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DECEMBER 2005 INTERNATIONAL EDITION
Cargo’s New Directions the 2005-2006 Review & Outlook
Saving Fuel • Latin America • Buying BAX
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INTERNATIONAL EDITION
December 2005 CONTENTS Volume 8, Number 10 REGIONS Review & 10 North America Outlook Air cargo traffic fell back Cargo carriers are looking at 2220 to earth in 2005 after 2004’s creative ways to reduce sky high strong growth. What’s on fuel costs • Delta Crisis tap for 2006? 12 Europe An integrated Air France/ KLM aims to be the word’s lead- ing international cargo airline 16 Pacific Asian carriers are fretting over a peak season that may be too little, too late Buying 20 Latin America Anti-trade sentiments and BAX restrictive regulations cool air 4 Deutsche Bahn’s pur- cargo growth in the region chase of the U.S. logistics operator adds to the speedy consolidation of global freight transport.
2006 DEPARTMENTS Corporate 2 Edit Note 29 Oulook 4 News Updates Special Advertising Sec- 35 Events tion provides companies’ pro- jections on the year ahead. 36 People 38 Bottom Line 40 Commentary
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Air Cargo World (ISSN 0745-5100) is published monthly by Commonwealth Business Media. Editorial and production offices are at 1270 National Press Building, Washington, DC, 20045. Telephone: (202) 355-1172. Air Cargo World is a registered trademark of Commonwealth Business Media. ©2005. Periodicals postage paid at Newark, NJ and at additional mailing offices. Subscription rates: 1 year, $58; 2 year $92; outside USA surface mail/1 year $78; 2 year $132; outside US air mail/1 year $118; 2 year $212. Single copies $10. Express Delivery Guide, Carrier Guide, Freight Forwarder Directory and Airport Directory single copies $14.95 domestic; $21.95 overseas. Microfilm copies are available from University Microfilms, 300 North Zeeb Road, Ann Arbor, MI 48106, USA. Opinions expressed by authors and contributors are not necessarily those of the editors or publisher. Articles may not be reproduced in whole or part without the express written permission of the publisher. Air Cargo World is not responsible for unsolicited manuscripts, photographs or artwork. Please enclose a self- addressed envelope to guarantee that materials will be returned. Authorization to photocopy items for internal or personal use is granted by Air Cargo World, provided the base fee of $3 per page is paid directly to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, USA, and provided the number of copies is less than 100. For authorization, contact CCC at (508) 750-8400. The Transactional Reporting Service fee code is: 0745-5100/96/$3.00. For those seeking 100 or more copies, please contact the magazine directly. POSTMASTER and subscriber services: Call or write to Air Cargo World, Customer Care Department, 400 Windsor Corporate Park, 50 Millstone Rd., Suite 200, East Windsor, NJ 08520-1415 USA; telephone (888) 215-6084
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Editor’s Note International Edition Editor Paul Page • [email protected] Managing Editor Aaron Karp • [email protected] Contributing Editors Roger Turney, Ian Putzger Mike Seemuth Art & Production Director Jay Sevidal • [email protected] Anticipating Editorial Offices 1270 National Press Bldg., Washington, DC 20045, U.S. +01 (202) 355-1170 • Fax: (202) 355-1171 t’s impossible to know whether air cargo will rebound in 2006. PUBLISHER Last year was far better than anticipated while 2005 was much Steve Prince • +01 (770) 642-9170 • [email protected] worse than anyone predicted. What does seem clear, however, is I U.S. Business and Advertising that 2006 will be a critical year for a changing air freight industry. 1080 Holcomb Bridge Rd. • Roswell Summit Building 200, Suite 255 • Roswell, GA 30076 Several key issues are worth following closely next year. Decisions made in +01 (770) 642-9170 • Fax: +01 (770) 642-9982 2006 could guide air cargo’s future direction for years to come. Assistant to Publisher Security. U.S. Congress’ investigative arm issued a report last month that Susan Addy • [email protected] International Advertising Offices raised questions about the U.S. government’s air cargo security efforts. The U.S. Europe, United Kingdom, Middle East Transportation Security Administration’s endless delay in issuing a final rule David Collison • +44 192-381-7731 [email protected] for air freight security left the agency ill-positioned to counter the critical re- Hong Kong, Malaysia, Singapore port. The TSA has promised a new security regime for more than two years. Joseph Yap • +65-6-337-6996 [email protected] But a TSA spokesman says there’s no timeline for when the new regulations Japan will be rolled out. Masami Shimazaki • +81-3-6418-0580 [email protected] It’s unlikely another year of delay from the TSA will be tol- Thailand Chower Narula • +66-2-641-2695 erated. Political pressure will probably force a new air cargo se- [email protected] curity rule next year, and may even force the TSA to impose Taiwan Ye Chang • +886 2-2378-2471 tougher regulations than the agency would like. [email protected] Airline finances. With fuel prices unlikely to take a steep dive Korea Mr. Jung-won Suh • +82-2-3275-5969 next year, it’s a good bet the global airline business is in for [email protected]
another rough year and the slow-motion restructuring of the Classified Advertising and Reprints industry may take a significant turn. The reshaping of bank- Tamara Rodrigues • [email protected] +01 (770) 642-8036 rupt carriers in the United States (United, Delta and North- Display Advertising Traffic Coordinator west) and other parts of the world could alter global air cargo networks. Tracey Fiuza • [email protected] Open skies. Trends throughout the world point to greater liberalization in air (973) 848-7106 Electronic Rights rights but the biggest potential breakthrough — a new air treaty between the and Syndication United States and the European Union — remains stalled. Both sides are look- Barbara Ross • [email protected] (973) 848-7186 ing for a way to reach an agreement in 2006, but even a “first stage” pact to- CUSTOMER SERVICE OR TO SUBSCRIBE: +01 888-215-6084 ward open skies faces heavy political opposition on both sides of the Atlantic. Limited rights for European airlines to operate cargo flights within the United States may be the path to a compromise in which neither side can possibly get 400 Windsor Corporate Center, all that it wants. 50 Millstone Rd., #200, East Windsor, NJ 08520-1415, U.S. Logistics consolidation. News of Deutsche Bahn’s purchase of BAX Global was +01 609-371-7700 barely out last month before other names hit the rumor circuit, suggesting the Chairman, President and CEO Alan Glass Senior Vice President, CFO Dana Price consolidation game remains in full swing. Expansive global networks and a Senior Vice President, wide-portfolio of product offerings are becoming requirements to compete in Strategy & Operations Betsy Sherer Vice President, Magazine Group Peter Tirschwell the lucrative logistics sector, and the biggest players will seek to close gaps in President, PIERS Brendan McCahill their networks and further fill out their product portfolios. That will only ac- Vice President, Directories Group Amy Middlebrook celerate air freight’s separation from the passenger side of aviation as global Vice President, Human Resources Kenneth P. Slivken Vice President, players push more density through expanded networks scaled more to Production & Manufacturing Meg Palladino freighter operations. Director of Circulation John Wengler POSTMASTER: Send address change to: Air Cargo World, 400 So even if 2006 doesn’t shine, the shape of air freight may look far different Windsor Corporate Park, 50 Millstone Road, Suite 200, East in the next year. Windsor, NJ 08520-1415. © 2005 Commonwealth Business Media Inc. — All Rights Reserved For more information visit our website at www.aircargoworld.com
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The sale ends the odd fit of BAX within a corporation otherwise devot- ed to security services and coal mining. David Beatson, who once compet- ed against BAX as head of what was then Emery Worldwide, says logistics operators are building greater scale as a response to trends in globalization that are creating new shipper de- mands. “The shippers are driving the industry and people are looking for global solutions,” said Beatson, now a consultant based in California. “Ship- pers are reducing the number of core carriers and they are looking for a full range of services. You just look at the scale of what Exel and DHL are creat- ing by combining and you see there’s a drive for these companies to grow even bigger.” BAX’s Global Reach For Schenker, he says, “the trick will be getting the IT systems inte- s there a logistics operator in the United grated, and that is a very long-term States left to buy? German operator process, even within a single compa- Deutsche Bahn is taking a big leap onto the ny. That is one of the biggest chal- Iglobal freight transport and logistics stage lenges facing the industry today.” with its $1.1 billion purchase of BAX Global, a For BAX, North America accounted response to the rapid consolidation in the logis- for $937.3 million in revenue and tics world that experts believe will itself trigger $10.6 million in operating profit in new competitive response in a business where the first nine months of 2005 against scale, service and survival all are moving on the nearly $1.2 billion in revenue and same track. $50.5 million in profit from interna- BAX, ringing down years of rumors about its sale, will be paired with tional freight. Stinnes Logistics, Schenker and Railion in Deutsche Bahn’s Transportation The companies did not say and Logistics Group, creating a formidable competitor for Deutsche Post whether they would keep the North World Net. American heavyfreight network Although long identified as a North American heavyfreight integrated air- backed by 18 aircraft operated by line, BAX is a $3 billion company with a considerable weight in air and BAX subsidiary Air Transportation In- ocean logistics. ternational. The airline will have to “BAX will be entering a dynamic phase of growth and expansion,” Joey be carved apart to meet regulatory re- Carnes, president of BAX Global, said in a letter to customers. “Our combined quirements but there is plenty of networks and product offerings will provide BAX customers with a much precedent for that in the expansion more competitive and flexible platform. With the addition of BAX, DB en- of DHL in the United States. hances its already strong position as a leading global logistics provider.” Deutsche Post’s buy of Exel, mean- The combined logistics and forwarding entities of BAX and time, was moving forward and new Schenker/Stinnes will be the leader in surface freight transport in Europe – merger talk involving such names as both rail and truck – No. 2 in air freight worldwide and No. 3 in global sea TNT, EGL, FedEx and others was al- freight, Carnes said. ready swirling.
