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DECEMBER 2008 Trends & Analysis INTERNATIONAL EDITION

Seabury’s Air Cargo Forecast

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December 2008 CONTENTS Volume 11, Number 12 COLUMNS 10 AMERICAS Forecast A curious claim of outsourcing faces UPS. 2009 14 EUROPE Follow the money—if 20you can find any. It’s More green than orange and going to be a rough year. red? Is this a makeover for DHL? 18 ASIA As demand dwindles Bel- gium takes up the slack. Sustainbility A leading consulting 33company explains why it matters and how to do it.

DEPARTMENTS 2 Viewpoint 4 News Shanghai 44 People From culture capital to 36 commerce center. 45 Events 48 Bottom Line

Airport Cargo Screening Would you pay the TSA 42to do it?

www.aircargoworld.com Air Cargo World (ISSN 1933-1614) 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. ©2008. Periodicals postage paid at Newark, N.J., and at additional mailing offices. Subscription rates: 1 year, $58; 2 year, $92; outside USA surface mail/1 year, $78; 2 year, $132; outside U.S. 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. Opinions expressed by authors and contributors are not necessarily those of the editors or publisher. Articles may not be reproduced in whole or part without the express written permission of the publisher. Air Cargo World is not responsible for unsolicited manuscripts, photographs or artwork. Please enclose a self-addressed envelope to guarantee that materials will be returned. Authorization to photocopy items for internal or personal use is granted by Air Cargo World, provided the base fee of $3 per page is paid directly to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, and provided the number of copies is less than 100. For authorization, contact CCC at (508) 750-8400. The Transactional Reporting Service fee code is: 0745-5100/96/$3.00. For those seeking 100 or more copies, please contact the magazine directly. POSTMASTER and subscriber services: Call or write to Air Cargo World, Subscription Services Department, PO Box 5051, Brentwood TN 37024; telephone 888-215-6084.

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001TOCINT.indd1TOCINT.indd 1 111/20/081/20/08 4:00:104:00:10 PMPM Editor Editor’s Simon Keeble • [email protected] Note Associate Editor Jessica Binns • [email protected] Contributing Editors Roger Turney, Ian Putzger

Art & Production Director Jay Sevidal • [email protected] Editorial Offices 1270 National Press Bldg., Washington, DC 20045 (202) 355-1153/1172 • Fax: (202) 355-1171 Face Time PUBLISHER Steve Prince • (770) 642-9170 • [email protected]

espite a grim forecast, there’s no shortage of events in the Advertising/Business Office 1080 Holcomb Bridge Rd. • Roswell Summit global air cargo calendar next year, with several major gath- Building 200, Suite 255 • Roswell, GA 30076 Derings on three continents between January and April. (770) 642-9172 • Fax: (770) 642-9982 China India Will they be as big a draw as TIACA? The recent Air Cargo Forum in Kuala Beijing Office Madhav Kulshreshtha Nancy Sun (Sun Junqin) [email protected] Lumpur was generously hosted by MASkargo and superbly organized for about [email protected] ++86 10 5879 5885 +91 124 420 3323 3,000 exhibitors and attendees—and the odd scribbler. Shanghai Office Japan Isabella Hou (Hou Ying) Masami Shimazaki For us in the trade press, there’s always a danger of forgetting that we don’t [email protected] [email protected] +81-42-372-2769 run the United Parcel Service, we just report on it. Exposed to—and subse- ++86 (21) 5116 8877 Guangzhou/South China Thailand quently unimpressed by—industry leaders who can misplace $10 billion and Sherry Yuan Chower Narula [email protected] [email protected] still keep their jobs, we are tempted to pontificate, demanding ++86 10-5879-5885, ext. 601 +66-2-641-26938 Europe, United Kingdom, Taiwan changes and improvements and questioning the efficacy of Middle East Ye Chang David Collison [email protected] process and procedure. +44 192-381-7731 +886 2-2378-2471 [email protected] Australia, New Zealand Not to mention people. Hong Kong, Malaysia, Fergus Maclagan Singapore [email protected] However, if Ram Menen of Emirates SkyCargo wants to in- Joseph Yap +61-2-9460-4560 +65-6-337-6996 Korea stall a pavilion the size of a two-story row house at the TIACA [email protected] Mr. Jung-won Suh +82-2-3275-5969 exhibition in KL and ship in a uniformed bevy to hand around [email protected] the sweetmeats, that’s his decision—not ours. International Advertising Offices His Chairman must think he’s doing a bang-up job; after all, Classified Advertising he’s been at it successfully for more than two decades. and Reprints Laura Rickman • [email protected] What was obviously needed in KL was not so much the (770) 642-8036 scribblers but the forwarders. DHL is so functionally ubiquitous (for the time Administrative Assistant Susan Addy • [email protected] being anyway) it doesn’t count. The organizers didn’t know why Panalpina, Display Advertising Traffic Coordinator DB Schenker, Kuehne + Nagel, et al. were absent. Maybe they prefer a differ- Tracey Fiuza • [email protected] (973) 848-7106 ent forum. Electronic Rights and Syndication Barbara Ross • [email protected] Perhaps we should be grateful there are sponsors still able to fund these (973) 848-7186 events and organizations willing to put them on. Given the financial chaos CUSTOMER SERVICE OR TO SUBSCRIBE: (888) 215-6084 that now threatens economies worldwide, obviously we could all benefit from more, not less, face-to-face communication. Whether you turn up at a CNS, IATA or TIACA event, the objective is possi- bly to explore your golf handicap and to check out the business competition. If you’re an exhibitor, you push a product or service. You might be looking 400 Windsor Corporate Park for a deal. But you know why you’re there—it’s to network. 50 Millstone Rd., Suite 200 • East Windsor, NJ 08520-1415 The success, and relevance, of these events is in their repetition—not wheth- (609) 371-7700 • (800) 221-5488 President and CEO Alan Glass er they meet or exceed a scribbler’s preconceptions. Apparently, many repre- Interim CFO Pete Spinelli sentatives of the air cargo industry still think there’s a good reason to pay the Vice President, Magazine Group Liam Power President, PIERS Brendan McCahill requisite attendance fee and schlepp across the planet for face time. Vice President, Directory Databases Amy Middlebrook Maybe that’s the real news story. Vice President, Production & Manufacturing Meg Palladino Director of Circulation John Wengler President, OAG Aviation Steven G. Casley & Cargo Solutions POSTMASTER: Send address change to: Air Cargo World, 400 Windsor Corporate Park, 50 Millstone Road, Suite 200, East Windsor, NJ 08520-1415.© 2008 Commonwealth Business Media Inc. — All Rights Reserved For more information visit our website at www.aircargoworld.com

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Air India Launches Domestic Cargo Service

ir India will begin domestic car- Ago service this month after an eight-week delay, using the central city of Nagpur as a hub connecting points east, west, north and south. The airline plans to operate its ser- vice to Mumbai, Delhi, Kolkota and Chennai via four freighter-configured 737-200 aircraft and one 310-200 freighter. The city of Chennai, known for its textiles, garments, machine parts, leather products, pharmaceuti- cals and mobile devices, will also con- nect to Bangalore and Hyderabad. Air India expects to take possession of a 310-300 freighter by year’s end. USPS Can Fly Foreign Carriers The move comes after several inter- national carriers have exited the Indian resident Bush has signed into law an amendment to section cargo market this year. Etihad Crystal 5402 of title 39, United States Code that allows the United Cargo discontinued service to Mumbai PStates Postal Service (USPS) to have general negotiations and Bangalore but picked up Chennai with foreign air carriers for the first time. and Kozhikode. Cargolux terminated Specifically, “if the Postal Service has sought offers or proposals from cer- service to Chennai, and China Airlines re- tificated air carriers to transport mail in foreign air transportation between portedly pulled out of Delhi. Meanwhile, points, or pairs of points within a geographic region or regions, and has not Cathay Pacific improved its investment received offers or proposals that meet Postal Service requirements at a fair and in Delhi and Mumbai by increasing reasonable price from at least two such carriers, the Postal Service may seek of- flights to those cities earlier this year. fers or proposals from foreign air carriers.” Air India was among the many cash- At the same time, the USPS is raising prices on international shipping 8.5% poor Indian carriers to receive govern- in a bid to redress a net loss of $2.8 billion for the year ending Sept. 30. ment funding in a mini-bailout last The USPS says the loss occurred despite more than $2 billion in cost-cutting month. No word yet if a portion of Air measures that included the use of 50 million fewer work hours compared to India’s $1 billion Indian Overseas Bank the previous year. loan—which is earmarked for aircraft Mail volume in 2008 totaled 202.7 billion pieces, a decline of 9.5 billion funding—will be used toward the Air- pieces, or 4.5%, compared to the previous fiscal year. The USPS cites the bus freighter purchase. worsening economy and trends toward the use of electronic mail for the decline. ATSG Profits Up As Total revenue for the 2008 fiscal year was $75 billion, unchanged from last Largest Customer year. Expenses totaled $77.8 billion, including $5.6 billion required by the Postal Act of 2006 to pre-fund retiree health benefits. Disappears “We expect the new fiscal year to be another difficult one for the Postal ir Transport Services Group (ATSG), Service and the entire mailing industry, as economic factors will continue Aformerly known as ABX Holdings, to reduce mail volume and increase expenses,” Postmaster General John Inc., has reported a 41% increase in Potter said. revenues to $403.1 million, and a 107%

