategy in the knowledge that has a good mix — perhaps the best “When you look at airports like it will legally be able to operate a sec- — of charter, low-cost, and scheduled Frankfurt and Amsterdam it is obvi- ond runway from 2019. In contrast, short- and longhaul flights,” he said. ous that there is a far more coordi- BAA has pulled back from plans to In fact, some will argue, London nated approach to developing and en- develop a third runway at Heathrow. Gatwick can hardly be said to have couraging cargo traffic, to the extent A UK election next year is expected been sold as a going concern. that London is now lagging behind to see the current Labour run gov- In recent years it has lost much of rather than in direct competition with ernment replaced by the Conserva- its premium long haul traffic. British these hubs.” tives who, waving their environmen- Airways has transferred nearly all of Quantrill says the U.K. air cargo tal friendly credentials, have already its long haul flights to Heathrow. The industry would like to see any new indicated that they would veto the new Open Skies accord with the US investor develop London Gatwick as a development of a third runway at meant that finally, U.S. carriers like premier cargo gateway, attracting the Heathrow. Delta and Continental were able to major freighter operators. Operator BAA has at least made get a toehold in Heathrow, previously “This could provide a focus to de- some effort to develop London Stan- restricted to just two U.S. carriers, velop a single alternative to the incon- sted as a freighter hub, with British American and United. sistent and piecemeal cargo strategy Airways World Cargo and FedEx us- It is hardly a heartening story from which BAA currently appears to em- ing the gateway for their freighter op- the point of view of cargo. The airport ploy,” he says. erations. But it seems that BA World has suffered a dramatic decline in With London Gatwick now out of Cargo could easily be charmed away. cargo volumes in recent years. From the grasp of BAA, Peter Quantrill says Earlier this year it made it very
ACW DECEMBER 2009 5 EUROPE ASIA MIDDLE EAST AFRICA AMERICAS
public that it had gone through the claims to be the UK’s second busiest gateways, with many carriers these exercise of looking for alternative op- cargo airport after London Heathrow. days choosing to fly to just one point,” tions. A possible relocation to Kent The more northerly UK gateway says Blanchard. International Airport, south of Lon- is currently home to parcel movers “On those terms London Gatwick don was apparently considered as a DHL and UPS, which account for will be no different and might even real alternative. much of the airport’s 300,000 tonne find it difficult to accommodate dedi- But what are the real options for annual throughputs. But, apart from cated freighter services, due to the London Gatwick to be developed as a steady flow of ad hoc charters, the high number of low cost carrier op- a cargo hub in its own right, or in gateway has enjoyed little recent suc- erations at the airport.” direct competition with its London cess in luring fully-fledged long haul GIP promises to expand on its plans neighbors? scheduled freighter operators. for London Gatwick shortly. Does Eu- “Limited” is the answer from a more “You have to face up to the fact rope have a new international cargo distant interested observer — Bill that UK airports as a whole, includ- gateway at its disposal or just a dis- Blanchard, cargo development man- ing London Heathrow, are losing out posed of international gateway? We ager at East Midlands airport, which to more centrally located European shall have to wait and see. ACW
In The News... For the fi rst nine months of 2009, freight traffi c of three additional A330-300 aircraft, bringing decreased by -19.8 percent compared to the the total number ordered by the company to ten. The Association of European Airlines (AEA) same period in 2008, says the Airports Council Future production of the cargo aircraft is tied to is calling on European policy-makers to convene International Europe. Its September results the outcome of a battle between Airbus parent a stakeholder summit to address the challenges cover 110 airports. “Although there are tangible EADS and Boeing in a $35 billion competition facing the European airline sector. Secretary signals that the air traffi c downturn is bottoming to supply aerial tankers to the U.S. Air Force. General Ulrich Schulte- out, the pace of air traffi c Airbus has said it would assemble the freighters Strathaus said, “The recovery in the winter will in the U.S. if its Northrop Grumman-led team foundations for a “The foundations for a remain slow and gradual wins the Pentagon’s tanker competition…Cargo sustainable European — mainly driven by low and ground services provider Worldwide Flight air transport sector are sustainable European cost airlines. A sustained Services says it has boosted its volumes in crumbling. Portions of recovery is unlikely before Paris by over 6,000 tons a month after signing our industry are close air transport sector are mid-2010, with the fi rst contracts with 12 new airlines. Korean Airlines to collapse — indeed, crumbling.” half of the year expected to is the largest of the contracts, with WFS handling we have seen failures grow only marginally.” ACI 2,000 tons a month for Korean Airlines at Paris among premium car- says airports are experi- CDG. Brazil-based TAM will boost throughput by riers, leisure carriers, encing “their worst ever a further 1,000 tons a month and the remaining no-frills and cargo airlines. Tens of thousands of trading conditions” with 82 percent of European contracts will generate a total of 3,000 tons… people employed by or sustained by the airlines airports reporting falls in traffi c so far this year. The Baltic Air Charter Association (BACA) are losing their jobs”...Brussels Airlines Africa …The AEA reports that Ireland’s air naviga- named Volga-Dnepr Airlines the Best Cargo cargo traffi c in October 2009 was the second tion provider will raise rates to airlines using its Charter Airline at its 60th anniversary luncheon highest in its history... GSSA European Cargo airspace by 17 percent in 2010. AEA Secretary in London. Other winners of BACA’s 2009 Excel- Services (ECS) produced over 1,000 tonnes General Ulrich Schulte-Strathaus noted that EU lence Awards included Gama Aviation (Best of southbound freight for the carrier during the Transport Commissioner Antonio Tajani has asked General Aviation Operator), Infl ite Jet Centre month — a 97 percent load factor. ECS markets EU member states not to increase navigation Stansted (Best Handling Agent) and Tyrolean belly cargo capacity on Brussels Airlines’ Airbus and airport charges during the current economic Jet Services (The Global Excellence Award). A330-300 fl ights to 14 destinations across slump. “What the Irish government has failed BACA is the successor of the Airbrokers’ Associa- Africa. Guy Hardy, head of cargo sales for the to see is the implication of penalizing aviation, tion founded by members of the Baltic Mercantile Lufthansa subsidiary said, “Compared to other and thus jeopardizing employment, by the twin and Shipping Exchange in March 1946… British continents like Asia and North America, Africa burdens of a heavily taxed customer base and an Airways World Cargo reports a drop of 30.9 has been less affected by the economic crisis. We overpriced and underproductive infrastructure,” percent in revenue to $414.33 million for the fi rst expect the fi nal revenue outcome for 2009 to be he added. Earlier this year, the AEA made a half of its fi nancial year starting April 1, 2009. close to our 2008 result, which is a remarkable similar complaint to the EU Commission follow- Overall yield per cargo tonne-kilometer (CTK) result for northbound and southbound Africa ing a move by Poland to raise airport and air dropped 37.2 percent compared to the same combined.”…Freight traffi c at European air- navigation charges to recover lost income as a period in 2008 due to price pressures and lower ports decreased -7.8 percent in September 2009 result of the recession… Turkish Airlines has fuel surcharges. Traffi c fell 8.1 percent for the half compared to the same period one year ago, says signed a memorandum of understanding (MoU) year. Since April, cargo capacity has been reduced a group that represents Europe’s major airports. for two A330-200Fs in addition to the purchase by 6.5 percent. ACW
6 DECEMBER 2009 ACW Project1 6/17/08 12:27 PM Page 1 MIDDLEworld EAST news AFRICA AMERICAS EUROPE ASIA
Care By Air Agility Hit By Takes Off Fraud Indictment
aximus Air Cargo has joined Mforces with Etihad Airways and the Abu Dhabi Airports Company (ADAC), to launch ‘Care by Air’ on behalf of the UAE Red Crescent and the U.N. World Food Programme (WFP). Care by Air says it will provide cargo services at cost to relief and humanitar- ian organizations. According to IATA, four million tonnes of capacity flies empty every week, every year via 3,400 airports in 220 countries. Care By Air claims that if 0.0003 percent of this space was filled, five million hungry people could be fed for a day. James Hogan, chief executive of Eti- had Airways said, “As the national air- line of the UAE we are uniquely placed to support the Emirate’s humanitarian aid initiatives both in our community and further afield. We are proud to work ollowing a two-year probe by at $374 million. alongside local partners as part of Care the FBI and other U.S. gov- TSC is a retail chain founded by by Air.” ernment agencies, a federal Sultan Al Essa’s uncle, Jamil Abdul ADAC’s senior vice president opera- grand jury in Atlanta has Aziz. He and four other Sultan family tions, Ahmed Al Haddabi, added, “With F returned a six-count indict- members are the largest stockholders a sustainable business model behind it, ment against the Kuwait-based Pub- in TSC and also control a significant ‘Care by Air’ represents a perfect exam- lic Warehousing Company (PWC), share in Agility. ple of how private and public businesses also known as Agility. The case was initially filed by whis- can work together for mutual benefit, The lawsuit alleges that since tleblower Kamal Mustafa Al-Sultan, a and play an active role in supporting 2003, PWC, The Sultan Center Food cousin of Sultan Al-Essa and owner humanitarian programs. I hope that our Products Company (TSC) and Tarek of a Kuwaiti company Kamal M. Sul- efforts will demonstrate to many other Abbul Aziz Sultan Al-Essa, Agility’s tan Co. that had originally partnered companies how they can creatively and CEO, have made false claims for pay- with PWC in order to obtain U.S. gov- financially integrate a social responsibil- ment under PWC’s multi-billion con- ernment business. ity agenda into the fabric of their orga- tracts with the U.S. Defense Logistics In 2003, PWC won a contract to be- nizations.” Agency to supply food for the U.S. come the prime food vendor to U.S. The three founding service providers military in Kuwait, Iraq and Jordan. forces in Iraq and Kuwait. As a result expect additional partners in the venture The complaint alleges that Agility PWC’s business grew from $77 mil- to include airlines, forwarders, shippers, knowingly overcharged the U.S. for lion in 2002 to $3.69 billion in 2006. auditors, oil and gas companies and fresh fruits and vegetables that PWC However, reports say PWC won the airports. purchased through TSC. The com- contract without Kamal, its original The UAE Red Crescent was founded plaint also alleges that PWC failed partner. in 1983 to provide humanitarian aid to disclose and pass through rebates In Dec. 2008, Agility won anoth- to victims of disaster and help people and discounts it obtained from its er Department of Defense contract prevent, prepare for and respond to U.S.-based suppliers. worth an initial $223 million and a emergencies across the globe. ACW One report has put the rebates as maximum $932 million over eight high as $80 million and overcharges years to supply and deliver repair
8 DECEMBER 2009 ACW ASIA EUROPE AMERICAS AFRICA MIDDLE EAST
“The Department of GlaxoSmithKline, Rolls Royce and BP, $1.63 billion compared with the same the Boeing Corporation, the Bechtel period last year. Justice will spare no Group, KBR, and the Northrop Grum- Net income for the first 9 months man Corporation.” was $403.8 million, an increase of effort in investigating Robert Leffel, Ethisphere’s Associ- seven percent compared to 2008. those persons and ate Director said of the survey result, Adjusted for non-recurring items, “We were impressed by Agility’s com- Agility’s net profit for the first nine companies, regardless mitment to ethical business practices months was $424.7 million, a 22 per- and, given the company’s fast global cent increase over the same period of location, who seek growth, think that they have done re- last year. ACW markably well in such a short period to defraud the United of time.” States.” The Ethisphere Institute’s analysis of Agility’s ethics program, noted that the Agility Code of Conduct, which parts for communications and elec- received an A- minus rating, “is sig- tronics equipment. In August that nificantly above standards in terms of year, the company announced a $140 meeting the spirit of the law.” million contract over seven years on At the time of the survey, Agility behalf of the U.S. Marine Corps. said Michael Mills led its ethics and Agility acknowledges the lawsuit compliance program and reported was instigated by Kamal, “who has directly to Tarek Abbul Aziz Sultan a long history of strong animos- Al-Essa. ity towards PWC, its officers and its Mills said of the company’s per- employees.” The company says it is formance, “At Agility, integrity is “surprised and disappointed that the the first of our four core corporate (U.S.) government has decided to in- values and we continue to live that tervene.” ethos everyday. It makes us proud to In a statement, Agility says Kamal be ranked as a leader in ethics and originally brought a “qui tam” case compliance, especially among major under the U.S. False Claims Act in global players and we look forward to November 2005. The Act, which is growing and improving our program based on English Common Law, en- in the coming future.” ables a private individual who assists New York-based Ethisphere is an a prosecution to receive all or part of international think-tank “dedicated any penalty that can be three times to the creation, advancement and the amount of the total losses, plus sharing of best practices in business civil fines. ethics, corporate social responsibility, In Kuwait, Agility says Al Sultan anti-corruption and sustainability.” has filed more than 40 court actions Commenting on the Federal indict- against PWC and claims all of them ments acting U.S. attorney F. Gentry have been unsuccessful. Shelnutt said, “The decision to join in In May 2008 Agility noted it had this civil lawsuit follows a multi-year “the third highest ethical practices probe into abuses in Middle East sub- of foreign companies which are U.S. sistence prime vendor contracts. The government contractors according to Department of Justice will spare no Ethisphere Institute’s 2008 Govern- effort in investigating those persons ment Contractor Ethics Rankings. In and companies, regardless of loca- addition, Agility out-ranked nine of tion, who seek to defraud the United the 25 largest U.S. government con- States.” tractors.” For the first nine months of 2009, At the time, Agility claimed its eth- Agility’s gross revenue decreased by ics program scored higher in the sur- 10 percent to $4.2 billion compared vey “than many larger and more well to the same period in 2008. Net rev- SWISSWORLDCARGO.COM known global corporations such as enue increased by one percent to
ACW DECEMBER 2009 9 MIDDLE EAST AFRICA AMERICAS EUROPE ASIA
In The News...