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“The consolidation trend will con- tract talks, suggesting a possible strike Security Attack tinue in 2006 as service providers if progress is not made this month. roponents of greater screening seek to offer clients end-to-end solu- The Independent Pilots Associa- Pfor air cargo shipments are tions, expand globally and serve new tion told UPS it will ask the U.S. Na- keeping the pressure on the indus- vertical markets,” said Adrian Gonza- tional Mediation Board to release it try, pointing to a new report that lez of the ARC Advisory Group. from formal talks, potentially paving is highly critical of United States the way for job actions, if manage- government efforts on air freight Eyeing TNT ment does not submit a new contract security. by Dec. 23 that the pilots can ratify. The report from the U.S. General ven as BAX Global’s sale to Talks between UPS and its pilots Accounting Office, the investigative EDeutsche Bahn was being have been going on for more than arm of the U.S. Congress, said offi- agreed to, rumors were rampant last three years. cials blamed “limited resources and month that the logistics world was “It has become clear that UPS’s re- competing priorities” for a long de- in for another big sale: German in- cent overture for a settlement is not lay in issuing a comprehensive cargo vestor Cornelius Geber said he was genuine, but a cynical move timed to security rule and it questioned the considering buying Dutch express prevent any disruption during Christ- reliability of “known shipper” data- transport company TNT. mas Peak,” said IPA President Capt. bases. Meanwhile, the report said, But TNT CEO Peter Bakker moved Tom Nicholson. “Christmas 2005 will only “a very small percentage” is quickly to squelch the speculation, be our fourth holiday season during physically or electronically inspected announcing that management wasn’t this contract negotiation — that’s at airports. interested in selling and that TNT has long enough. UPS has one more shot That was a red flag for lawmakers more than $1 billion ready for acquisi- to deliver a contract that our pilot who have pointed to air cargo as a tions of its own. TNT buttressed group can ratify.” gaping hole in anti-terror security. claims of independence by announc- If the NMB were to release UPS pi- “GAO’s report blows away the ing a joint venture with China’s lots from mediated talks, the pilots Bush administration’s smoke screen Cosco Group, the most populous na- would enter a 30-day “cooling off” that paperwork checks, random in- tion’s largest ports and shipping firm. period before being allowed to strike. spections and other half measures Analysts expressed skepticism Mediated talks are scheduled for Dec. keep Americans safe,” said Rep. Ed about Geber’s chances of closing a 19-23. Markey, a Massachusetts Democrat deal for the $12.5 billion TNT, even UPS says the pilots are making “in- and relentless critic of the Trans- though Geber has decades of experi- accurate statements” and that the portation Security Administration. ence as a logistics executive with possibility of a walkout is highly re- A private-public working group Kuehne + Nagel and other compa- mote. “The union continues to en- gave the TSA recommendations on nies. Key to success would be bring- gage in the normal rhetoric that is air cargo security measures more ing in an industry partner such as common to labor negotiations,” said than two years ago but the agency FedEx, which was rumored to be in- UPS spokesman Norman Black. has never issued a full rule, a regula- terested in TNT’s express unit. Industry observers see little chance tion many in the industry say they FedEx would be a good fit with of service disruptions. hope will put the debate, and the TNT’s express unit, says investment “We continue to believe that UPS criticism, to rest. firm Bear Stearns, since the former and IPA will complete the contract “TSA has established a strong, is strong in U.S. and Asian markets renewal process without labor ac- layered system of security in the air while TNT is strong in the European tion,” said equity investment firm cargo arena and recognizes the need parcel market FedEx lacks. Bear Stearns. to do more,” the agency said in a Any job actions, whether a work statement responding to the report. Piloting UPS slowdown or an actual strike, could “In the last year alone, TSA has re- only occur after a release from federal quired passenger air carriers to triple PS pilots are turning up the heat mediation and a 30-day cooling-off random inspections of cargo, hired Uon UPS in their long-stalled con- period. an additional hundred cargo inspec-
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tors to ensure compliance, launched Nippon operates 13 747 freighters through a comprehensive capacity a risk-based approach to provide ad- and has six more on order. agreement between Lufthansa Car- ditional vetting of indirect air carri- The firm orders for the 747-8 go and Swiss WorldCargo. ers, and is testing new technologies freighters are valued at $5 billion The accord guarantees each carri- to more effectively inspect the full based on Boeing list prices. er specified capacity on each other’s spectrum of cargo.” Boeing surpassed 150 orders for flights, expanding the cargo net- the -400 version of the 747 last works of both carriers. Beginning Freighter Launch month, with most coming since the this month, Lufthansa will guarantee plane-maker added new features to space to Swiss customers on flights new flurry of 747-400 freighter the version that debuted with Car- from Frankfurt to Shanghai, Tokyo, Aorders pushed the aircraft past golux in the early 1990s. Boeing built Osaka, Nagoya, Madras and Tehran. the 150 mark, more than twice the 72 747-200 freighters when that Lufthansa Cargo customers can al- orders for all-cargo editions of the plane was the workhorse of interna- ready use Swiss capacity on Zurich 747-200 and Boeing appears eager to tional air freight but industry experts flights linked to Frankfurt, Karachi keep up the momentum. say the newer planes, although more and Montreal. The manufacturer signed Cargolux expensive to buy, are vastly more “This agreement shows how and Nippon Cargo Airlines as the fuel-efficient. rapidly we are putting our collabora- launch customers for its new 747-8 “High fuel costs are killing the air- tion into practice,” says Andreas freighter, an aircraft that will feature lines that are operating older aircraft Otto, Lufthansa Cargo head of sales. technology derived from research for that burn more fuel,” said one air car- Adds Swiss chief cargo officer Boeing’s 787 aircraft program. The go industry official. Oliver Evans, “We are working to- manufacturer says the plane will re- Boeing President and CEO Alan gether on exploiting further immedi- duce emissions, lower trip costs and Mulally says the 787 technologies ate-gain synergies — especially have an upgraded flight deck and im- will “offer greater fuel efficiency, im- through sharing capacities, providing proved wing. proved operating economics, and be reciprocal network access and con- Cargolux, which operates 13 747- more friendly to the environment ducting joint purchasing activities.” 400 freighters, ordered 10 747-8 with reduced noise and emissions.” The two carriers also said they freighters, with the first delivery slat- would begin joint business opera- ed for the third quarter of 2009, with Joining Forces tions for cargo services in Canada options for 10 more. beginning in January. NCA, meanwhile, ordered eight he impact of Lufthansa’s pur- “This arrangement will enable aircraft and will take its first 747-8 in Tchase in March of Swiss Inter- both our companies to substantially the fourth quarter of 2009. The air- national Airlines is starting to rip- strengthen their market positions,” line also took options for six more. ple across the freight world says Jürgen Siebenrock, Lufthansa
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Cargo’s vice president of sales for Forward Peak percent in the first nine months of the Americas. xpeditors International of 2005, outpacing all other Panalpina EWashington was setting activities except Asia-Pacific freight, EGL Looks records with its business even be- which expanded 22.9 percent during fore the forwarder said demand the period. GL Eagle Global Logistics may get was growing at a strong rate Eback into the acquisitions game through the peak season. Dropping JFK but only to ramp up its business in Despite growing expenses in its contract logistics. main air freight business, Expeditors n a sign of the changing direction “We will only buy what we do not reported a quarterly record $55.8 Iof trade winds, Northwest Airlines is have,” EGL CEO Jim Crane said last million net profit in the third quarter, suspending its freighter operations month. 29 percent better than the same between Japan and New York. What the Houston-based forwarder quarter a year ago. Gross revenue Northwest says high costs at New does not have on the scale of some soared to $1.05 billion, 17 percent York’s Kennedy International Airport competitors is the contract logistics ahead of last year, helped by sharp were a factor in the move but that that has fed growth at companies improvement in ocean yields. the real driver in moving its 747-200 such as Exel and UTi Worldwide. But That came as Expeditors CEO and freighter to Los Angeles is the tilt of EGL has long experience with inte- Chairman Peter Rose was seeing trade out of Asia. “Most demand is grating acquisitions after its buy of “substantial shipping volumes on from Asia to the West Coast,” said Circle International several years ago, most major trade lanes” into late Shawn McWhorter, Northwest’s vice a purchase that took years to absorb. October, belying suggestions in president of network management. Above all, Crane said, “We don’t some quarters of a weak peak. The shift includes garment trade want any integration issues.” Still, air freight tonnage was up that used to move through distribu- He says EGL would consider buy- only 7 percent in the third quarter tion centers in the Northeast but now ing a logistics firm with sales of and ocean business was getting find their way to market through around $100 million to $500 million more attention, with double the myriad Midwest airports in new sup- as a way of boosting the company’s growth and improving yields. ply chains. freight handling business. Meanwhile, in its first financial re- Northwest is looking at shifting The core forwarding operations port as a publicly traded company, trade patterns with growing urgency pushed gross revenue up 8 percent in Panalpina said supply chain manage- as it operates through bankruptcy EGL’s third quarter, to $780 million, ment activities helped boost the protection. and net revenue up 9 percent, to nine-month net profit up 31.3 per- Cargo is doing its part this year, $247 million, from the same quarter cent, to $78 million. with revenue growing 18.4 percent in last year. The net profit grew 16 per- Net revenue for supply chain the first nine months of the year to cent to $19.2 million. management business grew 21.5 $695 million and cargo yield up 12.2 percent during the period. ■
Correction In last month’s edition, a story titled “Even Freighters Get Detail- ing” contained two mistakes. First, FedEx says it is finalizing a con- tract with AAR to supply loading systems for its A380 aircraft and is not using Goodrich as stated in the article. Also, AYY and SAA containers are designed for nar- Log on to Top News, Features, the Bottom Line... rowbody aircraft while the AMJ WWW.AIRCARGOWORLD.COM container is used on widebodies.
