February 2015

THE SOURCE FOR AIRFREIGHT LOGISTICS International Edition • AirCargoWorld.com • February 2015

THE LION ROARS HOW ETHIOPIAN BECAME AFRICA’S LARGEST CARGO CARRIER p.20 KEEP COOL AND CARRY ON p.26 BOXED IN: THE E-COMMERCE CHALLENGE p.30

Contents Volume 18 • Number 1 • February 2015

THE LION ROARS HOW ETHIOPIAN BECAME AFRICA’S LARGEST CARGO CARRIER 20 News Inside:

6 UpFront 26 LAN’s new 787-9, holiday numbers from 2014, the great French-fry airlift and more KEEP COOL

8 Asia and Can the ANA-Lufthansa jv succeed where others have failed? CARRY ON Some modal shift may be inevitable, but a 10 Americas renewed commitment to quality can keep LATAM shifts focus from freighters to belly cargo high-value pharma cargo flying

12 Africa & Middle East Mideast carriers begin move to all-in pricing

14 Europe Brussels Airlines boldly goes where others fear to fly BOXED IN Departments Can transparency, predictability, and 4 Editorial reliability win the e-commerce game 18 Cargo Chat: Mohamed Ebrahim Al Qassimi against the integrators? 33 Marketplace 34 Bottom Line 36 People 30 37 Events / Advertiser’s Index 38 Forwarders’ Forum

Air Cargo World (ISSN 1933-1614) is published monthly and owned by Royal Media. Air Cargo World is located at 1080 Holcomb Bridge Rd., Suite 255, Roswell, GA 30076. Production office is located at 2033 Sixth Avenue, Suite 830, Seattle WA 98121; telephone 206-587-6537. Air Cargo World is a registered trademark. Periodicals postage paid at New York, NY and at additional mailing offices. Subscription rates: 1 year, $80; 2 year $128; outside USA surface mail/1 year $120; 2 year $216. Single copies $20. Express Delivery Guide, Carrier Guide, Freight Forwarder Directory and Airport Directory single copies $14.95 domestic; $21.95 overseas. Microfilm copies are available from University Microfilms, 300 North Zeeb Road, Ann Arbor, MI 48106. Opinions expressed by authors and contributors are not necessarily those of the editors or publisher. Articles may not be reproduced in whole or part without the express written permission of the publisher. Air Cargo World is not responsible for unsolicited manuscripts, photographs or artwork. Please enclose a self-addressed envelope to guarantee that materials will be returned. Authorization to photocopy items for internal or personal use is granted by Air Cargo World, provided the base fee of $3 per page is paid directly to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, and provided the number of copies is less than 100. For authorization, contact CCC at (508) 750-8400. The Transactional Reporting Service fee code is: 0745-5100/96/$3.00. For those seeking 100 or more copies, please contact the magazine directly. Member of Audit Bureau of Circulations Ltd. POSTMASTER and subscriber services: Call or write to Air Cargo World, 80 Broad St., Suite 1701, New York, NY 10004; telephone 212.564.8972 x3. ACW FEBRUARY 2015 3 Editor’s Note Is confidence the ‘new normal’?

THE SOURCE FOR AIRFREIGHT LOGISTICS As the afterglow of an honest-to-goodness peak season SENIOR EDITOR in 2014 lingers in the winter air, many businesses in the David Harris air cargo supply chain are experiencing something they’ve [email protected] rarely felt over the past five years – confidence. Perhaps EDITOR it’s time for the industry to start asking: Could this return Randy Woods [email protected] • (206)-801-8478 to modest, steady growth be the “new normal”? ASSOCIATE EDITOR In early January, a survey of IATA-member air cargo Linda Ball [email protected] • (206)-237-0799 execs and airfreight CFOs found that 71 percent said SPECIAL CORRESPONDENT they expected to see increased cargo demand for the Martin Roebuck next 12 months. An even larger group – 78 percent Randy Woods CONTRIBUTING EDITORS of those surveyed – said they expected an increase in Roger Turney, Ian Putzger profitability over the same time period, partially due to the historic drop in fuel COLUMNIST prices. It’s a refreshing change after the long years of stagnating volume, rising Brandon Fried fuel prices and excess capacity. PUBLISHER Change is, indeed, happening everywhere – even here at Air Cargo World. JJ Hornblass Alert readers have no doubt noticed our new graphic look since we joined Royal [email protected] VP OPERATIONS Media Group last year. Now we are adding some new faces to the magazine, Molly Stewart including my own. With more than a quarter-century of magazine editing experi- EDITORIAL DIRECTOR ence, covering such business topics as insurance, Lean Six Sigma, entrepreneur- Phil Ryan ism and solid waste management (yes, really), I joined this talented ACW team CREATIVE DIRECTOR in September and am excited to take on a new challenge, just as the industry ap- Alex Kwanten pears to be on an upswing. [email protected] CIRCULATION DIRECTOR I’d also like to introduce another addition to the ACW team, Linda Ball, our new Hattie Thomas associate editor. Linda joined Royal Media in December, bringing 13 years of solid [email protected] ASSOCIATE DESIGNER reporting experience to our permanent staff of writers. We’re thrilled to have Adnan Jusupovic her on board. Over the next few months and beyond, Linda and I hope to meet a lot of ACW readers at various industry events this year – specifically at AirCargo AIR CARGO WORLD HEADQUARTERS 2015 in New Orleans, the IATA World Cargo Symposium, as well as our Air Cargo 1080 Holcomb Bridge Rd., Roswell Summit Excellence Awards Dinner (aceawards.aircargoworld.com), in Shanghai, and the Building 200, Suite 255, Roswell, GA 30076 (770) 642-9170 • Fax: (770) 642-9982 CNS Partnership Conference in Orlando, Fla. WORLDWIDE SALES U.S. Sales & Emerging Markets Of course, without our loyal readers, this magazine could not exist. Air Cargo Sales Director World is as much your magazine as it is ours, so I invite you to join the dialogue. Tim Lord If you have any comments, questions or story ideas – or if you just want to chat [email protected] • (678) 775-3565 about air cargo – please contact me at [email protected]. Europe, United Kingdom, Middle East David Collison Our aim is to continuously improve this magazine as the number-one source for [email protected] • +44 192-381-7731 airfreight logistics information. We can only do that with your feedback. Together, Hong Kong, Malaysia, Singapore let’s make 2015 a year to remember. Joseph Yap [email protected] • +65-6-337-6996 India Faredoon Kuka RMA Media Randy Woods, [email protected] • +91 22 6570 3081 Editor, Air Cargo World Japan Mr. Mikio Tsuchiya [email protected] • +81-45-891-1852 Thailand Ms. Anchana Nararidh [email protected] • +66-26-412-6938 Korea Mr. Jung-Won Suh [email protected] • +82-2785-8222 Marketplace Alyssa Stebbins [email protected] • (212) 991-6735

Special photo credits: Ethiopian Airlines historical photos, p22: Convair 340: ©Bair175/wikimedia, DC-6: ©Ken Field- ing, 720B: ©Tim Rees/Wikimedia, 767: ©Aero Icarus/Flickr, 787: ©Alex Kwanten, 777F: ©Rainer Bexten. 4 FEBRUARY 2015 ACW Departs Gate 10:22 aM

With you all the way.

When you ship with us, we consider you our partner. Because, like you, an entrepreneurial spirit of change and growth guides everything we do. We’re in this together, and with our larger, expanding network, we’ll have even more opportunities in the future to give you the same exceptional service you’ve come to expect. That’s a great partnership.

American Airlines Cargo and the Flight Symbol logo are marks of American Airlines, Inc. ©2014 American Airlines, Inc. All rights reserved. Find a solution that works for you at aacargo.com UpFront As we begin 2015, we’re introducing UpFront, a Photo: ©Alex Kwanten new one-page section reserved for late news items, photos, quotes and LAN’s biggest belly info-graphics – a quick-read LAN’s first Boeing 787-9 flew for the snapshot that lets you know first time on January 18 and delivery is expected in February. at a glance what’s happening The aircraft will give LAN the largest belly hold in its current fleet (though TAM has around the industry. a larger one - the 777-300ER). For more on LATAM’s belly plans, see page 10. UPS and FedEx survived the holidays FedEx and UPS can breathe a sigh of relief knowing that the investments made in facilities and a larger holiday workforce resulted in fewer last-minute shipping problems compared to Christmas 2013. UPS spent $500 million to make sure 2013 wasn’t repeated. Both companies built new facilities, added more holiday staff and coordinated with retailers for clarity on estimates and deadlines. Nonetheless, some retailers fell short on their promises, reflecting the difficulty of accurately calculating holiday demand as e-commerce becomes more popular.

The great French-fry airlift The Japanese appetite for McDonald’s French fries was JFK builds an Ark satisfied thanks to many air cargo The ARK at JFK, a privately-owned ani- Centurion Cargo flies again companies that helped get an Photo: Martin Visser/Wikimedia mal handling facility, will soon become emergency shipment of approxi- a reality. ARK Development LLC signed After being grounded since September 2014 for non-payment to its debtors, mately 2,600 tonnes of French a 30-year lease with the Port Authority fries delivered to Japan’s golden of New York and New Jersey to develop, Miami-based Centurion Cargo is said to be back in the air again. Among the car- arches in late December 2014. finance, build, operate and manage the The shortage was due to the $48 million project. The facility will rier’s many legal hurdles, Chemoil Corp. had filed 11 lawsuits in Miami-Dade ongoing labor dispute by ILWU be equipped to accommodate horses, workers at West Cost seaports. pets, birds and livestock. Professor civil court claiming that Centurion and its affiliates were past due on $12.9 McDonald’s Japan said 1,000 Temple Grandin, regarded as the lead- tonnes were sent via airfreight ing authority on livestock movement, million in fuel bills. Previously, Chemoil had filed mechanic’s liens against all 11 from the East Coast and another designed the livestock handling area. 1,600 were shipped by seafreight. The facility will have every imaginable aircraft in the fleets of Centurion and its partner airline SkyLease Cargo. For more on the port slowdown, creature comfort for dogs and cats. see page 11.

The airport, located in the center Robin Hood Airport Doncaster Sheffield more than doubles cargo traffic of the U.K., reported a 112 percent increase in cargo transported through its facilities, year-over-year, for 2014. Between October and December 2014, seven 747-400s operated from Robin Hood’s cargo terminal. (Okay, we’ll admit, we just wanted to run this cool image of this An-225 landing at Robin Hood).

6 FEBRUARY 2015 ACW Lime

INTRODUCING SKYSTABLES YOUR NEW EQUINE TRANSPORT SERVICE

Etihad Cargo, winner of 2014 Air Cargo Industry Customer Care Award, is proud to announce the launch of SkyStables, the brand new bespoke service for your equine shipments. Right from booking to arrival, SkyStables will guarantee a safe, comfortable and convenient journey for your valuable horses, giving you the peace of mind you require. With dedicated Equine Managers who supervise the handling teams both in the air and on the ground, you can now take advantage of our global freighter network, and ship from Abu Dhabi to destinations in Europe, Asia, Africa, Australia, and the Americas. Visit etihadcargo.com for more information.

Job No: 260066 Client: Etihad Campaign: Cargo Height : 276 Width : 203 Publication: Air Cargo magazine Colour Profile: 39L Insertion Date: 01/02/2015 Around the world and profits, which eliminated the pit- ASIA falls of competition within the partner- ship, he said. Senior Lufthansa Cargo executives have blamed the failure of the carrier’s