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earnings of $11.2 million. Commenting on the withdrawal of DHL from the U.S. domestic mar- ket, ATSG President and CEO Joe Hete said, “While we understand DHL’s situation, we are saddened that its decision will cost the jobs of most of the 7,000 remaining ABX Air employees who have loyally sup- ported DHL in Wilmington and sev- eral other locations.” During the second quarter of 2008, ABX Air had 55 DC-9 aircraft in service with DHL. In October, ABX sold DHL fourteen of the DC- 9s for $3.7 million and ABX expects to sell up to 40 additional DC-9s to DHL for as much as $11.0 million as they are removed from the DHL net- work through the first half of 2009. In September, DHL released one of ABX Air’s 28 767s from its U.S. net- work for conversion to a full freighter. Hete noted that the cash raised by the DC-9 sales will be used to convert the remaining 27 767s currently oper- ated for DHL for use under dry lease or ACMI arrangements: “That’s how we will emerge from this transition as a strong, flexible, and highly competi- tive global air cargo service company. “We are not dialing back our com- mitment to achieve results in keep- ing with the high quality assets we control, and the talented people who manage them.” FedEx Earns TNT Express set a new Guinness World Record at its Liege, Belgium, hub by loading 30 Mercedes Smart Cars in a 747F in 35 minutes and 34 seconds. The whole affair Environment was an event for TopGear Italia, an offshoot of the popular BBC TV car enthusiast show. To celebrate 10 years of the program, the Italian editors wanted to see how Endorsement many cars could fit. Seven ground staff had a three-hour window to load, unload eflecting its sustainability man- and then re-load the aircraft with real shipments before it departed for Shanghai. Ragement goals, FedEx Express and FedEx UK have received ISO increase in net earnings to $5.0 million ATSG’s revenues were $1.18 billion, 14001 2004 certification. for the third quarter of 2008, compared and net earnings were $8.2 million. The company also announced it will with the third quarter of 2007. For the same period last year, rev- reduce aircraft CO2 emissions and im- For the first nine months of 2008, enues were $855.3 million with net prove the fuel efficiency of its ground

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vehicles by 20% respectively by 2020. Since 2005, the company has re- duced vehicle CO2 emissions by al- most 1 billion pounds. “FedEx recognizes that one of the most responsible steps we and the industrial sector can take for our businesses, society and the environ- ment is to reduce our dependence on fossil fuels,” said Frederick W. Smith, FedEx Corp. Chairman, Presi- dent and CEO. “Our role is to connect the world in responsible and resourceful ways. The world faces big challenges, and we Athens recently saw the addition of a new cargo carrier. Airgo Airlines commenced believe that collective, sustained efforts regional services in autumn with three weekly flights between Athens and Larnaca on can create greater possibilities for peo- the southern coast of Cyprus. The route is operated by a BAE-ATP E-class freighter— subleased from West Air Sweden—with a maximum payload of eight tonnes. Airgo ple, businesses and nations worldwide.” hopes to add a new aircraft in early 2009 and begin service to Turkey, Bulgaria, the FedEx operates 170 commercial hy- Balkan states and Albania. “The region lacks an all-cargo European airline that can brid electric trucks in North America, [operate] outside the borders of Greece...under the EU safety rules and its institution- including the E700 hybrid that im- al framework,” said Petros Stefanou, managing director, in a statement. In addition to proves fuel economy by 42%, reduces its regular routes, Airgo also charters flights throughout Southeastern Europe. CO2 by approximately 25% and cuts particulate pollution by 96% compared provide 20% more payload capacity. position of punitive “green taxes” that with conventional vehicles. The company will also acquire Boe- do nothing for the environment, said its More than 25% of the FedEx Express ing 777 aircraft that provide greater Director General Andrew Hardman. fleet has been converted to smaller, payload and use 18% less fuel than its Speaking at the Air Cargo Forum in more fuel-efficient vehicles, saving MD-11 fleet. Kuala Lumpur, he acknowledged that more than 45 million gallons of fuel in the industry is under attack and cited the past three years. Cargo Carbon Tax a U.K. proposal to add cargo to its Like DHL, the airline has begun To Hit UK current passenger tax. replacing narrow-body Boeing 727 air- Harman said the new levy would be craft with Boeing 757 planes to reduce he Association of Asia Pacific Airlines based on weight, include both passen- fuel consumption by up to 36% and T(AAPA) opposes the unilateral im- ger and all cargo aircraft, and apply to both outbound and transit cargo. If enacted, he predicted it would have a severe impact on the U.K. air cargo industry with rates rising by 25% and more freight being trucked to foreign airports. Hardman estimated the current- global aviation carbon footprint at 650 million tonnes of CO2 annu- ally, of which air cargo makes up 20% for a potential carbon cost of $3 billion. With air cargo industry revenues of $55 billion and a fuel bill of $25 billion, Hardman said

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the additional cost of carbon would only be sustainable if applied in a non-discriminatory way and subject to international agreements, prefer- ably via ICAO. He acknowledged that while gov- ernments set the climate change policy framework, strong leadership from the aviation industry could help overcome political inertia and “move in the right direction.” He suggested It’s not a bird, it’s not a plane—it’s a plane inside a plane. Or at least part of a plane the most contentious issue facing his in a plane. Volga-Dnepr Airlines put one of its AN-124-100 freighters to good use airline members is the extraterritorial transporting the fuselage of a Sukhoi Superjet 100 to Siberia for testing. The aero- aspect of a unilateral EU imposition space manufacturer needed to get the aircraft component to the Siberian Research of its carbon trading scheme. Institute to test the service life of the airframe across variable flight conditions. To plan for sustainable growth, he said the airline industry must be seen to emission charges in its growth forecasts. when the global climate change be paying for its environmental impact “Governments are reluctant to policy debate remains unresolved,” and should plan to factor the cost of compromise on aviation at a time he declared. ■

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AMERICAS UPS Mechanic –What’s in a Name?

A Teamsters campaign to stop outsourcing aircraft maintenance has UPS bemused.

Commenting on a recent court rul- ing that limited Frontier Airlines’ abil- ity to outsource heavy maintenance on its airplanes except as a last resort, Matthew Fazakas, president of the Teamsters’ local representing Denver- based mechanics, commented: “Why on Earth does Congress allow laws to encourage the foreign outsourcing of good, skilled, middle-class and criti- cally important jobs?” UPS says it has no intention of out- sourcing line maintenance and appears rather bemused by the Teamsters’ posi- tion. Since the last UPS mechanics con- tract was ratified in 2002, the airline has acquired more planes—and created more than 200 additional U.S.-based jobs. “UPS aircraft mechanics perform urrently, close to 1,400 Teamsters mechanics are negotiating only line maintenance duties or the a new contract with UPS Airlines. They are worried about routine repairs and maintenance need- Ctheir jobs being outsourced to other countries. ed to keep our aircraft operating on a The United Parcel Service employs nearly 240,000 Teamsters. It is the day-to-day basis,” according to a UPS largest single employer of the union, which claims a total membership of 1.4 million. spokesman. According to UPS, its line maintenance mechanics are paid a base salary of $43 an The company says major mainte- hour, or the equivalent of close to $90,000 a year. The group currently enjoys a 401K nance—apparently the focus of the and pension plan. To date they have not had to pay for healthcare benefits. Teamsters’ campaign—is a highly To put this in context, UPS supplies a convenient salary comparison: FedEx pays specialized business and is not a core its line mechanics just over $40 an hour while the top rate at ABX is $32.70. US competence for a parcel delivery com- Airways mechanics earn just $29.06 an hour. pany. Having studied the option, UPS According to the U.S. Census Bureau, the median annual household income in concluded that such a facility would August 2007 was $48,200. cost “hundred of millions of dollars” The Teamster mechanics, represented by Local 2727, reportedly say the nego- and not be used for a quarter of any tiation is not about income—although they’d rather not have to contribute to a given year. health plan—but about the security of their jobs. So the company has contracted out Coincident with the UPS talks, the Teamsters Union is campaigning against any non-line haul maintenance to FAA- form of aircraft maintenance outsourcing on the grounds it eliminates American jobs. licensed Maintenance, Repair & Over-

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haul (MRO) facilities of which 90%, it Airplanes?” the Teamsters claim United the destinations (661) are located in the says, are located in the U.S. had been outsourcing heavy mainte- U.S.; 69 in Canada; 17 in Mexico; 81 in A spokesman acknowledged that out- nance to Beijing and Korea using “re- Central America; and 79 in Asia. side the U.S. line maintenance is per- pair facilities not licensed or certificated The DOT says MROs performed 27% formed by FAA-certified local vendors by the FAA.” of outsourced heavy airframe mainte- who are “subject to close scrutiny by In September 2008 the U.S. Depart- nance checks in 2007 for the nine carri- the company and government regula- ment of Transportation Inspector Gener- ers, up from 21% in 2003. tors to ensure their services meet exact- al’s office published a report reviewing the However, the Inspector General also ing aircraft safety standards.” FAA’s oversight of nine U.S. airlines and says that “while air carriers increasing- The company also notes it has a their heavy maintenance outsourcing. ly are contracting with foreign compa- scorecard system in place for grading The report concluded that AirTran, nies for heavy airframe maintenance, vendors. Alaska Airlines, America West, Con- foreign companies are also sending In December 2007, the Teamsters’ tinental, Delta, JetBlue, Northwest, work to the United States.” The DOT Aviation Mechanics Coalition produced Southwest and United are increasingly says it doesn’t know how much this a report based on information about outsourcing maintenance to repair sta- amounts to but noted in its report that United Airlines outsourcing its heavy tions to reduce operating costs. The 24% of one U.S. carrier’s maintenance maintenance. United reportedly pays its nine airlines sent 71% of their heavy customers are foreign. line mechanics $31.25 an hour. airframe maintenance checks to MROs Meanwhile, the UPS negotiations Entitled “Who Is Really Fixing Our in 2007, up from 34% in 2003. Most of continue under the aegis of the Federal