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EXCEEDINGEXPECTATIONS
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NORTH AMERICA Fueling Savings UPS implements a series of fuel conservation measures aimed at lowering soaring energy costs
may be a money-losing proposition. “If we fly as fast as possible, the best we can do is save a few minutes on a two or three-hour flight, but it could cost us thousands in terms of fuel burn,” says Olson. By devaluing flight speed, “the sys- tem was not compromised and the cost of operating flights dropped dra- matically.” Olson says UPS slowed down 17 daily flights to the U.S. West Coast. The flights still arrive early, but the flights’ slower speed is “saving thou- sands per flight per night,” says Ol- son. “The numbers get staggering pretty quickly.” Staggering Numbers here’s one sure way for airlines to reduce fuel costs, even The moves at UPS come as air car- if oil prices remain sky high: use less fuel. Amid growing riers and forwarders say cargo cus- signs that shippers are balking at the fuel surcharges that tomers are pushing back at the fuel- Tare driving up the cost of air freight, conservation is be- driven increases in air shipping, coming a central business component for carriers that formerly sending some of their business to placed speed above all else. cheaper ocean vessels to bring UPS, for one, has taken a series of measures to reduce its fuel costs. The transport budgets down. company’s long-held philosophy that its top priority should be to get flights The International Air Transport to destinations as early as possible has given way to a new mindset that seeks Association estimates airlines will to balance flight speed with fuel efficiency. spend a collective $97 billion on jet “This is a major cultural shift because we have historically been By Aaron Karp fuel in 2005, 30 percent a time-driven business,” says Tom Olson, a 19-year UPS pilot who higher than 2004. Air- this year was named the integrator’s first-ever flight operations fuel manager. lines are looking for ways to save on “Historically, our belief has always been, ‘On-time, great, early, even better.’ … energy costs, which IATA says are There’s a price to pay for that kind of thinking.” sabotaging the industry’s efforts to He says the “squeeze” of soaring fuel costs “drove us to re-look at that.” Al- return to profitability. though UPS obviously does not want to compromise its express delivery FedEx Express said in its most recent schedules, the cargo carrier found that being a few minutes early actually financial filing that its fuel spending
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jumped 49 percent in the quarter end- tra fuel) when none were required,” which would force $325 million in ing Aug. 31 to $628 million. says Olson. annual wage and benefits cuts. But Northwest Airlines, operating UPS aircraft are also now being the members of the Air Line Pilots As- through Chapter 11 bankruptcy pro- loaded so that a freighter’s center of sociation, threatened to strike if the tection, kept the growth in its fuel gravity is further back than used to judge grants Delta’s request. consumption to just 0.7 percent in its be the case. “Further forward center Delta said in a filing with the third quarter on a 1.5 percent gain in of gravity creates fuel drag because bankruptcy court that a pilots’ strike capacity. Its reward was a 47.6 percent more lift is needed for the plane’s would amount to a “murder-suicide” jump in the airline’s fuel bill. tail,” says Olson. “Moving center of that would “kill the company.” Virgin Atlantic Airways’ Chairman gravity aft is money in the bank.” But ALPA, which offered $90.7 mil- Richard Branson went so far as to In addition, the cargo carrier is lion in givebacks, says outright rejec- suggest last month that he would carefully monitoring jet fuel prices at tion of the contract would force the build “cellulosic ethanol plants” to various airports to find the cheapest union to explore all options, includ- make jet fuel “derived from the rates. “We look at fuel prices at every ing a strike. waste product of the plant.” gateway in our system,” says Olson. Branson conceded that he was in “If Louisville is a nickel or more … Briefly the “early days” of planning for the cheaper than Ontario, we’ll tanker alternative fuel plants, but insisted a fuel out to Ontario. We save hun- The Airforwarders Association replacement for traditional jet fuel dreds per flight by tankering fuel.” canceled the contract of David Wirs- needs to be found. The carrier is also using Lufthansa ing as executive director and named Conserving Costs Systems Lido Operations Center, a Brandon Fried, a former executive at flight planning system that calculates Adcom Worldwide, to replace him. ... UPS has instituted more conven- the most efficient route between two Air freight trucker Forward Air tional fuel conservation steps that points, including an analysis of boosted its net profit 34 percent in the may provide a window into how air- which altitudes make best use of tail- third quarter to $12.1 million on an lines, particularly express cargo carri- winds while avoiding headwinds. 18 percent gain in revenue, to $84.8 ers, can save on energy costs. Olson’s Olson says high fuel prices were a million. Forward Air’s $231.9 million mandate to “re-look” at UPS’s use of “good wakeup call” that forced UPS in revenue in the first nine months of fuel has led to a number of measures to revaluate its use of jet fuel. “We 2005 was 13 percent better than last that the integrator says is saving don’t have to throw fuel at every- year. … Pilot Air Freight’s forward- more than $1 million in energy costs thing,” says Olson. “We’re much ing revenue grew 5.6 percent in the each month. smarter now than we were 12 third quarter to $79.7 million, lead by For example, Olson concluded that months ago. … This is a process tak- 13.7 percent growth in international UPS airplanes were using too much ing place throughout our company.” business, to $14.7 million. … Emi- fuel on the ground. So the company And it also makes UPS more envi- rates launched a second daily A340- now has ground-based power units or ronmentally friendly. “We’re trying 500 passenger flight between New generators waiting for planes at air- to be a good neighbor from a pollu- York’s Kennedy International Airport ports so aircraft engines can be tion point of view,” says Olson. and Dubai, raising the airline’s cargo turned off while planes are on the capacity on the route by 30 percent. ... ground at airports. ‘Murder-Suicide’ ASIG started performing ramp han- He also foiund that UPS planes dling and warehouse services for were carrying extra fuel to reach al- elta Air Lines is just at the freight airline Kitty Hawk Aircar- ternative airports in the event of beginning of Chapter 11 go in San Diego. … Abu Dhabi-based weather-related closings, even on Dbankruptcy restructuring but Etihad Airways started three-times- days when the skies were clear. “On is already near a crisis point. weekly flights to Toronto through good weather days, almost 70 per- Delta asked a bankruptcy judge to Brussels and appointed Swissport cent of flights were being planned reject its collectively bargained agree- Cargo Services as its ground handler with alternate airports (and thus ex- ment with the carrier’s 6,000 pilots, in Toronto. ■
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EUROPE Merging Ambition Air France and KLM are combining their cargo operations, creating the world’s largest international air freight carrier
executives insisted on heading the passenger business, so it was thought diplomatic that cargo should be run by KLM executives. “You can write that I am alive and well and living in Paris,” insists Boudier. Hot Potato
Wisbrun in Amsterdam, mean- time, has got the hot potato in this key integration phase of joining the two carriers’ commercial functions, which will include the whole gambit of sales, customer service, products, marketing, revenue management and network planning. “We have approached and smelled he Air France-KLM Cargo venture advanced a stage fur- each other and compared our ther with completion of the “integration” phase. From strengths and weaknesses,” says Wis- now on, the carriers will present one face to the cus- brun, perhaps revealing a little too Ttomer. A team of 70 managers has been appointed world- much information. “We realized that wide to cement into place the building blocks of what is now the we could work efficiently together, world’s leading international cargo carrier. with trust becoming one of the cor- Michael Wisbrun, executive vice president of KLM Cargo, is the chairman nerstones of our cooperation.” of the Air France-KLM Cargo joint management committee, lead- By Roger Turney The mutual trust, says ing an inner sanctum of four key executives. Jean-Charles Fou- Wisbrun, has already led cault heads up sales and distribution, Pascal Morvan is in charge of operations to capacity swaps, network synchro- and logistics, and Claude Sereno oversees strategy and development. The three nization and commercial alignments. Frenchmen are joined by Dutchman Bram Graber, who is taking care of mar- Coordination has already taken place keting and network management. on such routes as Atlanta, Bangkok Just to even up the equation, one of the Frenchman was posted to Amster- and Sao Paulo, while capacity swaps dam, although it is still insisted that Amsterdam is “not necessarily” the head- were initiated on flights to Sao Paulo, quarters of the joint venture. One person remaining in Paris is Marc Boudier, ex- Beijing, Hong Kong and Tokyo. The ecutive vice president of Air France Cargo. Boudier seems to have lost out in the main commercial synergies have ap- senior management numbers game brought on by the grand merger. Air France parently been gained through KLM
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Cargo adopting the SkyTeam Cargo But in some respects the twin-hub freighter networks in order to obvi- product portfolio. operation of the Air France-KLM Car- ate duplication and provide better “It will be synergies, productivity go combo, may yet prove to be its offerings on key sectors. improvement and innovation which Achilles heel. That much appears to “What we are trying to achieve is a will contribute positively to our mar- have been acknowledged by the carri- balanced growth through both our gin in the long term,” says Wisbrun. ers themselves. European hubs,” says Graber, head of “Even in this first year of operation we In the headlong rush for integra- marketing and network manage- believe we have achieved synergies tion on all fronts it has been made ment. “That is already being which have resulted in savings of over clear that the operational activities of achieved, with for example a pre- $14 million. That will more than dou- both carriers on the ground at Paris dominance of Air France main deck ble in the next year and head towards and Amsterdam will remain distinct space to South America and a strong synergy savings of more than $58 mil- and separate. Here Wisbrun appears KLM presence to South East Asia. But lion over the next three to four years.” to be on the back foot, talking not of this also enables us to play to our As far as Wisbrun is concerned, Air free-flowing integration, but of one strengths and provide a joint network France-KLM Cargo is on track to be- team and two solutions. That may presence in key markets like China, come the powerhouse cargo carrier in not be the kind of dilution the end Japan and North America.” Europe. customer wants to hear. Graber says the joint venture can “Although we are now facing a pe- “It is important that we don’t now offer the market more than 50 riod of slowdown in air cargo growth, mix up the two operations at percent of its overall capacity in main the European market has the Schiphol and Charles De Gaulle,” deck lift, with over 170 frequencies a strongest growth prospects in the said Morvan, the Air France Cargo week. The joint cargo fleet comprises long term, but the trend is not linear, executive charged with coordinat- 16 747 freighters and 17 747 combis. but cyclical and will be constantly ing the ground handling operations On the way are five 777 freighters or- disrupted by economic factors,” he at both hubs. dered by Air France. said. “As a major European carrier we “What we will do instead is to It is obvious that there is genuine are now operating in an increasingly build bridges between them so that harmony and respect between the competitive environment, with customers can get connectivity as re- two parties. But there are still hurdles strong expansion by the Asian carri- quired,” he said. “We need to recog- to overcome. ers and the aggressive development nize that the characteristics of the Across the North Atlantic an anti- of Middle East carriers. The European two systems differ and we must man- trust immunity bar remains in place, carriers’ market share is shrinking, age each of these operational process- preventing the two carriers from ini- down from 45 percent two decades es in the way they were designed.” tiating any form of joint commercial ago to 30 percent today. We cannot Morvan talks of aligning standards cooperation in the United States. In afford any further erosion.” at the two hubs, insisting that 80 per- Europe, Air France’s SkyTeam cohort, cent of this process is already com- Alitalia awaits an uncertain fate. High Ambition plete. There will be physical connec- “We hope that both these issues tivity between the two hubs, but are resolved soon,” says Wisbrun.” To that end Wisbrun has set out Morvan maintains that the need for The U.S. market is of obvious strate- the goals for the AF-KLM Cargo ini- moving transfer between hubs will gic importance to us and in the case tiative to be the No. 1 carriers in their never be more than two percent of all of Alitalia, we already have important respective home markets and to be at traffic handled by the two carriers. plans in place when the carrier’s fu- least No. 2 in most other key global However, there will be a common ture can be assured.” markets. The two carriers hold sway handling strategy imposed at all out- at their two key European strong- stations. … Briefly holds of Paris and Amsterdam, cur- The carriers have helped alleviate rently ranking second and third, re- the need for double handling at European airlines saw freight traf- spectively, among European cargo their two European hubs by swiftly fic grow 1.5 percent in September, airports after mighty Frankfurt. coordinating their respective putting the carriers up only 2 per-
December 2005 AirCargoWorld 13 10RegionalsINT 11/21/05 12:01 PM Page 14
ReportsRegional
cent over last year in the first nine rope, the air freight electronic com- says its services aimed at new cus- months of 2005. Traffic across the munications provider, says its ser- toms regulations in the United North Atlantic was down 1.8 per- vice surpassed five million monthly States and India helped more than cent in September. … TRAXON Eu- electronic messages. The operation double business in those markets. ... Cargo traffic at Air France-KLM inched up 1.9 percent in October but cargo load factors fell nearly 3 percent as capacity grew at more than three times the growth in traf- fic. For the first 10 months of 2005, Air France-KLM cargo traffic was up 3.7 percent, half the 7.4 percent in- crease in cargo capacity. … Ending a long-term trend in all-cargo volume growth, traffic on freighters at Ams- terdam Airport Schiphol slipped 0.1 percent in September although overall cargo traffic was up 0.9 per- cent in the month and 2.9 percent for the first nine months of 2005. … Memorex Europe extended its in- bound logistics, inventory manage- ment and delivery contract with Kuehne + Nagel for two years. … Martinair Cargo started weekly MD-11 freighter service between Amsterdam and Khartoum, the capi- tal of Sudan. … bmi started service to Jeddah and Riyadh out of Lon- don Heathrow. … Globe Air Cargo will represent Ethiopian Airlines as general sales agent for the United Kingdom and Ireland, where Ethiopian plans to upgrade capacity this year from a 757 to a 767. … French forwarder Geodis will build a warehouse in Maisfeld, Germany, to help handle a three- year contract for logistics services in Western Europe for audio and video distributor Thomson. … The Belgian post office will use ABX Logistics for customs clearance of inbound international parcels. … Virgin At- lantic Airways contracted with Unitpool to manage ULD repairs for the airline at Unitpool’s 30 sta- tions around the world. ■
14 AirCargoWorld December 2005
10RegionalsINT 11/21/05 12:02 PM Page 16
ReportsRegional
PACIFIC Peak Worries Asian exports are finally reaching a peak, but it may too little too late for the struggling air carriers
tailers in time. Despite warnings that the rail heads could prove a weak link causing another wave of prob- lems this year, there was no conges- tion to speak of at the ports well through October. Lesson Learned
Operators are still scratching their heads what happened to cargo de- mand in September. Peter Rose, chairman and chief executive officer of Expeditors International, said he received no indications from his shippers about why the peak got un- derway so late this year. Ole Ringheim, senior vice president for global air freight at Exel, suggested ou could almost hear the collective sigh of relief rise that shippers had learned their lesson from airline offices on either side of the Pacific Ocean from previous years and lined up as the peak season finally moved into gear in the second maritime capacity in time. Yweek of October. Hopes for an early start to the season “I think people were better pre- – perhaps as early as mid-August – turned into a glum waiting pared. It’s not that there was less game by late September, and some executives wondered if this freight, but it was better planning year would produce any surge in eastbound volumes at all. and forecasting. We’ve had a good di- With stratospheric oil prices taking massive bites out of alogue with key their income, carriers desperately needed a buoyant peak sea- By Ian Putzger clients trying to antic- son, but their Christmas remained elusive throughout Sep- ipate needs,” he said. tember. International Air Transportation Association statistics for the month This would explain the pattern of showed a paltry 1.3 percent rise in global air freight and the figures for Asia- air freight volumes from Asia since Pacific airlines have consistently shown meager growth in freight traffic lag- mid-October, which executives de- ging behind their capacity growth. scribed as strong but steady. Nobody was expecting massive growth, for sure. “It’s not gangbusters; it’s a con- The previous year had set the bar at a pretty high level, as port congestion trolled peak,” said Jim Friedel, presi- on the United States West Coast triggered a stampede of shippers and for- dent of Northwest Airlines Cargo. The warders to air freight terminals in Asia in order to get their goods to U.S. re- airline has experienced some backlogs,
16 AirCargoWorld December 2005 17acwi1205 11/19/05 5:22 AM Page 1 Take off, eh. From Winnipeg: Canada’s fastest growing cargo airport.