Photo: ©Alex Kwanten former WOW alliance (with Japan Air- lines, Singapore Airlines and Scandina- vian Airlines System) on the absence of a joint bottom line, resulting in a lack of cohesion that allowed the mem- bers to drift apart. A different kind of alliance that took shape last year was the connec- tion between IAG and Qatar Airways, Can ANA-Lufthansa succeed? which centers on the former taking By Ian Putzger block space on the Middle Eastern car- rier’s freighter service from Hong Kong to London, via its Doha base. This ar- ll Nippon Airways (ANA) is push- joint pricing to the emergence of “a rangement allowed IAG to return the ing for broader global reach. virtual airline” to control both airlines’ 747-8 freighters it had leased prema- On the heels of its joint-venture capacity jointly. turely to the lessor. To some observers agreement with Lufthansa Cargo, A How unfettered is each partner’s ac- this is pretty much all there is to the the Japanese carrier has joined hands cess to the other’s capacity? Interline IAG-Qatar link, but Wraight reckons with United Airlines’ cargo division to agreements, which have played a core that partnership will go further. form a partnership. role in many alliances, are only effec- “They trying to develop a real cargo While cargo joint ventures tend to tive if the partners have guaranteed alliance,” he said, adding that oth- look good on paper, they don’t always space on each other’s planes, notes Jan ers are also on the hunt for alliance unfold as planned. But the ANA-Luf- Krems, president of United Cargo. thansa jv is adding a few new wrinkles partners. “It is no secret that KLM has This was confirmed by the ANA to create a more symbiotic relationship. been trying for years to do something spokesman. “We can sell each partner’s For example, both tie-ins differ from with China Southern.” free space on each flight, then both sales most traditional airline alliances on Some observers regard the cen- sections are now communicating like the cargo side in the inclusion of anti- tral role of antitrust immunity in the [a single company] to fit our customer trust immunity. “This allows them to Lufthansa-ANA venture as a reflec- space requests to our joint capacity and synchronize their network schedule, tion of the German carrier’s approach. maximize space accommodation. In that float common tariffs, and also carry out “This alliance is driven by Lufthansa. meaning, we are going to expand our joint sales and marketing activities,” Lufthansa needs it to build a strategy transparency in space control through observed industry veteran Ram Menen, to compete,” Wraight said. The Ger- the joint venture program.” who headed Emirates SkyCargo from man airline has signalled its intention its early days until 2013. At this point, the cooperation be- to form similar alliances with other “Antitrust immunity is great. How- tween ANA and the German carrier cov- partners. The alignment of ANA and ever, it is a very expensive and time- ers regular and express cargo. Mindful United suggests a possible link be- consuming process in obtaining all of customer interest in other segments, tween Lufthansa and United. Krems approvals worldwide because of the the pair would like to add special prod- had no comment on this. ucts gradually, ANA indicated. global nature of the air cargo busi- According to ANA, its venture with ness,” he added. The Japanese airline and its venture the U.S. airline would basically “be Operational aspects aimed at achiev- partners have left it open in how far almost the same business program as ing cost savings are secondary in such product definitions should be aligned, we do have with Lufthansa Cargo.” For a constellation, but this does not mean as the SkyTeam has done with its his part, Krems sounds less sure where there is no room for them, according to lineup. ANA views this matter as a the journey is going. Having taken over Menen. A spokesman for ANA pointed medium-term question to address. the controls at United Cargo last year, to joint activities such as co-location Stan Wraight, executive president of with some issues to address, building at a number of stations in Japan and Strategic Aviation Solutions Interna- up the ANA link is clearly not at the Germany, but he confirms that the em- tional and a former executive of KLM top of his agenda. phasis is elsewhere. Cargo, pointed out that the joint ven- “We look where we can grow to- “We are not only focusing on sales ture that KLM and Northwest had on gether,” Krems added.“We look at each activity, however. Joint sales is one of the North Atlantic (which has survived other’s network, we look at interline the biggest parts of the joint venture, to include Delta today) worked well, possibilities. How can we connect our which should be authorized through although both airlines sold their own schedules better? We do not want to antitrust immunity,” he said. The ulti- products. The key element was the move too fast, not take too big steps in mate goal of the venture goes beyond commercial decision to share revenues the early stage.” ACW

8 FEBRUARY 2015 ACW AsiaNews

al is currently looking for a hub to handle Alibaba shipments to Europe and is considering “slipping into the role” of integrator. China Postal Airlines currently operates fourteen 737-300Fs, eight 737-400Fs, and ACMI-leases four 757-200Fs, mostly delivering domes- tic express mail for China Post. While Alibaba currently dominates the e-commerce sector in China, responsible for roughly 80 percent China Postal deepening ties with Alibaba? Photo: ©Edwin Leung of all online sales in that country, With the meteoric rise of both e- that an increasing amount of Alibaba SF Express is beginning to make commerce and express shipping across shipments are now moving through some inroads on its market share. In China, a distribution relationship be- Hong Kong International via China 2012, SF Express launched SFBest. tween Alibaba and SF Express seems Postal, possibly at the expense of SF com, a premium food website where to be a natural fit. However, with SF Express’s air division, SF Airlines. Chinese consumers can order fresh, hard-to-find gourmet selections and Express recently showing interest in Further, according to a report in cold beverages and have them deliv- developing its own e-commerce busi- CargoForwarder Global, China ered directly to consumers via the nesses, Alibaba may consider SF Ex- Postal has long-term plans to become cold chain operated by SF Express. press as more of a competitor, making Alibaba’s “main distributor” by coop- China Postal Airlines a more comfort- erating with several cargo and combi- SF Express currently accounts able distribution option. nation carriers rather than operating for about 21 percent of China’s ex- Cargo Facts, a sister publication a large fleet of long-haul freighters it- press delivery market, with air cargo to Air Cargo World, reported in De- self. One panelist at a recent German volume reaching 1 million tonnes cember from the Asian Logistics and Aviation Press Club event in Leipzig per year. –Randy Woods Maritime Conference in Hong Kong was quoted as saying that China Post-

we turn cargo into an art form © PMCE DESIGN

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ACW FEBRUARY 2015 9 Around AMERICASthe world

LATAM shifts focus from freighters to belly cargo

By Linda Ball Photo: ©Alex Kwanten he LATAM Airlines Group, formed said. “However, in the last few months, Prior to the merger, LAN operated through the merger of Chile-based we have seen demand increase in a significant freighter fleet, includ- T LAN Airlines and Brazil’s TAM, is certain markets and capacity being ra- ing eleven 767-300Fs and four 777Fs, hoping a strategy of downsizing its tionalized. We are permanently moni- some in its LAN Cargo subsidiary freighter fleet while carrying more toring market development in order and some placed with affiliated carri- cargo in the bellies of its passenger to make the necessary adjustments ers throughout Latin America. These aircraft, will ensure a profitable cargo in capacity, itinerary and rates. We do freighters carried 60 percent of its car- operation in 2015. not make across-the-board rate adjust- go, whereas TAM had no freighters and While the United States suffered ments, but [rather] specific to certain moved all of its cargo in the bellies of through the Great Recession, Latin markets and commodities.” its passenger fleet. Post-merger, with America’s economy from 2003 to 2010 Guido Henke, LAN Cargo’s director, LAN able to move cargo to and from grew at an annual rate of close to 5 Europe, said there is little economic Europe in TAM’s network, the need for percent. More than 50 million people growth in many of South America’s freighters has decreased, and LAN has emerged from poverty while the countries, since imports into Argen- reduced its fleet by leasing three of the middle class expanded to a third of the 767 freighters to FedEx. According to population. However, the forecast for Henke, only 35 percent of cargo now the region is not clear. Both the IMF It is true that in the future moves in freighters, while 65 percent and the World Bank project growth is carried in the bellies of passenger of only 2.2 percent in 2015 for Latin we will rely more on our aircraft. America. Many governments squan- The freighter fleet will not be dered their windfalls from the boom, belly capacity, but we still phased out altogether, though. Cer- and Brazil’s loose fiscal policy will tain markets and commodities still result in an economy that will be hard need freighters due to seasonality or pressed to grow at all in 2015. Brazil’s have the need for freighters because of origin and/or destination, trade deficit widened to $1.1 billion in Campos Valdes said. “It is true that in October 2014, the highest-ever for the to complement and support the future we will rely more on our bel- month. Both imports and exports fell, ly capacity, but we still have the need pointing to weak activity. Also, poverty [the customer]. for freighters to complement and sup- and inflation added to the problem. port [the customer]. This mix of belly —Andrea Paz Campos Valdes, and freighter capacity is an important So where does this leave LATAM? LAN Cargo Andrea Paz Campos Valdes, head of component to our strategy” corporate affairs at LAN Cargo, said tina, Chile and Peru have slowed down The freighter fleet may be shrink- that in the past few years the carrier recently. This slowing of GDP growth, ing, but Campos Valdes said this year has seen belly and freighter capacity combined with currency devaluation in LAN expects to add one A350-900 and grow in many markets, but at the same the key Latin American economies, has seven 787-9 aircraft to its fleet, adding time demand has been weak in most hurt demand for imports. For 2015, the considerable cargo capacity in the bel- markets, pushing cargo rates down. airline predicts increased stability in lies. LAN serves Madrid and Frankfurt, “We have made adjustments in rates the region, and believes stronger GDP while TAM, based in Brazil, serves Lon- where we operate and related to this growth should bump up imports, espe- don, Milan, Paris and Zurich. ACW new market balance,” Campos Valdes cially in the second half of the year.

10 FEBRUARY 2015 ACW AmericasNews Lingering U.S. port crisis boosts airfreight South Suburban Airport The many weeks of positive air- November 2014, shipments from Asia freight numbers during the 2014 peak Pacific to North America skyrocketed project inches forward season, inflated somewhat by the on- by 17 percent over the same period, Citing congestion and lack of going West Coast port crisis, were re- with yields improving by 9 percent. adequate facilities at O’Hare and flected in the latest figures from World Meanwhile, the port crisis contin- Midway airports in the Chicago ACD, showing worldwide volume ued into January as federal mediators area, the state of Illinois continues growth of 4.3 percent, compared to the began a series of talks between the In- to move forward on a long-delayed previous November. However, the year- ternational Longshore and Warehouse plan to build a regional airport near over-year growth for the month was Union (ILWU) and the dockworkers’ the small town of Monee, Ill., located significantly smaller than the rise seen employers, represented by the Pacific about 45 miles south of the city. in recent months, and yields fell, year- Maritime Association (PMA). The Under the plan, the project would over-year, by 4.0 percent – the largest ILWU claims that the main source of transform the existing Buld Field dip since a 5.0 percent decrease in the months-long congestion felt from airport into what will be called the February 2014. Los Angeles to Seattle was a series of South Suburban Airport (SSA) and “managerial mistakes” by PMA, even- The bottleneck at U.S. ports could extend the runway, with the aim of tually leading to a severe shortage of be inferred most dramatically in World attracting cargo flights to the region. truck chassis. ACD’s figures for the trans-Pacific mar- The site in Will County, Ill., is near ket. While air cargo revenues for North PMA countered that the near-grid- the largest rail intermodal terminal American exports to the Asia Pacific lock conditions at the ports stem from in the Chicago area. The county, region fell 9 percent from October to deliberate work slowdowns on the part developers said, also has 165 million of ILWU members since November, square feet of warehouse space. causing a shortage in the number of The plan has the backing of local qualified crane drivers. PMA claimed government and U.S. Congresswom- that the average number of crane an Robin Kelly, but there are many operators in the Seattle-Tacoma and hurdles to overcome. For instance, Los Angeles-Long Beach yards fell no air carriers have expressed from 110 to just 35 per day at the ter- interest in moving away from the Port of Long Beach minal yards. –Randy Woods freight-handling infrastructure around O’Hare. In addition, about 94 percent of cargo currently flying Three An-124s, one job to O’Hare is carried in the belly of Nine oversize power substations The pressure-sensitive substations passenger aircraft, which are not were successfully moved from Porto, traveled without incident from manu- likely to switch their routes to a Portugal, to Buenos Aires, Argentina, facturer Efacec’s plant in Portugal to rural airport. the Buenos Aires-based end user, in December, using three An-124-100 So far, the state of Illinois has Edesur, an Argentina utility. “This was aircraft operated by Antonov Airlines. acquired 3,500 of the 5,800 acres a one-of-a-kind job,” Vekshin said. Konstantin Vekshin, vice president for needed to accommodate the SSA “Both the manufacturer and the end- Bertling Air Freight Charters, said three project, which is slated to start con- user made the right decision. They just of the aircraft dedicated to one project struction in 2016 and be completed didn’t want to take a chance. This is doesn’t happen very often, but time by 2019. very expensive equipment.” constraints and the delicate, high-tech –Randy Woods equipment required extra care. –Linda Ball LAX – HNL – LAX 5 FLIGHTS WEEKLY ALL CARGO 767-300 FREIGHTER

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ACW FEBRUARY 2015 11 Around the worldAFRICA &MIDDLE EAST Photo: Alec Wilson