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Railway Labor Act and the National achievable. UPS is also reducing paper traffi c from January through October Mediation Board. The company says use and operational costs through rose 11.4% compared with the same the discussions are scheduled through the implementation of a scanner and period the previous year. … World- January 2009 so there’s no threat to its paperless printing device from HP. wide Flight Services won a contract holiday season operations. … Horizon Logistics has opened a to handle cargo for Brazil’s TAM Air- Air Cargo World contacted the Team- 176,000 square-foot distribution center lines at Orlando International sters national headquarters and Local in Los Angeles for port drayage using a Airport...Gulfport-Biloxi Interna- 2727 to determine why the union company-owned Clean Truck and TSA- tional Airport gave the green light should be including UPS in its “no approved driver identity fl eet… Sch- to a $3 million project to develop a outsourcing” campaign when line neider Logistics has opened fi ve new road linking an Interstate to its new maintenance is not the same as heavy forwarding offi ces in Chicago, Atlanta, air cargo facility for completion by the maintenance. New York, Rotterdam and Amsterdam. end of the year...American Airlines No one was available for comment at … Seattle-based Naverus claims the Cargo upped the per-piece weight press time. delay in adopting performance-based limit for its domestic Parcel Priority navigations systems (PBN) costs the Service to 100 lbs. from the previous … Briefly aviation industry $8 billion in wasted maximum of 70 lbs. ... Delta Air UPS is testing a group of hydraulic fuel each year. ... Southwest Air- Lines offi cially merged with North- hybrid vehicles. The trucks have a 45% lines is adopting PBN system-wide west Airlines at the end of October to 50% improvement in fuel economy, in a move that should reduce its CO2 and will fl y to a new total of 375 cities and the company estimates that a 30% emissions by 155,000 metric tons an- in 66 countries. Neel Shah remains the reduction in CO2 emissions will be nually. … Chilean carrier LAN’s cargo head of the combined company. ■

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EUROPE Going Green, Going Global – Gone DHL?

Reducing your carbon footprint when it extends across a global network can be a daunting challenge Shippers can then use these cer- tificates to prove their contribution to countering the effects of climate change. He adds that customers pay a premium for using the GoGreen service. “We have had a high uptake for the product in Europe, particularly in Scandinavia and the U.K. market, which have both seen double digit growth rates since the product was first launched,” says Dr. Kerschbaumer. “In Asia customers still tend to ques- tion why they should pay a higher premium for this enhanced service,” he says. “This I think is more about under- standing the need to tackle the issue of carbon efficiency, which politically in many of these countries is still not high on the agenda.” arcel mover DHL Express has set the ambitious target of But DHL Express is looking to an achieving a 30% improvement in carbon efficiency across its “energizing” push in the U.S. market, Pentire network by 2020 in what will be a truly global sustain- with a new sponsor for its carbon effi- ability initiative. ciency initiatives. But as if that were not enough, it is also launching a parallel campaign offering “President-elect Obama has made it its customers the opportunity to offset carbon emissions produced when shipping quite clear that he ranks tackling cli- individual parcels. Its GoGreen shipping service has been available in Europe since mate change as one of his most impor- 2006 but this year is being expanded to 17 countries in Asia-Pacific as part of a tant tasks,” says Dr. Kerschbaumer. “We network-wide rollout. fully intend to support that call.” According to Dr. George Kerschbaumer, executive vice president, commercial at Prior to taking up his new position DHL Express, GoGreen is the first product to be provided by a logistics company that at DHL Express just two months ago, allows the customer the option to offset the carbon outputs of their shipments. Dr. Kerschbaumer was an executive vice “Using two custom built tools—a carbon calculation system and a carbon man- president at parent company Deutsche agement system—DHL can assess the carbon emissions created by a customer’s Post World Network (DPWN). As such individual shipment moving through our network,” he says. he was the architect for much of the “This allows us to identify the most appropriate abatement projects, coordinate the GoGreen initiative now being rolled offsetting of emissions, and then, in conjunction with an independent third party, is- out across the company. sue certificates that detail the annual carbon offset date for that particular customer.” “We approached the whole issue of

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sustainability the same way in which we 300ERF aircraft—a simple addition carbon efficiency. This ranges from would undertake a major cost-cutting which will reduce fuel consumption equipping its trucking fleets with hy- program,” he says. Every aspect of the and increase carbon efficiency by more brid engines for biofuels and the intro- business will be audited and every part than four percent,” he adds. duction of telematics to help identify of the business will be expected to make One might ask: does DHL Express the most efficient routes. a contribution. We have deliberately support the European Union proposal “Here again, we have found that it can set some very tough targets, particularly to include aviation in its Emissions come down to the smallest detail of, that of achieving a 30 percent improve- Trading Scheme, which will require for instance, raising a delivery driver’s ment in carbon efficiency by 2020.” airlines to buy permits allowing carbon awareness of how he can improve fuel In the air, the company is already emissions over European airspace? efficiency by the way he drives a ve- committed to replacing 90% of its fleet “No, most definitely not,” says Dr. hicle,“ says Dr. Kerschbaumer. by 2020. DHL Aviation has embarked on Kerschbaumer. “We feel this form of In a further example of gaining ef- a program to replace older B727F aircraft carbon taxation is not the approach to ficiencies on the ground, DHL Express with newer, more fuel-efficient B757 take. In our consideration it would be far has installed a rainwater harvesting sys- special freighters that consume 20% less more equitable to create a carbon trad- tem at its new central European hub in fuel per tonne than the B727. They are ing futures market, similar to that now Leipzig, Germany, to capture and store also quieter. being established in the energy market.” approximately 3,000 cubic meters of “Aerodynamic winglets are being fit- On the road, DHL Express is being water. The recycled water is used to wash ted to an initial six of our fleet of B767- equally aggressive in efforts to increase its aircraft fleet, thereby reducing pres-

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sure on natural water supplies. plan to reduce emissions across its A350s. … Fraport Group reported Does a dynamic carbon efficiency three million square meters of real es- a 2.9% growth in air cargo tonnage program equate to direct cost savings tate. ... Spain started e-freight service for the fi rst three quarters of 2008 for for a major logistics service provider like through Iberia Cargo in September. its combined airports... Frankfurt DHL Express? ... Lufthansa suspended takeover Airport alone posted growth of 1.2%. “It is too early to say, at the mo- talks with SAS to concentrate on ... London’s Luton, Gatwick, ment,” says Dr. Kerschbaumer. “I think acquiring Austrian Airlines. The and Manchester Airports shed when we audit this program, say in two German carrier will reportedly buy the approximately 50 cargo and ground- years’ time, I think we will find that we Austrian government’s 41.6% stake in handling staff as part of a 600-em- have achieved significant economies the ailing airline. … AirBridgeCargo ployee worldwide layoff at Scottish in addition to achieving our goal of in- says Amsterdam’s Schiphol Airport airport services firm Menzies Avia- creased carbon efficiency.” will be strategic to its growth. ABC has tion… Lufthansa hopes to add an acquired three 747-400ERFs and has extra flight between Frankfurt and … Briefly ordered fi ve 747-8s. … Humberside Luanda, eyeing potential in Angola’s TNT opened a carbon-neutral depot Airport, U.K. opened a £1.6 million oil sector. ... Air France-KLM saw in The Netherlands in October. The Perishables Hub last month to handle its profits plummit 96% in its sec- facility, the fi rst in a planned group shipments of seafood and other goods. ond fiscal quarter for 2008, due to of green buildings, doesn’t emit CO2 … Grupo Marsans ordered 61 Airbus worsening economic conditions and and is part of the logistics company’s aircraft, including four A380s and 10 declining demand. ■

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December 2008 AirCargo World 17

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ASIA

Japan Tries to Find Bottom

Amid fierce rate pressure and an economic downturn, Japan’s carriers keep looking for further cuts

nounced that its last two –200Fs would exit service at the end of November and that one order for a 747-400 conversion had been cancelled. This keeps the carrier’s 747 freighter fleet at seven aircraft, well below earlier plans. Originally management had envisaged using at least 11 747-400Fs. Moreover, the 767-300F fleet, brought in last year because of capacity short- falls on intra-Asian routes, will remain frozen at three planes. Management had planned to use four or five of the mid-sized freighters. According to sources in Tokyo, 767 loads out of China have been disappoint- ing. The coming months are unlikely to bring any improvement as many large Japanese manufacturers have taken steps ver the past two years, news of an Asian airline disposing to decrease production, both at home of 747-200 freighters has become a routine phenomenon in and abroad, and are scaling down their Othis industry. long-term airfreight bookings. But now Japanese carriers are cutting back on –400 freighters. The domestic market offers little After two years of operating with lean capacity as it was taking its –200s out of solace. Galaxy Freight, the cargo airline service, Nippon Cargo Airlines was finally due this fall to grow its freighter fleet, launched two years ago by Sagawa Ex- but the latest 747-400F to join its ranks is going straight to the Belgian freighter press in partnership with JAL, Mitsui operator Cargo B, which is dry-leasing the aircraft for three years. and Sumitomo, went out of business in “This is just a way to offset our leasing cost while we are not operating the October, having been unable to make plane,” explained Shawn McWhorter, president for the Americas of NCA. “We a profit. don’t have a route to use it on today. For the short term it doesn’t make sense to Under these circumstances, pricing expand at this point.” competition has intensified both in the NCA is due to take delivery of its tenth 747-400 at the end of March. Man- domestic and the international arena. agement will evaluate in the coming months how best to use that plane, According to some sources, All Nippon McWhorter said, adding that there are some 747-200F operators who would Airways made UPS an irresistible offer welcome a –400 lease. for a partnership deal, which will kick Besides speeding up the retirement of its 747-200s ahead of schedule, Japan in next March. Airlines has jettisoned one 747-400BCF altogether. In late September the carrier an- Pointing to the need to obtain