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ReportsRegional
but only moderate amounts which are for Canada of Korean Air, expressed Kong-based forwarder U-Freight cleared within a week, he said. concern about signs of weakness of opened an office on Indonesia’s Claude Morin, president of Air air imports to North America this Batam Island, an electronics manu- Canada Cargo, attributed the lack of past year. “That’s worrying. That’s facturing base. … Hong Kong Air drama to an abundance of capacity. what has been carrying the bacon for Cargo Terminals saw traffic grow For one thing, the liberalization of years,” he said. 6.7 percent in October as the handler air services treaties between the U.S. set a monthly record of 228,234 and a number of Asian countries — … Briefly tonnes. It was the third straight not least of all China — has brought month of decelerating growth at more scheduled freighter lift into the Freight traffic for Asian airlines HACTL and imports grew only 1.8 market. And American freighter oper- grew 1.5 percent in the third quarter, percent. ... Freight traffic at Singa- ators who have contracts with the less than half the 3.5 percent increase pore Changi International Air- military to run charters to the Middle in capacity, according to the Associ- port grew 2.8 percent in September East return back to base via Asia. ation of Asia-Pacific Airlines. and was up 2 percent in the first nine “They’re already handsomely paid for Capacity growth outstripped traffic months of the year over the same pe- the military work, so for them the for five straight months, including a riod a year ago. … Dragonair Car- Asia-U.S. leg is gravy,” Morin said. September report that showed capaci- go was seeking government approval ty measured in available freight to add five freighter flights a week to Import Drive tonne-kilometers up 4.9 percent and Taipei to respond to growing demand FTKs rising 1.9 percent over the same for shipping between Mainland Chi- There are still glimmers of hope month a year ago. … China’s Central na and Taiwan. The Hong Kong- that the tail end of the season could Bank said China’s economy would based airline’s cargo traffic was up bring a spike in traffic. grow at better than 9 percent in 2005 15.8 percent through the first nine For one thing, early November after the GDP rose 9.4 percent in the months of 2005. … TRI-US Entertain- brought news that rail bottlenecks first nine months of the year. … Ko- ment of Thailand appointed GAC were finally producing slowdowns at rean Air saw cargo traffic fall 4.5 Thailand to provide a full door-to- West Coast ports, prompting the Na- percent in the third quarter because door service from Thailand to Holly- tional Retail Federation to raise its as- of weak exports out of Korea. ... The wood for its film projects. … Exel sessment of port congestion from owner of Nippon Cargo Airlines joined the RosettaNet logistics tech- ‘low’ to ‘medium.’ says the Japanese freighter operator nology standards group in Thailand. Moreover, output and orders have placed a firm order for eight 747-400 … Singapore Air Terminal Ser- gone up in several Asian economies. freighters with options for up to six vices, working with partners in Chi- Taiwanese exporters saw orders more of the jumbos, sharply scaling na to increase its stake in ground from overseas rise 22 percent in Sep- up capacity for an airline with 11 handling services in the country, tember, buoyed by demand for chips 747s in its fleet. NCA projects its struck a joint venture with China’s and consumer electronics and a drop profit will grow to $84 million this Tianjin Airport Cargo Services in the value of the Taiwan dollar ver- year. ... AirBridge Cargo and Nip- and will be the single largest share- sus the greenback. Singapore’s manu- pon Cargo Airlines signed an holder with a 46 percent stake. … facturing output unexpectedly surged agreement to share 747 freighter ca- Boeing struck a deal with 9.6 percent in September, fueled by pacity between Japan and Europe on Afghanistan’s Ariana Afghan Air- pharmaceuticals and electronics. In flights that will operate through ways to renew the carrier’s fleet with Korea, investment in plants and ABC’s hub in Krasnoyarsk, Russia. … two leased 757-200s this year and di- equipment rose 4.5 percent during Singapore Airlines took its 15th rect purchase of four 737-700 aircraft the third quarter and economists 747-400 freighter and stepped up ser- in 2009. … New Zealand’s Ministry of forecast a strong fourth quarter. vice to India and the United States, Defense awarded ST Aerospace a Airlines must be praying that this including new twice-weekly flights $38 million contract for the cargo momentum carries on. on a Singapore–Dehli–Copen- conversion and avionics upgrade of But Bob McGowan, cargo manager hagen–Chicago rotation. … Hong two 757-200 aircraft. ■
18 AirCargoWorld December 2005 19acwi1205 11/19/05 5:22 AM Page 1 10RegionalsINT 11/21/05 12:03 PM Page 20
ReportsRegional
LATIN AMERICA Perishable Market Air cargo operators have mixed feelings about Latin America, where politics and regulations restrict freight flows
gion long marked by steep imbal- ances, there’s growing import de- mand for high-tech goods from Asia and the United States. Still, even after years of promised growth, “a lot of these economies are still at a base level,” says Ron Kuhlmann, a Unisys principal trans- portation consultant . “I am unaware of a broad air cargo network that ex- ists for Latin America. Especially with the price of fuel, you’re not going to send a 747 freighter somewhere where it’s not going to cover costs. … There’s an influx of manufacturing goods from China to Latin America, but the Chinese can only buy so many flowers from Latin America.” Overall, cargo handled at Latin he Latin American market is something of a conundrum American airports rose just 1.5 per- for air cargo operators trying to decide how much to in- cent year-over-year for the first nine vest in the region. Demand for its products, no- months of 2005. Air cargo By Aaron Karp Ttably perishables, is growing in the United trade between the United States and elsewhere, and production methods throughout the re- States and Latin America fell 1.1 per- gion are becoming more sophisticated. But there is skepticism of cent year-over-year for the period. free trade in much of Latin America, and complicated and conflict- ing regulations stifle air freight growth. Seeing Possibilities “We still see that the region is very polarized in terms of countries that want to open up free trade and the ones that want to be more restrictive,” says But companies such as Hellmann Frederick Jacobson, the president of Colombian all-cargo airline Tampa Cargo. Worldwide Logistics see growing pos- “It has a lot to do with politics,” he says. “Most (Latin American) countries sibilities in Latin America’s products are developing countries and they view globalization with suspicion. They and believe that most of the region’s believe that U.S. and European companies will take over and create more un- nations will eventually ease trade re- employment.” strictions. Fish, flowers and fruit are the region’s top draws for cargo operators, and “I feel good about the Latin Ameri- Chile, Brazil and Argentina are Latin America’s strongest markets. Textiles are can market right now despite some of also a growing export commodity, and in a promising development for a re- the political developments,” says Karl
20 AirCargoWorld December 2005 10RegionalsINT 11/21/05 12:03 PM Page 21
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Weyeneth, Hellmann’s president and cedures and rules that is needed, says transformation” in “service levels” of CEO of the Americas, noting the re- Jacobson. “One of the most pressing the producers of Latin America’s key cent unrest when international lead- matters (in the Latin American cargo commodities, such as Chilean salmon ers gathered for a summit in Argenti- market) is customs regulation. Cus- farmers. “Export demand is growing na. “Most definitely, politics has an toms varies from country to country and creating a more consistent air influence on the economies and the and they are very complex,” he ex- freight community,” he says. He con- economics has an impact on our plains. “Columbia, Brazil and Ecuador cedes, however, that it’s “difficult for business. … But we’re going to con- have very complicated regulations carriers to make money in the market.” tinue seeing healthy growth. Argenti- and it inhibits the flow of commerce. Indeed, growth in Latin American na is recovering, Brazil is very strong, Unfortunately, we don’t see (customs) air cargo is likely to be a slow process. Chile remains healthy.” as a regional process.” “The omens are not pointing to the Air cargo players involved in Latin Regional consensus does not appear fact that this is a market on the cusp America agree that the region won’t to be near. “There seems to be a wide of explosion,” says Kuhlmann. reach its trading potential without range of opinion as to how the borders across-the-board liberalization of should be opened,” says Kuhlmann. … Briefly trade and customs regulations. “You “There’s anything but a mandate to can’t ignore that,” says Frank Viscon- change the trading relationships.” Varig Brazilian Airways lost ti, president of Miami-based LGSTX $175.4 million in the third quarter Services and former head of Arrow Ancient Fleets but boosted its prospects for emerg- Air. “More liberalized regulations will ing from bankruptcy protection by certainly help. Short-sighted political Kuhlmann points to another im- agreeing to sell its logistics units, views will hurt (trade), but inevitably pediment to Latin American air cargo VarigLog and Varig Manutencao, to (a more liberalized system) will come. development, particularly on intra-re- TAP Air Portugal for $62 million. “There are people on the political gional operations. “One of the con- … Mexicana added a seventh daily side and on the commercial side that cerns across the board is the age of flight between Los Angeles and really understand the value of open- (Latin American airlines’) fleets,” he Guadalajara. ... Panama’s Copa Air- ing markets and creating a more sta- says. “The fleets are just ancient. It’s lines will buy up to 15 next-genera- ble, competitive platform for carriers not an accident that Miami is one of tion 737 aircraft for delivery from to operate. You can’t stop the forces those airports where you can see air- 2007 to 2009. … LAN Airlines’ car- of good, sound trade.” craft from previous eras, and many of go traffic fell 1.3 percent in October Customs regulations remain a key the older planes are operated by Latin on a 0.3 percent reduction in capaci- sticking point, particularly