Emirates reports a 165 percent improvement in net profi t to $205 million for the fi rst six months of its current fi nancial year ending 30th September 2009. The airline estimates its direct contribution to the U.A.E. economy was $2.4 billion with the carriage of 13 million passengers and over 700,000 tonnes of cargo during the period. Total revenue was $5.4 billion — a drop of 13.5 percent compared to the same period last year due to lower passenger and cargo yields. Costs were reduced by 15.8 percent to $5.2 billion compared to 2008 because of lower fuel prices and “cost containment”… Ethiopian Airlines has ordered 12 Airbus A350 XWB aircraft valued at $2.9 billion. No date has been announced for delivery. The aircraft has a range of up to 8,300 nautical miles and a belly capacity of 28 LD3s... a career in aviation engineering technology. Dr to employment opportunities throughout the Yemenia based in Sanaa, has signed an MoU Abdullatif Al Shamsi, IAT Director General of airline”…Senegal Airlines has ordered four worth $770 million for 10 Airbus A320 to en- IAT, said: “IAT’s system of fi ve high schools, a A320s and two A330s for a reported $670 hance and expand services on regional, African, Logistics Academy, Aviation Academy and our million prior to launching next year. The airline, Indian and European routes….Maximus Air Vocational Education Development Centre are which has a majority of private equity, has signed Cargo, the UAE’s cargo aircraft operator, has uniquely resourced for such a partnership. IAT a deal with Emirates for commercial support, appointed Avanti Consult to further develop its is pleased to support Etihad’s Emiratisation technical expertise, training and aviation-related business strategy and expansion into scheduled goals by offering our graduates better access goods and services. ACW services…Etihad Airways will increase its A330-200 Abu Dhabi- Frankfurt services from 10 to 13 per week from Dec. 12, increasing to a double daily from March 28 2010…Airbus’ new freighter variant of the A330-200 passenger aircraft made its maiden fl ight last month. Plans call for fi rst delivery in the summer of 2010 to Etihad Crystal Cargo. There are 67 fi rm orders for the A330-200F with nine customers…Etihad has signed an MOU with the Institute of Applied Technology (IAT) to provide students with opportuni- ties to build successful future careers with the national airline of the UAE. The MOU between the Abu Dhabi-based airline and the IAT supports the development of the UAE national workforce by providing students with the skills and knowledge required to pursue
10 DECEMBER 2009 ACW Project5 6/9/06 9:08 AM Page 1 worldASIA MIDDLEnews EAST AFRICA AMERICAS EUROPE Human Rights Freight Market Bounces Lag In Asia But Future Unclear Supply Chains new study says major companies Ain Asia and the U.S. lag behind Europe in establishing labor and human rights policies (LHR) in their supply chains. While 28 percent of global companies – including nearly half of those with market capitalizations of more than $10 billion – have LHR policies, “materially fewer have established follow-up monitoring and en- forcement procedures,” says the study. The Harvard Law School Pensions Project and Asset4, a provider of corporate gover- nance information, conducted the study of 2,500 global companies. It was funded by the IRRC Institute, a New York-based non- profit that advises investors on corporate responsibility, Aaron Bernstein, senior research fellow reighters are sprouting current peak season. Vietnam, which at Harvard Law School’s Labor and Worklife all over the region again. saw the launch of four weekly Kore- Program noted, “The fact that 45 percent Amidst the flurry of activity an Air 747 freighter flights between of the 657 largest companies in the sample Fto deal with emerging bottle- Hanoi and Seoul at the end of Octo- have adopted a supply-chain LHR policy necks at the major gateways, ber, looks set to get its first home- – and that 25 percent have published a Asian carriers are opening new routes grown all-cargo operator next year. specific supplier code of conduct – suggests and lining up main deck capacity for The authorities issued a license to such approaches may be an emerging best new ventures. Trai Thien Air Cargo, which intends practice that is prudent to emulate. The Tight capacity due to a surge in de- to take off in 2010, starting with do- implication is that LHR concerns are close to mand, exacerbated by the earlier re- mestic services using a 737-300F the norm for large global corporations, while ductions in freighter fleets, has gen- aircraft. The new player intends to those lacking LHR policies may come under erated a scramble for charters. add four more freighters later on and pressure to adopt them,” he added. Mindful of last year’s market slump, expand its network to other Asian Jon Lukomnik, program director of the forwarders had refrained from lin- destinations. IRRC Institute noted, “Retail and institu- ing up charters for this peak season, Thailand is also bracing for new tional investors are increasingly concerned so the sudden capacity shortage has all-cargo operations. Thai Airways, about the sustainability of the companies given airlines ample opportunities to which had made noises about main they own. While they are looking at gover- deploy freighters on extra sections deck ambitions for years, finally nance practices such as executive compensa- for top dollars. Airfreight rates out of signed a block space agreement to tion and at environmental practices as never Asian gateways have climbed day by secure the entire capacity of two before, LHR practices and policies have been day to levels last seen in 2007, and B777-200 freighters operated by highly under-researched. At the same time, beyond. Southern Air. The planes are sched- sweatshop and quality and safety controver- In September, traffic from mem- uled to come into action early next sies have erupted regularly for Western com- bers of the Association of Asia-Pacific year and will be deployed initially be- panies with overseas supply chains – Nike, Airlines was up 4.7 percent over Au- tween Thailand and Europe. Later Wal-Mart and Tesco to name just a few. gust to the highest level since Novem- Thai intends to use them on routes Investors remember all too well what results ber 2008, 28 percent above the low to North America and Australia as when public criticism inflicts reputational point in February. well. damage on companies or when substandard Arguably even more promising In neighboring Malaysia, MASKar- suppliers create safety recalls – it damages than this is the fact that some airlines go recently signaled that it intends to the bottom line.” ACW are making commitments beyond the acquire freighters, possibly 747-400s
12 DECEMBER 2009 ACW AMERICAS EUROPE ASIA MIDDLE EAST AFRICA
or A330s, once its wet-lease deal for take some time to put in place. would be more extensive 747-200s expires next year. At least NCA has sidelined 747- and time-consuming, Woodrow ob- Encouraging as these signals are, 400s, which would not require heavy served. most operators in the region remain maintenance to get back into ac- All this is academic, of course, if the on the defensive for the time being. tion. Most of the freighters side- market runs out of steam in January, There is widespread agreement that lined this year are older models, and even though nobody expects a slump the current surge will run until mid- the inevitable maintenance checks as severe as in the past year. ACW or late December, but nobody has a clear picture at this point whether or not the momentum will carry on into MAS Cargo: Avoiding The 2010. Mindful of the savage yield decima- Cuts That Hurt tion that occurred in the first seven months of this year, airlines that have parked freighters are not rushing alaysia Airlines’ cargo arm, ers, four B747-200s, two B747-400s them back into action. MMASkargo, is beginning to and an A330-600 that began serving “While we are encouraged by posi- see modest volume recov- the regional three-to five-hour mar- tive trends in airfreight and in the ery in line with Asia’s other leading ket from the end of 2008. Two Boe- broader economy, significant uncer- operators. ings were diverted from scheduled tainty still exists regarding the pace Throughput in the first half of of services to charter business at the of recovery heading into 2010,” com- 2009 was 28 percent down on the bottom of the market. A 747-200 was mented Bill Flynn, chief executive of previous year. Business continued also “used as a buffer” for six months. Atlas Air at the presentation of the shrinking into September, when the “Now the whole fleet is operational,” company’s latest results. Likewise, division recorded a 10 percent year- Salleh noted. airlines and forwarders in Asia ex- on-year decline. It finally moved The Airbus is now on charter duty pressed cautious optimism but do ahead in October, with a two percent in Dubai after it was withdrawn from not expect significant growth in the tonnage increase over October 2008. scheduled service, taking destina- coming year. “Back at the start of the year we tions such as Dhaka, Chennai, Bang- Besides the uncertainty about de- were expecting really bad news - pos- kok, Ho Chi Minh, Jakarta, Kota Kin- mand in the first half of 2010, there sibly a return to our cargo volumes of abalu and Darwin off the freighter is also a question mark over the price 2002,” said Ibrahim Mohamed Salleh, network. of oil, which could dampen economic head of cargo operations at MASkar- Suspension of a number of passen- recovery as well as undermine the vi- go’s Kuala Lumpur hub. “We saw ger services including Stockholm to ability of using airfreight, remarked some improvement after the Chinese Newark, culled in October, has also James Woodrow, general manager of New Year, and from June the year- cost MASkargo useful bellyhold ca- cargo for mainland China and Hong on-year decrease began to narrow.” pacity. Kong at Cathay Pacific. Malaysia Airlines told each part of A new 747-400 freighter routing to Cathay took five freighters out of its business to cut costs by 10 per- Tokyo began in September. MASkar- service earlier this year in response cent as the financial crisis worsened go at one time served Narita Airport to the downturn. To bring them back, and demand fell. Salleh said MASkar- direct, then via Penang. Now the there has to be sustained demand go had achieved more than the re- aircraft calls at Johor Bahru, at the with improved yields. Recent rate quired figure with a series of “surgi- southern tip of Malaysia. increases have made up for some of cal cuts,” including renegotiation of Part of the Iskandar Development the losses sustained earlier, but they its handling costs. Flights that were Region, Johor Bahru has seen sig- cannot entirely compensate for the refuelling in Dubai are now going via nificant investment in manufacturing yield deterioration prior to Septem- Tashkent and benefiting from cheap- industry and specifically export pro- ber, Woodrow said. er fuel. duction. The aircraft is able to pick Likewise, Nippon Cargo Airlines The division had implemented a up electronic cargo trucked across is not reactivating any of its parked recruitment freeze but had lost no the border from Singapore, as well as freighters for the time being, said personnel, and Salleh emphasised garments, flowers and tuna fish. Shawn McWhorter, president for the he had been anxious to maintain the Wet leases on MASkargo’s 747- Americas. Besides the cost associ- customer relations effort. “Across- 200Fs expire next year and the car- ated with such a move — between the-board cuts can hurt your bottom rier may be looking to bring in more $500,000 and one million dollars — line,” he said. modern, fuel-efficient replacement flight crews and maintenance would MASkargo operates seven freight- aircraft. ACW
ACW DECEMBER 2009 13 AMERICAS EUROPE ASIA MIDDLE EAST AFRICA
In The News... forwarders and airlines in Thailand through an As Indonesia was hit by another earthquake that expansion of a partnership measured 6.7 on the Richter scale, Volga-Dnepr with Trade & Logistics Siam completed a series of freighter fl ights carrying Ltd. Portal users can upload 391 tonnes of relief goods to victims of an earlier or generate electronic rate disaster in Pedang. Following the earthquake sheets, distribute quotations on Sept.30 that killed more than 1,000 people, to shippers, access real-time impacted a further 1,250,000 and damaged airfreight rate information 275,000 houses, Swiss-based NGO Medair and publish time-sensitive reports “a remarkable response” with as many operational announcements. as 190 international NGOs arriving in Padang to The portal can be reached assess the damage and provide assistance. For the via www.oagcargo.com. past few weeks, Volga-Dnepr has operated from OAG Cargo is part of UBM Kuala Lumpur to Padang and delivered water Aviation. The Airports of tanks, tents, blankets and generators to the af- Mauritius Co. Ltd. has fected region. FedEx Corp. has begun domestic awarded Lufthansa Con- express service in the Indian market and opened sulting a contract to prepare plans for air cargo including Mantraco, DB Schenker, Hecny, seven new forwarding offi ces. Its FedEx India sub- and freeport zones at the island’s Sir Seewoo- NNR and Dimerco. Founded in 1989, privately- sidiary will provide the next business day owned EVA Air is a sister company express services, initially offering delivery to Evergreen Marine Corp. to 50 major Indian cities from 14 cities. EVA Air Cargo serves major air The move means FedEx will now vie for cargo markets worldwide with business with BlueDart, the Indian arm its fl eet of eight MD-11 and nine of DHL, as well as compete with Captain B747-400 freighters... Air cargo GR Gopinath’s Deccan 360 venture. In a throughput via Hong Kong rose related move, FedEx Trade Networks, in October for the fi rst time since an international ocean and airfreight June 2008, up 1.7 percent from forwarder, has opened seven new offi ces a year earlier, a further indication bringing its total to 14 for the year to that global trade fl ows are picking date. The new facilities are in Xiamen, up, according to Hong Kong Air Tianjin, Dalian and Ningbo, China; Ho Chi Cargo Terminals Ltd. Cargo Minh City, Vietnam; Paris and Amster- exports from the city continued dam. Guggenheim Aviation Partners to fall, by 2.8 percent from a year has delivered a leased Boeing 777-300 ago, but that was modest com- extended range aircraft to Seoul-based Korean sagur Ramgoolam SSR International Airport. pared with an 18.6 percent drop for the fi rst 10 Air. Air Mauritius reported a net profi t of $4.31 months of this year, reports said. Cargo imports The delivery comes as Korean reported a net profi t million for the quarter ending Sept. 30 2009 rose 15.4 percent from a year earlier, compared of $228 million for the third quarter of 2009. Its compared to a loss of $3.84 million in the same with a 9.8 percent decline in the fi rst 10 months cargo and passenger business showed a slight period last year. The airline took delivery of a of the year... ACW improvement in October partly due to lower fuel second A330-200 at the costs. “As oil prices continue to stabilize and the end of October...... EVA won strengthens further, the airline expects to Air Cargo has introduced deliver better performance in the coming year,” IATA’s e-freight system the carrier said in a statement. Air New Zealand on its airfreight routes plans to buy 14 new Airbus A320 aircraft to between Taipei, Kaohsiung, replace its domestic fl eet of 15 Boeing 737-300s. Hong Kong and Singapore. The carrier said it also has purchase options for Taiwan-based EVA Air said 11 more A320 aircraft. The fi rst A320 is set for the move followed several delivery in January 2011. The carrier’s decision to months of preparation consolidate its short-range fl eet around the larger and coordination with aircraft was reportedly spurred by technical fac- Customs authorities, the tors including the width and cargo system of the Association of Airfreight aircraft as well as price. Forwarding & Logistics OAG Cargo has launched a new portal for and freight forwarders
14 DECEMBER 2009 ACW Corporate Outlook 2010
Boeing Commercial Airplanes provides the industry’s only com- plete product line of new and converted freighter airplanes. Boeing freighters provide more than 90 percent of the world’s dedicated freighter capacity.