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regulatory approval, a spokesman for the previous incumbent—who had a 14 B747-400E combis and 14 UPS said he was unable to release any strong background in shipping and B777-200s and –300s with a to- details at press time. But the essence logistics. tal weekly capacity of more than of the deal gives the integrator lift on The logistics ambitions are not fully 1,900 tonnes. Out of Beijing, some ANA routes in Asia, while UPS buried, though. According to reports the carrier maintains 23 weekly allows the carrier space on its flights to in the Japanese media, next year Japan scheduled flights, representing North America and Europe. Post is planning to establish a logistics 700 tons of capacity. With so UPS has a similar arrangement in service in four European countries to much capacity to offer, it’s “this place with NCA that is due to expire in support Japanese electronics and auto- slowdown in worldwide trade March. For his part, McWhorter said mobile manufacturers. [that] is the main concern to us,” that the ANA deal would not affect Castillo comments. (For more on NCA much, as UPS Supply Chain Solu- Trade Slowdown Shanghai, see page 36.) tions is keeping its allocations with the Concerns KLM all-cargo airline. The airline codeshare … Briefly deal would be easy to replace with ir France-KLM Cargo Maximus Air Cargo is under new other carriers, he argued. reported overall cargo ownership by Abu Dhabi Aviation, For ANA the biggest benefit may be Avolume in October fell which has a 95% stake in the com- the allocation of some cargo slots in 4.4% from the same pany. … HACTL picked up Skopje, Tokyo, McWhorter reckoned. Be that as month in 2007. Traffic in Sep- Macedonia-based cargo carrier STAR it may, the airline is clearly hungry for tember was also down by 12.2% Airlines as a new customer. … Brit- business. A few months ago it formed a compared to the same month last ish Airways Cargo opened its own joint venture with Nippon Express and year. The airline experienced a sales offi ce at Suvarnabhumi Air- Kintetsu, who hold 30.38% stakes each 6.8% drop in cargo traffic for its port, replacing Qantas Freight as in the new outfit called “ALLEX” (All second fiscal quarter of 2008. its general sales agent for Thailand… Express Corporation). Jean-Jacques Castillo, direc- Australian Air Express is the new Other shareholders are Yusen Air tor, China for AF-KLM Cargo, cargo-handling vendor for Virgin & Sea and MOL Logistics, who hold says airfreight business in the Atlantic Cargo’s operations in Syd- less than 2% each. ANA is the big- past years has prompted an ney. … Emirates SkyCargo plans gest stakeholder with 36.38%. Based increase in capacity, mainly to increase its cargo capacity in India at Haneda airport, ALLEX is due to to Europe. Growth until now, to 2,647 tonnes on 163 weekly fl ights launch express services to Hong Kong he says, has been driven by a by February 2009. … Air New Zea- and Shanghai with more Asian destina- steady demand in Europe thanks land completed the fi rst test fl ight tions in the pipeline. to a strong Euro, an undervalued using commercially viable, sustainably Observers in Tokyo say ANA’s appe- Chinese Yuan, and positive mar- sourced biofuel. … Delta Air Lines tite springs in part from disappointing ket dynamics for high-tech ship- chose National Aviation Services volumes generated by Japan Post, its ments, consumer electronics, as the ground handling agent and gen- partner in the joint venture all-cargo and the garment industry. eral cargo sales agent for its Kuwaiti airline launched last year. “Competition has increased operations. … Air China implement- The post office has given mixed mainly since 2005-2006 with ad- ed AIMS Corp.’s Airline Information signals about its future direction. Prior ditional capacity on passenger Management System to support its to a split-up into several divisions in flights [and] more freighters cargo operations....The governor of 2007—a prelude to privatization—it operated by all-cargo airlines... Kwara State, Nigeria says that construc- had signaled ambitions to develop from other gateways in China tion of “cargo-friendly” Kwara Air- into an international logistics player. like Beijing, Tianjin, Guangzhou port should be completed this month. However, the focus appears to have and Shenzhen,” says Castillo. … South Africa’s Durban TradePort shifted after a change at the top last AF-KLM operates 40 weekly started a search for a company to oper- year which saw an executive from the flights out of Shanghai, includ- ate the cargo terminal at its planned post office banking arm take over from ing 12 B747-400ERF freighters, aerotropolis. ■

December 2008 AirCargo World 19

110RegionalsINT.indd0RegionalsINT.indd 1919 111/20/081/20/08 4:21:404:21:40 PMPM Feature Focus: Seabury Forecast

No Break in the by Jan Maurits de Jonge

220F1-ForecastINT.indd0F1-ForecastINT.indd 2020 111/20/081/20/08 4:23:054:23:05 PMPM 2009 will gainstgag ins the backdrop of the worst economic cri- sississ iin decades, the convergence of weaker de- be a grim mammand, lower net yields and higher fuel costs A ddrastically reduced air cargo profitability. year for the CCapacity reduction measures only partially offset this decline. Air trade in 2009 is likely to see an amplification of 2008’s lows, with negative conse- air cargo quences for the industry through 2010. Although air cargo executives knew that weakening industry economic conditions would dictate severe belt-tighten- ing throughout 2008, the magnitude and simultaneous occurrence of a global slump in trade growth, a decline in net yields and a spike in fuel costs took even the wis- est veterans by surprise. And just when they thought that the “perfect storm” had arrived, the blackest of black clouds appeared: a worldwide economic crisis. That 2009 will be one tough year for the air freight sector is a certainty. Seabury forecasts a 3.1% growth in air trade in 2009—the same growth rate as in 2008 but far below the annual average of 7.4% from 2002 to 2007. And it is rapidly becoming clear that the road to recovery is likely to be long and bumpy. Based on the most recent analysis and trends, Seabury antici- pates a 4.2% growth in 2010, picking up to 5.1% to 5.6% from 2011 to 2012. Of course, that assumes a minimum of stability in an otherwise difficult eco- nomic environment. But before we dive into the details of this projection, let’s look at the following: • What really happened in 2008 Storm • Four major trends that will affect air trade in 2009 and beyond.

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2008: Triple Trouble Growth decline since early summer Air cargo igrowth has declined since May 2008, So what happened to our industry and is expected to drop further in September-December. in 2008? Several concurrent factors contributed to making it a more than YoY air trade growth in terms of weight (%) 15% difficult year, with numerous themes 3 2 weaving in and out to complicate man- agement of the unfolding events. In 10% 9 7 the shadow of the deepening financial 7 6 5 5 5% crisis, weakening demand, depressed 3 3 yields and high fuel costs, air trade 2 growth slowed dramatically. 0% –1 Trade volumes began to lose altitude air trade growth (%) YoY as the global economy, led by weaken- –5% –6 –6 ing demand from the U.S., softened 2008 monthly average –6 –7 –7 early in 2008. As the credit crisis un- –10% folded, volumes slid further, resulting ’03 ’04 ’05 ’06’07 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec in 2008 growth in air trade of just Source: Seabury Trade Database & Forecast November 2008; Seabury analysis 3.1%—a far cry from the 7.1% of just one year earlier. al average of 7.0%, and trade between decline in 2008 is anticipated. The four largest trade flows all Europe and North America fell from While oil prices currently are below showed a slowdown in growth. Trade 5.2% growth annually for that period to $60 per barrel—a huge relief follow- between Asia Pacific and Europe grew only 0.8%. ing the record highs of mid-2008—the by 4.2% compared to an annual average Meanwhile, escalating fuel costs 2008 average oil price is likely to end of 10.2% from 2002 to 2007, while Asia pumped up gross yields (that is, net up around $100—an increase of almost Pacific/North America trade declined by yields plus surcharges), eclipsing the 40% compared to 2007. With fuel pric- 7.9%, down from 6.0% annual growth fact that net yields remained under es accounting for 40% to 60% of an air over each of the preceding five years. pressure. Seabury’s analysis of the top cargo carrier’s costs, fuel surcharges fail Intra-Asia Pacific trade expanded by just 100 airlines reveals that net yields de- to protect profitability. 3.8% compared to the 2002-2007 annu- clined by 4% in 2007; and a further 2% However, fuel costs were not suffi- cient to force the industry shake-out pre- dicted by some. Only two major cargo Net yield decline carriers went bankrupt in 2008, repre- Gross airline yields are expected to grow by 9% in 2008 due to an senting less than 0.4% of global capacity increase in surcharges, disguising a decline in net yields of 2%. in terms of ATKs, leaving most of the 2.4 Gross airline yields 2004-2008E (USD/kg) industry’s incumbents in competition. +9% 2.3 2.3 In response to the challenges, sur- Captured surcharge 2.2 viving air cargo players did cut some Net yield 2.1 -1% 2.1 2.1 capacity, but the relief was slight. In the 2.0 2.0 0.7 first half of 2008, it was possible to see a 0.4 1.9 1.9 0.4 reduction in growth of international ca- 1.8 0.3 0.2 pacity for both freighters and passenger 1.7 aircraft and to anticipate further declines 1.6 –4% –2% 1.7 1.7 1.8 1.7 1.7 in the third quarter of the year. But actu- al capacity cutbacks for freighters didn’t 0.1 start to show up until August, with fur- 0.0 ther declines in November and Decem- 2004 2005 2006 2007 2008 ber. The net result: Overall international Source: Seabury. air cargo capacity still grew by 6.1%