for air car- American cargo carriers. So if there’s ty. ... The U.S. Department of Trans- go operators used to a more fast-track going to be any kind of serious portation granted American Air- clearance of goods in the United growth, they need new equipment.” lines antitrust immunity to form a States, Europe and Asia. “Latin Amer- Also clouding air cargo prospects three-way alliance with LAN Peru ica has always been a difficult region in the region are the financial diffi- and LAN Airlines that will allow for in regard to customs regulations, no culties of bankrupt Varig Brazilian the coordination of marketing, doubt about it,” says Weyeneth. “We Airways, which operates VarigLog, scheduling and other services among live with that. Is it putting added Latin America’s second largest air car- the three carriers. ... Continental costs on supply chains? Yes it is. But I go carrier and “the biggest player in Airlines received preliminary gov- think it’s a matter of time before reg- the region’s most established mar- ernment approval to operate flights ulations ease. ket,” says Kuhlmann. “VarigLog is in to Buenos Aires from its Houston “It really depends on the politics as the process of reinventing itself. hub. ... Delta Air Lines plans to to how long it will take before coun- They’re going to have to have the add service over the next six months tries will loosen up. Right now it’s money to buy planes that will allow to 28 destinations in the Caribbean very cumbersome.” them to expand.” and Latin America, including Roatan It’s not just an easing of regulations But Visconti says air cargo players and San Pedro Sula in Honduras and but a standardization of customs pro- should take note of the “phenomenal Managua, Nicaragua. ■
December 2005 AirCargoWorld 21 22F1-Review/ForecastINT 11/21/05 12:06 PM Page 22
Feature Report: Review/Outlook
After a banner year in 2004, air freight g
22 AirCargoWorld December 2005 22F1-Review/ForecastINT 11/21/05 12:06 PM Page 23
This year’s review/outlook is a collaboration between BACK Aviation Solutions and the editors of Air Cargo World
The skyrocketing growth in air cargo traffic in 2004 was followed by a loud thump in 2005. After cele- brating the industry’s best year of growth since 1997 last year, air freight fell rapidly back to earth this year. Growth in 2005 did not just fail to repeat last year’s high level; global air freight traffic basically stag- nated in 2005 as fuel prices soared and air cargo moved, in many instances, to less expensive ocean and ground alternatives.
t growth stalled in a lackluster 2005
December 2005 AirCargoWorld 23 22F1-Review/ForecastINT 11/21/05 12:06 PM Page 24
Feature Report: Review/Outlook
Annualized Air Cargo Growth by Regional Market
2.2%
–1.6% 0.4% 5.1%
4.4% 0.8% 8.3% 1.6%
–1.1%
World (Year-Over Comparison) Jan. – Aug. 2005 vs. Jan. – Aug. 2004: 2.5%
Sources: U.S. Department of Commerce, AAPA, AEA, ATA and the Boeing World Cargo Forecast.
Air cargo observers knew full well lowed by a spate of major hurricanes U.S. economic slowdown caused that 2004’s 12 percent traffic growth in the southeast United States and a business investment to decline, dri- could not be sustained. But few could debilitating earthquake in Pakistan. ving up inventory levels of goods have predicted a year ago that the None of these events alone mas- traditionally carried by air such as drop-off in 2005 would be so severe. sively interrupted global commerce. high-tech intermediary parts and Through September, global freight But the disasters cumulatively added finished products. tonne kilometers flown had grown to an overall slowing in global de- And, of course, the price of oil just 3 percent over the pervious year, mand, including usually reliable soared, passing $60 per barrel in the with little turnaround expected in American consumer demand. The second half of 2005. This led to un- the year’s final month. Remove Janu- ary’s figures, when momentum from World Air Cargo 2004 generated a strong month of World air cargo grew 2.5 percent January–August 2005 relative to traffic, and 2005’s FTK growth stands traffic levels of 2004 at just 2 percent. Even traffic on 11.0 trans-Pacific routes, the mightiest of air trade lanes, grew just 2.5 percent 2004 10.0 in 2005 when January is excluded. TKs ost forecasts still project long- 9.0 2005 Mterm annual air cargo traffic
growth of about 6 percent annually. Billions of R 8.0 This year’s growth was well below that level. What happened? Natural 7.0 disasters, for one. Last December’s JFMAMJJASOND devastating Asian tsunami was fol- Sources: U.S. Department of Commerce, AAPA, AEA, ATA and the Boeing World Cargo Forecast.
24 AirCargoWorld December 2005 25acwi1205 11/19/05 5:23 AM Page 1
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Feature Report: Review/Outlook
Monthly Swings World air cargo grew 3.5 percent in August 2005 compared to August 2004. 25% Month % change – History Also hurting air 20% 12-month avg. history freight growth is 15% the ongoing 10% financial problems 5% faced by the 0% world’s airlines, 5% which are –10% expected to lose –15% Monthly percentage change over prior year over Monthly percentage change $7.4 billion in 2005. –20% 2000 2001 2002 2003 2004 2005 FMAMJJA January January January January January January the ongoing financial problems Sources: U.S. Department of Commerce, AAPA, AEA, ATA and faced by the world’s airlines, which the Boeing World Cargo Forecast. are expected to lose $7.4 billion in 2005. In the United States, three ma- precedented jet fuel prices and an prices was “drastically higher” than jor airlines (United, Northwest and escalating series of fuel surcharge in- historic levels. Delta) are operating under bankrupt- creases on air cargo shipments. The There is another less overt but cy protection. Struggling airlines are Air Transport Association of Ameri- very serious impact on air freight forced to curtail services and elimi- ca says airlines paid 45 percent more traffic from rising oil prices. As ener- nate unprofitable routes, thus erod- year-over-year for a gallon of jet fuel gy costs climb higher, consumers’ ing shippers’ confidence in the relia- in 2005. According to ATA Chief disposable income is reduced, bility of carriers’ capacity on trade Economist John Heimlich, the cor- dampening demand for high value lanes. This is especially true in the relation between rising oil prices goods typically carried by air. U.S. domestic market, where chang- and the rate of increase of jet fuel Also hurting air freight growth is ing airline strategies and high fuel Asia Airlines Monthly year-over-year percent change in capacity, in available tonne kilometers, and traffic, in freight tonne kilometers, of Asia-Pacific airlines. 25% Capacity 20% Traffic
15%
10%
5%
0%
–5% 1/04 2/04 3/04 4/04 5/04 6/04 7/04 8/04 9/04 10/04 11/04 12/04 1/05 2/05 3/05 4/05 5/05 6/05 7/05 8/05 9/05 Source: Association of Asia Pacific Airlines
26 AirCargoWorld December 2005 22F1-Review/ForecastINT 11/21/05 12:07 PM Page 27
Feature Report: Review/Outlook
Exporting America Monthly year-over-year percent change in air exports from United States by weight. surcharges make air cargo increas- 30% ingly less competitive. 25% Domestic U.S. air cargo traffic 20% growth was again flat in 2005. Air 15% freight is losing an uphill battle with 10% expedited truckers in the United 5% States. Forwarders complain that air- 0% 10/04 11/04 12/04 1/05 2/05 3/05 4/05 5/05 6/05 lines’ domestic cargo capabilities are unreliable with carriers shifting to Source: CNS-USA Market Monitor smaller planes on many routes and cargo getting tied up in bottlenecks Regional Air at major hubs. Year-over-year change in air cargo traffic handled at airports, by region, Perhaps the most telling develop- first nine months of 2005. ment in the air cargo sector in 2005 10% was that the strongest growth came 8% in the Middle East and Africa, histor- 6% ically weak air cargo markets. 4% 2% ill 2006 look more like 2004 or 0% W2005? Analysts say it is reason- –2% able to conclude that the year will Africa North AmericaLatin America Europe Asia-Pacific Middle East Worldwide fall into the 5 to 7 percent “normal” Source: Airports Council International annual growth range, although air cargo has not had a “normal” year in American Airlines quite some time. BACK Aviation So- Monthly year-over-year percent change in air traffic at U.S. air carriers. lutions predicts a rebound in trans- Pacific traffic and continued strength 15% in Africa and the Middle East. 12% Domestic Key to a rise in air cargo traffic 9% International growth in 2006 will be the fortunes 6% Total of the Asia-Pacific region, and there 3% 0% are some good economic signs in –3% the Far East’s top two economies. –6% With bad debts diminishing, per- Jan. Feb. March April May June July Aug. manent employment on the rise, Source: Air Transport Association of America and a Tokyo stock market thriving at a four year high, Japan is show- Europe Airlines ing signs of shaking off its decade- Monthly year-over-year percent change in air freight traffic carried by long economic woes. Given that European airlines in 2005. Japan remains the second largest 15% economy in the world and a major 12% air freight trade partner with the 9% United States, Japan could be one of 6% the leaders driving Asia air freight 3% traffic growth in 2006. And China’s 0% recent monetary policy actions –3% could allow further currency appre- Jan. Feb. March April May June July Aug. Sept. ciation against the U.S. dollar, Source: Association of European Airlines
December 2005 AirCargoWorld 27 22F1-Review/ForecastINT 11/21/05 12:08 PM Page 28
Feature Report: Review/Outlook
Air Prices – Pacific Air Prices - Atlantic Quarterly year-over-over percent change in air Quarterly year-over-over percent change in air freight prices over the Pacific. freight prices over the Atlantic. 15% 20% Westbound 12% Eastbound 15% 9% 10% 6% Westbound 5% 3% Eastbound 0% 0% –3% –5% 3Q’03 4Q’03 1Q’04 2Q’04 3Q’04 4Q’04 1Q’05 2Q’05 3Q’05 3Q’03 4Q’03 1Q’04 2Q’04 3Q’04 4Q’04 1Q’05 2Q’05 3Q’05 Source: Citigroup Investment Research Source: Citigroup Investment Research