Mideast carriers begin move to all-in pricing By Randy Woods

he days of the much-vilified fuel curity fees folded into one price. Along decisions. So we encourage other car- surcharge in the airfreight industry with added fuel and security fees, the riers to do the same.” T may be numbered. Less than two new policy will also eliminate surcharg- By removing surcharges, all-in pric- weeks after Emirates’ freight division es for various other criteria. ing, “takes complexity out of sourcing said it will return to a simplified “all-in” Forwarders and shippers have called on the one end and invoicing to the rate structure and was dropping vari- for the end of surcharges for years, customer on the other,” Keuhner ex- ous surcharges, Qatar Airways Cargo partly because their complex structure plained. “The more carriers that switch announced last month that it will take makes it hard to quote a definite price to this model, the more this holds true, a “phased approach” to transition its for customers, and partly because for- of course.” pricing structure to a “one-rate basis.” warders’ do not receive commissions Robert Keen, director general of the According to a Qatar Airways state- on the added surcharges. British International Freight Associa- ment from Jan. 12, the carrier said it With crude oil trading for under tion (BIFA), was a bit more muted in “recognizes that current surcharge US$47 per barrel as of mid-January his reaction. The Emirates SkyCargo conventions expose the supply chain – a six-year low – there is no longer a decision, he said, is “a step in the right to significant price volatility.” As a re- justifiable need for a fuel surcharge, direction, provided it leads to the trans- sult, the airline will replace its existing forwarders have argued. However, nei- parency that freight forwarders re- rate structure, beginning in April, and ther Emirates nor Qatar Airways made quire.” He also applauded SkyCargo for will “abolish” its current fuel and se- mention about the reduction of its base providing “simpler and more transpar- curity surcharges, while keeping other rates or changes to the mechanism ent cost structures,” adding that Sky- ancillary charges in place. of the all-in price structure in case oil Cargo’s decisions could be a response Qatar’s decision was preceded by a prices spike or an international event to “previous comments that freight Dec. 31, 2014, announcement by Emir- raises security concerns. forwarders stop accepting at face value ates SkyCargo that it would eliminate Despite this uncertainty, the reaction opaque and unjustified surcharges.” surcharges for fuel, security and other by shippers and forwarders to SkyCar- Panalpina’s Kuehner said he expects variables – a move that was praised go’s announcement has been positive. the SkyCargo decision to lead to more as long-overdue by many forward- transparency across the industry. “It is ers and shippers. SkyCargo said the “We welcome any simplification of the pricing structure and have long the fuel surcharge mechanisms that are single-charge structure would begin not transparent today. Different airlines Feb. 1 for airfreight shipments to and since asked airlines to rid themselves of surcharges,” said Lucas Kuehner, factor in different elements for fuel sur- from Europe, and March 1 for all other charges. With all-in rates you are left Emirates flights. global head of air freight for Panalpina. “This is about going back to basics and with only one figure to compare: overall SkyCargo’s single rate will be based what our customers want, since they costs. That’s what matters in the end, on weight and will include fuel and se- look at all-in cost when making freight and it just makes it so much easier. The key is rate validity going forward and how airlines intend to manage the risk of fuel price fluctuations.” We welcome any simplification of the pricing Shippers appear equally pleased about the pricing changes. Joost van Doesburg, freight policy manager of structure and have long since asked airlines to rid the European Shippers’ Council, said the switch to all-in pricing is “definitely themselves of surcharges. —Lucas Kuehner, global head a positive step in the right direction of air freight, Panalpina that other carriers must follow.” Ship-

12 FEBRUARY 2015 ACW Africa & MiddleEastNews pers, he said, consider surcharges the “number one topic the air freight industry should change,” stemming Qatar Airways Cargo adds three destinations mainly from the distrust of certain Qatar Airways Cargo expanded its The new China route, which began carriers that developed during the sur- network in early December by starting Dec. 4, is the first cargo service be- charge price-fixing scandal. service to Lagos, Nigeria; Accra, Gha- tween Guangzhou and Qatar Airways’ The all-in pricing, “will improve na; and Guangzhou, China. All three Doha hub, and also the carrier’s first stability in the airfreight market,” van destinations are being served by A330 scheduled cargo flight to South China Doesburg added. “The current sur- freighters, with twice-weekly service outside of Hong Kong. Qatar selected charges system is everything except to Lagos and Accra, and three times a Guangzhou because of its geographi- transparent. In a future without sur- week to Guangzhou. cal location, but also for the advanced charges, shippers and freight forward- Doha-based Qatar Airways took de- facilities, equipment and support at ers would know the costs of shipments livery of two A330-200Fs from Airbus Baiyun International Airport’s Interna- in advance instead of when the in late November and early December, tional Cargo Terminal 1. invoice arrives.” adding them to its existing fleet of Guangzhou is a major manufacturing TLF Overseas, a French freight for- three A330-200Fs and seven 777Fs. city, exporting high-tech products, bio- warders organization, issued a state- The Lagos route will cater to the tech, aerospace technology, software ment after the Emirates announce- city’s high-value exports of petroleum and automobiles, while importing gar- ment urging other carriers “to follow and petroleum products, as well as ments, auto parts, fashion accessories, suit.” Fuel surcharges, the group said, cocoa and rubber. The city imports pharmaceuticals and perishables. were originally intended to be tempo- textiles, manufactured goods, food, Qatar also expanded its service to rary, but ended up becoming “perma- machinery and transport equipment. Erbil, Iraq; Kolkata and Delhi, India; nent and uncorrelated to the variation Major exports from Accra include and Istanbul, Turkey. Additionally one of the oil prices … Air carriers were in- agricultural produce, oil, gold, cocoa, more frequency was added on the deed more likely over the past 13 years timber, tuna, bauxite, aluminum, man- Houston-Liége-Doha run, and more to increase their fuel surcharge as soon ganese ore, diamonds and horticultural frequencies are expected for Brussels, as the oil price rose rather than grant- products, while imports include capital Chennai, Johannesburg, Nairobi and ing cuts when it decreased.” ACW equipment and refined petroleum. Shanghai. –Randy Woods

ACW FEBRUARY 2015 13 Around the world EUROPE Photo: Martin Visser/Wikimedia

Brussels Airlines boldly goes where others fear to fly By Roger Turney russels Airlines Cargo is winning It has left the airline little option but Cargo. The airline’s long-haul fleet-mix plaudits from world health and aid to charter in its own main-deck capac- of three A330-200s and five A330-300s agencies for its response to the ity to ease the pressure on its Brussels has a capacity limitation in the range of B ongoing Ebola epidemic, which hub. MD-11F capacity has been ac- 10 to 12 tonnes per flight. continues to plague West Africa. While cessed using neighboring Liege airport The airline is expected to increase other carriers withdrew or redirected in Belgium to facilitate these flights. capacity in the medium term if, as flights, the Belgian national carrier, The decision by Brussels Airlines hinted, it leases further long-haul Brussels Airlines, has maintained a not to desert its single most important aircraft. full schedule, particularly to the worst- long-haul market at its time of greatest But if there is one thing Brussels hit countries of Liberia, Guinea and need has come at some cost to the car- Sierra Leone. Airlines has been careful to do, it is rier. It has had to bring in extra staff to not to over-reach. It is a bitter lesson As a result, the airline’s cargo divi- screen passengers departing the worst- learned from the bankruptcy of the for- sion, Brussels Airlines Cargo, has seen affected countries. Crew changes have mer Belgian national carrier Sabena in unprecedented demand. Its Brussels been adjusted to avoid overnight stops 2001. The new national carrier of today, hub has become a major feed point out in high-risk countries. launched by a group of 40 Belgian inves- of Europe for the flow of medical sup- Some of these additional costs have tors, emerged initially as SN Brussels plies and other relief goods. Although been recovered by increasing cargo Airlines in 2002. By 2006 it changed much of the belly-hold capacity was rates on certain routes to West Africa, its name to Brussels Airlines, after the withdrawn from these markets by oth- generated by the high demand for lift. merger with Brussels-based short-haul er airlines, some main-deck capacity But the efforts of Brussels Airlines European carrier Virgin Express. has been maintained by carriers such and Brussels Airlines Cargo are seen Perhaps the greatest fillip the car- as Cargolux and Lufthansa Cargo. But as a genuine humanitarian gesture to this has not been enough to relieve the rier received was the acquisition of a maintain faith with its local market. 45 percent stake in the airline by Luf- pressure on Brussels Airlines Cargo, Nonetheless, the carrier is projecting which operates A330-300/200 aircraft thansa in 2009, paving the way for the a strong financial return when it posts Belgian flag carrier to join the Star Al- on its African routes. its annual results in March, with cargo

Photo: ClipperArctic/Wikimedia liance. The German carrier has had the volumes expected to be well in excess opportunity to take up the remaining of the 27,000 tonnes uplifted in 2013. 55 percent since 2011, but has thus far Not that Brussels Airlines Cargo is not exercised that option. badly in need of a fix to bolster its cargo Even so, the reincarnation of the revenue returns. Load factors on south- Belgian carrier is still very much about bound African services regularly exceed the ghost of Sabena and the legacy of 90 percent. On northbound routes, a its African network, with the new car- now-year-round demand for perishables, rier even adopting the IATA code of its such as pineapple and mango for the predecessor. Brussels Airlines is a partial outgrowth of European market, ensures load factors it’s predecessor, former Belgian flag-carrier of over 70 percent. The only constraint At its inception, the new airline was Sabena, and flies much the same route on growth appears to be the belly-hold launched with about half of its staff network, with a diverse array of African capacity available to Brussels Airlines drawn from the ranks of Sabena. Im- destinations from Kinshasa to Marrakech. Continued on page 16

14 FEBRUARY 2015 ACW TH THWORLD CARGO WORLD CARGOSHANGHAI SYMPOSIUM SHANGHAI10 – 12 MARCH 2015 9SYMPOSIUM 10 – 12 MARCH 2015

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For more information: Forwww.iata.org/events/wcs more information: www.iata.org/events/wcs EuropeNews Continued from page 14 only other long-haul services, to New portantly, this included many outsta- York and seasonally to Washington, the tion managers with vital knowledge and GSA option has been taken in both di- Will Amazon deal save or expertise of the African market, such rections, which again has been provid- as Brussels Airlines Cargo’s incumbent ed by ECS Global Air Cargo. The U.S. doom Royal Mail? cargo boss Herman Hoornaert. market benefits from a high demand for pharma traffic out of Brussels. In a deal that could have long-term Before taking on his current role in consequences for the future of ex- Brussels Airlines Cargo admits it was 2011, Hoornaert headed up the air- press delivery in the U.K., recently a big ask – and risk – for both parties line’s cargo sales operation in Africa. privatized postal carrier Royal Mail to hand over the entire belly-hold ca- It’s a unique archive of market knowl- entered into a partnership with its pacity to a single GSA in Europe. It is a edge, which has enabled the airline to largest competitor, Amazon, to join its risk, though, which has paid dividends fully recover the presence in the Afri- new “click-and-collect” parcel service, for both parties and resulted in an can market of its luckless predecessor called Local Collect. and grow it further to the 19 points even closer working partnership. served today. Under the agreement, Amazon will Being largely responsible for its own gain access to the 10,500 post offices Brussels Airlines Cargo, though, may cargo sales in the African market has Royal Mail operates across the coun- be said to have a somewhat perverse helped Brussels Airlines Cargo develop try, providing convenient, secure dis- approach to marketing its services. In its “Fresh to Shelf” product to ensure tribution points at which customers normal circumstances an airline would perishables are delivered to European can pick up packages ordered online. expect to take charge of cargo sales in markets in prime condition via its Local Collect will be similar to the ser- its home market and resort to using a Brussels hub. The airline works closely vice offered by U.K.-based Collect Plus, general sales agent (GSA) in its out- with major African exporters and Eu- which delivers parcels to a network of stations. Brussels Airlines Cargo has ropean wholesalers, recognizing that convenience stores, newsstands, su- reversed that strategy. It has taken the margins are tight, so it rarely imposes permarkets, and gas stations. decision to outsource sales in its home fuel surcharges on this traffic. The Royal European market to a GSA, while in But this has not stopped other Mail agreement Africa it has retained responsibility for predator carriers, notably from the will make it eas- marketing nearly all inbound capacity, Arabian Gulf, from trying to undercut ier for Amazon with a couple of GSA exceptions. Brussels. Brussels Airlines Cargo has to grow faster in The GSA responsibility in Europe held its ground on price, the company the U.K. without has been handed over to ECS Globe reports. Small consolation when con- incurring the added costs of last-mile Air Cargo, part of the French-owned sidering the health crisis in the West delivery to customers’ doorsteps. ECS Group. In the case of the airline‘s Africa market. ACW And for Royal Mail, the benefits are… well, unclear at the moment. In November 2014, Royal Mail re- City Link faces layoffs ported that Amazon’s own parcel de- City Link, one of the United King- retrieve about 40,000 uncollected par- livery network would reduce its annual dom’s largest parcel delivery services, cels. Customers who placed parcels growth rate from 4 to 5 percent annual- was placed in administration – similar with City Link on Christmas Eve were ly to just 1 to 2 percent. While its share to a Chapter 11 bankruptcy in the urged to pick them up. Rival parcel price was still trading above its IPO price U.S. – on Dec. 24, 2014. On New delivery firm APC Overnight pledged from October 2013, Royal Mail saw its Year’s Eve, the company announced to offer up to 100 positions at its na- operating profit plunge 21 percent in that about 2,000 employees would be tional sorting centre in the city of Can- the six months ending Sept. 28. “made redundant” and laid off. nock, as well as other depots across Amazon’s more rapid growth in Coventry-based City Link has the U.K., giving priority to laid-off City Great Britain will most likely come at ceased to accept new parcels from Link employees. the continued expense of Royal Mail, customers. Its depots were to remain City Link, founded in 1969, had which currently has less-convenient open into early 2015 with a substan- suffered several years of losses until hours, is mandated to keep costs down tially reduced staff to allow patrons to 2013, when it was purchased by and lags behind other click-and-collect private equity firm Better Capital services in IT and logistics services. LLP. After investing more than £40 However, Martin George, chief million to restructure the company, commercial officer of the U.K.’s Post Better Capital was unable to turn City Office, said the Amazon agreement Link around. meshes well with its plan to mod- Since Dec. 24, the business of ernize state-owned postal locations City Link has been managed by around the country. Today, about joint administrators Hunter Kelly, 2,000 post offices are now open on Charles King and Tom Lukic of Ernst Sundays, while other postal stores are and Young. –Linda Ball open an additional 85,000 hours each week, nationwide. –Randy Woods