The Boeing Company is the world’s leading aerospace company – the largest manufacturer of satellites, commercial jetliners and military aircraft. Boeing is the largest U.S. exporter with 2008 revenues of $60.9 billion. The company has customers in 145 countries and its nearly 160,000 employees reside in more than 60 countries. Boeing Commercial Airplanes produces the world’s leading jetliner family – highly efficient, reliable, comfortable airplanes from 100 to 465 passengers and a complete freighter line – designed and sized to enhance airline profitability while considering the environment. The world’s air cargo market leader, Boeing’s production freighter family ranges from 18 tonnes (20 tons) for the 737-700 Convertible to 134 tonnes (148 tons) for the new 747-8 Freighter, complemented by the successful 747-400 and 767-300 Boeing Converted Freighters and conversions by licensed partners. Based on economic consensus for positive GDP growth to return in 2010 with a long-term average of 3 percent, Boeing expects that 2010 will begin the recovery from the 2008/2009 economic crisis. “The air cargo industry is supported by sound fundamentals -- the imperative for speed, consumer product innovation and global industrial interdependence as key drivers,” notes Jim Edgar, regional director, Cargo Marketing, Boeing Commercial Airplanes. During 2010, Boeing will conduct the first flight of the 747-8 Freighter, and the flight test programs for that airplane and the 787 Dreamliner will lead to certification of both airplanes. The first 747-8F delivery is expected in the third quarter and the first 787 delivery is planned for the fourth quarter. Backed by more than 90 years of aerospace industry expertise, Boeing Commercial Aviation Services and its family of companies (Boeing Training & Flight Services, Aviall and Jeppesen) help customers enhance their profitability by providing lifecycle business solutions, materials and engineering services, and 24x7 global customer support. Boeing provides worldwide service infrastructure and networked operations to resolve technical issues, provide quick access to information and deliver vital spares, products and services. Boeing improves efficiency with digital productivity tools, product and industry expertise and leverages the power of aviation’s leading integrated supply chain.
BoeingBoeing Contact: Bob Saling, Boeing Commercial Airplanes, +1-206-766-2914, [email protected]
ACW DECEMBER 2009 15 worldAMERICAS EUROPEnewsEUROPE ASIA MIDDLE EAST AFRICA TSA Wants To Will Blue Ribbon Panel Tighten Security Spell Brighter Aviation he Transportation Security Admin- Tistration wants to tighten security Future? requirements at aircraft repair facilities in the U.S. and abroad to guard against terrorist threats involving aircraft. TSA said its proposal to increase security op U.S. government avia- protections would build on the extensive tion officials announced certification and safety requirements for plans last month to create repair stations instituted by the U.S. Federal a high-level committee Aviation Administration. T of representatives from For purposes of the proposed rule, across the aviation sector to address “repair stations” are those facilities certifi- ways to ensure the future health and cated by the FAA to perform maintenance, competitiveness of the U.S. industry. repair, overhaul, or alterations on U.S. Department of Transportation aircraft or aircraft components, including Secretary Ray La Hood announced engines, hydraulics, avionics, safety equip- the step at a one-day forum in Wash- ment, airframes, and interiors, TSA said in a ington Nov. 13 where he hosted rep- Nov. 16 notice outlining the proposal. resentatives from airports, airlines, The FAA has certificated thousands management, labor, manufactur- of aircraft repair stations in the U.S. and ers, general aviation and consumer dustry, its competitiveness, and its abroad that vary in size, type of repair work groups for “the (Obama) administra- ability to address evolving transpor- performed, employee count and proximity tion’s first forum on the future of the tation needs as well as challenges and to an airport. There are 4,227 domestic U.S. aviation industry.” opportunities of the global economy. repair stations located in the U.S. and 694 Participants discussed a wide ar- The panel will be composed of stake- foreign repair stations located outside the ray of topics at that session including holders from across the industry,” La United States that have an FAA certificate. alliances, modernization of the U.S. Hood said in a blog last month. TSA Office of Security Operations Assis- air transportation system or Next- The Air Transport Association, tant Administrator Lee Kair said: “This pro- Gen, foreign repair stations and labor which represents the leading U.S. posed rule supplements FAA requirements issues. airlines, said it welcomed discussion that protect aircraft undergoing repairs Following the session, La Hood told about “the financial health of com- from terrorist threats. By enhancing repair a press briefing, “We could only begin mercial aviation — an economic en- station security, this rulemaking guards to scratch the surface of the changes gine that it drives 8 percent of global against the potential threat of an aircraft being destroyed or used as a weapon.” we need to address.” So La Hood an- gross domestic product.” nounced formation of the advisory In its statement, ATA said that air- There will be a 60-day public comment committee that he said will make rec- line executives participating in the period on the proposed rule. ommendations within one year. forum pressed for no new taxes and Under the proposal, FAA-certificated But the former Republican U.S. fees that would burden an already foreign and domestic repair stations would House of Representatives lawmaker overtaxed industry, travelers and carry out a standard TSA security program from Illinois, who has seen his share shippers. ATA said airline represen- to safeguard the security of a repair station, of blue ribbon panels launched with tatives also pushed for full funding the repair work conducted, and all aircraft and aircraft components at the station. fanfare and never heard from again, and accelerated modernization of the It will require such stations to implement warned skeptics not to expect more nation’s air traffic control air traffic strict access controls, provide security of the same. control system. awareness training, and allow for Depart- Said La Hood: “This is not going to Addressing creation of the advisory ment of Homeland Security inspections. be just another advisory committee, committee, ATA President and CEO The agency said the proposed rule and I am not commissioning some re- James C. May said, “We appreciate fulfills a requirement for the Department port to fill space on my bookshelf. This that Secretary LaHood is taking this of Homeland Security to establish security committee will make a difference.” step to address the future health and regulations for domestic and foreign air- The DOT Secretary said the ad- competitiveness of the U.S. aviation craft repair stations. ACW visory panel would examine the in- (Continued on page 18)
16 DECEMBER 2009 ACW AFRICA MIDDLE EAST ASIA EUROPE AMERICAS
Boeing moved the first 747-8 freighter out of the company’s paint hangar Nov. 17 at its Everett, Wash., facility. The extended fuselage aircraft sports a new twist on the Boeing Commercial Airplanes livery. It features an oversized “8” on the background of the tail as well as “747-8” on the belly. This light livery will stay until the flight test program is completed, the U.S. manufacturer said. Plans call for the first freighter to undergo tests leading to first flight in early 2010. Boeing has advised Luxembourg-based Cargolux Airlines International to expect delivery of the first aircraft in the fourth quarter of 2010. Boeing has 78 orders for the new freighter from cargo operators including Cargolux, Nippon Cargo Airlines, AirBridgeCargo Airlines, Atlas Air, Cathay Pacific, Dubai Aerospace Enterprise, Emirates SkyCargo, Guggenheim and Korean Air.
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ACW DECEMBER 2009 17 AMERICAS EUROPEEUROPE ASIA MIDDLE EAST AFRICA
industry.” if the cost of deploying NextGen has is now higher than the rates charged May added, “The formation of a to be covered by even higher taxes by the government on tobacco or li- federal advisory committee of govern- or fees imposed on the airlines, “we quor,” he noted. ment and industry stakeholders, who prefer to live without it at the current According to the Air Transport will seek solutions to the challenges time,” he said. Association, airline executives that facing U.S. aviation in order to restore Parker added, “This is not just be- participated in the November forum jobs and the financial health of our cause we believe the public benefits also called for enhanced oversight of industry, is essential. Ultimately, a of NextGen justify funding it with gen- energy markets to excessive specula- healthy airline industry will help drive eral tax revenues (although they do). tion and the resulting volatility of oil the nation’s economic recovery.” It is more because our industry cur- prices; elimination of arcane restric- In a Nov. 11 letter to LaHood, US rently lacks the financial wherewithal tions on airlines’ ability to operate Airways Chairman and CEO Doug to finance costly projects like this.” efficiently in the global marketplace, Parker said, “All of us at US Air- According to the U.S. Airways head, and a global sectoral approach to cli- ways applaud your effort to begin a the best thing the department can do mate change for aviation developed dialogue about the health and future for the American aviation industry is through the International Civil Avia- competitiveness of U.S. aviation.” to “do no harm.” He said that means tion Organization. Any discussion must first and fore- no new taxes, fees or unfunded man- In his comments last month, La most assess the current financial state dates. This approach also would let Hood signaled that the planned U.S. of the nation’s airlines, he said. The the industry make rational business NextGen system is a priority for the U.S. airline industry has lost nearly decisions and take actions such as White House also. LaHood has had $60 billion since 2001, with $27 billion self-help mechanisms. two meetings with President Obama’s of those losses coming during the oil In 2008, U.S. airlines paid nearly top economic adviser about NextGen. price spike and the global recession in $18 billion in federally levied or ap- La Hood also made clear, however, 2008 and 2009, Parker stated. proved special aviation taxes and fees, that “he has not heard one word in Addressing the NextGen system, according to Parker. “That’s up from this Administration about re-regu- which will be implemented over many $12 billion in 2000. Today, on a $300 lating the industry.” He said, “This years at considerable cost, Parker roundtrip ticket with a stop in each di- country has an aviation system that is agreed it would yield huge benefits in rection, $60 or 20 percent constitutes losing billions of dollars, shedding jobs the form of reduced congestion and government imposed taxes and fees. and using an aging infrastructure. It’s reduced carbon emissions. However, That’s up from 13 percent in 1992 and time to get to work fixing it.” ACW
In The News... Liquid Scanner program. The scanners penetrate services National Airlines, based in Ypsilanti, The Messenger Courier Association of containers without opening or damaging them. MI will take delivery of two DC-10-30 freighters America (MCAA) is launching an on-line college In less than 20 seconds an analysis can compare in the fi rst quarter of 2010 and cease operating on Dec. 7. The new site will feature webinars results to a propriety library of substances that a DC-8-63 freighter…TIACA is urging the TSA and a resource center featuring best business can be tailored to include toxic or hazard- to expedite its evaluation of new technologies to practices, operational issues, merging trends in ous chemicals and explosives…The National support the pending 100 percent cargo screening same-day delivery and tools for entering new Right to Work Foundation (NRTW) says the mandate, scheduled to take effect in August markets. The “Courier College” will include a American Federation of Labor and Congress of 2010. TIACA says much of the equipment cur- members-only library of documents, forms and Industrial Organizations (AFL-CIO) and 30 other rently certifi ed for use for screening is inadequate an archive previous webinars, as well as access U.S. labor organizations have persuaded the U.S. and ill-suited for processing palletized air cargo. to live webinars…The construction of a $29 mil- National Mediation Board (NMB) to change …Despite cost-cuts of $6 billion and “a reduc- lion air cargo center at Las Vegas’ McCarran the way unions recruit railway and airline industry tion of 40,000 career USPS employees,” the U.S. International Airport began last month. The workers.The AFL-CIO wants the NMB to drop a Postal Service lost $3.8 billion in its fi nancial 201,000-square-foot airfreight logistics center at 75-year policy of requiring a true majority of all year to Sept. 30, 2009. With a total mail volume the airport’s new Terminal 3 is set for comple- workers to decide if they wish to be represented of 177.1 billion pieces, a reduction of 12.7 per- tion in one year. The Marnell Air Cargo Center is by a union and replace it with a new procedure cent compared to 2008, the USPS reported oper- being designed to host freight and mail-sorting that requires only a majority of workers actually ating revenue of $68.1 billion, down from $74.9 operations for FedEx Corp., Southwest Airlines, voting in an election to make that decision for billion, and a drop in expenses to $71.8 billion Worldwide Flight Services, Allegiant Air and the whole group. The NMB ruling, if made perma- from $77.7 billion. In its 2010 business plan, the UPS…Smiths Detection has received an order nent, is likely to make it easier for the Teamsters USPS forecasts a further revenue drop of $2.2 worth $21.9 million from the Transportation to recruit 290,000 FedEx employees who are billion, a net loss of $7.8 billion, cost reductions Security Administration (TSA) to supply currently non-union… Prompted by a growth in of more than $3.5 billion and a reduction in mail portable liquid detection scanners for its Bottle both military contracts and commercial scheduled volume of 11 billion pieces for the year. ACW
18 DECEMBER 2009 ACW
CARGOAIR WORLD2020
2013
In the latest OAG air cargo forecast, author Marty Graham says it will be at least 2013 before air cargo demand returns to 2007 levels. featurefocus CargoForecast