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Growth international air cargo capacity combined. Other nations that prom- Total international capacity grew on average by 6% in the first 10 ise longer-term growth—Vietnam, for months of 2008. example—also lack the industrial po- 12% Global YoY international ATK growth tential and therefore the export trade 10% volumes to compensate for China’s 8% declining export volumes. The “flat-lining” phenomenon is of 6% serious concern. It now appears to be 4% afflicting powerful trading nations such Passenger capacity % Growth 2% Average growth 7. 3 % as Japan, the U.K., Australia, Taiwan, 0% and even Singapore. These five coun- Passenger capacity tries, collectively representing roughly –2% Average growth 6.0% 15% of all exports by air, have shown –4% Passenger capacity less than 0.3% annual average growth Average growth 4.3% –6% between 2000-2007. Jan Feb Mar AprMay Jun Jul Aug Sep The shift from air freight to ocean Source: Seabury shipping is very much on the minds of most air cargo executives today. And so in the first 10 months of 2008, with largest air export market for the foresee- it should be. Although air penetration— freighter capacity alone up by 4.3%. able future, it can no longer be viewed the share of all goods’ weight shipped Will those headwinds continue as the “constant producer.” by air—has not fluctuated much, in defi- into 2009? Let’s have a look at the key No other countries will make up for ance of the warnings of some observers, trends affecting air trade in the future this absence of growth. In 2012 alone, there is indeed an incremental migration and what we can expect for the next China’s air trade growth gap (the dif- of product shipments from air to sea. few years. We will see that, in fact, ference between the nation’s air trade Seabury’s historical analysis of com- several of the trends that contributed growth rate and its 20% annual aver- modity flows confirms that over the to the early difficulties described above age in 2002-2007) will be larger than last few years, the growth of ocean have existed for quite some time. the total air trade of the three other freight volumes has exceeded that of Air trade growth was decelerating BRIC countries (Brazil, Russia, India) air freight. However, the differential even before the credit crisis hit. China’s export engine had begun to cool down, China air trade growth and several major nations were in dan- Gowth began to decline in 2005, a trend that is expected to continue after ger of “flat-lining”—facing years of zero 2008; average growth 2009-2012 will be 9% vs. 20% in 2002-2007. or even negative air trade growth. The fall-off in China’s air cargo 30% 28% 28% growth is a setback for air freight com- 27% China air trade growth in terms of weight panies after years of double-digit rev- 25% enue growth. Where air trade growth 20% 20% Average annual rates averaged 28% in 2002-2004, they growth ’02-’07 dropped to a 13% average in 2005- 15% 2007. Indeed, June 2008 registered one 15% 12% 13% of the first year-over-year declines in 10% 9% 10% air exports from China, and air exports 8% 8% 9% annual growth 7% expected in in 2008 are expected to register only a 2009-2012 5.2% increase, versus 14% a year earlier. 5% Although Seabury anticipates a return 0% to double-digit growth in 2012 or 2013, ’02 ’03 ’04 ’05 ’06’07 ’08 ’09 ’10 ’11 ’12 and even though China will remain the Source: Seabury.

December 2008 AirCargo World 23

220F1-ForecastINT.indd0F1-ForecastINT.indd 2323 111/20/081/20/08 4:23:104:23:10 PMPM Project6 8/16/07 12:27 PM Page 1 Project6 8/16/07 12:27 PM Page 1

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China growth gap to date has been modest. Since 2001 China’s growth reduction has resulted in a ‘gap’ that is 49% larger than for example, air has lost only 4% of all air trade to and from Russia, Brazil and India combined. its weight to sea as most products that Air trade, BRIC countries shifted from air to sea were replaced (tons x 1,000,000) 15 by successive waves of new products— The additional 49% China growth gap growth if China Equivalent of many of them driven by the consumer China would continue 120 full 747 to grow by 20% freighters electronics boom of the last decade. Russia annually per day The change in air penetration var- 10 Brazil India ies by commodity group. For products such as fashion apparel and accessories, air has been losing out for years. And 5 even some perishable commodities, such as flowers, are being moved by sea as shippers turn to new refrigeration techniques and better supply chain 0 planning methods. A few commodities, 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012E including machinery parts and high Source: Seabury. technology products such as laptop computers, have shown modestly posi- up more than 21% and is expected mobile phones, Xbox video game con- tive penetration in air freight’s favor. to make up 22% in 2012. Yet, four of soles, and more—these days there are Also, the shift varies by trade lane: the five leading high-tech products in few such ‘breakthrough’ products on For instance, for mobile phones terms of absolute growth are growing the horizon. shipped from Asia to North America, air faster by sea than by air. Moreover, Yet the threat is not limited to high- penetration declined from 86% to 70% high-tech products, with their typically tech. Time-definite delivery is giving between 2002 and 2007 while penetra- short life cycles, are very dependent way to day-definite delivery as supply tion for those shipped from Asia to Eu- on the introduction of new prod- chain managers work harder to contain rope stayed constant at around 80%. ucts. Over the last few years, we have costs, a trend that will only increase with While high-tech was less than 19% seen plenty of exciting new product fuel costs. Express carriers collectively of air weight in 2002, it now makes introductions—iPods, iPhones, other reported disappointing volumes of their premium express products in 2008. Further proof of this trend can be Change in air penetration found in the growth numbers for air Air penetration (share of total shipped by air per commodity group) has express: While ‘express outpaced con- declined 4% since 2001 (equivalent to 41 full 747F flights per day) ventional air freight by 6 to 9 percent- Change in air penetration, cumulated age points in 2005-2006, by 2007 the 0% growth difference was less than 3%. This means that air trade is 4.3% lower than Trade lane imbalances have long if 2001 penetration rates for each –1% commodity group would still apply in 2008. been a curse for the air freight sec-

Today, this loss of penetration accounts for tor. The premium obtained on the 1.5M tons of freight (or 41 full 747 freighters stronger leg of a round trip is under- –2% per day) that are not transported by air cut substantially when considering –2.8% the yield and load on the weaker leg. –3% –3.2% –3.5% Seabury’s forecast of trade flows shows –3.4% that relative current trade imbalances, –4% although declining somewhat in the –4.2% –4.3% next four years, are here to stay for the –5% 20022003 2004 2005 2006 2007 2008 foreseeable future. As a result, absolute imbalances will grow in most cases, Source: Seabury Aviation

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High-tech growth air vs. sea Of the fastest growing high-tech commodities by weight transported by and that is not welcome news. air, four of the top-5 product groups are growing faster by sea. Looking at the largest flows, there are Air vs. Sea, high-tech top-15 in terms of air weight growth, CAGR 2000-2008 25 sizeable imbalances between China and Sea grows faster Mobile Telecom Top-5 the U.S. and between China and Eu- 20 Air grows faster rope. For every three to five kilograms Computers 15 Size: weight by air Land Line Telecom shipped from China to those regions, 10 Semiconductors only one kilogram goes in the other 5

direction. Air trade profiles between Air growth the rest of the Asia Pacific region and 0 Europe, and between those nations and –5 North America, will be far more bal- –10 Non-top15 Air Growth 2008 anced, as will transatlantic trade. –15 Trade imbalances are the result of un- –20 Sea growth derlying imbalances of consumption and -20 -15 -10 -5 0 5 10 15 20 -25 production, both driven by economic Source: Seabury. and physical factors. But imbalances can also be affected by exchange rates. the picture is not expected to change sig- due to increased consumer spending, this With respect to the underlying con- nificantly in the next five years. Although growth is not enough to significantly off- sumption and production imbalances, China’s imports likely will grow quickly set the trade imbalance with the U.S. and

December 2008 AirCargo World 27

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Intercontinental air trade growth Worldwide trade will show a 4.4% annual growth until 2012; growth on transatlantic lanes will stagnate while transpacific segments will do only slightly better due to continuous growth in China.

Intercontinental air trade growth 2008–2012 (CAGR %)

4 –0 5 –1 8 2 4 6 3 3 7 8 11 7 5

7 2 2

Worldwide CAGR 2008-2012: 4.4% Source: Seabury .

Europe:E ThThe iiincrease is llow iin absoluteb l t 0.3%0 3% tto 1 millionillit tonnes, respectively. til OtherOth imbalancesi b l tthath t hhave majorji im- terms, and a large amount of the nation’s We can also expect the imbalance pacts are the movements of perishable imports will be sourced from Asia. In- between the U.S. and Europe to widen goods (often highly seasonal) from na- creasingly, China will source from within somewhat with a stronger dollar. The tions such as Kenya, Ecuador and Peru, its borders as well. In absolute terms, by chart below shows how the weakening which far exceed return goods flows 2012 the imbalance between China-Eu- dollar closed up the air trade gap between from the Northern hemisphere. Seabury rope and China-U.S. is expected to widen the U.S. and Europe. Imbalances are not expects the imbalances of those three by 0.2% to 1.2 million tonnes and by limited to the largest flows, however. countries, in terms of a Northbound to

Impact exchange rate on trade imbalance The weakening dollar closed the air trade gap between the US and Europe, but as the dollar gains strength, the gap is likely to widen again.