which may further fuel China’s ap- less belly space on key international ger demand, all-cargo operators are petite for imports. lanes. For example, Continental Air- ordering freighters in increasing But several factors could once lines recently down-gauged from numbers, with total orders for 747- again keep air cargo growth levels 777s and 767s to 757s on several Eu- 400 freighters pushing past the 150 down. Struggling U.S. legacy carriers ropean destinations, including Ams- mark by the end of 2005. are in the process of “right-sizing” terdam, London Gatwick, and Paris Greater use of pure cargo capacity, flights based on decreased passenger De Gaulle, from their Newark hub. along with passenger “right-sizing” demand. That means carriers are of- As the combination airlines adjust and the tighter combination cargo ten switching to smaller aircraft with schedules to correspond to passen- capacity that comes with it, may help support stronger 2006 air freight yields in markets such as the North Atlantic, where yields have been soft. It is hard to see any positives, however, in regard to escalating en- ergy costs. A steep drop in the price of crude oil looks unlikely, leaving air cargo players to hope for little-to-no escala- tion. If the price of oil does not sig- nificantly exceed $60 per barrel, BACK does not believe fuel costs will further erode air cargo traffic growth. But even at current levels, fuel will likely continue to hurt airlines’ ef- forts to regain profitability and make air cargo traffic growth of more than 6 percent highly unlikely. But even to achieve 6 percent traf- fic growth, the economies of the United States and China must have good years. Given that trade with the United States accounts for approximately 60 percent of all global air freight traffic flows, the continued strength of the U.S. economy is vital for air freight to return to normal growth rates. ■
28 AirCargoWorld December 2005 29CorporateOutlookINT 11/21/05 3:01 PM Page 29
Special Advertising Section
CorporateAir Cargo World OUTLOOK2006 29CorporateOutlookINT 11/21/05 3:02 PM Page 30
Air Cargo World Corporate Outlook 2006 SPECIAL ADVERTISING SECTION Canadian Airports Council
Canadian airports — gateway to North America
Canadian airports expect further growth in 2006 as they continue to establish Canada as the preferred gateway for air cargo into North America. Working together through CAC Cargo, a division of the Canadian Airports Council, 11 cargo- focused airports from coast to coast are committed to promoting Canada’s strategic business and logistics benefits. Canadian airports, the first point of entry for Asian and European flights via the Polar Route, provide excellent access to the major North American markets through extensive transportation super-networks. They offer cargo carriers year-round; congestion-free, flexible and efficient cargo-handling facilities; and customs clearance procedures. The result: less down time and greater profitability. Building on the North America Free Trade Agreement, Canada and the U.S. have an excellent cross-border relationship and efficient protocols. These longstanding relationships and clear procedural requirements make the movement of goods efficient and trouble free. Landing in Canada and bringing cargo into the U.S. by rail or truck are all competitive options that are readily available, depending on specific need. In November 2005, the U.S. and Canada reached a full Open Skies agreement that removes all economic restrictions on air services to, from and beyond the other’s territory by the airlines of both countries. Other negotiations with various U.S. federal agencies are directed toward improving cargo security and border clearance procedures. In 2006, CAC Cargo will continue to work with the Canadian government in negotiations to further improve access and ease of use of Canadian airports. Since 1970, international air cargo flying into Canada has increased almost tenfold. International airfreight carriers such as Martinair, Cargolux, Cathay Pacific and Asiana have successfully introduced scheduled flights to Canada, joining Air Canada, UPS and FedEx in an expanding market. At the same time, domestic cargo flights have grown significantly, primarily through the Cargojet and Purolator/Kelowna Flightcraft networks, as well as heavy-lift charter activity. We expect this growth to continue in 2006. CAC Cargo members are looking forward to meeting one-on-one with our current and potential customers at the 2006 International Air Cargo Forum and Exposition, occuring in Calgary, Alberta, from Sept. 12-14. Calgary Airport Authority, one of our members, is serving as host for ACF 2006 on behalf of The International Air Cargo Association. A Canadian pavilion at ACF 2006 will bring Canadian airports, air carriers, Transport Canada, Canada Border and Revenue Services, and other partners, all under one roof. Together, we are dedicated to building Canada’s air-cargo business through lower trade barriers and improved awareness of Canada as a gateway to North America. CAC Cargo members represent Canadian airports at Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Hamilton, Ottawa, Montreal, Halifax, St. John’s and Gander.
Contact Canadian Airports Council 350 Sparks St., Suite 604 Info Ottawa, ON K1R 7S8 Canada www.caccargo.com
December 2005 29CorporateOutlookINT 11/21/05 3:02 PM Page 31
Air Cargo World Corporate Outlook 2006 SPECIAL ADVERTISING SECTION Emirates Sky Cargo
Company Mission
To deliver the highest standards of product quality to support business logistics within the air transportation industry and to achieve complete customer satisfaction through innovation and refinement of service levels.
Emirates Sky Cargo Senior Vice President Ram Menen’s Outlook for 2006 Emirates Sky Cargo In 2006, major markets worldwide are set to perform better than they have in 2005, on the Senior Vice President strength of their experience with certain fundamental paradigm shifts that the world has Ram Menen witnessed this past year — especially in relation to oil prices, inflation and the resilience exhibited by many economies and industries. The world has become accustomed to high oil prices, but the trends suggest that they will be stabilized, pegged between (or moving in the range of) mid-US$50s to US$60s. The current strengthening of the U.S. dollar and the economy is heartening, as it will boost world trade. But if this trend does not continue into 2006, we are likely to encounter another challenging year. We are closely monitoring the European markets and although the current sociopolitical unrest is unsettling, the German economy is on the mend, and the U.K. markets will perform well, depending on the American currency parity and the oil prices. Emirates SkyCargo’s performance in these key markets will remain strong. India and China will outperform most other markets, and there will be better clarity in the latter’s trade relations with the U.S. and European Union. Although the quotas are being reinstated, Chinese markets will continue to dominate the textile trade, and Emirates SkyCargo is in a good position to service the market requirements. The Middle East markets will remain buoyant, with the staggering pace of developments in the Gulf states leading growth. African markets will experience a higher growth curve. With the arrival of the two Airbus A310 freighters on order by the end of December, Emirates SkyCargo will increase its cargo capacity to the Indian subcontinent, Africa and the Middle East next year to better fulfill customer demands.
Contact Emirates Sky Cargo P.O. Box 686 Info Dubai, United Arab Emirates Phone: (971) 4 228 151 www.skycargo.com
December 2005 29CorporateOutlookINT 11/21/05 3:03 PM Page 32
Air Cargo World Corporate Outlook 2006 SPECIAL ADVERTISING SECTION Winnipeg International Airport
Mission Statement With our community, we provide excellent airport services and facilities in a fiscally prudent manner.
Winnipeg Airports Authority Inc.’s President and CEO Barry Rempel’s Outlook for 2006
Winnipeg Airports Authority Inc. Winnipeg International Airport is Canada’s leading express cargo hub. Major operators such as Purolator Courier, Cargojet, FedEx and UPS contribute to Winnipeg having more scheduled President and CEO freighter departures than any other airport in Canada. In 2006, it is our intent to continue Barry Rempel working with customers to solidify our role in domestic cargo, strengthen our ties to other North American markets, building critical mass in support of potential international cargo capacity. Creating the optimal environment for cargo airlines to thrive, including the right regulatory environment and the right infrastructure is critical to our mutual success. As western Canada’s only federally designated international cargo transshipment center, we currently offer tremendous flexibility for carriers wishing to take advantage of it. We would, however, welcome even more liberalized air transport agreements for Canada. Offering maximum flexibility at our airport, and keeping costs low, translates into maximum profit opportunities for carriers in 2006. A new dedicated cargo apron has enabled us to accommodate increased cargo traffic from major express operators. The additional capacity also accommodates more technical stops, particularly by heavy-lift carriers. The airfield infrastructure supports any aircraft type, with 24-hour operations, rehabilitation of both major runways since 2001 and CAT II operations on the longest runway. The airport is at the crossroads of the TransCanada Highway, and the International Mid-Continent Trade and Transportation Corridor, supported by truck and rail options to uncongested border crossings into the United States. Whether it is polar cargo routes or international flights over the Atlantic and Pacific Oceans, Winnipeg’s geography works to our advantage as Canada’s most centrally located airport. Our location can help carriers save significantly on fuel burn compared with flying to other North American markets, and we see opportunities to develop such routings. Our rate of cargo tonnage growth through August 2005 has our airport on pace for another record year, following on the heels of phenomenal 24 percent growth in 2004. According to the July 2005 issue of Air Cargo World, Winnipeg was Canada’s fastest-growing cargo airport in 2004, and the 12th-fastest growing in the world. Our growth rate, which is forecast to be between 2 and 5 percent per year, will be more modest in 2005 and 2006. A strong corporate commitment to cargo has helped facilitate this growth. We continue to demonstrate our ability to respond quickly and effectively to customers’ needs. In meeting those needs, we have witnessed strong cargo growth by our customers. Focus on meeting customer needs is driving our business processes in 2006.
Contact Winnipeg Airports Authority Inc. Room 249, Administration Building Info 2000 Wellington Ave. Winnipeg, Manitoba R3H 1C2 Canada Phone: (204) 987-9400 / Fax: (204) 987-9401 www.waa.ca
December 2005 29CorporateOutlookINT 11/21/05 3:03 PM Page 33
Air Cargo World Corporate Outlook 2006 SPECIAL ADVERTISING SECTION Southwest Airlines
Company Mission
The mission of Southwest Airlines is dedication to the highest quality of customer service delivered with a sense of warmth, friendliness, individual pride, and company spirit.