iven the economic climate in the U.S. and sev- WORLD OUTLOOK eral other key global airfreight markets, the • World FTK 10-year forecast: 5.3 percent next five years face uncertain times. compound annual growth rate (CAGR) With the rising cost of operations, tough decisions lie ahead for the entire air freight industry that will impact capacity on • Intercontinental average: 5.5 percent a global level. However as the U.S. economy rebounds from • Regional average: 4.6 percent the current downturn, long-term prospects remain positive because all of the critical elements that drive freight demand in the long-term are in place. • World FTK 5-Year forecast: 4.7 percent (due to U.S. Overall global economic expansion will continue. Developing economic factors) countries are continuing to grow not only as sources of manu- • Intercontinental average: 4.9 percent facturing capacity but of con- • Regional average: 4.2 percent sumer wealth. Perhaps most Forecasted 2010 -2019 CAGR: importantly, the measures Regional 4.6% Key Factors that companies have taken Intercontinental 5.5% to weather the current crisis Because trade with the U.S. accounts for over 60 percent of World 5.3% provide them with a baseline global air cargo FTKs, a rebound in the U.S. economic outlook efficiency that will enhance growth in a recovery. All of these would be welcomed by the industry. Key factors that observ- elements will ensure that airfreight capacity remains an impor- ers must monitor include: tant component of the global supply chain. The Housing Crisis. With values declining, available home Nevertheless, the fundamental economic issues surrounding equity for consumers has shrunk or in many cases disap- the U.S. domestic economy, as well as macro-economic factors, peared. Much of U.S. consumption in the past few years was means U.S. consumption and economic growth may be stag- driven by this incremental disposable “income” from home nant over the next two to four years. equity credit lines that no longer exist. Over the past few months, OAG has started to see signs of stabiliza- tion although there are pockets of the country that continue to be battered by the housing slump, particularly Las Vegas, Florida and California. However, OAG projects a slow recovery in airfreight flows led by pain- foreclosures will subside and the housing stock and prices will fully slow economic recoveries in both the U.S. and Europe. rebound to a sustainable level sometime in the next 12 to 18 U.S. GDP is projected to grow less than two percent per year months. in both 2010 and 2011 (after 0.4 percent and -2.4 World Air Freight Traffi c Snapshot 2010-2019 percent GDP growth in 2008 and 2009, respec- tively) while Europe GDP is expected to remain es- sentially flat through 2010 and then grow a pedes- trian 1.8 percent a year over the remainder of the forecast period. It may well be 2013 before airfreight volumes return to 2007 freight tonne-kilometers (FTKs) volume levels. The good news is that Credit Crisis. The U.S. economy has been hit with a Per- as the global economy begins to recover and return to normal fect Storm that has restricted economic growth. As the hous- growth levels, airfreight is likely to once again be a leading ing bubble began to burst and erode a major source of U.S. indicator of future economic activity. This is due to the nature economic growth in mid-2007, a lot of the structured finance of commodities and traffic utilized by airfreight. vehicles used to subsidize and finance this growth began to im-
ACW DECEMBER 2009 21 featurefocus CargoForecast
plode, taking the American financial system with it. up, which challenges profitability for air cargo carriers. The air- As Wall Street began taking huge financial losses due to lines will have to review networks and fleets in light of where speculative and non-traditional financial instruments, the U.S. and how the economy recovers and where the associated de- financial system was pushed to the brink. The correction of mand for air cargo resides. that system resulted in a restriction of credit available to con- Air Cargo Operating Economics. Airfreight traffic has de- sumers and businesses; yet it was these credit facilities that creased by 15 percent in 2009 (following a soft 2008) and the had provided the grease for the economic engine. As credit industry has aggressively tried to rationalize capacity but thus evaporated, companies’ ability to invest in inventories, goods, far is finding profitability difficult to achieve. With oversupply capital improvements and other activities was restricted and in some markets and demand weakened, the yield environment finally resulted in a rapidly falling GDP and recession in mid- remains very challenging. 2008. Additionally, as corporations are squeezed to reduce costs Dollar Exchange Rate. A devalued dollar makes foreign to remain profitable, modal shift from air to ocean is a growing goods more expensive for U.S. consumers. In addition, U.S. concern. Shippers are more willing to accept slower transit corporate investment dollars do not stretch as far as in previ- to gain the cost advantage maritime or ground shipping offers ous years due to dollar declines across world markets. The dol- over air cargo. Thus air cargo operators must overcome not lar has struggled to regain strength against key currencies such only a slowdown in global shipment volumes, but also a modal as the British Pound (GBP), Euro and Japanese yen. However, shift caused by shippers looking for ways to reduce logistics the dollar has been stable against the Chinese yuan, helping costs. This is more prevalent in regional markets where lo- U.S. importers afford Chinese imports although demand has gistics providers (Intra-Europe/Intra-North America) can of- declined in 2009. fer enhanced truck networks that offer a service level that is Overall Macroeconomics. The U.S. economy has not only nearly comparable to air cargo in terms of shipment delivery been dependent on an overleveraged consumer, but also on windows (1-2 days). foreign investment. As the dollar depreciates and U.S. inter- est rates remain at historical lows, the overall U.S. economy is REGIONAL OUTLOOK adversely affected as foreign investors may take flight to more lucrative investments. North America-China Corporate Profitability. The Dow Jones Industrial Average • 10-year forecast: 8.0 percent CAGR has struggled to be anything more than erratic of late as many • NA-China – 7.8 percent CAGR market sectors continue to absorb the aftershocks of the bur- geoning economic slowdown. However, there seems to be light • China-U.S. – 8.1 percent CAGR at the end of the tunnel as the past three profit quarters have been strong, possibly signaling an end to the U.S. economic Over 85 percent of westbound commodities from the U.S. slide. to China are goods related to manufacturing or production in- Interest Rates and U.S. Recession. While a devalued dol- cluding machinery, chemicals and intermediary goods such as lar improves the overall trade imbalance, which helps the fabrics, leathers and oils). The remainder is primarily printed U.S. macroeconomic outlook, a push for lower interest rates matter and consumer products (pharmaceuticals, toys and mu- counters that impact as foreign investment finds the currency sical instruments). less attractive. The Federal Reserve has dropped the Fed Fund Nearly 90 percent of all exports from China to North rate two points since August 2008, making U.S. government America are consumer-product related including electronics, backed securities less attractive for foreign investment. apparel, footwear, toys and consumer appliances. Chinese Economy. China alone has fueled much of the global economic and air cargo expansion since 2001. There are Key Factors several factors that will affect China’s future GDP growth in- China GDP Growth. Overall cluding foreign owned manufacturing facilities on China’s East- Chinese GDP is forecast to grow Forecasted 2010 -2019 CAGR: ern Seaboard moving from lower value commodities such as 6.5 percent per annum. However, NA-China 7.8% shoes and apparel, into more high-tech goods and encouraging it is important to note that this is China-NA 8.1% companies to move lower value manufacturing into Western a drop from over nine percent an- Total 8.0% China to increase jobs and fuel continued economic expansion. nually. OAG now forecasts a slow- The inclusion of China in the World Trade Organization down of Chinese economic activity over the forecast period (WTO) has forced China to increase health, safety, environ- versus the previous eight to 10 years. mental and work standards that have increased costs for many U.S. Dollar Devalued. This has made U.S. exports more producers. Interestingly, Chinese-owned facilities are not sub- affordable to a growing Chinese middle class. However, U.S. ject to the same standards as foreign-owned entities. consumers’ ability to purchase Chinese imports has been hit Oil and Jet Fuel Prices. Credit issues make it difficult to because of the current U.S. economy. hedge fuel positions, yet fuel and oil continue a steady climb Impact of Chinese Political/Economic Policy.Although
22 DECEMBER 2009 ACW North America – China Air Freight Traffi c 2010-2019 China is a WTO member, the Communist govern- ment still often demon- strates isolationist trade behavior, acting in what it views as the best inter- ests of China rather than what is best for global trade. This often leads to reciprocal actions by other governments such as punitive tariffs. This is from China will be challenged by the evolving manufacturing a short-term phenomenon and likely will subside as China nor- capabilities of China as companies seek out the lowest costs malizes within the context of its WTO membership and contin- of production. If cargo that historically ships via air shifts to ues to mature as an industrialized nation. However, the politi- other countries, China exports will suffer. However, most of cal policy of China will have an impact on how and what types the production shift is likely to be in the lower value-added of manufacturing capabilities prosper in the future, which may production area (textiles and apparel) rather than high value impact the volume of goods typically shipped via air cargo. products that typically ship via air. Additionally, if this pro- U.S. Credit Crunch. This has hit U.S. consumers and busi- duction shifts to other countries, the primary air cargo goods nesses. Coupled with less affordable imports due to the devalu- shipped from North America to China (machinery and inter- ation of the dollar, short-term growth in Chinese imports to the mediary production inputs) will shift with them, reducing de- U.S. will suffer. U.S. and Europe are the largest consumers of mand for capacity outbound from North America to China. Chinese exports. Thus any delayed recovery (or worsening) of However, the U.S. economic outlook for the long-term is these economies will dampen China’s export growth. positive once interest rates stabilize, the dollar strengthens Evolving Manufacturing Base. In the long-term, exports to historical levels, credit markets stabilize, housing concerns
ACW DECEMBER 2009 23 featurefocus CargoForecast
Intra - North America Air Freight Traffi c 2010-2019
ease as excess inventory of homes are consumed, and mortgage markets return to sustainable levels. This may not occur until late 2010. Foreign direct investment will continue to flow into Chi- na as the Chinese government continues its efforts to push economic development inland. Additionally, this will increase the “high-tech” manufacturing consumer products (electronics, appliances and toys). capabilities of the Chinese manufacturing base that produces goods that typically flow via airfreight. It is expected that as Key Factors China moves up the industrialization ladder, lower value-added Exchange Rate. The devalued dollar assists the trade imbal- production will shift to lower production countries while Chi- ance, as exports from the U.S. are more affordable compared nese labor will become more specialized and educated, allow- to Asian domestic goods in Korea, Japan, Taiwan, and Singa- ing the production base to grow with technology and higher- pore. value added types of goods. U.S. Consumer Appetite. Similar to the situation with Chi- If the Chinese yuan continues to strengthen against the U.S. nese exports, due to U.S. consumers tapped-out consumption dollar along with the growing affluence of the Chinese middle ability and the dollar devaluation, imports are less affordable class, U.S. exports to China may become more attractive and then in recent years, which will hurt imports from key trade help lesson the large trade imbalance for the U.S.-Asia trade partners like Japan, Korea, Taiwan, and Singapore. lane including U.S.-China. However, it will never be a 1-to-1 As China manufacturing becomes more sophisticated, some Eastbound/Westbound trade relationship. high-technology manufacturing may shift from more mature markets (e.g. Japan or Korea). The trade imbalance will continue to be a struggle. With in- North America–Asia (excluding China) bound cargo volume twice that of outbound, trans-Pacific traf- • 10-year forecast: 5.4 percent CAGR fic will rely heavily on eastbound segments to generate profit- • NA-Asia – 5.7 percent CAGR ability for full round-trip operations. Carriers will continue • Asia-NA – 5.2 percent CAGR to explore ways to make return trips to Asia more profitable through alternative routings than standard return trips. Key Trade Partners: Japan, Singapore, Taiwan, Intra-North America and Korea Forecasted 2010 -2019 CAGR: • 10-year forecast: 3.7 percent CAGR NA-Asia (exc China) 5.7% Key Commodities: Asia (exc China)-NA 52% Exports from U.S.: Manu- Key Factors Total 5.4% facturing Machinery/ Instru- A Mature Market. Intra-North American airfreight contin- mentation (20 percent), Commercial Machinery (10 percent), ues to be competitive against the expanding overnight and Perishables/Live Animals (15 percent), Intermediary Produc- LTL trucking networks as companies reduce cost out of their tion Materials (25 percent) domestic supply chains without having to sacrifice significant Imports to U.S.: Approximately 75 percent of imports are transit time loss. As was the case in North America- Asia Air Freight Traffi c 2010-2019 2008, air cargo can grow by selectively marketing commodi- ties whose nature require airfreight selection over ground transport including freight that requires expedited airport-to- airport handling. Integrators are win-
24 DECEMBER 2009 ACW North America - Western Europe Air Freight Traffi c 2010-2019 ning this battle over scheduled combina- tion airlines because they can supplement air service with a strong ground truck- ing network to keep costs competitive and offer reasonable service times that are better than those of- North America – Latin America fered by LTL and ground-only services. • 10-year forecast: 4.6 percent CAGR North America–Western Europe • NA-LA – 4.1 percent CAGR • LA-NA – 4.7 percent CAGR • 10-year forecast: 3.3 percent CAGR • NA-W. Europe – 3.3 percent CAGR Major trade lanes are Co- • W. Europe-NA – 3.3 percent CAGR lombia (cut flower importer into U.S.), Brazil (exports The U.K., Germany, Forecasted 2010 -2019 CAGR: industrial machinery to U.S.), France, Italy and the Nether- NA-W.Europe 3.3% Venezuela, and Mexico (Cen- lands account for 70 percent W.Europe -NA 3.3% tral America’s largest trade of traffic and the UK, Ger- Total 3.3% partner with North America). many and France account Key commodities north- for over 50 percent. bound are perishables (fruit and flowers), consumables Key Commodities (from North America) are machinery, (liquid beverages), precious medical instruments, jewelry/valuables and pharmaceutical stones, chemicals and live products. Pharmaceutical exports are growing in airfreight im- plants. Southbound, the traf- portance due to the combination of low weight and high-value. fic is mainly chemicals, inter- mediary goods (metals, rubber and pulp) and machinery. Key Factors Exchange Rates. The strength of the GBP and euro against Key Factors Forecasted 2010 -2019 CAGR: the dollar will support trade in this region, although the market Growth between bordering NA-LA 4.1% is much more mature than Asian trade lanes with North Ameri- economies will continue through LA -NA 4.7% ca, so the impact on the growth trajectory is lessened. the next ten years as Latin Amer- Total 4.6% Exchange rate fluctuations will continue to influence trade ican countries benefit from re- flows. If the euro and GBP stay elevated against the dollar, bounding economies, strong perishable exports, and high-tech exports will grow more quickly than forecast. However, OAG export and intermediate goods traded as multi-nationals build forecasts that the dollar will strengthen against these curren- production facilities in South and Central America. cies as the U.S. economy recovers, helping balance the trade The overall forecast will continue to be subject to political flows in this region. instability in region, especially in Colombia. However, Brazil’s economy is rapidly improving and had the lightest recession among large econo- North America - Latin America Air Freight Traffi c 2010-2019 mies. With the award of 2016 Olympic Games, trade with this large regional economy should increase over the forecast period as the country prepares fa- cilities for the event.