US$/€ exchange rate has a clear impact on the trade imbalance between the US and Europe A weakening dollar closed the air trade gap with Europe

Gap between US air exports and imports to/from Europe Air trade to/from Europe Euro/$ exchange rate (Tons x 1,000,000) 1.4 1.4 Exports exceed 10% imports by 10% 2008 1.2 1.2 5% Jan – Aug 1.1 0% € /US$ 1.0 1.0 0.9 –5% 0.5 1 1.5 0.8 0.8 –10% 0.8 0.7 0.8 0.7 0.7 –15% 0.6 0.6 –20% Slope: –86% –25% For every €10ct the US$ lost 0.4 0.4 –30% value, exports to Europe 0.2 0.2 –35% gained 8.6% versus imports 2002 –40% from Europe 0.0 0.0 –45% 2002 2003 2004 2005 2006 2007 2008E US imports from Europe US exports to Europe Eur/$ exchange rate Note: 2008 trade based on 8 months actual data and 4 months forecast Source: www.exchange-rates.com; Seabury.

28 AirCargo World December 2008

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Trade imbalances top-5 flows In relative terms, China’s trade imbalances with Europe have grown by 33%, while the imbalance with North America has decreased by 11%; Southbound weight ratio, to expand from both imbalances are expected to decline in the next 4 years. 6:1 in 2007 to almost 8:1 in 2012. Trade imbalances on largest trade flows As discussed earlier, the 2008 aver- (strong leg : weak leg) –6% age oil price will likely be around $100 a 7:1 barrel—higher than ever before. In 2008, –11% 2000 6:1 2008 we also saw how unpredictable the oil –13% 5.4 5:1 4.8 2012 price can be, with the maximum price +33% 4.5 more than double the minimum. Despite 4:1 3.3 3:1 2.9 recent drops during the global economic 2.5 crisis, average oil prices will continue to 2:1 1.2 1.3 rise over the long term—a continuation of 1:1 0.9 1.1 1.1 1.0 1.0 1.1 1.1 the pattern since 2002. It is reasonable to Notation: first APac* – APac* – China – China – Europe – region’s export Europe NA Europe NA NA say that today’s prices are at a temporary is larger 1.9 2.0 1.7 1.3 2.7 Sum 2008 trade both low, and they will remain unpredictable. directions (M Tons) Oil prices will therefore continue to Source: Seabury. put pressure on the industry. Seabury’s trade forecast is based on an oil price older aircraft types), rising to $106 in up by $1.6 billion, according to IATA. of $75 per barrel in 2009 (a figure that 2012. For every dollar increase in the Although the lofty prices reached in the remains a serious issue for those flying price of oil, aviation industry costs go first half of 2008 did not structurally

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December 2008 AirCargo World 29

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Top-10 Countries & Commodities EXPORTS IMPORTS COMMODITIES Top-10 countries in terms of compound Top-10 countries in terms of compound Top-10 commodities in terms of compound annual growth rate 2008-2012* annual growth rate 2008-2012* annual growth rate 2008-2012**

COUNTRY CAGR COUNTRY CAGR COMMODITIES CAGR 1 Peru 12.6% 1 Russia 19% 1 Cereals & products 11.4% Vehicle electricals, 2 India 9.1% 2 Kazakhstan 18% 2 10.0% lighting, instruments, 3 Kenya 8.7% 3 Nigeria 14% audio/video Radio & mobile 4 China 8.4% 4 Vietnam 12% 3 9.2% telecommunications Chile India 5 7.8% 5 11% 4 Industrial electrical 9.0% power control & 6 Pakistan 6.1% 6 United Arab Emirates 10% distribution machinery Russia China 7 6.0% 7 10% 5 Electrical generators 8.9% 8 Brazil 5.9% 8 Saudi Arabia 9% 6 Transport vehicles 8.7% Computers & laptops 9 Spain 5.6% 9 Indonesia 8% 7 8.5% 8 Fruits, fresh: other fruit 8.4% 10 Philippines 5.1% 10 Korea (South) 6% 9 Tubes & pipes for the oil 8.0% & gas extraction industry 10 Fruits, fresh: soft berries, 7.6% *Note: only countries with a larger export /import volume of 150,000 tons in 2012 are included grapes & figs **Note: only commodities with a volume larger than 50,000 tons in 2012 are included Source: Seabury .

change the air cargo industry, there is of 5.3%. From 2009 to 2012, annual rate of 2.6% in the next four years with no guarantee that the weaker players growth will be just 5%—less than half Eastbound freight expanding by 4.5%—a will remain unchanged by elevated and that for the years preceding 2008. contrast to the 7.0% annual growth in unpredictable oil prices in the future. The rapid deterioration of the global both directions over the last few years. financial markets undercut growth at Within this trade lane, China has lost 2009: No Silver Lining the start of the forecast period, and some growth momentum, but it remains a Following the G20 summit in Washing- fuel price increases will still cause pain growth driver of some significance, with a ton D.C. last month, the global financial as the global economy begins to im- forecast of 7.7% and 9.2% annual growth system is expected to recover in 1-2 years. prove. Here’s how the global market East- and Westbound, respectively. However, the global economy has already breaks down by region: The Transatlantic sector also faces sustained great damage as a result. The The U.S. has fallen into a recession slower growth. Westbound will grow outlook for the U.S., Europe and Japan in 2008 that will continue into 2009. annually by 0.2% in 2009-2012 versus is discouraging enough, but emerging The Economist Intelligence Unit (EIU) 4.0% in 2004-2007. The U.S. Dollar’s re- markets also are being pulled down. The expects a full year of negative GDP cent strengthening against the Euro will result: From 2008 until 2012, the global growth in 2009. (During 2001—the result in an Eastbound annual growth economy will be much weaker than in previous U.S. recession—GDP still grew rate of just 0.6%—a huge drop from recent years. Specifically, average GDP by 0.8%). The worsening of financial 2004-2007’s average of 9.2%. growth is forecast to be almost 1.5% low- markets still has to filter through to Trade from Latin America to North er—down from an annual 3.8% between affect conditions for consumers and America will grow at a reasonable level 2004 to 2007 to about 2.4% a year from non-financial companies. A very grad- of 2.9% a year, but Southbound trade 2009 to 2012. The largest drop will be in ual recovery is expected in 2010-2012 will expand at just 1.7% annually. 2009 with an average GDP growth of just when GDP growth will average 1.9%. Like the U.S., Europe has experienced 1.3%, with only slow recovery after that. And the weakened U.S. economy is its own burst housing bubble and the Air trade is expected to echo that certainly hurting air trade. impact of the expected correction is decline in 2009 with a growth of just On a trade lane level, the U.S. West- barely built into the current economy. 3.1%, and then a pick-up from 2010 bound transpacific lane is expected to slow The EIU forecasts zero GDP growth for to 2012 for a year-over-year average to a compound annual average growth the region in 2009, slowly recovering

30 AirCargo World December 2008

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to 2.2% in 2012. As a result, European exports to Brazil will demonstrate than recently. Many combine a North- imports will slow considerably, hurting growth of 1.6% each year. Imports South with an East-West movement—for imports from Asia and the U.S. from South America will exhibit example, between Asia and Latin Amer- European exports to Asia and espe- healthy growth of 8.0% a year; and ica, where annual growth will average cially the Middle East will continue to imports from Peru and from Chile will 6.5%, and between Asia and Africa, 8.6%. show strong annual growth of 4.3% and show double-digit growth. Clearly, air cargo companies are 7.6% respectively between 2009-2012. Economic growth in Asia and Aus- entering particularly troubling times. Germany will remain the driver for Eu- tralasia (excluding Japan) is projected It is not simply that their growth will ropean exports to Asia, albeit at lower to decelerate to 5% in 2009—down be curtailed by worldwide slowing of levels than of late. Imports from Asia from 8.3% in 2007 and 6.5% in 2008. economic activity coupled with sharp and the Middle East into Central Europe Growth is expected to fall markedly drops in demand in many industrial will show continuous growth—12.6% a in 2009 as the sharp drop in demand sectors. They will also have to deal year—but imports into Western Europe from Europe and North America de- with the sizeable volumes of additional will drop to 3.1% from the 7.9% average flates Asian export growth and this new capacity that will take to the air between 2004-2007. feeds into domestic investment and in about a year with deliveries of new Exports to Africa will show some- employment in the export sectors. 747-8s, 330-200Fs and 777Fs. And even what lower growth (trade with South As world trade begins to recover lat- when the global economy starts to pick Africa will decline most). Imports of er in the forecast period, growth will up again, they will be faced with steadi- perishables will remain important, mak- rise to 5.8% in 2012. This is especially ly rising fuel prices. ing up 81% of Northbound air trade true in Northeast Asia, where annual The next few years will be a true test in 2012. This traffic can be expected growth, driven by China’s imports, will of air cargo management skills. ■ to continue to grow by 6.4% annually, reach 6.2%. Japan is set to flatline, with strengthening (seasonal) imbalances. zero or fractional growth at best. Based in Amsterdam, The Netherlands, European exports to South America Niche trade flows are set for the stron- Jan Maurits de Jonge is a senior analyst overall will grow 2.1% annually; while gest growth, although at a slower pace with Seabury Aviation & Aerospace.

AIRCARGOWORLD.COM Log on to Top News, Features, the Bottom Line...