16 FEBRUARY 2015 ACW EuropeNews Transaero Airlines receives government bailout Russia’s second largest airline, Tran- including two Tu-204C freighters – and to Air Cargo World’s sister publica- saero Airlines, has been guaranteed a has four A380s, twelve A330s, and eight tion Cargo Facts, Transaero Airlines three-year, 9 billion-ruble (US$164.8 A320s on order with Airbus, as well launched the first scheduled freighter million) bailout by the Russian govern- as four 747-8Is on order from Boeing. service in its history in early Decem- ment. There has been some speculation that ber, operating the Tu-204Cs on a TASS Russian News Agency report- the carrier’s precarious financial situa- Beijing-Novosibirsk route. ed that Prime Minister Dmitry Medve- tion may force it to cancel the A380 and “We have overcome the crises of dev signed a resolution on Christmas 747-8 orders, but, so far at least, no an- 1998 and 2008. We have great Day to support Transaero in light of nouncement has been made. experience of finding a way out,” the economic situation in Russia. TASS In 2013, Transaero carried 70,000 Transaero CEO Olga Pleshakova told also reported that inflation in 2014 in tonnes of cargo overall, a 5.9 percent Russian news agency RIA. “As then, Russia was 11.4 percent. increase over 2012 figures. According all our actions are aimed at safe and The government will cover up to 100 reliable transportation, as well as in- percent of Transaero’s liabilities with a creasing the availability of air travel, three-year loan from VTB Bank, which which is affected by the current ex- is 60.9 percent government-owned. change rate.” The loan is strictly for payment of the Russia’s third-largest airline, Utair,

airline’s operating costs, and its use Photo: ©Leukhin Fedor has also asked the Russian government will be monitored by the Ministry of for help. It owes 13 billion rubles ($214 Transport. Russia’s government said million) to banks. It plans to cut its cur- this will not be an extra burden on the rent fleet of 68 aircraft by 40 percent, budget until 2017 since Transaero’s as it cannot meet its lease obligations. guarantee-secured liabilities only be- Vice-Premier Arkady Dvorkovich told Transaero’s diverse fleet includes only two come mature after Jan. 1, 2017. TASS that the airlines must look for freighters (Tu-204-100Cs), but it operates Transaero currently operates 103 a variety of wide-bodies including ways to eliminate losses in the next aircraft – 53 of which are widebodies – the non-ER 777-300. few months. –Linda Ball I am Peace of Mind

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ACW FEBRUARY 2015 17 SWC Mambio_EN_178x124.indd 1 12.01.15 15:34 CargoChat Cargo Chat: Mohamed Ebrahim Al Qassimi In June 2013, Abu Dhabi-based Maximus Air, one of the largest specialist cargo operators in the Middle East, grounded its fleet of five A300-600s, terminated its ACMI-lease contracts and began restructuring. This year, the all-cargo charter airline has re-emerged with plans to offer door-to-door delivery for cargo of almost any size, plus freight forwarding services for air, sea and land transport modes. Air Cargo World caught up with the new Maximus Air CEO, Mohamed Ebrahim Al Qassimi – a co-founder of Air Arabia and former advisor to GE Aviation – to discuss the new “one-stop-shop” forwarding venture and some of his expan- sion plans for what looks to be a busy year.

Why did you decide to enter the forwarding market perspective. As such, expansion is something we will be with this new door-to-door service? looking to achieve through a number of phases staggered The rationale behind this new venture is based on the fact across the year. However, while carriers outside the Middle that, up until very recently, freight forwarders have been the East continue to face the combined challenge of overcapac- oil that keeps global supply chains running. They are a vital ity [and] weak demand … our approach is more about sus- component in ensuring that international trade maintains tainability than it is about being overly cautious. pace with the increased speed in which business transac- Do you plan to return to ACMI operations or tions and the worldwide transportation of goods now takes scheduled service? place… While the freight forwarding market dipped 3.3 per- Not at this point in time. But who knows? The ACMI indus- cent last year, the forecast through to 2017 remains bright, try is definitely changing, and the motivation behind ACMI with a 6.7 percent CAGR being projected by [market re- customers’ decisions to lease freight aircraft has changed search firm] Transport Intelligence. Like Maximus Air, many dramatically. Whereas before companies might have leased a in the freight forwarding industry are looking at ways to freighter to test out a new service before committing to the adjust their business models to reflect the changing nature of purchase of a new aircraft, for example, the ACMI customer the global economy, and maximize their share of this global mix has diversified to include airlines, freight forwarders, growth. and charter brokers, etc. This presents fantastic growth op- Does the move into freight forwarding signal a shift portunities if you get it right, but at this point in time it is away from air cargo flight operations for Maximus? not something that we are actively looking into. No. Air cargo operations were what Maximus Air was found- What are some of the growth markets you see ahead? ed upon and will remain a core part of our business opera- Some of the main drivers in African markets have been tions. This is our bread and butter, if you like, and we see urbanization and stability. While not directly linked to air no reason to change something that isn’t necessarily bro- freight, these two factors have enabled economies to grow, ken. We are encouraged by the positive economic forecast and have prompted increasing demand for the import and that has been predicted by IATA, and we are targeting 20 export of wholesale, retail and manufactured products, percent growth over the coming few years. We will have to which accounted for over two-thirds of the continent’s GDP work hard to achieve this, as with any company seeking to in recent years. Africa is also home to five of the world’s achieve double-digit growth, but the opportunities are most dozen fastest-growing economies and has seen 6 percent definitely there… Middle Eastern cargo airlines continue to growth in demand for air cargo in 2014 – second only to the outpace global markets. Regional carriers recently reported Middle East. Linking the supply chains between these two 7.8 percent growth and IATA have also said that robust key regions therefore holds many benefits for our business growth in global air freight industries is very promising. operations, as regions like Latin America and others are Maximus is currently operating one An-124 and two struggling to reverse 6 percent negative growth in FTK. Il-76s – all ACMI-leased from Ukraine Air Alliance. ACW Will there be any changes to this fleet arrangement? We are always looking to add new aircraft to our fleet but, Maximus is one of the few carriers outside of Russia and Ukraine to like always, we will only do so if we think it will add a new operate the Antonov An-124. dimension to our offering and maximise the potential for creating new cargo flows and revenue streams by doing so. This is a vital part of our new growth strategy, but for now our plans are focused on consolidating business and creat- ing demand-driven services that are good for business. Does Maximus Air have any other expansion plans for 2015? We want to hit the ground running and start the year… but we are also aware of the need to ensure business operations are sustainable, both in the short-term and from a longer

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Presented in partnership with during its World Cargo Symposium 20 FEBRUARY 2015 ACW THE LION ROARS HOW ETHIOPIAN BECAME AFRICA’S LARGEST CARGO CARRIER By Randy Woods

the nose of every Ethiopian Air- efficient fleet, viable route network, strong lines aircraft, near the cockpit customer base, strategic partners and ad- window, there is an image of a equate financial resources.” golden lion rearing up on its hind Ethiopian, he added, has been cognizant legs. The painted logo – based on of all of the above. the “Lion of Judah” that used to be on the The Addis Ababa-based carrier was one Ethiopian flag – is small and subtle, but it is of the first in Africa to understand the ben- a symbol of prestige and strength that has been as- efits of generating revenue from both cargo and sociated with the country for centuries. passenger operations. “From day one,” Fadugba For most of the airline’s 70-year existence, Ethio- said, Ethiopian has been driven by its “Pan-African pian Airlines resembled this quiet, inconspicuous vision and unswerving commitment to bring Africa lion logo, slowly growing its fleet of propeller- together by developing comprehensive air links driven and jet aircraft and adding routes across the throughout the continent. It now has the best route continent. Today, however, the golden lion is in full- network in Africa.” throated roar, growing by an average rate of 20 to 25 percent per year since 2005 – expanding more Eyes on the horizon in the last 10 years than the previous 60 combined. In 2010, just before Gebremariam made the leap “We are now the fastest growing, largest and from COO to CEO, and just after the airline started most profitable airline in Africa, by far,” says CEO a massive fleet modernization plan involving the or- Tewolde Gebremariam, who has served continu- ders for 35 new aircraft, Ethiopian embarked on an ously in various roles at the airline for 30 years. ambitious 15-year development strategy, called “Vi- Gebremariam, a soft-spoken, balding man with a sion 2025.” The ultimate goal of the airline’s strate- wide smile, started at Ethiopian Airlines as a trans- gy was clear: “To become the most competitive and portation agent in 1985. Since then, the deceptively leading aviation group in Africa by providing safe, quiet executive has proven to be a ferocious com- market driven and customer focused passenger and petitor in the air cargo market, shepherding Ethio- cargo transport, aviation training, flight catering, pian’s rapid growth into a US$2.3 billion African MRO and ground services by 2025.” powerhouse. In 2013-14, the airline reported net Since crafting that statement, every decision at income of $228 million, making it the most profit- Ethiopian has been based on the Vision 2025 prin- able carrier in Africa. ciples. “Unlike many in the industry, [Ethiopian is] In a continent that is often racked with economic an airline that plans long term,” Gebremariam said. strife, famine, internecine war and a centuries-long The Vision 2025 roadmap has enabled the carrier legacy of colonialism, Ethiopian Airlines, the na- “to tap into the market opportunities by leveraging tion’s flag carrier, has managed to not only survive our internal strengths and external opportunities.” but thrive where so many other cargo carriers have Gebremariam is also well versed in the caution- struggled or expired. ary tales from other failed African airlines that grew Nick Fadugba, CEO of consulting firm African too fast or failed to keep up with the market. “Avia- Aviation Services Ltd. and former secretary general tion is a capital-intensive industry with no or little of the African Airlines Association, has followed the return on investment,” he said. “If you look at the arcs of many African carriers over the years and last 40 years of return on investment of the global has seen some patterns emerge among those that airline industry, it is actually destroying wealth. In did not survive. “The main reason why few cargo such a low-margin industry, high performance and airlines have been successful in the past in Africa stringent cost management are critical.” is that they lacked the critical combination of an Continued on page 22 ACW FEBRUARY 2015 21 LionRoars

Continued from page 21 Being progressive in its growth strat- • Carrying more than 18 million hub in Lomé, Togo. There are plans to egy has been one of the keys to the passengers and 720,000 tonnes of eventually establish a Southern Africa carrier’s success, Fadugba says. “Over cargo per year hub in Malawi and a Central Africa the years [Ethiopian] has invested • Operating 20 freighter aircraft and hub in the Democratic Republic of the heavily in modern aircraft, aviation serving 37 freighter destinations globally Congo (DRC). maintenance and training facilities, • Creating multiple hubs in Africa The airline now has 76 aircraft, and human resource development.” including eight dedicated freighters: Armed with this knowledge, the Vi- Now a full five years into the 15-year four 777Fs, two MD-11Fs and two sion 2025 goals under the Ethiopian plan, Ethiopian is either approach- 757-200Fs. (Ethiopian recently lost its CEO include the following: ing or has surpassed most of its cargo only narrow-body freighter, a benchmarks. Besides its main hub at • Increasing its overall fleet to 120 air- 737-400F operated by subsidiary ASKY Bole International Airport in Addis Airlines, when it slid off the runway craft and the number of destinations Ababa, it now has a European hub in to 90 worldwide last month at Accra, Ghana, in a non- Liège, Belgium, and a West African fatal accident). The freight division, Ethiopian Cargo, serves 24 global freight destinations (15 in Africa, 70 Years of Service seven in the Middle East and Asia, and 1945 two in Europe), with a current annual Ethiopian Air uplift of around 200,000 tonnes. The Lines Inc. is airline also has four more 777Fs on or- 1956 founded at the der from Boeing. National Airline request of Emperor Haile Selassie I in Training Project a joint venture with TWA. Service begins State owned, not state run set up in Addis a year later with Douglas DC-3s. If there’s a red flag to be found con- Ababa to train cerning the management of the carrier, local pilots and technicians, which it comes from a pay grade above and eventually becomes the Ethiopian 1958 beyond that of the CEO. Ethiopian Aviation Academy. Long-haul Airlines is a state-owned carrier, origi- services begin using Douglas DC-6Bs; nally established nearly 70 years ago, becomes IATA member in 1959. in December 1945, at the request of 1962 Emperor Haile Selassie I. Students of Hub established at newly-opened aviation history know that government Bole International Airport. 1963 interference in Africa does not always breed success (read: South African 1971 Jet service Airways, Air Namibia, Air Zimbabwe), begins with two Boeing 720Bs. Two Colonel Semret Medhane named especially in countries like Ethiopia, years later the carrier becomes a general manager, the first Ethiopian with a recent history of military junta share company and changes its name to hold the position. governments and Soviet influence in to Ethiopian Airlines. the 1970s and ’80s. “Yes, Ethiopian is a 100 percent gov- 1982 1989 ernment-owned airline,” Gebremariam Ethiopian admitted. “But there is a clear separa- becomes Cargo Management Department established. tion between the function of owner- the launch ship and management.” customer for the Boeing 767-200ER. Deliveries begin in May, 1984. “To their credit, successive govern- 2005 ments of Ethiopia have allowed the Becomes national airline to be run by competent 1998 launch management and dedicated staff,” Fa- The route network is extended to customer in dugba agreed. North America, first to Washington, Africa for Boeing’s 787 Dreamliner. Like a well-run sports franchise, D.C., and later to New York. Ethiopian Airlines has an owner that provides funding when needed, but 2010 stays out of the way on business deci- 2009 “Vision 2025” 15-year sions, leaving management to be run development strategy begins. by professionals. “The government is Orders of great support to the airline, with 35 new its general oversight role, but fully re- aircraft, including five 777-200LRs, 2011 spects the sacrosanct principle of the twelve A350-900s and ten 787s. An Joins Star Alliance; named “African independence of the airline,” Gebre- order for four 777Fs follows in 2011. Cargo Airline of the Year.” mariam said. 22 FEBRUARY 2015 ACW LionRoars