ACW DECEMBER 2009 25 featurefocus CargoForecast
Intra - Europe Air Freight Traffi c 2010-2019 Intra–Asia • 10-year forecast: 6.2 percent CAGR
Key Factors Expansion of Chinese consumption capabilities coupled by growing intra- Asia trade with China will fuel this sector, maintaining a continued importance to the air cargo industry. Intermediate goods are Intra - Asia Air Freight Traffi c 2010-2019 flowing from China with new manufacturing coun- tries experiencing contin- ued growth as global compa- nies continue to seek lower costs, economies of scale, and more efficient ways to build a global supply chain.
Intra – Europe • 10-year forecast: 5.4 percent CAGR Key Factors continued growth in imports? Forecasted 2010 -2019 CAGR: Airfreight growth is driven primarily by time-definite ex- Will Chinese government policies press shipments and oversized goods given that the intra-Eu- begin to make Chinese exports China-W.Europe 4.1% rope market has a sophisticated trucking network that offers more expensive relative to similar W.Europe -China 8.3% competitive pricing and transit times. products exported from other Total 6.8% Should the EU expand to include Croatia, the former Yugo- Asian developing countries, slav Republic of Macedonia, Turkey, as well as Albania, Bosnia which could dampen Chinese exports? and Herzegovina, Montenegro, Serbia and Kosovo, trade and Beyond Western Europe, Eastern Europe continues to be particularly express shipments will grow. an interesting market to monitor. While small in size now, the market has potential to evolve into both an import consumer Western Europe – China and export producer for air cargo, including trade with China. • 10-year forecast: 6.8 percent CAGR Western Europe – Asia • W. Europe-China – 8.3 percent CAGR (excluding China) • 10-year forecast: 5.2 percent CAGR • China-W. Europe – 4.1 percent CAGR • W. Europe-Asia – 5.8 percent CAGR Key Factors • Asia-W. Europe – 4.1 percent CAGR The interesting driver of this market will be the trajectory of Western Europe - China Air Freight Traffi c 2010-2019 the foreign exchange strength related to the GBP and euro as well as the overall health of the Chinese government as China continues to evolve into WTO status. Specifically, will the euro and GBP maintain strength to support
26 DECEMBER 2009 ACW Forecasted 2010 -2019 CAGR: Key Factors Asia-W.Europe 4.1% uncertainty in our forecast, the long-term growth trajectory of Similar economic argu- W.Europe -Asia 5.8% this market is favorable given the rising economic tide in the ments can be said about Asia Total 5.2% region. excluding China airfreight markets. However, the argument is coupled by many of the Western Europe – Africa traditional Asian tigers finding economic growth difficult as • 10-year forecast: 6.0 their economies mature, industries shift to lower production percent CAGR and domestic economic issues stymie ability to maintain the Forecasted 2010 -2019 CAGR: high-flying GDP growth displayed by China. However unless • W. Europe-Africa – 6.2 W.Europe-Africa 6.2% production shifts out of Asia, which is extremely unlikely over percent CAGR Africa-W.Europe 5.3% the next 10 years, into lower production areas (Africa, the • Africa-W. Europe – 5.3 Total 6.0% Middle East, or some parts of Eastern Europe), this trade lane percent CAGR will continue to be a vital part of the airfreight global Forecasted 2010 -2019 CAGR: Key Factors network. W.Europe-M.East 6.2% Solid growth is simply the result of a few economies M.East-W.Europe 5.8% building some expertise in some airfreight commodity categories coupled by the strong currencies and Western Europe – Total 6.0% Middle East consumption rates of Western Europe. ACW • 10-year forecast: 6.0 Western Europe - Africa Air Freight Traffi c 2010-2019 percent CAGR • W. Europe-ME – 6.2 percent CAGR • ME-W. Europe – 5.8 percent CAGR
Key Factors This market will be interesting to watch Western Europe - Middle East Air Freight Traffi c 2010-2019 as it unfolds over the next decade. Many countries within the Middle East are experiencing rapid economic growth with huge amounts of foreign direct investment. Furthermore, many airlines are bolstering capacity, especially airfreight-friendly Western Europe - Asia Air Freight Traffi c 2010-2019 wide body lift, to support the growing need for a high-tech infrastructure. While the ongoing conflicts in Iraq and Afghanistan and continued political turmoil in Gaza and the West Bank offer some
ACW DECEMBER 2009 27
The new 777F and the 747-8F make for an unbeatable combination. Already the most capable and flexible freighters in the industry, together they fulfill virtually any large payload (from 100-135 tonnes), range and mar- ket requirement. Add to that industry-leading efficiency and you’ve got the biggest advantage of all—the highest profit potential combination in the business. Time For Tianjin? regionfocus Northern China
ianjin airport, the designated air cargo gateway for northern China, has been humming in recent weeks. Volumes have been rising, both in inbound and departing traffic, and airlines have responded by boosting their flights at the airport. “Capacity in Tianjin has more than doubled for the winter schedule,” observed Ulrich Huesson, managing director of cargo handler Tianjin AirCargo Terminal (TAT). TBefore the recent surge in demand out of China produced bottlenecks at all the country’s major gateways, Tianjin had had a rougher ride than its major rivals, notably Shanghai. Airlines like Jade Cargo International reduced their allocations for the northern gateway while striving to maintain their capacity in Shanghai. Cathay Pacific, which once operated both freighters and passenger aircraft to the Beijing-Tianjin market still runs 17 B747 freighters a week between Shang- hai and its Hong Kong base. “Traditionally yields have been lower in Beijing than in Shanghai and Hong Kong,” said James Woodrow, general manager of cargo for mainland China and Hong Kong. “If Beijing doesn’t get the yields, we’d rather give the space to Shanghai.” Despite the recent upturn in the market, Cathay is in no hurry to bring its freighters back to northern China. “It’s probably not a priority for us at the mo- ment,” Woodrow commented. “We look at it on an ongoing basis, but there are other areas where it would make more sense at the moment, Southeast Asia, for example, even Japan.” For the time being, Cathay will focus on filling its belly- hold capacity on the Beijing-Hong Kong route. The lion’s share of the cargo flown out of Beijing and Tianjin originates in the immediate catchment area of the two airports, notably the Binhai Industrial Zone, a sprawling area of 2,700 square kilometers which houses branches of multinationals like Nokia, Samsung and Toyota. According to Huesson, 60-70 percent of the volume flown out of Tianjin is from the area. “Our cargo is mostly from Beijing, Tianjin and the Binhai area,” agreed Steve Huang, managing director for China of DHL Global Forwarding. A major focus for Binhai is the telecommunications industry, he observed, adding, “Automotive, aerospace and pharma are catching up.” DHL Global Forwarding is planning to set up a dedicated warehouse for life sciences traffic in Tianjin, the company’s second such location in China, after Shanghai. According to Huang, the new facility should be ready next year. “For north China in particular, high growth can be found in industries such as
ACW DECEMBER 2009 31 regionfocus Northern China
life sciences, high-tech goods and electronics,” remarked David Cun- ningham, president, Asia Pacific of FedEx Express. A lot of the output from the Beijing area, such as the aviation industry’s traffic, is characterized by a high number of shipments rather than large vol- ume consignments, observed Jens Drewes, national manager for Central and Northern China at Kuehne + Nagel. In conjunction with the lower number of large shippers in the area compared to the Shanghai region, this makes the area a less fertile ground for freighter operators. “The strength of Shanghai is the num- ber and strength of large manufacturers “Our gateway for northern China is third-tier cities in northern China. there. Beijing has a more limited in Beijing, where we operate our own One big question is how the joint number of shippers, but some busi- aircraft. Our Beijing gateway handles venture cargo airline planned by Air nesses are migrating to that area, so our inbound and outbound interna- China and Cathay Pacific will ap- demand is likely to require more lift tional shipments and has the capacity proach the northern market. In line down the road,” Woodrow said. for expansion. We have no plans to with government policy, the carrier, Tianjin has attracted a growing move our operations at this time,” which will be based in Shanghai, number of international all-cargo commented Cunningham. ought to use Tianjin. Rival China Car- operations, including China Cargo FedEx favors a strategy that com- go Airlines did pull out of Beijing and Airlines, Great Wall and Jade. Grand bines flows through major gateways has since slotted its freighters serving Star, the joint venture all-cargo off- with its growing domestic network. this market through Tianjin. Howev- shoot of Korean Air, has also set up “Through our China regional hub er, operating out of the latter would its base at the airport. FedEx has successfully introduced a deprive the new player of ready ac- The central government has des- reliable hub-and-spoke network. Our cess to Air China’s vast passenger ignated Tianjin the chief air cargo domestic service offers unmatched network out of Beijing, its home base. gateway for northern China (besides levels of reliability to the market,” The new carrier is slated for take-off Shanghai and Guangzhou for the re- declared Cunningham. “Many of our early next year, but its parents have gions further south), leaving Beijing customers in northern China now not given any indication which north- free to concentrate on developing have access to our next-morning ern gateway they intend to use. passenger traffic. No freighter airline delivery service, which is available In terms of volume, Beijing towers has been kicked out of Beijing, but no in more than 35 cities in China, with high over its smaller neighbor. Last new slots are available for cargo air- shipments picked up in the evening year it handled some 1.3 million met- craft at the capital’s airport either. and delivered by 12 noon the next ric tonnes, whereas Tianjin clocked Carriers that are entrenched in day.” up less than 200,000. The authorities Beijing are reluctant to migrate to He added that FedEx has expand- may have stopped giving slots for Tianjin, though. ed coverage to more second- and new freighter activities at Beijing, but
32 DECEMBER 2009 ACW Corporate Outlook 2010
Mr. Goh Choon Phong, President, Singapore Airlines Cargo
Singapore Airlines Cargo Pte Ltd is the world’s fourth largest international cargo airline, and a wholly-owned subsidiary of Singapore Airlines Limited (SIA). On July 1, 2001, Singapore Airlines Cargo assumed the entire cargo operations of SIA and commenced business as an all-cargo airline. Singapore Airlines Cargo serves 72 cities in 37 countries, linking major trading centres across five continents.
Outlook There are signs of a modest recovery in traffi c volumes in recent months. Demand have picked up and short-term improvements are likely as freight benefi ted from the inventory cycle as well as from the massive government and central bank stimulus packages. However there is uncertainty on whether the recent improvement we have seen could sustain itself. Yields will continue to be under pressure as there are enough capacities in the market ready to be turned back on.
In the face of the challenging and uncertain business environment, SIA Cargo will remain nimble and disciplined in the deployment of its resources, and continue to be vigilant on cost management. SIA Cargo will also continue to seek out markets with growth opportunities and to actively pursue more charter opportunities.