December 2008 AirCargo World 31

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nowing what Sustainability is and why it is by financial, social and environmental indicators. This important is much easier than knowing how triple bottom-line approach enables leading companies to to do it. But do it we must, for the long-term drive near-term financial success without incurring off-the- viability of the air cargo sector, as responsible book debts in their social and environmental accounts. individuals, and as business leaders who have Once upon a time we thought there was no charge for fiduciary responsibilities that extend beyond using Nature’s supply of water; we have learned otherwise. Kthe next quarter. Once upon a time we thought there was no charge associ- This article explains how air cargo organizations can be- ated with emitting carbon dioxide into the atmosphere; but gin the sustainability journey in ways that are both good for we are discovering differently now. However we frame it— the business and good for the society and planet that sup- as economists, environmentalists, or business people—the port that business. costs are there and the bill always comes due, whether in When our company, SustainAbility, began operations this generation or the next. 21 years ago, people often asked us how to spell the word. Sustainability demands that we not simply pass this debt Today, with titles such as Chief Sustain- ability Officer ever more common in leading global companies, and with more than 2,500 companies publishing annual sustainability reports, the word has fully entered the business lexicon. In essence, sustainability is acting so Sustainability that we are able to meet the needs of the present without compromising the ability of future generations to meet their own A Fertile Arena needs. It means asking questions that go beyond the immediate to understand the A sustainable future requires practical steps. implications of our actions across a longer time horizon. It means, for example, ask- What can the air cargo industry do to build ing about where the timber for palletized benefits for today and for 20 years down the road? cargo comes from and whether the way it is harvested can be sustained not for a week but for a decade or a century; and not only how the air on to the next generation but do what we can now to man- cargo industry impacts climate change but also how climate age both the opportunities and the costs associated with our change will impact the industry. current actions and practices. Sustainability is often used as a short-form for sustain- So how, given sustainability’s cross-generational meaning able development, a phrase also defined 21 years ago in a and broad scope, does any company, organization or single landmark report prepared for the United Nations World business manager “do” sustainability? What does it mean, Commission on Environment and Development. Titled in practice, to implement a financially sound, global sus- “Our Common Future” and also known as the Brundtland tainability program? Despite the differences that one finds Report (Norwegian Prime Minister Gro Harlem Brundt- across companies and sectors, there are some approaches land chaired the Commission), it rooted the idea of sus- and steps we have developed over 20 years in this business tainable development in the now increasingly clear reality that have broad applicability. and imperative of global interconnectedness. Not that we Absent formal data capture and reporting systems and a need new evidence in light of the global financial crisis, sustainability champion (that can range from a corporate re- but government polices and business practices in one part sponsibility manager to a chief sustainability officer who re- of the world have direct implications for people around ports directly to the CEO), companies often don’t have a full the globe. grasp of all that is going on related to sustainability. A first More richly yet, sustainability requires an appreciation for step for many companies is thus to develop a small team to the business truism that corporate success must be measured assess and plan approaches to sustainability and to identify

December 2008 AirCargo World 33

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gaps in both performance and data. ognition of trusted brands, and to help new forms and types of engagement. Team members need to be chosen care- develop new relationships with niche But well beyond this tight circle of fully, with attention paid to function, customers as well. stakeholders are many other groups of expertise, politics, and authority. Critical to this effort, however, is the people who have a stake one way or A materiality analysis is an essential absolute necessity to deliver on prom- another in the operations of any given early step in the process of determin- ises. While public relations campaigns company. These might be people liv- ing where the company should focus are relatively easy to launch, the dem- ing around airport flight paths, suppli- its efforts. Drawn from the parlance of onstration of actual, measurable and ers, civil society organizations, custom- the legal and financial worlds, a sus- meaningful changes in operations or ers or business partners. So an efficient tainability materiality analysis helps approaches is essential to avoid being engagement process aligned with the companies determine where resources called to account in the marketplace for early materiality work can ensure ener- can be most effectively channeled to “greenwashing.” gies and limited resources are focused advance business goals by addressing As metrics are developed and in- appropriately. sustainability issues. The most useful ternal processes as well as lines of Sustainability is a powerful lens materiality analysis will help a compa- authority mature, one quickly realizes for companies to use across a tiered ny assess and understand issues from the need for accurate reporting. And approach. At an operational level, ap- three vantage points: potential impact whether following guidelines created plying the sustainability lens to fuel on the company, degree of societal by the Global Reporting Initiative or use, facilities management, packaging, concern and the company’s ability to other leading organizations in the field staffing, compensation patterns and influence. This kind of analysis will of reporting, companies report on their community involvement often leads to help identify and prioritize both risks sustainability and corporate responsi- early cost savings and efficiencies that and sustainability opportunities; gain bility work for a host of reasons. are just plain good business sense. a competitive advantage; anticipate Akin to annual financial reports for Applied externally, the sustainability and manage change; and assess perfor- many organizations, companies seek lens enables companies to imagine, test, mance over time. to keep their stakeholders informed via develop and launch new products. At Rather than a simple ranking ex- CR or sustainability reports. They want its most advanced setting, the lens lets ercise, the assessment looks across all to let investors know of challenges and companies accomplish even more in phases of the product/service life cy- opportunities; they seek to drive in- terms of experimenting and testing new cle—from raw material procurement, to ternal change and rectify problems by ways of doing business, new models supply chain management, to internal shining a bright light on practices; and for marketing or supply chain manage- operations, to customer experience, to they seek to position themselves in the ment, or creating new business units end-of-life/disposal—and ranges from marketplace of ideas as forward-looking that help their customers get what they the tactical to the strategic. and innovative. want in wholly new ways. Often conducted in tandem with And since it is often from customers Sustainability has always been about materiality work, benchmarking the or clients that sustainability issues are thinking differently—thinking about performance of other companies, both first called into light, companies must what we do today and how it affects the within one’s industry and beyond, can be accountable to such stakeholders. next generation. In application, it poses pinpoint what leading companies are Beyond reporting—and a critical the core question from which funda- already doing and can help identify ap- component of accountability—compa- mental business value is derived: how propriate pathways forward. nies develop any number of means for can we meet the needs of our customers keeping in regular contact with their not just today but across generations? s is quite apparent now across a stakeholders. Viewed narrowly, stake- It is a long-term perspective. The Amyriad of sectors, there is fierce holders would include employees, cus- time to start is now. competition among companies to be tomers and owners. And while there are seen as green or responsible or sustain- many existing mechanisms in place for Based in Washington, D.C., Jonathan able. Sustainability has the potential communication with these stakehold- J. Halperin is a director at SustainAbility, to be a market differentiator for some ers, companies find that sustainability the strategic consultancy and independent companies, to enhance consumer rec- issues are often a very fertile arena for research center.

34 AirCargo World December 2008

333F4-SustainabilityINT.indd3F4-SustainabilityINT.indd 3434 111/20/081/20/08 3:50:523:50:52 PMPM Project1 6/17/08 12:27 PM Page 1 Region Focus: Shanghai

Stimulating Shanghai?

336F3-ShanghaiINT.indd6F3-ShanghaiINT.indd 3636 111/20/081/20/08 4:23:434:23:43 PMPM ong known as China’s cultural capital, The southeastern metropolis also established a sister-city rela- Shanghai has become an economic power- tionship with Dallas, announcing Shanghai Airport and Dallas- house in its own right. Home to the world’s Fort Worth Airport as Friendship Airports. DFW, the third busi- fourth-busiest cargo airport by freight ton- est airport in the world, offers strategic access to the headquar- nage, Shanghai continues to develop into ters of 24 Fortune 500 companies. China Cargo Airlines operates an increasingly strategic logistics center. 747 freighters five times weekly between Shanghai and DFW Taiwanese shipping company Evergreen with nonstop service. Notably, cargo service to China composes Group recently established its Chinese headquarters in 21% of DFW’s entire cargo market. Shanghai,L which company chairman Y.F. Chang described As countries around the world turn more attention to as China’s “economic and transportation center.” Perhaps cargo crime, DHL Global Forwarding announced over the tellingly, Chang said, “After 15 years of growth and success, summer that it is entering into strategic partnerships with Shanghai is the economic and transportation center for the critical handling and airline partners in Shanghai to improve entire Asia-Pacific region. Evergreen will continue to choose security of high-value and high-risk cargo. DHL, Shanghai Shanghai in the future because we believe it is becoming the Pudong International Airport Cargo Terminal (PACTL) and economic and transportation center for the world.” Air China Cargo are working toward an agreement on stan- UPS sees Shanghai as a strategic transportation center as it dard operating procedures and will share best practices and expands its operations around the globe. The carrier expects information on crime trends and statistics. to open its newest hub at Shanghai Airport on Dec. 9, linking There’s a particular emphasis on high-value cargo, and a all of China to its international network with direct connec- working committee composed of airport cargo terminal opera- tions to Europe, Asia and the Americas. The Shanghai hub tors, freight forwarders, trucking companies and carriers will will also support domestic package service via all-cargo carrier convene to increase security surrounding high-tech, high-priced Yangtze River Express. commodities—a favorite target of criminal gangs. DHL and its The hub occupies nearly 1 million square feet at the West partners are also assembling a joint action taskforce to focus on Cargo Terminal Area at Pudong International Airport. Upon cargo crime prevention. opening, the hub will employ 600 staff and have the capap- Greg Reynolds, vice president airfreight USA for Hellmann bility to sort 10,000 pieces per hour. UPS expects the hub to Worldwide Logistics, a non-asset based forwarder, says that reach a sorting capacity of 17,000 pieces per hour by 2012 while the outlook for China in general and Shanghai in par- and to employ 1,000 staff by 2010. The carrier will operate ticular isn’t as rosy as in past years, there’s still hope for steady 104 flights per week through Shanghai via 15 747-400s plus volume going forward. “We, as has everyone else that operates MD-11s, 767s and chartered airlift. Pudong added a third in China, have seen a contraction in the market this year. After runway to support the project. five years of economic growth in excess of 10% annually, the