What’s good for Ethiopian is not Although Befekadu said he did not completed in 2017, is being built with always great for the freight forward- see any evidence of change yet at Bole, an outlay of US$150 million he said. ing community, which naturally wants Ethiopian is already responding to the This is yet another example of Ethio- to find the best cargo handler at the need. Gebremariam signed a deal with pian’s “ability to accurately read the best price. At Ethiopian’s Addis Ababa the French Development Agency last changing market and implement busi- hub, Ethiopian is pretty much the only year to construct a new air cargo ter- ness plans successfully,” Fadugba said. game in town. minal at Bole with an annual capacity With a B.A. in economics from Ad- “They have sort of a monopoly at of 1.2 million tonnes of both dry and dis Ababa University and an MBA from the Bole cargo terminal,” said Brook perishable freight. Construction has the Open University in the U.K., Ge- Befekadu, general manager of Addis recently started and is scheduled to be bremariam is well equipped to master Ababa-based freight forwarder Green completed in two phases, Gebremari- the intricacies of global commerce. Yet International Logistics Services. “No am said. The first phase, which will be Continued on page 24 one else is allowed to do cargo han- dling there.” Despite this lack of unfettered choice, Befekadu said the carrier does provide excellent services at competi- tive rates. “Ethiopian has a very good connection with the rest of Africa,” he said. “We like to use them because if you have a shipment going to the States, there is a direct flight to Dulles Airport. With all the other carriers, you have to first go through Frankfurt or some other hub first before going to the U.S.” Addis Ababa puts us in the middle of the major East-West trade lane, giving us a natural edge on the competition. —Tewolde Gebremariam, CEO, Ethiopian Airlines

Kidist Berhanu, owner of Kidist Berhanu Custom Clearing, agreed that Ethiopian “charges a fair price” and makes it easy for her to arrange shipments of spare parts or perishable goods to most regions of the world. Right place, right time Befekadu also said he and other forwarders at Green International said they would like to see larger ware- house space at Bole. Although the air- port underwent an expansion in 2006, boosting its annual capacity to 350,000 tonnes and enough room for 180 pallet positions, cargo containers often still get left outside, exposing them to po- tential damage.

ACW FEBRUARY 2015 23 LionRoars

Continued from page 23 he attributes a significant amount of Ethiopian to sign code-sharing agree- US$80 million in expanding both the his success to simple geography. “Ad- ments among a network of 26 other scope and scale of its training facility. dis Ababa puts us in the middle of the carriers that serve more than 1,300 “Today, thanks to this investment, its major East-West trade lane, giving us destinations in nearly 200 countries. annual intake capacity of trainees has a natural edge on the competition,” increased from 250 to around 1,000,” he said. “We are located right in the Africa first he said. Following the Vision 2025 middle of the fastest-growing trade Based on this phenomenal growth, strategy, the carrier plans to quadruple lane in the world between China, India, Ethiopian is a carrier with clearly glob- the annual capacity yet again to 4,000 Africa and Brazil, and are tapping into al ambitions, but it has never forgotten students, “half of whom will come from this opportunity.” where it comes from. other African countries.” The timing of the airline’s recent “We know the African continent, Another goal of Gebremariam’s growth spurt also coincides with a our home market, better than anyone tenure is the development of a strong surge in Africa’s overall economy, else,” Gebremariam said. “We have intra-African air network, like the one which has averaged continent-wide been in Africa for the last 70 years, pioneered by pan-African airline Air GDP growth of 5 to 6 percent over the in good and bad times, and believe Afrique, which went bankrupt in 2002 last decade. “The African air cargo that Africa should not just be a con- (see sidebar). In an effort to recapture market represents just 1.6 percent sumer base for the global economy, but the spirit of Air Afrique, Ethiopian Air- of the world’s total freight traffic, but should also have its own indigenous lines has purchased a 40 percent stake encouragingly grew at a faster rate and globally competitive industries in ASKY Airlines, a private regional than the global average in 2014,” Fa- that reap the benefits of Africa’s carrier launched in 2010 and based at dugba said. “Barring political unrest growth.” Lomé-Tokoin Airport in Togo. or economic setbacks in major African One of the fruits of this philosophy is Filling in where Air Afrique left off, markets, the region’s air cargo market ASKY is “providing critically essential should see steady growth in 2015.” the airline’s Ethiopian Aviation Acade- my, a training institute launched by the air connectivity for West Africa,” Ge- These rosy forecasts have attracted carrier in 1956 as an example of self- bremariam said. ASKY operates three much attention from large European, sufficiency and professionalism on a 737-700s and four Dash-8-400s, serv- Middle Eastern and Asian carriers continent that was finally beginning to ing 22 scheduled destinations across seeking to capitalize on Africa’s rise break the chains of colonial rule. The West and Central Africa. The regional to prominence. As more competitors academy provides intensive training carrier plans to gradually add non- sought routes to Africa, Gebremariam for cabin crews, marketing, ground op- West African stations in Europe and seized the opportunity to join the Star erations, pilots, aviation maintenance the Middle East. Alliance in 2011, paving the way for technicians and leadership. Ripe market for perishables The academy “has been the bed- rock of our success,” Gebremariam Today, much Ethiopian’s cargo said, by providing a steady supply of growth is being driven by the skilled manpower. Over the last five country’s booming perishables export years, Ethiopian has invested about market, including such time- and temperature-sensitive goods as flow- ers, fruits, meat and vegetables. As the country prepares to scale up its

24 FEBRUARY 2015 ACW LionRoars perishable exports, Gebremariam is ready to grab the lion’s share of this Africa’s Fractured Skies lucrative market. thiopian Airlines may be doing well which it was drafted), pledg- “We are responding by expand- compared to most others on the conti- ing to remove their restric- ing our capacity to handle E nent, but because it is an African car- tions and allow open access such cargo by investing in a rier, it is always fighting an uphill battle, even to carriers from other African perishable cargo cold room” on its home turf. nations. The treaty, however, has at the new cargo terminal While many other airlines around the world never been ratified after 16 years. now under construction, he have been able to set up various types of “open As a result, “gaining market access said. The airline also plans skies” agreements, allowing cross-border traffic within Africa can often be more diffi- on heavy use of its 777Fs, to take place with certain regions, this route cult for African airlines than foreign car- “which have the ability to liberalization has never taken root in Africa. riers,” noted aviation consultant Nick Fa- maintain cold temperatures of In 1999, the continent came close, when dugba.This failure to cooperate is “the major up to 4 degrees centigrade.” 44 countries signed what is known as the obstacle for the growth of the African aviation Yamoussoukro Decision (after the Côte industry,” said Ethiopian Airlines CEO, Tewolde On the import side, Ethiopian d’Ivoire city in Gebremariam. “Generally speaking, aviation is not is benefiting from the booming oil treated as a strategic sector – as an enabler of sector in other parts of Africa, as an investment, trade and tourism growth.” increasing amount of oil drilling and In addition, aviation in Africa “is being taxed exploration equipment flow through service between Bole and like tobacco and alcohol,” he said. The price the hub at Bole. The petroleum busi- Brussels Airport, bringing of jet fuel is twice the global average, and ness is also creating a larger middle mostly flower shipments to other fees for overflying, aircraft landing class, which is developing a taste for Europe and carrying back gen- and parking are exorbitant. “We are fac- high-value goods, such as medical eral freight to Ethiopia. Later ing unfair competition from Gulf-based equipment and electronics. this month, Ethiopian will begin airlines, which have access to government subsidies and to cheap fuel,” he added. “The increased volume of trade service to Goma, DRC, which will Gebremariam said he hoped to see a resulting from huge investments [in be the carrier’s 50th destination in Africa. renewed political commitment to liberal- Africa] by China and India is causing ization of the skies from the continent’s the cargo traffic between these regions “We have managed to suc- leaders, in accordance with the to thrive and has increased our market cessfully tap into the opportuni- African Union Agenda 2063. “We share in the cargo business,” Gebre- ties of Africa, which is now the are lobbying for the creation of mariam said. second-fastest-growing region a single African air space and for aviation to be treated as a So far, 2015 is looking at least as in the world” Gebremariam said. strategic sector by mobiliz- bright as 2014 at Ethiopian Airlines. “The employees and management of Ethiopian have a strong sense ing the African Union Last month, with the help of Keuhne Commission, industry of ownership towards the airline + Nagle and DHL Global Forwarding’s actors and Starbroker subsidiary, Ethiopian Cargo and work tirelessly to ensure that it governments.” launched four-times-a- week 777F shines high in the sky.” ACW Photo: ©Rainer Bexten

ACW FEBRUARY 2015 25 KEEP COOL and CARRY ON

Some modal shift may be inevitable, but a renewed commitment to quality can keep high-value pharma cargo flying

by Randy Woods

26 FEBRUARY 2015 ACW KEEP COOL andCool CARRYChain ON o matter how cool we keep the maceutical products has risen, but av- tive services offered by the forwarders, supply chain, how fast we fly or erage weights per shipment have been handling agents, airport and airlines,” how low fuel prices go, in this cost- declining,” said Phil Abbate, global vice said Steef van Amersfoort, chairman of Nconscious economy, there is no president, pharmaceutical and health- the Dutch Airfreight Shippers Council. competing with one of the oldest and care, for logistics firm UTi Worldwide “To ensure time- and temperature- slowest forms of transport: seafreight. Inc. “We attribute this shift to an in- sensitive services for your shipments, Indeed, while demand for temper- creasing number of mature products you need to know how and where your ature-sensitive shipping is rising and that are being converted to ocean.” shipments are handled, including the airports build larger cool-chain termi- With more generic drugs hitting the priority given. We cannot rely on ‘Don’t nals, airfreight’s share of the lucrative market and some patents expiring on worry, we take good care of your ship- pharmaceutical market has shrunk blockbuster medications, Big Pharma ments’ services.” from 17 percent in 2000 to just 11 has less of a profit margin today. “This Of all AstraZeneca shipments that percent in 2013, according to a 2014 has led to an influx of procurement- were made last year across all modes, report by research firm the Seabury driven purchases,” Abbate said. “That, Wann said 80 percent of all reports of Group. plus a bad economy, has driven compa- mishandled products, or “excursions,” Let’s face it – modal shift is already nies to cut costs. And what’s the first originated from the airfreight sector; upon us for transporting pharmaceu- place you look when you’re cutting about 18 percent of the excursions ticals. This has caused alarm among costs? Move it on the ocean. One cus- came from road transport and just 1 some cargo carriers that have counted tomer used to ship five to six ULDs a percent came from ocean vessels. on gaining market share in this US$64 week – now it’s all going by sea.” “We do a lot of prediction analysis on billion business. But with a little under- [excursions], and, nine times out of ten, standing, cooperation and agreed-upon it’s because it’s been sitting out on the standards among the various players in You need to know how and cookie sheet in the hot sun,” Abbate the cool chain, the airfreight world can said. In most cases, he added, the tem- learn from this inevitable economic perature spikes could be avoided with reality and retain the pharmaceuticals where your shipments are special handling, such as added ther- that they still carry, which just happen mal tarps to insulate the containers, or to be the highest-value ones. handled, including the ensuring that the pharma containers are loaded on aircraft first so they don’t Shift happens priority given. We cannot wait as long on the tarmac. “But people The signs of the modal shift are ev- don’t want to pay for special handling.” erywhere. In 2014, Lufthansa Cargo rely on ‘Don’t worry, we Despite the well-known risk of tar- shipped in excess of 65,000 tonnes of mac exposure, “even the most phar- pharmaceutical products, or about 8 maceutical-friendly of airlines will only percent of its annual carry. “In past take good care of your tentatively commit to exposure under years we had steady double-digit two hours,” he said. “No equipment or growth figures in tonnages,” said Chris- shipments’ services. technology has been introduced to miti- topher Dehio, head of product and gate or reduce this constraint. So far the —Steef van Amersfoort, chairman, solutions management, temperature expectation is that the shipper will bear Dutch Airfreight Shippers Council control, at Lufthansa Cargo. “However, the additional cost of packaging.” in the last two years, growth was not In recent years, many airports, quite as strong as in the years before.” At the same time, the demand for ground handlers and cargo carriers Julian Wann, global category leader, cool-chain handling is growing. “Look have created high-tech cold chain logistics, at Big Pharma firm Astra- at the therapies coming out today,” storage facilities, such as Amster- Zeneca, said that about 55 percent of Abbate said. “It used to be they were dam’s Schiphol Cargo, the Lufthansa its global primary volume (20 million shipping simple molecules, but now Cargo Cool Chain Center in Frankfurt, kg) is shipped by air and 45 percent they’ve turned into complex biologics, LuxairCargo’s Healthcare and Pharma- by ocean. Four years ago, nine out of all of which need even more tempera- ceuticals Center in Luxembourg and every ten of his pharma products were ture control.” IAG Cargo’s network of Constant Cli- sent by air. “A major factor for this More than just price mate Centers. change has been the environmental But even these facilities aren’t im- benefits of using ocean routes, as there With airfreight rates sometimes as mune to excursions. Abbate described are 90 percent less emissions on the much as 78 percent higher than sea- one case of a temperature-controlled water and the slow steaming increases freight rates per kilogram, cost is an Envirotainer that had been stored in a this,” he said. obvious driver of modal shift. However, cool chain facility, yet still suffered an According to some experts, this poor service, questionable cargo in- excursion. “When the shipper asked shift may have as much to do with tegrity and supply-chain transparency why, the ground handlers said, ‘Well. the pharma industry as it does the have become serious problems. There weren’t any free outlets we airfreight business. “Over the past five “The airfreight service is reliable, but could plug it into.’” years our air shipment count of phar- not the time- and temperature-sensi- Continued on page 28