Singapore Airlines Contact: Public Affairs Department Tel: (65) 6541-5880 (office hours), (65) 9753-2126 (after office hours), URL: www.siacargo.com
ACW DECEMBER 2009 33 regionfocus Northern China
“Six years ago trucking cargo facility development continues. from Beijing to of northern China we believe the gov- Huesson is philosophical about this, ernment is moving in the right direc- remarking that passenger traffic in Shanghai took three tion to upgrade its infrastructure and the capital is growing, boosting belly- service levels. Investment in airports hold capacity. “It does not change the to four days, driving throughout northern China will result basic tenet that Tianjin is the desig- nonstop; now it’s 12 in improved facilities and enhance ac- nated airfreight gateway for northern cess into this region.” China,” he commented. hours.” Korean air carriers have marketed This is not to say that he is pleased their home base in Seoul as an alter- with the way business has shaped Association (TAPA) and is the only native gateway. Cargo from northern up for TAT so far since its start last handler at Tianjin with a license to China is brought by barge to Incheon year. The company is a Sino-German deal with hazardous materials. One port and transferred by truck to the joint venture involving Lufthansa fruit of this has been a contract to nearby airport for uplift to destina- Cargo, which had earlier established handle high-tech traffic for Great- tions in North America and Europe. similar operations in Shenzhen and Wall. The carrier is a client of the air- Over the past year, however, this Shanghai. The latter has been charac- port’s handling arm but picked TAT traffic has slumped. First the ero- terized as “a license to print money”. for its high-tech cargo because of its sion of air cargo rates undermined For its part, TAT has had to contend TAPA certification, Huesson said. the advantage of the cheaper sea-air with the downturn in the market and The handler has also tried to boost alternative, then higher prices out of delays in the construction of a cargo its position by going after road feeder Korea became a factor, and finally ramp adjacent to its terminal, which service traffic to destinations further the surge in traffic out of China and is now due for completion by the end afield. Airfreight is trucked to the Korea has strained capacity, leaving of the year. Beijing area from Haerbin as well no lift for lower-yield sea-air traffic. “Tianjin is not easy,” said Kay as from Shenyang, Dalian, Qingdao By the same token, rail-air and Kratky, chief executive of Shenzhen- and Xian. Traditionally the north pure rail services from China to Eu- based Jade Cargo. “Strategically, for has focused on heavy industries, but rope have lost much of their attrac- the long term, yes, but it’s not easy.” there is also a strong concentration of tion, Drewes remarked. Even some large logistics players automotive and aerospace business, For international air cargo to and do not see much merit in the airport Huang pointed out. from northern and central China, at this point. Kuehne + Nagel uses Like the Pearl River Delta, the domestic airfreight and trucking links Tianjin for ocean cargo to and from Binhai area is facing some shift away to the major gateways are going to be northern China, but its gateway for to lower-cost areas in Central and crucial, Huang said. The former, how- airfreight is Beijing. western China, but there is still fresh ever, is facing severe limitations, as For Huesson an additional source investment in the region, especially lift within China consists of passenger of frustration has been a rather luke- for high-tech business. This will re- aircraft with few widebodies. Truck- warm drive by the airport to lay the sult in long-term growth in air cargo, ing, on the other hand, has advanced proper foundations for a gateway Huang predicted. by leaps and bounds. Service levels role. It does not help that Tianjin air- At the same time, remoter areas have improved dramatically, while port does not belong to the munici- will generate more air cargo that operating costs have been dropping, pality but to Beijing airport, nor that will have to flow through Beijing and Huang observed, adding that much the airport authority offers ground Tianjin. With the exception of a few of the current stimulus package un- as well as ramp handling and seems international flights, for example in leashed by the Chinese government reluctant to welcome competition. Dalian and Shenyang, these have no has been allocated to infrastructure He stressed the need for a proper international lift available, and the improvement, with a lot going to framework to develop Tianjin’s gate- emergence of new major gateways highway construction. way role. is unlikely in the near- to mid-term, “Six years ago trucking from TAT is talking with potential forwarders reckon. Beijing to Shanghai took three to partners about a joint venture to Cunningham sees promising devel- four days, driving nonstop; now it’s offer ramp handling, which would opments at airports serving smaller 12 hours,” Huang said. DHL Global strengthen its competitive position points in northern China but sees no Forwarding is leveraging its network at the airport. Another key plank in emerging gateway on the horizon. in China to move freight between its strategy has been the pursuit of “The Beijing airport is well-estab- gateways. In the current situation, official quality accreditation. TAT has lished and it will continue to serve as it has trucked cargo from Beijing to been certified by Cargo 2000 as well our gateway to northern China,” he Shanghai, where it is using charters as the Transported Asset Protection remarked. “In more remote regions to avoid serious delays. ACW
34 DECEMBER 2009 ACW
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For the first nine months of 2009 it reported profits as it is late. of $337 million — without staff layoffs. T The global economic recession has found BA So it is not altogether surprising that as Germany and desperate to share a last European airline chair France lead the Euro-zone out of recession, Britain re- now that the revenue music has stopped. mains the only country in Europe that shows no sign of a But Europe has had too many airlines for too long. KLM’s rebound. former CEO Leo van Wijk acknowledged this 17 years ago This is not a good starting point for an airline consolida- when he approached BA for a merger plus second hub at tion that will only work if American Airlines is allowed to Schiphol, Amsterdam. co-mingle in support of transatlantic traffic. The talks ultimately failed because BA thought it should Meanwhile, with Continental adding to the Star Alliance be the dominant brand in any Anglo-Dutch union. and the full acquisition of bmi, Lufthansa has joined KLM Now Air France has the second hub and KLM’s 30,000 and Air France in re-drawing Europe’s airline map while employees are assured of a future as part of the Air France- BA looks to Madrid for its second hub. KLM Group — again due to the efforts of van Wijk. If the British Airports Authority investment is any indi- With BA’s $4.5 billion pension liability unresolved as cator, maybe Iberia should ask itself whether it wants to be 3,000 staff face redundancy, the airline’s remaining post- involved with anything that has “British” and “airport” in merger employees will not be so reassured. the same sentence. No wonder BA and Iberia cabin staff want to strike in Notwithstanding Margaret Thatcher’s documented oppo- anticipatory protest. Two losers don’t make a winner in any sition to a unified Germany, the country has just celebrated language. the 20th anniversary of the collapse of the Berlin Wall – ACW DECEMBER 2009 43 managementseries Benefit of All and with it East Germany. believe you know what you’re talking “The energy company e-on AG had While the subsequent unification about. It takes something to inspire their annual management conference has proved painful and remains cost- 22,000 flight attendants to be friendly here recently. Usually they take over ly, perhaps it is one reason why Luf- every day to their customers. But if a five star hotel and resort so there thansa is such a successful company you can do it, you’re more than 90 was some doubt as to whether this — its employees wish it so. percent there in running a successful was a good choice. They’re coming While BA pursues shareholder val- airline,” he adds. back next year.” ue despite its staff, the German airline Seeheim, a half-hour drive from Space and light is everywhere — a group acknowledges that its 109,000- Frankfurt airport, remains a key ele- feature that Schoelzel acknowledg- plus employees are its ROI. Without ment in Lufthansa’s commitment to es is not usual in a hotel. “Normally them, there’s no company and as part its staff. you try and utilize every bit of space of the greater good, no economic nor Opened 35 years ago, the facility in a commercial property, otherwise social benefit to Germany. underwent a two-year, $150 million you’re losing potential revenue. Here, Yet two years after the Berlin Wall overhaul before re-opening last Feb- the object is to create a place that re- fell, Lufthansa was almost bankrupt. ruary. Lufthansa CEO and Chair- flects the pride each of us has in our- As Gerald Schoelzel, managing di- man Wolfgang Mayrhuber describes selves and the company.” rector of the airline’s Seeheim train- the 483-room location as “the place It’s a view shared by Spohr, “When ing and conference center tells it, in where our corporate culture can be I started in Lufthansa as an engineer 1991 the company had less than a experienced and where Lufthanseats I couldn’t afford a car. So I’d take the week of free cash flow left as CEO (sic) from all over the world can come train to work and wear my Lufthansa Jurgen Weber met with his senior together and discover Lufthansa’s i.d. on my jacket. I was proud to see managers to decide the future of the roots.” that people noticed. I still am.” airline. Schoelzel is more explicit, describ- Spohr is convinced this attitude The options were to go bankrupt ing the center as where members of translates into a sustainable business and start again or somehow carry on. the Lufthansa Group can come to un- for the airline despite the prospect Schoelzel says Weber decided that derstand how to accept and manage of grounding more freighters if the bankrupting the company would ruin change in their lives — be it personal global economy doesn’t pick up. its reputation and devastate its em- or business. “If we start treating our business ployees. So Lufthansa sold the only “ We try and get across to em- like a commodity then we will lose. two large assets it had that were un- ployees who come here from all over Recently I promised my two daugh- encumbered – the head office in Co- the world that change is a constant. ters I’d build them a sandpit. So I logne and Seeheim. There will be crises in our lives from went to the store and asked this guy Six years later in a remarkable turn- time to time – whether in a family or where I could get the right sort of around, Weber was able to announce a company. We’re experiencing one at sand. I found there were five differ- the airline had achieved a record pre- the moment in the airline industry. By ent brands of ‘sand-pit sand’ with tax profit of $1.9 billion. learning how to manage change, and a price range from $2.23 to $3.72 a Carsten Spohr, Lufthansa Cargo’s not to be afraid of it, we have a bet- kilo. So I told my service manage- CEO, explains the ethos, “People ter chance of achieving success,” says ment that as long as there isn’t a want to be proud of their leaders; Schoelzel who has been running the commodity approach for toy sand they don’t want someone who is an facility for ten years. for children, don’t let anyone tell you ‘arschloch.’ If he is it is likely there’s Nestled in some wooded hills and that we are producing a commodity something wrong with the company’s built on several levels, Seeheim pro- in air cargo.” values; and if there are wrong values vides the focus for individuals to de- Lufthansa Cargo is waiting to see then likely there will be wrong lead- velop, maintain or expand their skills what the U.S. market does before it ers in place — which creates more including an MBA program that runs decides what to do with its MD-11 wrong values and so a vicious circle in conjunction with the London Busi- freighter fleet. The good news is the begins.” ness School, the European School aircraft are just about fully amortized For this reason Spohr says Luf- of Management and Technology and so the cost of operation makes them thansa would never parachute in a Harvard Business School. very compelling — despite the fact professional manager to run the air- Other companies also use the ho- that the AeroLogic 777 aircraft have line because of the signal it sends to tel and conference facility. Schoelzel’s lower direct operating costs and CO2 everyone that no employee is either goal is to run the place so that 20 per- emissions. trusted or capable of running the cent of the capacity is sold to gener- Spohr is a little more sanguine company. ate enough revenue to make Seeheim about the Frankfurt nighttime ban “It is easier to inspire people if they cost neutral for the Group. now that there is a new center-right 44 DECEMBER 2009 ACW government and transport minister in power. His threat to stop flying freighters and thus shrink his cargo Business Survey business to the point where several thousand staff might lose their jobs Endorses Sustainability seems to have struck a chord. In any event it will take several years before a Federal court in Leipzig makes a fi- nal ruling. s the various actors head to the U.N. climate change According to Lufthansa Cargo’s fi- conference in Copenhagen this month, a survey of nance chief Peter Gerber, the current 275 business leaders from 15 countries by the U.S. crisis has forced the company to look advocacy organization Business For Social Respon- at whether it can still afford business sibility (BSR) says climate change and human as usual. Plans have been drawn up rights are the most significant priorities for busi- for every contingency and sometime ness’ sustainability efforts next year. next year, Gerber doesn’t know when, The survey also revealed that companies should take two key the management will pull what they actions to rebuild the public’s trust in business as a result of the hope will be the right solution out of a economic crisis: demonstrate positive social and environmental be- drawer and implement it. havior and innovate for sustainability. “America is the key to all this. Aron Cramer, president and CEO of BSR said, “Innovative We’re seeing signs that Asia markets companies that embrace the immense opportunities presented by are coming back; but we don’t see our ‘reset world’ will be poised for growth and success. The sur- any signs in the U.S. or Europe,” says vey shows that sustainability is not simply Gerber. about the green economy. It’s about “Whatever business option we the whole economy.” choose next year, we have Those surveyed by the BSR ap- to try and hold on to our parently are increasingly optimis- employees, particularly tic that sustainability will be a in a crisis such as this. core part of business strategy in If we are forced be- the years ahead, with majorities cause of the market to expecting increased activity take drastic action we and no budget cuts in key areas. still won’t fire people. Nine out of 10 respondents Anyone who leaves us were somewhat or very optimistic will be on a voluntary basis.” that global businesses will embrace Lufthansa already has a vocation- sustainability as part of their core al program in place that allows em- strategies and operations in the next five ployees to pick another area of the years, a jump from 77 percent in a 2008 survey. Group’s business and spend a year Within that group, the increase in the number of respondents who being retrained. are very optimistic rose from 11 percent in 2008 to 26 percent this The airline is also encouraging em- year. ployees who are beyond the usual re- In the latest survey, 89 percent said their companies’ sustain- tirement age to stay on and educate ability budgets would stay the same or increase. In 2008, 31 per- a new generation in order to ensure cent said they expected their budgets to decrease, whereas this the decades of operational or service year, only 8 percent said they expect a decrease. experience is not lost. The BSR notes that majorities also expect an increase in several For Gerber, who also is responsible key areas of their companies’ and organizations’ sustainability pro- for Lufthansa Cargo’s human capital, grams in 2010, including the amount of external communications it just makes good sense. Why waste and the amount of internal communications (66 percent each) and all that experience — which the air- more CEO-level engagement on sustainability (50 percent). line has paid for — when a new gen- “The business leaders have confirmed that sustainable business eration can learn from it for the ben- is not just surviving amid the recession — it’s thriving,” said Cra- efit of all? mer. ACW Somebody should tell British Air- ways. ACW ACW DECEMBER 2009 45 photo courtesy of Kuehne + Nagel review of the freight airfreight and container shipping sec- the report says. forwarding industry by tors that offered miscellaneous ser- The consolidation trend that has the UK-based research vices rather than focus on a particular been underway the past several years company Transport In- sector, are rethinking this approach is likely to continue as large forward- telligence (TI) suggests in the wake of the global financial ers such as Kuehne & Nagel and pos- Aa tactical shift is underway