Southwest Airlines Director of Cargo Mack Sikorski’s Outlook for 2006 Southwest Airlines 2005 was a challenging but exciting year for Southwest Airlines. As the industry faced Director of Cargo bankruptcies, downsizing and restructuring, Southwest continued to spread its wings — adding 33 new planes to its Boeing-737 fleet (for a total of 445) and two new cities, Pittsburgh, and Mack Sikorski Fort Myers, Fla., to its vast 61-city network. By remaining focused on its core principles of customer service, value, and reliability, Southwest Airlines Cargo continued to provide its customers with outstanding levels of dedicated and personalized service. “Even though Southwest is growing and expanding, we continue to place a lot of emphasis on maintaining a close connection with our cargo customers by giving them the necessary communications tools they need to stay in close connection with their shipments,” said Mack Sikorski, Southwest’s director of cargo. “We know that, as a shipper, your goal is to get the most reliable service at the best value, and we strive hard to make that happen every single day.” In January 2006, SWA Cargo will begin offering that same value and service from Southwest’s newest city — Denver. “We’re excited about serving the ‘Mile High City’ as well as giving our existing customers a new destination for their shipping needs,” Mack said. SWA Cargo also will be working in 2006 to explore and implement additional technology solutions to create even more efficiency and increased bin space for all of the airline’s cargo shipping options including NFG (Next Flight Guaranteed), RUSH Priority Freight and FREIGHT services. “We truly view ourselves as business partners with every customer that we serve, and we understand, that by constantly studying and looking for new ways to improve our efficiency, we are ultimately improving the efficiency for the businesses we work with.” SWA Cargo wants to thank its customers for a successful 2005 and looks forward to continuing to provide the value, reliability, and customer service you have come to expect from Southwest Airlines Cargo in the coming year!
Contact SOUTHWEST AIRLINES CARGO Angela Vargo Info (214) 792-6013 [email protected]
December 2005 29CorporateOutlookINT 11/21/05 3:04 PM Page 34
Air Cargo World Corporate Outlook 2006 SPECIAL ADVERTISING SECTION ARGO Tracker
Company Mission ARGO Tracker’s mission is to be the global provider of choice for customers seeking to reduce product and freight losses resulting from theft, poor supply-chain visibility, damage and spoilage — through the deployment of ARGO Tracker’s real-time asset-tracking solutions — ultimately culminating in higher profits, productivity and shortened return-on-investment cycles for our customers. ARGO Tracker’s Chief Operations Officer Michael J. Hammons’
ARGO Tracker Outlook for 2006 Chief Operations Officer ARGO Tracker’s business objectives for 2006 involve our continued research and development Michael J. Hammons efforts into emerging technologies that support and enhance our existing products and services. Specific applications involve the development of global radio-frequency identification, video integration and compatibility with the new ZigBee sensor protocol. Concurrently for 2006, the company plans to continue its core competency of providing its customers with the lowest cost, highest value and real-time asset-tracking solution(s) currently offered. For the coming fiscal year, ARGO Tracker’s marketing strategies involve the expansion of our global sales efforts targeting eastern Europe and Asia. To date, ARGO Tracker has engaged pilot programs in England and currently has ongoing programs in Mexico. Moving forward, the company will continue to target transportation, along with assessing the needs of security service firms and those of other high-value manufacturers to articulate ARGO Tracker’s competitive posture in these industries. As an extension of its current sales and marketing strategy, biomedical transport will be another vertical market throughout which ARGO tracker will identify its competitive advantages. Key to the upcoming 2006 business outlook is the launch of ARGO Tracker’s “Partners Program.” This new program will involve the use of “distributors,” or well-defined businesses with strategic industry partnerships, who will facilitate company sales by offering the capabilities of the ARGO Tracker to provide their clientele with a value-add service. Also, to meet the anticipated sales growth projections in 2006, the company will augment its independent sales force by adding additional sales representatives in key regions throughout the country. Given our current market forecast predictions, and the successful attainment of our operational goals and objectives, the company anticipates a twofold business growth in 2006. This optimism is shared by management and non-management alike, as the measurements upon which this forecasts are being made are not predicated on stretch goals, but more appropriately, on reasonable, highly attainable goals driven by a robust market and a well- defined business plan. As such, the future appears very bright not only for ARGO Tracker, but also its customers who stand to gain significantly as cargo losses decline and productivity and profitability rise — all because of greater supply-chain visibility and throughput accountability.
ARGO Tracker Contact 3280 E. Hemisphere Loop, Suite 190 Tucson, AZ 85706-5027 Info Phone: (520) 202-2785 www.acw.argotracker.com
December 2005 35EventsINT 11/21/05 12:08 PM Page 35
Events
Dec. 5-6 perspective. For information, e-mail: March 26-28 [email protected]. Miami: World Mail & Express Orlando, Fla.: ISTAT 23rd An- Americas, at the Sheraton Bal Har- Feb. 28-March 1 nual Conference, the annual meet- bour, the Triangle Management event ing of the International Society of looks at how private meets postal in Washington: FAA Aviation Transport Aircraft Trading. For infor- express markets. For information, call Forecast Conference, the annual mation, call (703) 978-8156 or visit: operators meet Central European part- event includes detailed looks at Unit- www.istate.org/conferences. ners. For information, call +44 870 ed States air traffic and a luncheon March 27-30 950 7900 or visit www.triangle.eu.com. address by Southwest Airlines Chair- man Herb Kelleher. For information, Cleveland: 2006 Material Han- Dec. 5-6 call (202) 267-7924 or visit: www.apo. dling and Logistics Show & Con- faa.gov/conference/welcome.htm ference, at the I-X Center, the annual Kuala Lumpur: Asia Pacific event includes keynote speakers from Aviation Outlook Summit, the March 8-10 supply chain chiefs at Lucent and The forward-looking annual gathering Limited. For information, call (704) hosted by the Centre for Asia Pacific Geneva: International Forum 345-1190 or visit: www.NA2006.org. Aviation. For information, call +61 on Aircraft Finance and Com- 9241 3200 or 870 950 7900 or e-mail: mercial Aviation, at the Hotel Pres- April 9-11 [email protected]. ident Wilson, the event includes 120 speakers from the capital world and Beijing: International Air Car- Dec. 8-9 airline operations, including Lufthan- go Association Annual General sa Cargo chief Jean-Peter Jansen. For Meeting, TIACA’s high-level yearly Tallin, Estonia: Transport & information, call +44 207 915 5101 or gathering looks at air freight direc- Logistics in International Trade, visit: www.icbi-aircraftfinance.com. tions in aircraft, Asia and fuel. For in- Information Technology, West- formation, call (786) 265 7011 or ern operators meet Central European March 12-14 visit: www.tiaca.org. partners. For information, call +372 627 2755 or visit, www.bi-info.ee. Bal Harbour, Fla.: Air Cargo April 30-May 2 2006, at the Sheraton, the annual Jan. 23-25 meeting of the Airforwarders Associa- Las Vegas, Nev.: Cargo Net- tion, Air & Expedited Motor Carriers work Services 2006 Partnership Dubai: World Air Cargo Event and Air Courier Conference of Ameri- Conference, at the Hyatt Lake Las 2006, at the Jumeirah Beach Hotel, a ca. For information, call (703) 519- Vegas, the annual CNS meeting is the Tabmag Publishing event bringing to- 0335 or visit: www.airforwarders.org. largest yearly gathering of the inter- gether global cargo leaders, including national air freight business in North top officials from Emirates, Etihah March 12-14 America. For information, call (516) and Cargolux. For information, call 747-3312 or visit: www.cnsc.net. +44 178 425 5000 or e-mail: Boston: International Boston [email protected] Seafood Show, at the convention May 11-12 center, for shippers of great scale. For Feb. 14-17 information, call (972) 620-3040 or Paris: World Express and Mail visit: www.bostonseafood.com. European Conference, at the Sofi- Shanghai: Air Freight Asia tel Forum Hotel, hosted by La Poste, 2006, at the Shanghai-Pudong Inter- For more events, visit: the annual event uniting the private national Conference and Exhibition www.aircargoworld.com/ and postal worlds. For information, Center, the bi-annual Payload Asia dept/events.htm call +44 870 950 7900 or visit event looks at China from a global www.triangle.eu.com. ■
December 2005 AirCargoWorld 35 36PeopleINT 11/21/05 12:09 PM Page 36
People
Airlines World, a senior com- Seattle-based forwarder named 20- munications special- year freight industry veteran David Atlas Air Worldwide ist at its Memphis, Wright an account executive at the Holdings: Wake Smith resigned as Tenn., headquarters. company’s headquarters. Wright chief operating officer of the parent She had most recent- spent 10 years in sales and pricing at of Atlas Air and Polar Air Cargo. He ly been at the Ameri- ocean container line CMA CGM started there as an advisor in 2000 can Association of Group and more recently was direc- and became COO in June 2004. No Exporters and Im- tor of transportation at Anderson Saccomano reason was given for his resignation. porters and also Hay & Grain in Washington state. Nippon Cargo Airlines: The worked at the California-based logis- Quick International Courier: Japanese freighter operator appointed tics technology company Arzoon. The New York-based emergency ship- Shunichi Fujimura senior vice She was logistics and technology edi- ment specialist named Dan Rourke president for the Americas and gener- tor for Traffic World in the 1990s and director of an expanded and reorga- al manager for New York. He replaces later covered logistics for the Journal nized air charter division. Rourke has Naoshige Makino, who returned to of Commerce. worked in the air charter industry for Japan. Fujimura was general manager more than 20 years with companies for sales at NCA’s Japan region. NCA Third-Parties such as General Motors, Caterpillar, also named Terry McDonald direc- BMW, Volvo and Dana. tor of sales and marketing for the APL Logistics: The unit of ocean Exel: The British logistics compa- Americas, Takashi Okushima di- container line APL named Brian ny named Diogo Reis as a sales rector of administration for the Lutt president, replacing Hans manager for freight management in Americas and Satoshi Shimura Hickler, who left as CEO in May for Portugal. Reis was a major account marketing section manager. DHL. Lutt has been president of manager in Lisbon for TNT and earli- SN Brussels Airlines: The pas- Asia/Middle East for APL parent NOL er worked at Refrige. senger airline named Neil Burrows Group since 2004 and has worked for Stonepath Group: The Seattle- executive chairman after the resigna- NOL in Asia for more than 20 years. based logistics provider promoted tion of Rob Kuijpers, the former FIATA: The International Federa- Lothar Kammerer to senior vice CEO of DHL Europe. Kuijpers re- tion of Freight Forwarders Associa- president as it expanded its project signed in October because of what re- tions, named Alicia Chin of Toron- logistics team because of growing ports in Europe said were differences to the 2005 ‘Young International infrastructure and energy projects with the board. Freight Forwarder of the Year.’ A around the world. The company es- Spirit Airlines: The regional pas- sales team leader for Exel, Chin sub- tablished a dedicated project logis- senger airline appointed Tony mitted a dissertation on new export tics team in Shanghai and expanded Lefebvre, the former head of cargo trade scenarios. Under the award, teams in Houston and the Czech at US Airways, senior vice president Chin will receive: two weeks’ practi- Republic. of customer service regional passen- cal experience in transport infra- Target Logistic Services: The ger airline, a position overseeing all structure in Hong Kong, London or Los Angeles-based forwarder named ground operations and airport ser- New Jersey; one week of training on industry veteran Jay Bellin manag- vices. Lefebvre had most recently legal and insurance aspects of trans- ing director at its San Francisco of- been managing director of Europe for port in London; and one week of air fice. Bellin was most recently at US Airways. cargo training. “Alicia’s achieve- Panalpina as vice president of pro- ments will provide motivation for fu- fessional services and compliance. Integrators ture Exel ssociates to take advantage He earlier worked in senior positions of the educational and professional at the Fritz Cos. and at Matson Lo- FedEx: FedEx Services named development opportunities available gistic Services. Ann Saccomano, a former reporter to them,” said Tim Speed, Exel Presi- Ozburn-Hessey Logistics: The at Air Cargo World sister publications dent, Canada. Tennessee-based logistics company the Journal of Commerce and Traffic Lynden International: The named Dave Hanley director of its