ACW FEBRUARY 2015 27 KEEPCool COOLChain and CARRY ON Continued from page 27 the companies’ diabetes alliance is expected to increase that to around 20 What Big Pharma wants percent,” Wann said. “The number of From the perspective of the pharma touch points and the different parties companies, airfreight is just one of an involved are a key element in the prob- array of options that can be tailored to lems that the airfreight industry is ex- their various needs and product lines. periencing. However, we have invested Simon White, Pfizer’s regional leader, a lot of time and effort into making quality operations, for Europe, the improvements with our airfreight part- Middle East and Africa, said the com- ners and in 2014 we saw a reduction in pany currently ships about 20 percent delays and issues.” of its pharmaceutical products by air, Wann also suggests that carriers may Inside Lufthansa’s cool center at Frankfurt and the rest by a mix of the other op- not know the full extent of the integ- tions. “We’re working to reduce the rity problem. “If there is an excursion Some of UTi’s pharmaceutical clients amount shipped by air because we can in the temperature range on arrival at prefer to truck their shipments to an better control the quality with other the destination, the delay may not be air hub with superior handling capabil- modes,” he said. “With air transport seen by the airline industry and the ex- ity, “even if it means adding a transit there is a lot of variability in our ability cursion will have to be investigated by day,” Abbate said. “For years a com- to assess the quality of the service and the pharma company themselves. This mon practice for exporters of vaccines to control handling, especially ground does not necessarily result in a claim, is to coordinate the release of ship- handling in certain destinations, such but it’s clear that the airlines are not ments in order to avoid arrivals over as the Middle East and countries always able to see the whole extent of the weekend, when there is a higher where the government controls air- the issue.” incidence of mishandling.” ports.” Reducing door-to-door transit time For pharma shipments, Lufthansa As a result, Pfizer mostly uses air is often emphasized as a goal by car- Cargo’s Dehio said that “rather safe transport for higher-value biological riers, but pharma companies say they than fast” is the best policy. While air- and vaccine products, and when the are willing to give up a few days in lines are good at speed, they can do speed of air transport can help meet exchange for safer handling. Wann said little about factors such as complex an urgent need, or to avoid a stock-out the standard six-day door-to-door ship- customs documentation, clearance situation, White said. ment time would be “more than procedures and punctual pick-up – “is- Only about 10 percent of Astra- acceptable” for most shipments, pro- sues that equally apply to sea and air Zeneca’s products are shipped via the vided the airlines demonstrate a con- freight,” he added. cold chain, “but our 2014 acquisition sistently higher level of service with Dehio said Big Pharma should be of Bristol-Myers Squibb’s interests in less variability. more involved in discussions with GDP & CEIV: Finding common ground When the issue of bottlenecks in air- Dutch Airfreight Shippers Council. “I freight pharma shipments is discussed, welcome the certifications as they can fingers start pointing quickly, said Se- be used as a tool to improve facilities bastiaan Scholte of the Cool Chain As- and services at the airports.” sociation. “There are so many players But some airlines question the in the wholesale supply chain, if some- applicability of GDP for air carriers. thing goes wrong, people are quick to “The GDP guidelines apply to holders say ‘It was the customer!’ or ‘No, it of wholesalers distribution licenses,” was the airline!’ We need to stop play- said Lufthansa Cargo’s Christopher De- ing the blame game. There are a lot of hio. “Airlines are not wholesale distrib- partners in the cool chain, but they all uters of pharmaceuticals but aircraft act as one.” operators.” One way to calm the waters is to One requirement of the GDP is to have a strong industry standard. At ensure that all subcontractors han- the moment, one generally accepted dling pharmaceutical shipments must regulation is the EU’s Good Distribu- be trained, managed and have a QA tion Practices (GDP), established in system in place that complies with the 2013. “The GDP guidelines become GDP. “How can an airline ensure this more and more strict and will force on all airports in their network, where pharma shippers to increase their han- ground handling is a monopoly and in dling requirements and validation of the hands of the airport authorities of the services and facilities used,” said a particular country?” Dehio asked. “It Steef van Amersfoort, chairman of the 28 FEBRUARY 2015 ACW KEEP COOL andCool CARRYChain ON and temperature-sensitive products, Lufthansa’s Dehio predicts that the such as vaccines and other complex bi- airfreight cool chain will become a ologics. There are also areas where the more competitive business as more concentration of global pharmaceuti- and more carriers join in. “I believe cal companies can produce enough that there will always be a significant volume to make sense for regular air- airfreight volume in all those cases freight routes. where speed is of the essence and the For instance, just last month Qatar values are so high that the necessary Airways Cargo announced the launch large seafreight volumes can no longer of its “Pharma Express” – twice-weekly be insured,” he said. “All airplanes fly A330F service connecting Doha, Brus- at the same speed, and have essentially the same technical status in air-condi- Inside Lufthansa’s cool center at Frankfurt sels and Basel. The freighter service ties in Qatar Airways’ extensive global tioning. Therefore the distinguishing airport authorities who decide on in- network with the pharmaceutical factor between competitors will be the frastructure investments on airport nerve center of Europe, providing easy capabilities and experience that can be premises. “To my knowledge, such access to 146 life science companies displayed while the shipment is being discussions have already been taken in Belgium and the booming Swiss handled on the ground.” up with sea ports but in air transporta- pharma and chemical industries. As more cool-chain products will be tion such discussions seem generally Sebastiaan Scholte, chairman of the shipped in smaller quantities, air car- to be left to the airlines with little or no Cool Chain Association and CEO of riers will have to focus even harder on influence. In some parts of the world Netherlands-based Jan de Rijk Logisitcs, quality, Wann said. “I believe the phar- Lufthansa has successfully engaged in said at least 70 percent of cool chain ma industry will continue to buy the such discussions. In others the efforts pharma shipments are between the U.S. right service, but as we become more are futile, and you can imagine how and Europe, but he expects to see the evolved in the logistics capabilities, difficult it is for a European carrier fastest growth in China, India and the there will be challenges to airfreight to exercise any degree of influence in emerging economies of the world. being a value-added service.” some countries.” “These pharmaceuticals are be- “Basically pharmaceutical companies Always a place at the table ing used all year round,” Schulte said. need ‘pharma grade’ service from the “We’re all getting older and the popula- air carriers, forwarders and handling While the reliability of seafreight tion is growing – it’s not like there’s a agents,” said Pfizer’s White. “We need may give ocean vessels a greater share Christmas holiday peak. Growth by to be sure that these valuable – in of the cool chain pharma market, there seafreight will also happen – we will con- many cases life-saving products – have will likely always be a place for air- tinue to see some modal shift – but some the high priority they deserve.” freight for shipment of the most time- pharma will definitely continue by air.” ACW

would not help to rely on some form of sels Airport cargo-handling audits, many of which certification.” community, and Singapore- were conducted by That’s where The International Air based SATS Coolport. our client’s QC group, Transport Association (IATA) comes Through CEIV, “a lot of the CEIV was by far in. IATA has launched a certification pharmaceutical companies the most thorough and program for the whole world to adopt will say ‘this is a process I detailed,” he said. “We via its new Center of Excellence for will trust,’” Scholte said. “It do feel that CEIV will Independent Validators (CEIV) on sets quality benchmarks provide a competitive Pharmaceutical Handling. Under the and also extends beyond advantage.” program, IATA-trained instructors and the airport to cover the “Over the next two validators will use on-site assessment, whole supply chain.” to three years the implementation planning, training and To earn CEIV certifica- Sebastiaan industry will adopt a follow-up audits to certify airlines, han- tion, UTi’s Abbate said his Scholte more formal approach dlers and forwarders that are deemed company received training to GDP certification to provide the highest possible temper- in five major categories: Temperature- or possibly embrace IATA’s effort to ature-controlled service. Controlled Cargo Handling, Tempera- create a single global quality standard According to IATA, the CEIV cert ture-Controlled Container Operations, with CEIV,” Abbate said. “One way or goes beyond the GDP guidelines, es- Risk Management of Temperature- another there will be a standard mini- tablished in 2013, because it is global. Controlled Cargo and Audit, and Qual- mum qualification for third-party pro- Some of the earliest CEIV-certified ity of Temperature-Controlled Cargo. viders to act as a qualifier for handling companies in the global cool chain “Our Brussels office did comment that pharmaceutical products.” ACW include UTi Worldwide Inc., the Brus- after having undergone numerous

ACW FEBRUARY 2015 29 BOXED IN Can transparency, predictability, and reliability win the e-commerce game against the integrators? By Martin Roebuck

you were not shopping for a puzzle. Ahead of his retirement last Sparkle Princess Elsa Doll from June, Hughes’ predecessor, Des Disney’s movie “Frozen” during Vertannes, set the airfreight industry the 2014 holiday season, well, a target of removing 48 hours from you were somewhat alone. The door-to-door transit times that have IfSparkle Princess Elsa Doll was the largely remained static at six days single most popular toy amid the rabid since the 1980s. The new man is not e-commerce buying that took place backing off from the challenge, but ap- during the 2014 peak season. How ra- pears to be changing the focus of this bid? Try 18 toys per second that were streamlining effort. ordered by Amazon customers just on To Hughes, the issue seems to be Cyber Monday, the first day after the less about going faster than about Thanksgiving holiday in the United working smarter. Hughes told a cargo States, traditionally a day for heavy media briefing at IATA headquarters in online shopping. Geneva late last year that the 48-hour In all, Amazon alone shipped to 185 challenge was not a goal in itself, but “a countries during the 2014 holidays, consequential benefit of doing some- which gives some indication of the thing else – transforming the business. massive pressure on air cargo carriers Airfreight spends 90 percent of time and freight forwarders from e-com- on the ground. It’s stationary for too merce providers to up their game, or long. We need to do things differently.” risk losing further traffic to the integra- Hughes has taken an analytical ap- tors. The question is, can carriers and proach to the challenge. “We need to forwarders meet the challenge? take a forensic look at the fragmented Glyn Hughes, the new global head supply chain, what we can focus on of cargo at the International Air and improve,” Hughes said, which, Transport Association (IATA), is part he explained, was why IATA will soon of the community of industry execu- conduct a global shipper survey, its tives working to solve the e-commerce first in four years. Photo: Disney