in the sec- crisis. sibly US-based integrator UPS seek tor now “in the eye of a recessionary TI says larger forwarders are in- additional heft. storm.” creasingly providing “dedicated ser- K&N will focus on gaining further Freight forwarders face a chang- vices to specific sectors not least as market share through strategic in- ing environment where not only integrated operations in conjunction vestments and organic growth in all geography and type of business but with their contract logistics busi- fields of activity, says TI. Its financial also companies’ competitive position nesses.” strength should give it a solid basis based on bets they made during the The result is a changing global lo- to achieve this end. TI also sees com- downturn are shaping a new market, gistics marketplace whose structure panies such as France-based SDV according to TI. continues to develop in “both volume poised for action. The forwarder, For one thing, forwarders in the and it might be suggested, power,” which had been expected to continue 46 DECEMBER 2009 ACW featurefocus Global Forwarding to strengthen its European opera- (-24 percent), Singapore (-24 per- trend to continue until the middle of tions, “has since turned its attention cent), France (-23 percent), the UK next year. to possible targets in Italy, U.S., (-23 percent) and Korea (-21 per- The U.S. deficit with China, which South Africa and Dubai,” TI says. cent). had been falling, jumped 9.2 percent TI also expects more in the way of The one bright spot in airfreight to $22.1 billion in September, the the Deutsche Post DHL model of a forwarding remained the Middle East highest imbalance in 10 months. large logistics division that combines region, which dipped just -3 percent. Meanwhile, the trends in the air- the ability to move large volumes While the Middle East freight for- freight and sea freight markets for of freight by sea and air using its warding market saw lower levels of forwarders are fairly similar, TI says. forwarding capability with the road growth in 2008 than the previous four In the sea freight arena, the fall in de- transport and warehousing capabili- years, “it was still the world’s best mand has “had a substantial effect on ties of its contract logistics business. performing region” and will continue revenue, yet the fall in rates has had K&N has also aggressively built up to grow strongly, TI notes. an ameliorative impact on margins,” its contract logistics/road freight The market’s 10.6 percent overall according to TI. network in order to complement its growth reflects the oil price boom in But the effect on the competitive freight forwarding business. late 2008 and underlying growth in position and the profits of freight for- What both these companies want consumer markets. TI acknowledges warders, TI claims, “has been one of to create is a level of synergy that will that governments in the region have separating the sheep from the goats.” enable them to offer higher margin invested heavily in transport infra- TI singles out US-based Expeditors services to large customers. “Instead structure to become a major hub for and K&N, which have suffered falls of purchasing individual forwarding the distribution of goods throughout in volume but partly compensated services, customers are offered the Europe. for this “by higher margins as well opportunity to cater for their more Airfreight markets on routes in and as increased market share” as other extensive requirements,” TI says. out of China have been hardest hit forwarders “suffered savage falls in Forwarders struggling to survive by the recession. “It is these critical both revenue and profits.” None have the global financial mess know only China trades that have provided both increased profits, TI notes. too well that airfreight rates dropped the growth of the freight forwarding In the airfreight arena, growth over significantly in 2009 due to overca- market over the past decade as well the past decade has been driven by pacity. Combined with the drop in as its difficulties today,” the report the “China trades” although other freight volumes, this led to a 28 per- says. markets have also played a significant role, TI says. The collapse in export traffic from China in particular has caused a severe recession in the sec- tor with high levels of over-capacity. cent decline in global market size in Looking back over the past twelve Regarding transport capacity, TI the first half of 2009, says the report. months, TI says there clearly has opinions that with many airlines mak- The United States saw a steep been “a violent reduction in trade.” ing capacity adjustments based on drop due to a plunge in consumer According to the World Bank, the val- passenger volumes rather than air spending and collapse of its automo- ue of traded goods in dollars fell by cargo volumes, “there has not been tive, financial and housing markets. 30 percent between September 2008 the necessary reduction in capacity” TI says the U.S. airfreight market and March 2009. However TI notes to bring the market back to equilib- tumbled 36 percent compared with that the profile of the fall suggests a rium. Europe and the Asia Pacific, which sharp contraction around December Looking toward an eventual re- slumped 30 percent and 27 percent, of 2008 and January of 2009, followed covery in the airfreight market, “it respectively. by a degree of stabilization. is highly probable that any upturn Other markets that experienced A report released in mid-November would see a rapid and substantial sharp drops in the first half of 2009 by the U.S. government showed that increase in available capacity – mean- were Italy (-44 percent), Belgium its trade deficit rose in September by ing that rates will stay depressed for (-39 percent), Taiwan (-39 percent) the largest percentage in a decade as some time to come,” according to TI. and Japan (-37 percent). Demand U.S. exports increased for the fifth In a survey of sectors, TI predicts fell in Germany by 28 percent; other straight month but imports rose fast- that Project Cargoes, a strength of areas posting drops included China er. Economists said they expect that both Germany’s DB Schenker and ACW DECEMBER 2009 47 featurefocus Global Forwarding Switzerland-based Panalpina, offers clear growth possibilities. This sector, which has been driven by expenditure on infra- structure – especially electricity generation and capital equipment Source: Transport Intelligence – offers promise in the have adjusted to the new short and long term, TI market environment. Those contends. that get left behind could The current reces- find themselves struggling sion has hammered to catch up with their rivals the consumer durables over the next three years or sector vital to the even more.” freight forwarding The research company’s industry. The dive in five-year market forecast consumer spending in indicates slow growth for the U.S. hit trans-Pa- the global freight forward- cific flows of furniture ing market. But this masks a – the single largest cat- dramatic drop in 2009, and egory of goods moved from China to mains a people-led business, and if a slow recovery between 2010-12. North America. staff are managed well and are good Taking this into account, TI pre- By contrast, fast moving consumer at their jobs, company performance dicts the global market will grow with goods categories and related areas, will shine,” according to the report. a compound annual growth rate of such as food and drink, have been Despite this, one area where for- just 1.9 percent to 2012. more resilient in the recession. Over- warders have moved to slash costs On a regional basis the small- all demand has been held to declines during the downturn involves staff est market, Africa, will show the in low single figure percentages, TI levels. Even so, TI notes that there highest grow rate: 8.8 percent. The asserts. With demand for these prod- are different opinions about this Middle East will continue to grow at a ucts likely to grow strongly even in strategy. healthy clip of 8.5 percent, according the short term, this sector is likely For example, Expeditors has to TI. “to be one of growing importance for vowed not to reduce headcount “as it The wealth generated by the oil- freight forwarders.” sees its staff as a key competitive dif- rich states in the past five years, and Adds TI: “It will be interesting to ferentiator,” TI suggests. In contrast, an increasing GDP per head of popu- see whether Kuehne & Nagel’s and Panalpina announced plans this sum- lation, will see the Middle East region DHL’s high exposure to this sector mer to reduce up to 1,700 jobs. through the initial slump and allow it through their contract logistics busi- Expeditors’ decision will have a to exploit the economic upturn. ness will result in them winning more short-term negative financial effect The forecasts for the largest re- forwarding business.” but may prepare it better to exploit gions are less hopeful. Asia-Pacific Discussing forwarder profitability the upturn, TI says. “However, if will lead the world out of the reces- and performance, TI notes that expo- Panalpina is able to effectively ramp sion, helped by the Chinese economic sure to trade lanes can be a differen- up its staffing when good times revival. Investment in infrastruc- tiator. Trans-Pacific trades, particu- return, whilst keeping sharehold- ture as part of a massive economic larly eastbound, have declined more ers happy through a cost reduction stimulus package will be key to this quickly than the whole market. How- program, who is to say that it did not growth, TI says. ever, the Europe-China lane has also have the better strategy?” Additionally, TI says the U.S. is “fallen violently and the two compose In the end, none of the major not expected to be a driver of global around half of all traffic,” TI notes. freight forwarders were able to react growth before mid-2010 and Europe TI also points out that companies quickly enough to the precipitous fall will also stay depressed before recov- have differing strengths on different in volumes and revenues, in terms of ering in 2010-12. routes. Another key performance fac- cutting costs, despite the asset-light “Global Freight Forwarding tor? “Some companies are just better nature of the business. 2009” is available from Transport run than others.” Says TI: ”The final two financial Intelligence. www.transportintel- Indeed, freight forwarding “re- quarters of 2009 will show which ligence.com ACW 48 DECEMBER 2009 ACW Corporate Outlook 2010 Shinichi Fukushima President & CEO Kansai International Airport Co., Ltd. Kansai International Airport Constructed on approximately 1000 hectares of reclaimed artifi cial islands 5 kilometers offshore, Kansai International Airport (KIX) has proudly operated for 15 years as a noise free, environmentally friendly airport. For three consecutive years, 2007-2009, Kansai International Airport (KIX) has attained the highest ranking amongst all airports in its class on Air Cargo World’s annual Air Cargo Excellence Survey. KIX’s smooth functionality and operational aspects are highly valued among its customers world-wide. Features include multiple runways of 4,000 meters and 3,500 meters, a 300 hectares site for future development and Japan’s only around-the-clock operation. To its advantage, KIX is strategically located in the center of Japan’s economic power zone, “the Kansai Region,” and it is surrounded by the headquarters of leading world companies such as Panasonic Corporation, Sharp Corporation, SANYO Electric Co., Ltd., Nintendo Co., Ltd. and KYOCERA Corporation. Additionally, the Kansai Region has long been home to manufacturers of household electrical appliances, high-tech machinery, pharmaceuticals as well as production plants for LCD or plasma and other high tech industries. KIX is strategically positioned as an Asian gateway to North America and Europe or as a transshipment center between Asia, Europe and America. It offers plenty of slot capacity and has tremendous potential for growth and future development. For now, please be informed that KIX currently offers an Incentive Discount Scheme for Aircraft Landing Charge until next winter. We would sincerely appreciate it if your airline would take into consideration and recognize the advantages and excellent potential of KIX Airport, and above all, our great enthusiasm to welcome you and your company. Placing air cargo business is one of our most important business domains and we will make our best endeavors toward establishing KIX as a world class international air cargo hub for Asia. Kansai International Airport Co., Ltd. 1-banchi, Senshu Kuko Kita, Izumisano-shi, Osaka 549-5801, Japan [email protected], www.kansai-airport.or.jp/en or www.kiac.co.jp/en ACW DECEMBER 2009 49 aircargoClassifieds AIR FREIGHT BUSINESS OPPORTUNITIES FREIGHT EXPEDITING www.algworldwide.com Move Your Career to the Next Level! 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Cypress St., Tampa, FL 33607 Nationwide: (813) 879-3210 Fax: (813) 874-6722 www.airanimal.com • e-mail: [email protected] an IATA Agency Dedicated to AVI Transport Only 50 DECEMBER 2009 ACW peopleevents of Aramex’s own operations in the AIRLINES UK, Ireland and the Netherlands. Global Aviation Holdings, Inc. Kelly founded the TwoWay Group has named Hendrik Falk Vice Pres- in Ireland and expanded the busi- ident-Cargo Sales, reporting to Chief ness into the leading UK-Ireland Marketing Officer Jeff Sanborn. overnight road express service. He He will be responsible for all com- then developed the business into an mercial activities involving the com- SCHLINGENSIEPEN KRUGER-LORENZEN WIENERS internationally recognized player pany’s fleet of Boeing 747-400BCFs and an Aramex service partner, with and MD-11Fs. Falk most recently served who previously served as Area Manager operations across Ireland, the UK and as Vice President Sales and Marketing Asia Pacific, will report to Board Member the Netherlands. Aramex acquired the for Europe, Middle East, Africa and In- Product and Sales, Dr. Andreas Otto. TwoWay Group in 2006 to form a key dia for Polar Air Cargo. Prior to that, Helge Kruger-Lorenzen will succeed part of its European network and inter- he was associated with Lufthansa Schlingensiepen as Area Manager Asia national expansion plan. Cargo based in Atlanta, Frankfurt and Pacific, based in Singapore. Stefan Aeronet has appointed Tony L. Me- Singapore. Georgia-based Global Avia- Wieners, former head of Road Feeder deiros President and Chief Executive tion Holdings is the parent company of Services, will take over as head of Global Officer. Medeiros has served as Aero- North American Airlines and World Network and Sales Steering division, ef- net’s President and Chief Airways. fective April 1, 2010. Additionally, Bern- Operating Officer since Mariusz Kuczek has been appointed hard Kindelbacher has been appointed October 2002. With Me- Director and General Manager of Cargo the new head of Strategy, Subsidiaries deiros as President and & Mail Bureau at LOT Polish Airlines. & Business Development. He succeeds COO, Aeronet has grown Kuczek previously was associated with Wolfgang Schmitz, who is retiring. Kin- threefold in revenues, Schenker and served as President of delbacher previously led the Network & expanded to the Asian Air Cargo Poland Geopost Group. Product Management division, which is and European markets MEDEIROS Kuczek will oversee the development of being disbanded. and effectively estab- the Cargo Department, cooperation with lished itself as a significant provider of agents and forwarders on Polish and ASSOCIATIONS integrated global logistics. Founded in foreign markets and implement the new J.D. Gamble, formerly the president 1982, Aeronet has grown to over 600 of- cargo management system. of the Board of National Transpor- fices and partners located throughout Lufthansa Cargo has made several tation & Logistics Association, is the United States and in 75 countries changes in top management, effective a member of the board of the Mes- worldwide. Feb. 1, 2010. Martin Schlingensiepen senger & Courier Association of Associated Global Systems (AGS) has been named head of the new Product America (MCAA). The move is one has named Stan Byra District Manager, Management division. Schlingensiepen, more step as the two associations join Sales & Service at its Los Angeles facil- forces under the MCAA banner. Gam- ity. Byra, who has held management po- ADVERTISER INDEX ble brings over 30 years of experience sitions with Conway, Overnight and in the same-day delivery industry to McCollister’s Transportation Group, Airdex International...... 36 the MCAA board. He is the president most recently served as Director Re- & CEO of AEXGroup. MCAA Presi- gional Express Services/Global Network Amsterdam Airport Schiphol ...... 23 dent Michael Gualtieri said, “As the Services for VSR Logistics. Also, Co- two organizations unite, it made sense lumbus Rankin has joined the company Austrian Airlines...... 17 to add J.D.’s experience to our board. in the position of District Sales Manager We are particularly pleased to have J.D. at their Cincinnati area terminal. Rankin Avient ...... 5 on the board because of the integral was responsible for developing and im- role he has played in the development plementing sales strategies as well as Boeing...... 28-29 of courier certification standards for overseeing operations, as the Sales and the banking and pharmaceutical serv- Terminal Manager at Atlantic-Pacific Kansai Intl Airport ...... CV2 ices sectors over the last few years.” Air & Transport. CargoWise edi, a supply chain THIRD PARTY logistics management systems com- Saudi Arabian Airways ...... CV4 Aramex has named pany, has named David Rollason Tommy Kelly Chief Ex- as Senior Vice President Business Singapore Cargo...... 