36 AirCargoWorld December 2005 36PeopleINT 11/21/05 12:10 PM Page 37
People
integrated solutions group and the 48 aircraft in Sigma’s portfolio istry of Equipment, Transport, Hous- Nathan Sanders director of opera- during a transition. Hebrand was co- ing, Tourism and the Sea. tions in Indianapolis. Hanley was at founder of Sigma and has been presi- Triangle Services, Ryder Integrated dent since 2004. Ground Handling Logistics and Performance Logistics Group before joining OHL last Febru- Technology ASIG: The Orlando, Fla.-based avi- ary. Sanders most recently was opera- ation services company named Mike tions director at Brightpoint. Traxon: Felix Keck of Conrad vice president, sales and Hellmann Wordwide Lufthansa Cargo became managing customer services. He had been re- Logistics: The German forwarder director of airline technology gional vice president for operations named Stephan Meyer to head key provider Traxon Europe, succeeding in the West, overseeing business at accounts for its Night Star Express Jean Yves Cap, who returned to 14 airports. A 39-year industry veter- service. Meyer, 36, had been at NET- Air France. Keck has been with an, he worked earlier at a sister com- Nachtexpress for 13 years. Lufthansa Cargo for 14 years, most pany, Signature Flight Support. Re- recently as vice president for margin placing him is Anthony Mazza, Manufacturers management, mostly responsible for who was with DHL for 12 years, cargo capacity from Europe. most recently as senior director of BBA Aviation customer operations for the Western Services: Hugh Airports division. Before that, he worked with McElroy became TNT and People’s Worldwide. president and CEO of Brussels Inter- the overhaul and national Airport: Government maintenance compa- The airport’s man- ny’s Dallas Airmotive agement company TSA: The U.S. Transportation Se-
McElroy subsidiary. He has named Wilfried curity Administration named Don- more than 30 years Van Assche chief ald L. Barker federal security direc- experience in the industry and executive officer and tor for Memphis International Air- joined the company in 1999. Before chairman of the air- port. Barker had been security direc- Van Assche that, he was president of UNC Air- port’s management tor at the Eugene, Ore., Mahlon work, a subsidiary of GE Aircraft En- committee. A consultant since 2004, Sweet Field. A 21-year veteran of the gine Services. he was chief operating officer of On- U.S. Marine Corps, he holds several Boeing Commercial Air- tex International, a European hy- degrees and has completed advanced planes: The jet maker named Kai giene products company. He was at studies in transportation manage- Heinicke regional director of cargo Procter & Gamble for 18 years before ment and logistics. ■ marketing for the Americas, expand- that, most recently as vice president ing the freighter marketing division of P&G Nordic. Advertiser Index from three to four. He joined Boeing Aéroports de Paris: François Air France Cargo ...... CV2 after seven years at United Airlines, Rubichon was named chief operat- Airport Authority of Hong Kong...... 3 and was at Challenge Air Cargo be- ing officer, replacing Hubert du Mes- Association of Canadian Airports ...... 7 fore that. nil. Rubichon, 42, has worked in Austrian Airlines ...... 14 Jetworks: The Greenwich, Conn.- government and postal positions, BACK Aviation Solutions...... CV3 based asset management firm whose and was executive director of Geo- Continental Cargo ...... CV4 portfolio includes widebody aircraft Post Logistics from 2000 to 2002. Etihad Airways...... 6 and A300-B4 freighters, named An- Earlier, he was head of the finance Mercator...... 25 ders Hebrand and chief operating division at La Poste and headed Sofi- Senai Airport Terminal...... 9 officer as part of an agreement with post, a holding company for sub- Tabmag...... 19, 28 Hebrand’s company, Sigma Aircraft sidiaries of La Poste. More recently Winnipeg Airports Authority...... 17 Management. Jetworks will take over he was a special advisor in the Min- World Airways...... 15
December 2005 AirCargoWorld 37 38BottomLineINT 11/21/05 12:11 PM Page 38
AirCargo theBottom Line
Cathay Capacity Chipping News Monthly year-over-year change in Quarterly worldwide semiconductor cargo traffic and capacity at Cathay factory utilization. Pacific Airways this year. 92 25%
20% 89 Capacity 15% 86 10% Traffic 83 5% 80 0% 1Q’04 2Q’04 3Q’04 4Q’04 1Q’05 2Q’05 3Q’05 4Q’05 –5% 1/05 2/05 3/05 4/05 5/05 6/05 7/05 8/05 Source: Company reports Source: iSuppli
Airline Costs Makeup Global Regions Operating costs’ percentage of U.S. Year-over-year percent change in air airlines’ overall expenses for the 2005 freight traffic in major world markets, second quarter first nine months of 2005.
Latin America Other Labor 42% 26% North America Fuel Europe 22% Asia-Pacific Africa Middle East Landing Fees Aircraft Ownership 2% 8% –3% 0% 3% 6% 9% 12% 15%
Source: Air Transport Association of America Source: International Air Transport Association
Carrying Oakland Oakland International Airport’s air freight traffic, 1988-2004. (in thousands of tonnes)
700
600
500
400
300
200
100 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: Oakland International Airport
38 AirCargoWorld December 2005 38BottomLineINT 11/21/05 12:11 PM Page 39
Airline Costs SemiInvest Year-over-year percent change in key Forecast for semiconductor industry operating costs for U.S. airlines for the capital spending. (in US$millions) 2005 second quarter. $65,000 50%
40% $60,000
30% $55,000 20%
10% $50,000
0% $45,000 –10%
–20% Labor Fuel Aircraft Landing Maintenance Interest $40,000 Ownership Fees on Debt 2004 2005 2006 2007 2008 2009 Source: Air Transport Association of America Source: Gartner Dataquest
Pricing Asia Quarterly year-over-year percent change in air freight pricing index for trans-Pacific air cargo since 2003.
15%
12% Westbound 9%
6% Eastbound 3%
0%
–3% ’03Q3 ’03Q4 ’04Q1 ’04Q2 ’04Q3 ’04Q4 ’05Q1 ’05Q2 ’05Q3
Source: Citigroup Investment Research
Pricing Europe Quarterly year-over-year percent change in air freight pricing index for trans-Atlantic air cargo since 2003.
20% Eastbound 15%
10%
5% Westbound
0%
–5% ’04Q3 ’03Q4 ’04Q1 ’04Q2 ’04Q3 ’04Q4 ’05Q1 ’05Q2 ’05Q3
Source: Citigroup Investment Research
December 2005 AirCargoWorld 39 40CommentaryINT 11/21/05 12:13 PM Page 40
Commentary
Liberalization Jeffrey N. Shane, Under Secretary for Policy, U.S. DOT The United States’ refusal to budge on foreign ownership rules shouldn’t stop historic U.S.-E.U. open skies deal would like to say a word about our negotia- quite simply, the most important thing we could do to tions with the European Union toward a possi- further the work-in-progress we call deregulation. Ible breakthrough aviation agreement — one We ask our friends in Europe to take our proposal seri- that would bring an entirely new level of liberal- ously. European airlines in particular should evaluate it ization to trans-Atlantic air services. carefully and let us know what they think. We believe, if Everyone knows the European Community has indicat- we ultimately adopt the proposal, that it would facilitate ed it wants to see progress in the removal of U.S. restric- much or all of what European airlines seek to achieve in tions on foreign investment in U.S. airlines. At the same the near term within a newly liberalized U.S.-E.U. avia- time, (U.S. Transportation) Secretary (Norman) Mineta has tion marketplace, and that the proposal will bring impor- made it abundantly clear that U.S. investment rules cannot tant benefits not only to airlines on both sides of the At- and will not be a topic for negotiation. If we decide to lantic, but to the users of air transportation as well. make changes, we will do so in response to our assessment Some critics on the other side of the ocean have already of what is in the best interest of the United States. complained to the commission that it should hold out for We think the proposal we have just issued is in the best a complete sweeping away of U.S. restrictions on invest- interest of the United States. Indeed, we think it is long ment — that nothing less than the right of establishment overdue. If the E.U. talks were to collapse we would not will be a satisfactory concession by the U.S. in return for abandon the proposal, but would see it through to its con- the agreement. clusion. We think — at least as a preliminary matter — that We all know that the perfect is the enemy of the good; the restrictions we propose to ease represent anachronisms but this is the first time in my experience that the perfect that no longer advance legitimate objectives. We are pro- has declared all-out war on the good. I have to confess posing to get rid of them for the same reason that we seek that I have grown weary over the years of hearing people to get rid of any regulation that no longer delivers value. argue that we should sacrifice achievable liberalization on But I will not pretend that we don’t care whether the the altar of what, in the near term at least, is clearly un- proposal will have a positive impact on the U.S.-E.U. achievable. It’s an old ploy, and it’s looking a bit shop- talks. Of course we do. I won’t mince words: We want to worn. When the liberalization we can achieve now is conclude that agreement —not only for the market access nothing less than a transformational agreement between that U.S. carriers will achieve, but because it can be ex- the United States and the European Community, the ar- pected to enhance the quality of competition across the gument seems even more transparently protectionist. Atlantic in a dramatic way. A bilateral agreement between The proposal we have just made, if ultimately adopted, the U.S. and the European Union would bring nearly 750 would engender a new level of cross-border cooperation million people and many of the world’s great airlines to- between alliance partners and, together with a “beyond- gether under a single liberalized regime. open skies” agreement between the U.S. and the E.U., It would take liberalization to the next level, linking would facilitate globalization on a scale heretofore unseen two huge markets and allowing airlines from both sides of in civil aviation. It represents a tremendous opportunity. the Atlantic unprecedented flexibility in how they build, Yes, deregulation is a work in progress. An aviation manage, and expand their operations. It would give us agreement between the U.S. and the E.U. would represent the momentum to do even more in follow-on U.S.-E.U. very important progress indeed. accords. And it would instantly become a new template for aviation liberalization elsewhere in the world. From an Excerpted from a speech delivered last month to the Interna- American perspective, a U.S.-E.U. agreement would be, tional Aviation Club in Washington, D.C.
40 AirCargoWorld December 2005 C3BackAviationHouseAdINT 11/21/05 12:14 PM Page 1 Cov4acwi1205 11/19/05 5:23 AM Page 1