30 FEBRUARY 2015 ACW BoxedIn Structural changes needed Hughes is particularly concerned Customers pick transit time based on the commodity about protecting the air shipping business’s stake in e-commerce, a $2 they’re shipping and the amount of money they want billion-per-year endeavour for about 250 IATA-member airlines in more than 100 countries. Hughes said the to spend. If time is an issue, you go to the fastest association was looking to collaborate more closely with the Universal Postal means; otherwise, you put it on the water. Union, the United Nations agency that — Rich Zablocki, VP trade lane management, CEVA Logistics coordinates postal policy among nearly 200 member nations, to ensure that airfreight is performing. “This is funda- distribution center – but we do find the mainstream airfreight supply chain mental, and will be addressed by the that many forwarders don’t pick up.” retains its share of the burgeoning on- latest Cargo 2000 initiatives,” Zablocki line market. CEVA’s Zablocki did not argue Mc- said. The IATA interest group has pre- Whorter’s point. However, Zablocki ex- For more years than most execu- viously introduced various milestones plains that forwarders rarely choose to tives in the air cargo industry care to in the transportation chain, “but each leave freight with the carrier, because remember, the golden ticket to better carrier has its own matrix,” he ob- handlers take on more work than they e-commerce fulfilment was the imple- serves. “There is no commonality.” can handle efficiently. “A carrier may mentation of electronic exchange of Some observers argue that compar- operate one flight a day on a given data. But progress on an electronic ex- ing airlines is much more difficult than route, but suddenly puts on extra change has been as slow as a 767 with ocean container lines, because the charters, or has unplanned diversions no engines. Hughes said the air freight number of origin-destination routes is and schedule changes. Backlogs then industry had failed to make the neces- vastly greater and there is much more build. It takes handlers a long time to sary structural changes in an era of variation in aircraft types – not least break down freight and pass it out. “unchallenged seven to eight percent the challenge of comparing freighters annual growth.” “Facilities are not big enough to ac- with passenger planes. Zablocki does commodate the number of trucks pull- Now, combination carriers are fight- not agree. ing up,” he adds. “Handlers can man- ing unprecedented modal shift – not “I’m not sure it’s as complicated as age in low season, but may not have just from integrators on one side, but some people picture,” Zablocki said. sufficient labor to handle peak flows.” from ocean freight and overland ser- “The questions are: Did you receive There are initiatives to resolve some vices. He pointed out that all Hewlett- the freight? How long did it take to Packard computers for the European of the shortcomings Zablocki highlights. you to receive NCA, for example, is trialing a scheme market now make a 17-day rail journey confirmation? from China – instead of flying. at its Chicago hub whereby it makes its How long own deliveries to forwarders’ off-airport “Smartphones are built to consump- does it take premises. “It comes at a cost, but I think tion, but laptops are built to inventory. you to put it’s a more efficient process,” McWhort- You write them off when a new model the data into er said. “We’re a full-service carrier. The comes out, so you can take the slower your system? philosophy is that if we can prove the distribution option,” Hughes said. In the past, service works, and the consignee is tell- The airfreight industry had been “too when carriers ing the forwarder he is getting a better passive,” he said. By streamlining its have tried to service, we have added value.” do this, they processes and communicating the ben- McWhorter said transit time is not efits more effectively, it could at least would choose Rich Zablocki the trade lane the real issue. The old mantra of get- “start a conversation” with transport ting what you pay for applies to trans- buyers about the flown alternative. and would collaborate with the for- warder to decide what was typical.” portation schedules. “If you tender to As vice president of trade lane man- me on a Friday and I have it in your agement for CEVA Logistics, it is Rich Unsnarling the airport hands by Tuesday, I’ll give you a cheap- Zablocki’s job to choose modes for the er price, just as if you are a private company’s clients. “Customers pick A common complaint from airlines consumer choosing from Amazon’s transit time based on the commod- and their cargo handlers is that ship- dropdown shipping options.” ments are lingering on their premises ity they’re shipping and the amount A forwarder may buy capacity a year of money they want to spend,” said for too long. There are, however, air- lines addressing this concern. Freighter ahead based on tendering a theoretical Zablocki, who is also vice chairman of number pallets on a Tuesday, Wednes- CNS, the U.S. arm of IATA. “If time is operator Nippon Cargo Airlines (NCA) is one such carrier. Shawn McWhorter, day and Friday, but in reality it will let an issue, you go to the fastest means; shipments accumulate over several otherwise, you put it on the water.” NCA’s president, Americas, said, “We want everything collected quickly – it’s days to build the Tuesday consolida- The critical issue is to establish new a transit facility, I’m not sized to be a tion. Carriers find this strategy coun- and better criteria to measure how terproductive. Continued on page 32

ACW FEBRUARY 2015 31 BoxedIn

Continued from page 31 ability as other operators, because they the industry and eliminating paper is “They could run it to me sooner, but are using them.” the true goal, not reducing the num- want to build better pallets,” McWhort- The difference, he said, is that even ber of days in transit. “Improving the er said. Some cargo will be used as a where the integrators use common car- amount of information you’re able to buffer, and if it gets rolled, it moves on riers, they can still call upon their own send electronically achieves better se- a later flight. “If they send the first pal- freight forwarding divisions, as well as curity and sustainability,” he said. let direct to me, then I’m charging $14 their ground transportation, thus elimi- The sticking point for McWhorter is per kilo. … Sure, I can move air freight nating some of the links in the conven- when paper documents and the e-air overnight if that is what’s required, but tional air freight supply chain. waybill don’t marry up. “The industry ocean doesn’t suddenly become com- “Quality, predictability, transparency, has gone through most of the issues petitive if I take a little longer. Modal and reliability must be at the heart of around technology and transmission shift is not a huge threat. On short- all we do,” Hughes emphasized to the standards, and we have to work with haul and intra-Asia perhaps you see it, IATA event. “We’re not integrating pro- forwarders to resolve this,” he said. but usually you’re talking 30-day move- cess and data.” Finally, Zablocki believes that re- ments door to door, and more likely 40 moving the need for repeated data re- to 45 days.” The importance of e-freight entry will be e-freight’s most important With that kind of time horizon, the Still, the e-freight drive remains cru- contribution. “The customer should product in question matters. Mature cial. The drive toward e-freight must enter the initial data and the forwarder consumer products are less time- be “by the industry, for the industry” and airline make their own additions. sensitive and thus at risk of migration, rather than prompted solely by a car- It’s a building process. If we eliminate “but the new chip, the new machine to rier body. Hughes candidly admits, the air waybill, we’ve eliminated the make the chip, the latest phone is go- “We lost years’ worth of opportunity on need for repetition.” ing to fly,” McWhorter asserts. e-freight because [the initiative] had While it is hard to argue with that While integrators stand accused of ‘IATA’ in front.” The association helped vision, the e-air waybill is only one hoovering up all the “Alibaba busi- “lubricate the pinch points,” but was part of this complex jigsaw. “When we ness,” he said they face the same not actively handling the cargo, he said. get to electronic consignment secu- time-versus-money considerations as Ask officials at IATA and they will rity declarations, that’s the real step other operators. quote statistics on an e-freight infra- forward,” McWhorter insists. He is “Look at FedEx,” McWhorter said. structure that they say is advancing. encouraged that aviation and customs “Their international express business Guillaume Drucy, IATA’s head of cargo authorities in key markets such as is flat or declining, but they see growth e-business, said 22 percent of air way- Shanghai are now committed. The doc- in deferred three-, five- or seven-day bills were now electronic, but added ument pouch and the need to distrib- traffic, which moves on third-party car- that removing paper was not enough in ute all that paper must be consigned to riers. Premium service is where they itself. “The way we share information history, he said. “When documents are make their profit, and FedEx can sac- is not optimized – the flow of data mir- lost it becomes a monumental night- rifice load factor to beat everyone to rors the flow of paper documentation as mare and can delay the recovery of [Seoul] Incheon from Oakland, or DHL parties send it one to another, and there freight.” from Cincinnati. are still issues of data quality,” he said. “It can boil down to the customs “As regards the ‘secondary’ market, There are other reasons to promote authority’s requirements and whether the integrators have to be more cost- e-freight beyond speed-of-transport. In they are able to accept electronic data,” effective and will offer the same reli- fact, CEVA’s Zablocki said modernizing Zablocki said. “Air Cargo Advance Screening [the U.S. Customs preclear- ance program] will force people to rec- ognize they have to get data into their Sure, I can move air freight overnight if that is what’s systems accurately and quickly. Once we get that nailed down and there is some commonality in what carriers ex- required, but ocean doesn’t suddenly become competitive pect, e-freight will skyrocket.” Everyone agrees that streamlining if I take a little longer. Modal shift is not a huge threat. the air freight process is nowhere near as simple as the passenger equivalent, — Shawn McWhorter, president, many years back, of migrating over to Americas, Nippon Cargo Airlines e-tickets. There are too many invoices, packing lists, manifests, and Customs declarations involved. But it’s clear to all that unless the industry changes its his- toric practice, customers will find other routes to market. People do want their Sparkle Princess Elsa Dolls, after all. ACW

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ACW FEBRUARY 2015 33 BottomLine

% GROWTH YoY in FTK 15% Nov 2014 REGION Nov. 2014 YTD YtD Nov 2014 Africa 10.5% 6.1% 10% 8.9 9.1 7.3 7.6 6.8 7.1 Asia / Pacific 5.9% 5.4% 6.0 6.3 % 5 4.0 4.3 Europe 0.9% 2.0% 2.8 1.5 Latin America -0.7% 0.5% 0 - 0.9 Middle East 12.9% 10.7% - 2.1 -5% North America -0.5% 2.3% Asia Pacific Europe North America Industry 4.2% 4.4% Africa Central & South Middle East Worldwide America & South Asia Source: IATA Source: WorldACD Market Data Total Freight Growth by Region Volume Growth Per Region Airfreight volumes measured in freight tonne kilometers (FTKs). Air cargo chargeable weight change year-over-year. Air freight volumes, y-o-y, were up 4.2 percent in November, Volume growth worldwide for November 2014 was a re- which was down from October’s 5.4 percent, but the reduc- spectable 4.3 percent, but it’s slightly misleading, given that tion in growth was the effect of a strong monthly rise in No- the November 2013 figures were unusually high. Central and vember 2013. Asia-Pacific airlines were only the 3rd fastest South America led the year-over-year November and year- growing region in the FTKs they carried in November, but to-date growth (7.6 percent and 9.1 percent). This was fol- that increase over the year still represented over 55 percent lowed by Asia Pacific (7.3 percent) and Africa (6.8 percent). of the total expansion in the market. The Middle East and South Asia region fell 2.1 percent and Europe by 0.9 percent in November, y-o-y, but both were still showing positive YtD growth. 130

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90 $ YIELD INDEX US 80 Asia Pacific to Asia Pacific

70 Europe to Asia Pacific Europe to Central & South America 60 Jan Jan Jan Jan Jan Jan Jan Nov Air cargo US$ yield index (Jan 2008 =100) 2008 2009 2010 2011 2012 2013 2014 2014

34 FEBRUARY 2015 ACW BottomLine

15% FTK FATK Freight Load Overall (mil.) (mil.) Factor 12% Intra-Europe Nov. 2013 5,538 8,399 65.9% 9% y

hl Nov. 2014 5,847 8,561 68.3% 6%

Mont YoY % Change 5.6% 1.9% 2.4 points 3% % Change 0% Jan.-Nov. 2013 54,729 85,354 64.1% -3% Jan.-Nov. 2014 57,545 88,785 64.8% D YT -6% YoY % Change 5.1% 4.0% 0.7 points 4 4 4 4 4 4 2/14 6/14 9/14 01/1 0 03/14 04/1 05/1 0 07/14 08/1 0 10/1 11/1 Source: Association of Asia Pacific Airlines Source: Association of European Airlines Asia-Pacific Carrier Traffic Nov. 2014 & YTD European Carrier Traffic International scheduled services, monthly and YTD, for Monthly year-over-year percent change in intra-Europe, long-haul, Asia-Pacific Airlines. and overall freight traffic (FTKs) for European airlines. As expected, international air freight demand for Asia-Pacif- November figures were mostly flat for freight traffic at Euro- ic airlines accelerated in November, driven by strong growth pean airlines, with intra-Europe FTKs rising 0.7 percent and in shipments of electronic goods going into the peak season. long-haul traffic barely rising 0.1 percent, year over year. Air cargo demand, measured in freight-tonne-kilometers Overall FTKs rose a modest 0.3 percent, y-o-y. (FTK), increased by 5.6 percent, reaching a year-long high point. Freight capacity (FATKs) grew by a comparatively modest 1.9%, leading to a 2.4 percentage point gain in freight load factor to 68.3 percent. 130

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100

90

$ YIELD INDEX Yield Index by Region

US November 2014 cargo yields (in US$) again topped those for October, grow- 80 ing 1.7 percent, yet worldwide yield fell by 4 percent, year over year. The Asia Pacific to Asia Pacific yield index for the Europe-to-Asia Pacific and intra-Asia Pacific routes both declined to 93.9 and 92.0, respectively, but the yield for Europe-to-Central Europe to Asia Pacific and South America rose slightly to 93.6. According to WorldACD, yield ex- 70 cluding surcharges dropped less in November, which could be a sign that changing fuel surcharges may be having an influence. Europe to Central & South America Source: WorldACD Market Data 60 Jan Jan Jan Jan Jan Jan Jan Nov Air cargo US$ yield index (Jan 2008 =100) 2008 2009 2010 2011 2012 2013 2014 2014