7 ecutive Officer, Europe. Growth, Optimization and Perform- Based at the company’s ance. He will be responsible for Swiss World Cargo ...... 9 Ballyboughal facility just managing technical and process inte- outside Dublin, Kelly is re- gration of new components, applica- Thai Airways ...... 11 sponsible for the activities KELLY tions and architectures. Rollason will 52 DECEMBER 2009 ACW events also be participating in growth- related strategy and manage- DECEMBER 10-11 formation, visit http://www.cool- chaineurope.com/ ment across the company. Rol- Washington: The Ninth Annual Aviation Security Summit will be lason most recently worked with MARCH 8-11, 2010 held at the Omni Shoreham Hotel. Soltech, where he was respon- Vancouver: The 2010 IATA The AAAE/TSA/DHS security sum- sible for running and success- World Cargo Symposium “Bounce ROLLASON mit will feature senior DHS and fully delivering a large, custom Back: Rebuild The Future” will fo- TSA officials as well as airport op- cus on what it will take for the air software application development that improved erators and other key players in se- cargo supply chain to bounce back warehousing, shipping and manufacturing opera- curity policy and operations. They from the current global recession tions for the company. will review security issues facing and steps it can take to build its fu- Flavio Renfer has joined European Cargo the aviation industry, including se- ture. The event will be held at the curity and screening operations, Services (ECS) in the new post of Vice Presi- Westin Bayshore. For more technology deployment and fund- dent Business Development & Customer Rela- information, visit www.iata.org/ ing and recent legislative initiatives. tions. Based in Frankfurt, he is responsible for events. Representatives from other federal new airline customers and main- agencies and members of Congress MARCH 9, 2010 taining customer relationships. will also speak at the summit. For Vancouver: The Air Cargo Ex- The role also incorporates ECS’ more information, visit www.avia- cellence Awards evening is a cel- working partnerships with global tionsecuritysummit.com. ebration to recognize excellence in forwarding organizations. Flavio FEBRUARY 2-4, 2010 the air cargo industry. Held on site joined ECS from Delta Air Lines, and in conjunction with the IATA Mumbai: The Air Cargo India where he held the post of Regional World Cargo Symposium in Van- 2010 conference, organized by The couver, BC, the results of Air Cargo Director Western Europe. He pre- STAT Trade Times, will be held at RENFER World’s annual ACE Survey will be viously held senior management Bombay Exhibition Centre. This announced and awards will be pre- posts with United Airlines in Washington and event will offer industry officials sented to those airlines and airports KLM in Chicago and Switzerland. from India and abroad a common that have achieved a level of excel- platform to discuss prospects for GFF Airfreight Solutions has been formed by lence as determined by their re- the emerging Indian air cargo mar- Achim van der Graff, who worked with Amster- spective customer market groups. ket. A concurrent exhibition will dam Schiphol Airport for more than 30 years. Registration for the ACE Awards showcase products and capabilities evening can be made through the The company will handle air cargo door-to-door in this fast-growing region of the IATA World Cargo Symposium reg- shipments to and from the Netherlands. For more market. For more information or to istration site at http://ww.iata.org/ information, visit www.gffairfreightsolutions.nl. register, contact Priyo Patra, Direc- events/wcs10/index.htm. For more OHL has named Jeff Gosline senior director of tor Events at +91 22 2757 0550 / information or to inquire about 2757 5055 or priyopatra@stattimes. business development for the 3PL’s North Amer- sponsorship opportunities contact com. ica Transportation business unit. Gosline will be Steve Prince, Air Cargo World, at responsible for new sales of OHL’s managed trans- JANUARY 26-28, 2010 [email protected]. portation service offering in the U.S., Canada and Amsterdam: Cool Chain Eu- MARCH 25-25, 2010 Mexico. He has nearly 20 years rope 2010 Conference, which will Shanghai: The China Commer- of logistics and supply chain ex- be held at the Hotel Okura, will cial Aircraft Summit, to be held at provide the latest information, best perience, most recently serving the InterContinental Hotel Shang- practices and solutions for moni- as senior director of business de- hai, will feature speakers who will toring and controlling tempera- velopment for ATC Logistics & discuss advanced composite mate- tures of biopharma products and rials technology, next-generation Electronics. clinical supplies. Speakers will in- engines R&D and supply chain Ground handling services pro- clude Riekert Bruinink, Chairman management solutions. For more vider Swissport International of the PIC/S GDP Working Group, GOSLINE information, visit, http://www.op- has tapped several airfreight spe- Member of the EMEA GDP Draft- plandcorp.com/aero/. cialists for new management duties covering the ing Group, Dutch Health Care In- Dutch and French cargo markets. In Amsterdam, spectorate; Ian Holloway, Manager, JUNE 15-16, 2010 Defective Medicines Report Centre, Jan van Anrooy, former head of Swissport’s local Brussels: The Air Cargo Han- MHRA; Johann Kurz, Deputy Head dling Conference “Providing Quality cargo organization, will be replaced by Wouter Pharmaceuticals and Medical De- & Retaining The Margin” will address Brand, who will continue in his present capacity vices, Federal Ministry of Health, how to succeed in building volumes as Global Key count Manager at Swissport Head Austria; Umit Kartoglu, Technical and relationships in challenging Office until a successor is appointed. In France, Officer and Scientist, World Health market conditions. The event will Organization; Vildan Kortan, Direc- Jean-Didier Savioz, Head of Ground Handling be held at the Crown Plaza Brussels tor, WW Clinical Supply Logistics, at Swissport France and President of Swissport Airport. For more information, visit Bristol-Myers Squibb, and Dr. Her- France, will assume full responsibility for all www.evaint.com or e-mail confer- bert Ernst, Life Sciences Program [email protected]. ACW Swissport business lines in France. A new General Manager, Sensitech. For more in- Manager will handle cargo duties by January. ACW ACW DECEMBER 2009 53 profile uropean governments must contribute ports and air navigation service providers — to re- solutions that allow the airline sector to duce costs,” he adds. continue to play a vital role in the competi- AEA airlines reduced staff levels by 35,000 during tiveness of the European economy, says the past year, he says. What’s more, “the current AEA Secretary General Ulrich Schulte- economic devastation shows the true weakness of Strathaus.E our sector: governments, unions, service providers, The chief of the Association of European Airlines, the tourism sector do not talk to each other enough who has spent much firepower in 2009 advertis- to identify how the value of aviation can be promot- ing the plight of Europe’s ailing aviation industry, ed, and must be promoted.” expresses optimism about the future in spite of the Until governments reduce the regulatory barriers dismal economic climate. “and accept the need for fundamental structural The industry “has great leaders who will rise to change” more redundancies will be unavoidable, the top and move the sector to pas- Schulte-Strathaus claims. tures green,” says Schulte-Strathaus, As one who “always likes to be two whose organization represents 33 steps ahead” of the game, Schulte- major airlines that generate almost Strathaus finds solace and stimulation 400,000 jobs. amid the current confusion. He has One childhood lesson he has tapped clearly played a pivotal role increasing is uncovering common ground. One the political clout of the association. He can have friends in different countries heaps credit on his AEA “dream team” and different ways of seeing things but that is “great in identifying what needs it’s “very important to find the common to be done.” denominator,” he says. Schulte-Strathaus says he landed at These days, Schulte-Strathaus is try- AEA in September 2002 when he was ing his best to bring people together considered a good candidate for the on a hot-button issue of utmost con- Ulrich Schulte-Strathaus, AEA job because of his international exper- cern to European carriers: excessive tise. He spent many years at Lufthansa, charges and fees slamming an industry struggling to where he helped pave the way for the German gov- survive the global financial mess. ernment to negotiate an Open Skies agreement with According to Schulte-Strathaus, EU Transport the United States. Commissioner Antonio Tajani recently sent a let- An outdoorsman, Schulte-Strathaus is fond of jog- ter to all 27 European Union Member States urging ging in the forest of Brussels. He also loves skiing, them to accelerate the implementation of the EU Di- “preferably in the Alps” but says friends in Croatia, rective on airport charges and the Single European Greece and Finland have also shown him the won- Skies Second Regulatory Package. ders of the seaside. And associates in Iceland have Indeed, “first reports of intended increases for taught him “how enriching it is to be on horseback air navigation service providers throughout Europe riding through fascinating and unique countryside.” range from +8 percent to +32 percent for 2010 in Schulte-Strathaus also thrives upon change, some- Europe,” Schulte-Strathaus notes. thing that can be useful on the parenting front too. And the timing could not be worse. Declares The married father of two says he adores his chil- Schulte-Strathaus: “The AEA airlines alone will make dren “although as adolescents they probably adore a loss of 2.9 billion euros ($4.3 billion) in 2009 be- their dad less.” cause less people will be paying less for their flights Looking ahead, Schulte-Strathaus says success- and for their transported cargo — and service pro- ful airlines will be those that have the economies of viders increase fees! That is totally unacceptable! scale, or a niche, or a perceptible cost advantage. In “We are in an unprecedented aviation crisis, and Europe, he notes, “the nationality of the airline is we have to jointly find ways — together with air- less important than it used to be.” ACW 54 DECEMBER 2009 ACW bottomline CARRYING EUROPE U.S. AIRLINES Monthly year-over-year percent change in overall Monthly year-over-year percent change in domestic freight traffic and Asia-Pacific freight traffic for and international cargo traffic for U.S. airlines. European airlines. -10 0 -5 -15 Overall Asia-Pacific -10 Domestic International -20 -15 -20 -25 -25 -30 -30 9/098/097/096/095/094/093/092/091/0912/0811/08 9/098/097/096/095/094/093/092/091/0912/0811/08 Source: Association of European Airlines Source: Air Transport Association of America CARRYING ASIA SHARING MARKETS Monthly year-over-year percent change in capacity, in International air cargo year-to-date change for available tonne kilometers, and traffic, in freight tonne September 2008 vs. September 2009 kilometers, of Asia-Pacific airlines. -5 Middle East -10 Capacity North America Traffic Europe -15 Asia/Pacific -20 Latin America -25 Africa Total -30 9/098/097/096/095/094/093/092/091/0912/0811/08 -20 -15 -10 -5 0 Source: Association of Asia Pacific Airlines Source: IATA CARRYING INTERNATIONAL SEMI CONDUCTORS Monthly year-over-year percent change in total scheduled Worldwide monthly year-over-year percent change international freight traffic and capacity worldwide in sales of semiconductors and month-to-month in freight tonne-kilometers and available tonne-kilometers. percent change. 0 10 5 -5 0 -5 -10 -10 -15 -15 Capacity Y-O-Y Traffic -20 M-O-M -20 -25 -30 -25 -35 9/098/097/096/095/094/093/092/091/0912/0811/08 9/098/097/096/095/094/093/092/091/0912/0811/08 Source: IATA Source: Semiconductor Industry Association ACW DECEMBER 2009 55 forster’sfocus Dr. Paul Forster is the Adjunct Professor, HongKong University Business School of Science & Technology and a member of the HongKong Climate Change Business Forum. His current focus includes carbon management in the logistics industry. Why are you waiting? olitical uncertainty about climate change regu- and action on climate change is a top priority again. lation abounds. It’s now clear that the talks in A second reason is opportunity. Climate change is often Copenhagen will not produce binding emissions misconstrued as all cost and no gain, which happens when targets or perhaps even a framework. Without an the focus is only on the price of carbon. When you look at agreement in Copenhagen, practical day-to-day climate change from a systems view, you see something regulationP may be a long time coming. different. The logistics sector has taken a battering in the past Logistics is one system intersecting many other systems. year and perhaps for a few more to come. “It is far too When you consider the supply chains served by logistics early to call this a recovery,” said IATA Director General and these supply chains’ supply chains, and the ultimate Giovanni Bisignani, “The airline industry remains firmly in consumer and how each system is affected by climate the red with a fragile business environment.” change, there is a world of opportunity. Climate change has slipped in priorities in the mind of Starting now, exploring collaborations and developing the public and therefore in the minds of politicians. The a “Sustainability Network” early will lead to opportunities recent HSBC Climate Confidence Monitor 2009 reports and positive externalities. that concern about climate change dropped in 11 of 12 A third reason is information. Solving climate change is countries surveyed, although emerging economies are still essentially an information problem. We didn’t know that more concerned than developed ones. In the U.S. the Pew carbon emissions were bad. Now we do. But we can’t know Research Center reports a sharp decline in those who say exactly what to fix until we have accurate information there is solid evidence of rising global temperatures from about the who, where, when and how of emissions. 44 percent in 2008 to 35 percent in 2009. At some point all companies need to gather information With an uncertain global framework, a recession and about their carbon usage and know in their activities, and sliding public interest, why on earth should a company their supplier’s activities, where the emissions appear. The consider acting on climate change? more accurate, reliable and timely the information, the There are several good reasons to keep Sustainability more valuable it is. In the future, carbon data is going to be initiatives going or to start them if you don’t have any. Cli- worth a fortune. That’s why it is useful to learn how to get mate change isn’t going to drop off the radar. The slide in the information now. For those of us that remember the public attitudes probably reflects a combination of the nat- start of the information revolution, it is “déjà vu all over ural progression of the climate change hype-cycle, short- again.” circuited early by the recession. The discussion is just Finally, it takes time to build a culture of energy efficien- postponed. When it returns, it will be even more pressing, cy. Identifying areas of carbon leakage, finding solutions, and the timeline will be much tighter than before. The tar- building an effective team to make decisions and adjust- gets of 350 parts per million, holding global warming to 2C ing activities, all take time. With the juicy plums picked and cuts of 80 percent by 2050 will still remain, just with easily, further energy improvements require delving into much less time. Shorter timelines mean fewer alternatives, work practices, education and the involvement of more of higher investments and even more radical change. the organization. So climate change and energy efficiency One reason to act now is the learning cost. Climate present many opportunities for employee commitment. change alters the economics of logistics. However, under- European logistics providers are leaders in Sustain- standing just how it changes the economics, or what to do ability in great part because of their green organizational with that knowledge takes time. Getting on the learning cultures which rest upon a greener social order than other curve now is relatively cheap and there’s room to make regions. If you don’t have that, then an even earlier start is mistakes and gain experience and wisdom. That learning a good idea. will pay back in spades when the economy shifts up a gear Climate change is here to stay. Why are you waiting? ACW 56 DECEMBER 2009 ACW incorporating Exciting news for all freight forwarders OAG Cargo.com - the leading information portal for the cargo industry. Visit www.oagcargo.com for the very latest freight operational news. Regularly updated by airlines, Inforwarding Announcements is an announcements board which features the most up-to-date changes in the cargo industry. This simple message board facility enables airlines to distribute their news direct to Freight Forwarders. It can range from the announcement of new routes to the acceptance of Dangerous Goods - in fact any topic that is relevant to the transportation of goods across the globe. Also available via www.oagcargo.com is the Inforwarding Air Freight Rates Application (AFRA). This web-based service allows you to find and store airline rates and create sales quotes. Airlines and General Sales Agents update their rates directly in AFRA so that users have the most up-to-date rate information. The most effective source of air freight information For more information visit www.oagcargo.com