ACW FEBRUARY 2015 35 People&Events erations in New York, California, Texas last eight years as Airlines and Canada. He steps into the position an account execu- Peter Scholten, previously held by Andy Christie, tive at FedEx. Pre- who has led Saudi who was promoted to group director of viously, she worked Cargo for four-plus ACS’s private jet charter division. ACS at Central Freight years, has left the has also promoted Thomas Howe to Lines and South- airline. Previously president of its U.S. West Coast opera- eastern Freight Scholten worked for tions. Howe, formerly vice president of Lines in Corpus airlines Martinair and the U.S. office, joined ACS at its cargo Christie and Victo- Kenya Airlines for division in the London headquarters. ria, Texas. Saenz a total of 19 years. Scholten Garuda Indonesia appointed Arif C. Thomas Shurstad is the new vice Scholten was, at one Wibowo, the head of its budget carrier chairman of the board of directors for time, rumored to unit Citilink, as its chief executive Tiger Cool Express LLC, a trans- replace Robert van de Weg as the to replace Emirsyah Satar. Satar continental, temperature-controlled executive vice-president of Cargolux resigned before his term is scheduled intermodal transporter of produce Airlines. Steve Manser, who worked to end, in March 2015, to give the new and fresh products. Concurrent with with Scholten, has moved to Qatar management more time to prepare for his election to the board of directors, Airways Cargo after nearly four years the year ahead. Shurstad has been named as an oper- working at Saudi Cargo, where he Gareth Evans has been appointed ating partner of Tiger Infrastructure worked in the airline’s charter business. chief executive of Qantas Interna- Partners, the private equity firm that Oliver Evans, chief cargo officer of tional and Freight after a manage- funded Tiger Cool Express LLC. Swiss WorldCargo, is leaving the ment reshuffle, effective March 2015. Essa Al-Saleh, airline, saying he seeks “new personal Evans, currently chief financial officer President and CEO challenges.” Evans, 60 – named Air for the Qantas Group, has been a senior of Agility Global Cargo World’s Executive of the Year executive at Qantas for 15 years. As a Integrated Logis- in 2014 – announced his intention to result of the new structure, the current tics, was inducted leave the airline in September, taking chief executive of Qantas International, into the prestigious the early retirement option offered by Simon Hickey, and chief executive of Supply Chain Asia SWISS. He will continue working as a Qantas Domestic, Lyell Strambi, have Hall of Fame at logistics consultant in Switzerland. Ev- decided to leave the airline. a ceremony held ans joined Swiss WorldCargo in 2002, in Singapore in Al-Saleh following roles at KLM and BAX, and November 2014. Al- other firms. Airports Saleh was nominated for his vision and Chris Woodruff, CEO of Australia Henrik Ambak has joined Emirates direction in helping Agility grow from Pacific Airports Corp. and the owner SkyCargo as senior vice president, a local company in Kuwait to a global and operator of Melbourne and Laun- cargo operations worldwide. Ambak supply chain leader today. ceston Airports, has resigned. He will joins the freight division of Emirates David Settergren has joined after- stay to assist with the transition of his with 27 years of experience in the air market aircraft lessor AerSale as vice role to his replacement, but wants to cargo industry, previously working for president, sales, Asia Pacific. Setter- leave no later than June 30, 2015. Novia, CSLux and Cargolux Airlines. gren most recently served as vice presi- Ambak started his career as a freight dent, sales and marketing, with GE forwarder, and then moved into ground Third Parties Capital Aviation Services, where he and cargo handling, before joining Car- Eric W. Kirchner has resigned as covered the Asia Pacific region for the golux. chief executive officer and as a mem- past 13 years. Roberto Gilardoni has switched to ber of the Board of Directors of UTi Etihad Cargo, as senior manager Worldwide, Inc. The Board has ap- Associations for commercial freighters. He left the pointed Edward G. Feitzinger, 47, as Des Vertannes, former head of cargo Dubai office of HAE Group (formerly CEO of the company and elected him at the International Air Trans- known as Heavyweight Air Express) as a member of the board as a Class B port Association, has won the 2014 in November. His colleague Mike director. Feitzinger has been with the Martin Schröder Award, honoring Duggan, is back in Dubai after HAE’s company since 2010. He has served as individuals or companies who have contract ended for the temporary executive vice president-global opera- distinguished themselves in the Dutch management of Raya Airways (for- tions since 2012 and previously served air freight sector. The award was pre- merly Transmile), where he was chosen as executive vice president-global con- sented to Vertannes by the award’s as commercial director. tract logistics and distribution. namesake – Martinair founder Martin Air Charter Service (ACS) has ap- Rebecca Saenz has been named Schröder, 83 – at the National Air De- pointed Richard Thompson as presi- branch sales manager in Houston, for bate in Hoofddorp, the Netherlands. dent of the company’s North American Purolator International. Saenz Vertannes, now retired, began his ca- operations. Thompson will be respon- brings 10 years of logistics sales experi- reer with British Airways in 1970. He sible for the U.K.-based company’s op- ence to the role. Saenz has spent the provided leadership at Gulf Air Cargo, Etihad Cargo and Menzies World Cargo. 36 FEBRUARY 2015 ACW People&Events Events FEBRUARY 10 at one of China’s largest airfreight hubs, sourcing/procurement, planning, trans- The Unmanned Cargo Aircraft Con- WCS is expected to draw 1,000 dele- portation, supplier relations and demand ference – Enschede, The Netherlands: gates from the entire value chain to dis- management. For more information, visit The second international edition of this cuss the latest airfreight trends. Check www.clocate.com/conference/Logi- conference will educate participants about out Air Cargo World’s daily updates on pharma-2015/294 unmanned cargo transport and the lat- conference happenings during the three- est developments in today’s low-volume day event, plus the winners of the “Air APRIL 19-21 cargo streams. For more information, visit Cargo Excellence Awards,” sponsored The CNS Partnership Conference – www.ucaconference.com by ACW. For more information, visit Orlando, Fla.: More than 500 air cargo www.iata.org/events/wcs/Pages/index.aspx professionals from the U.S. and around FEBRUARY 24 and aceawards.aircargoworld.com the world are expected to attend this Lithium Battery Workshop – Miami, year’s CNS show, including executives Fla.: CNS presents its first Lithium Bat- MARCH 31-APRIL 1 from airlines, freight forwarders and tery Workshop, which will review recent The Georgia Logistics Summit – shippers. Check out daily news updates changes to the air transport regulations as Atlanta, Ga.: was host to 2,200 attendees at the conference, sponsored by Air Car- well as the requirements for testing lithi- from 39 U.S. states and 11 countries go World. For more information, visit um cells and batteries. Discuss the prepa- in 2014. For more information, visit www.cnsc.net/events/Pages/cns-part- ration and process for shipments contain- www.georgialogistics.com/logistics-summit nership-conference.aspx ing lithium batteries, plus the application of both IATA and U.S. regulations to iden- APRIL 1-2 APRIL 21-22 tify, pack, mark and label shipments con- The Middle East Cargo & Logistics Cargo Facts Asia – Hong Kong, China: taining lithium batteries. Visit www.cnsc. Exhibition & Conference – Manama, Produced by Air Cargo World’s sister net/events Bahrain: This gathering will attract publication, Cargo Facts, and owner, Air more than 30 exhibitors and 1,500 Cargo Management Group, Cargo Facts FEBRUARY 25-27 trade visitors to highlight the latest Asia has become the center of airfreight Air Cargo Africa – Johannesburg, trends in multimodal logistics platforms opportunity, bringing together the South Africa: This international bien- connecting Middle Eastern cargo air, sea world’s aviation community for meaning- nial event showcases Africa’s air cargo and land transport. For more information, ful networking and strategy discussions potential on a global scale. The past visit www.cargomiddleeast.com centered on Asia. For more information, two editions, held in Nairobi and Jo- visit www.cargofactsasia.com hannesburg, saw major participation APRIL 7-9 from airlines and airports, particularly Intermodal South America – São APRIL 26-29 from Africa. For more information, visit Paulo, Brazil: This three-day confer- 28th Annual IGHC Ground Han- www.stattimes.com/aca2015 ence will include presentations from dling Conference – Istanbul, Turkey: the main suppliers in all transport IATA’s Ground Handling Conference, MARCH 1-3 modals. The event promotes businesses hosted by Turkish Airlines, will include AirCargo 2015 – New Orleans, La.: and partnerships, and works as a plat- session on such topics as global industry One of the leading airfreight events of the form for launchings, brand reinforce- standards, ramp innovations and busi- year, AirCargo 2015 will bring together ment, joint-ventures, sales and net- ness growth, based on the key theme, representatives from airlines, forwarders working. For more information, visit “Value at the crossroads of service and expedited trucking companies meet- www.intermodal.com.br/en and costs.” For more information, visit ing in one place to discuss trends in se- www.iata.org/events/ighc/Pages/index.aspx curity, business operations and the latest APRIL 14-16 cargo innovations. For more information, Logipharma Europe 2015 – MAY 5-8 visit www.aircargoconference.com Montreux, Switzerland: Now in its Air Cargo Europe – Messe Munchen, 14th year, Logipharma brings together Germany: This 7th annual exhibi- MARCH 10-12 personnel from the leading pharmaceuti- tion and conference usually attracts IATA’s 9th Annual World Cargo Sym- cal companies responsible for logistics, more than 50,000 visitors from 110 posium – Shanghai, China: Located supply chain management, distribution, countries. For more information, visit www.aircargoeurope.com Advertiser’s Index AEMCA - AirCargo 2015 ...... 33 Emirates SkyCargo ...... 40 Aeronautical Engineers, Inc . (AEI) ...... 2 Etihad Cargo ...... 7 Air Animal ...... 33 Hactl ...... 13 Air Cargo Excellence Awards ...... 19 IATA World Cargo Symposium ...... 15 American Airlines Cargo ...... 5 Northern Air Cargo/Aloha Air ...... 11 Ark Systems/Waybill .com ...... 33 Platinum Cargo Logistics ...... 33 Cargo Facts Asia ...... 39 Precision Aircraft Solutions ...... 23 Cargo Systems ...... 33 Swiss World Cargo ...... 17 David Cohen, Esq ...... 33

ACW FEBRUARY 2015 37 Forwarders’ Forum An Export Council wish list for 2015 by Brandon Fried

The New Year brings a renewed The report encourages the administration to lead in en- spirit of hope and optimism that couraging small- and medium-sized exporters on new think- the U.S. economy will continue ing to promote trade and simplifying international customs, its recovery from one of the lon- liability and consumer redress policies. A “whole govern- gest economic recessions ever. ment” approach should be taken domestically to increase Forwarders enjoying steady cooperation among the International Trade Administration, Brandon Fried is the increases in their air cargo and the Ex-Im Bank, the U.S. Trade and Development Agency executive director of the U.S. overall trade activity should and the Overseas Private Investment Corporation to ensure Airforwarders Association hope that recent recommenda- that federal trade tools, promotion programs and resources tions submitted to the White address the unique needs of small- to medium-sized busi- House by the President’s Export Council are implemented nesses. soon to help assure the good fortune continues. The air cargo industry welcomes a recommendation to The council’s midterm report outlines achievements and harmonize trusted trader programs between Canada and the recommendations in the areas of global competitiveness, ex- U.S., a yet-to-be-realized initiative that would help improve port promotion and advocacy, export administration, manu- North American trade and supply chains. The same should facturing, services and others. Many of these suggestions be done with Mexico, with bilateral agency certifications may not directly impact freight forwarders, but all are likely tending toward mutual recognition. Rules that prioritize re- to affect their customers. gional rather than national content should be enacted. The recent midterm elections brought a dramatic power shift in the U.S. Congress, likely to be challenging for the ad- ministration. Nevertheless, we hope that President Obama The recommendations also call for the will be able to continue to work with Congress – perhaps a more favorable Congress on trade issues, given the shift to Republican control – to ensure passage of trade promotion pursuit of additional open skies authority, setting the stage for broadening the U.S. trade agenda. This work should address issues such as removing agreements aimed at opening up more barriers to trade, strengthening protections for trade secrets and issues relating to digital trade. Hopefully this will lead flight routes between the United States to comprehensive trade agreements with Asia and Europe that will set the stage for increased shipping volumes for and other nations... forwarders and their customers. The report urges the administration to set an ambitious goal of upgrading the nation’s aging transportation infra- As the U.S. proceeds with its single-window access for structure network, particularly by improving roads, rail streamlining the export/import process, a final recommen- lines, energy grids, pipelines, ports, airports and border dation in the report calls for completing the move of the crossings – all of which need a great deal of attention. remaining departments and agencies involved in export licensing to a single IT system. Such a system will simplify The recommendations also call for the pursuit of ad- the licensing process and introduce commonality between ditional open skies agreements aimed at opening up more the agencies that will improve regulatory clarity and reduce flight routes between the United States and other nations, the interpretive burden on all U.S. exporters and importers. with the goal of bringing down barriers to travel and trade. Forwarders and their customers will likely benefit from Unfortunately, a few important issues were left out of the the increase in service and carrier choice by virtue of such recommendations, which failed to address the burdensome agreements. process for shippers who require access to passenger flights. We would like to have seen proposals to revamp known A number of countries have started to pursue policies shipper requirements in light of 100 percent cargo screen- to prevent the sale of products manufactured to U.S. stan- ing, use of private canines to expedite the screening process dards, or to leverage regulatory differences to impede mar- itself and a call for an institutional review of ill-conceived ket access for U.S. products. The report therefore recom- regulations that do nothing to promote air cargo security mends the administration promote the acceptance of U.S. but nevertheless continue to hamper forwarder and airline standards in foreign markets to promote cooperative regula- cargo business growth. tory practices. The air cargo industry has long advocated for regulatory harmonization in such areas as advanced data re- Hopefully, while implementing the President’s Export quirements, customs regulations and, most recently, lithium Council report recommendations, the administration will battery requirements, making this a favorable recommenda- work with the TSA in addressing these issues so that for- tion for our industry. warders can fully assist their customers in achieving our na- tion’s export goals. ACW

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