Wal-Mart China Shifts Sustainability Gears Wal-Mart CEO Lee Scott hosted more international division, outlined a number of ment. It’s going to take even stronger and than 1,000 suppliers, government officials requirements for suppliers who want to deeper relationships. And it is going to take and NGOs in Beijing to launch a socially re- continue to do business with Wal-Mart. The all of us working together.” said Duke. “We sponsible supply chain plan. company is creating a new supplier agree- are expecting more of ourselves at Wal- “Sustainability is about building a better ment that will require factories to certify com- Mart, and we will also expect more of our business. We think it’s essential to our future pliance with laws and regulations where they suppliers.” success as a retailer and to meet the expecta- operate as well as implement rigorous social Wal-Mart also announced a major effort to tions of customers,” he said. “Maintaining the and environmental standards. The agreement make Wal-Mart China a leader in sustainabil- trust of our customers, today and in the future, will begin with China–based suppliers in Janu- ity by designing a new store that uses 40 per- is tied hand-in-hand with improving the quality ary 2009 and expand to the rest of the world cent less energy. In addition, during the next of our supplier factories and their products.” by 2011. two years, Wal-Mart China will aim to cut wa- The company announced it would focus Wal-Mart will partner with suppliers to ter use by 50% in all of its stores. Outlining on areas aimed at meeting or exceeding improve energy efficiency by 20% by 2012 in the steps the company will take to become social and environmental standards, driving the top 200 factories it sources from in China. the most environmentally responsible retailer innovation and efficiency and building stron- The company said it would share information in China, Wal-Mart China President and CEO ger partnerships with suppliers, government and best practices with all of the factories as Ed Chan called for collaboration between and NGOs. “I firmly believe that a company well as its competitors. Wal-Mart, the company’s suppliers and the that cheats on overtime and on the age of its By 2009, Wal-Mart will require its suppli- Chinese government. labor, that dumps its scraps and chemicals in ers to provide the name and location of every “Few challenges in our world today are our rivers, that does not pay its taxes or honor factory they use to make the products it sells. more pressing than protecting the environ- its contracts—will ultimately cheat on the By 2012, it will also require its direct suppliers ment and, in China, Wal-Mart has a unique quality of its products. to source 95 percent of their production from opportunity to lead,” said Chan. “With the “And cheating on the quality of products is factories that receive the highest ratings on world’s largest population, and a robust the same as cheating customers. We will not environmental and social practices. manufacturing industry, no market presents a tolerate that at Wal-Mart,” Scott added. “Achieving the goals that we lay out greater opportunity for environmental sustain- DecemberMike Duke, 2008 vice chairman for Wal-Mart’s today is goingAirCargo to require aWorld common commit- ability to take hold than China.” 37

336F3-ShanghaiINT.indd6F3-ShanghaiINT.indd 3737 111/20/081/20/08 4:23:464:23:46 PMPM Corporate Outlook 2009 SPECIAL ADVERTISEMENT

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’’08CorporateOutlook_ACW.indd08CorporateOutlook_ACW.indd 3838 111/21/081/21/08 10:48:5710:48:57 AMAM Current China Domestic GoodsGAiro Cargoods aandTrafficnd GGrowth Isr oConcentratedwth on Coastal and Southern Trade Lanes growth rate has declined for six consecu- Top city pairs for domestic air cargo traffic tive quarters, dropping from about 12% last year to 9% in Q3 of this year. Growth forecasts for Q4 are 6% or less.” 1. Shanghai–Beijing Reynolds attributes the acceleration 2. Shanghai–Guangzhou of the pace of the decline partially to the 3. Beijing–Guangzhou global financial crisis. But beyond that, 4. Shenzhen–Shanghai 5. Shenzhen–Beijing he says, rising labor costs, reduced con- 6. Hangzhou–Guangzhou sumer spending in the U.S. and EU, a re- 7. Chengdu–Guangzhou duction in factory orders and the closure 8. Beijing–Chengdu of some 4,000 factories throughout China 9. Shanghai–Chengdu this year have also been contributing fac- 10. Kunming–Guangzhou tors. “In Shanghai, as well as our other 18 digit domestic transporta- offices throughout China, we are seeing a tion growth for 2009. “Just ment projects are being softer peak season this year and anticipate as has occurred in the U.S., put on hold, says Reyn- a relatively flat 2009,” he adds. domestic flights have been reduced olds, and Chinese consumers—like With the export market weaken- throughout China. But between air their American counterparts—are ing, the central government has been and surface transport, there is sufficient beginning to reduce spending. “The Chi- putting additional focus on domestic capacity to accommodate domestic nese government’s recently announced growth. Domestic tonnage in China has shipping needs,” he says. stimulus package will focus on infra- increased by 7% compared to last year, Companies that sell in China are structure so there could be some positive and according to Reynolds, some local beginning to be negatively impacted by effect on Chinese import and export economists are even forecasting double- the financial crisis because major invest- traffic in the coming months,” he adds.

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336F3-ShanghaiINT.indd6F3-ShanghaiINT.indd 3939 111/20/081/20/08 4:23:484:23:48 PMPM Region Focus: Shanghai Goods and Growth hina’s GDP is projected to grow 7.3% per year to 2027. The country’s domes- tic cargo market is forecast to grow 9.9% per annum during the same period. C At 2.6 million tonnes annually, China’s domestic air cargo market ac- counts for 6.7% of the world’s total by weight and has become the second largest, exceeded only by the U.S. To maintain a competitive edge, China’s domestic scheduled freight grew 11.5% in 2007, following growth of Hellmann operates its own scheduled 12.2% and 11.5% in 2006 and 2005. Mail tonnage grew 18.9% in 2007, follow- chartered service to the U.S. to supple- ing growth of 19.3% and 26.3% in 2006 and 2005, respectively. ment its blocked space agreements Most of China’s air cargo activity is concentrated in the coastal and southern with carrier partners. “We have been provinces where the bulk of the country’s 1.3 billion people and $2.3 trillion economy is located. The top 10 city pairs (see opposite page) generate approxi- running these charter flights for several mately 32.6% of all domestic air cargo tonnage. years and with the carrier capacity re- The types of goods transported on domestic routes vary by region. In the ductions over the past several months southeastern provinces, especially the Pearl River Delta, traffic consists largely of these flights have become an even more apparel, home electronics, and telecommunication equipment and light indus- important component of our service trial products. offering for exports from Shanghai and Goods that flow between regions include textiles, apparel, electronics, perish- the surrounding region,” says Reynolds. able foods and live animals from the east, precision instruments supplement ap- Effective Nov. 1, the Chinese govern- parel and electronics from the north and pharmaceuticals, cashmere, cut flow- ment raised the taxation refund rate for ers, and industrial equipment from the west. various commodities, including textiles Between 2001 and 2007, China spent nearly $19 billion on its 147-airport infra- and toys, to 14% to stimulate exports. structure and plans to spend a further $64.3 billion to increase the number to 244 by 2020. $8.8 billion will be spent in its western region, including construction of “This should have a positive effect for 37 new airports, expansion of 31 existing facilities and the relocation of six. Chinese exporters as we move through (Source: Boeing) Q4 into Q1 2009,” he concludes. ■ Transporting Very Large & Very Heavy Cargo

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336F3-ShanghaiINT.indd6F3-ShanghaiINT.indd 4040 111/20/081/20/08 4:23:494:23:49 PMPM Save the Date! Announcing the 1st 09

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MM_BB_10034_ver2.indd_BB_10034_ver2.indd 1 110/20/080/20/08 12:10:4812:10:48 PMPM Feature Focus: Airport Cargo Screening

ut when the U.S. Congress passed a law in 2007 saying 50% of cargo shipped on passenger aircraft leaving the U.S. after Feb. 3, 2009, must be screened, the legislators never really considered the prob- Blem of airport implementation—in either direction. And the fact that it will be 100% after lent process on both sides of the Atlantic. August 3, 2010, just adds to the pressure, This would mean that an airline flight says the air cargo industry. from Frankfurt to Newark would have to To meet the congressional mandate, comply with EU and TSA screening rules from Oct. 1, 2008, all cargo shipped on as well as U.S. Customs & Border Protec- Airport narrow-body aircraft originating from tion manifest-based inspections. U.S. airports both domestically and According to Dave Wirsing of the internationally is now screened at the Washington, D.C.-based Air Cargo Secu- piece level. According to Christopher R. rity Alliance (ACSA), the TSA multilay- Bidwell, vice president for security and ered approach currently relies on airlines Screening facilitation at the trade body Airports and other “interested parties” to participate Council International–North America, in a Certified Cargo Screening Program the process has gone “reasonable (CCSP) that will allow freight forwarders smoothly,” adding there have been a and other Indirect Air Carriers (IACs) to few “isolated challenges” largely due to conduct screening at off-airport sites so from the the use of cargo screening technology long as a proper chain of custody is main- that has been adapted from the passen- tained until the cargo is placed on a plane. ger side. The TSA says explosive detec- However, ACSA—which claims 125 tion systems, physical inspections and members—believes that the CCSP must more than 500 dogs are currently screen- be a complement rather than substitute TSA? ing cargo on narrow-bodied aircraft for federal air cargo screening at Amer- throughout U.S. airports. ica’s airports: In short, it wants the TSA Bidwell, the former managing director, also to be part of the solution. Edward Kelly, General security for the Air Transport Association, As currently envisioned by the TSA, Manager Cargo for the suggests a dog remains the best method the CCSP program would require a par- for screening cargo and expresses concern ticipating company to acquire the neces- U.S. Transportation that new technology to replace passen- sary screening equipment, warehouse Security Administration ger-derived equipment won’t be available space and trained employees to process told delegates at the by Feb. 1, 2009—and that this might lead all of its cargo. to bottlenecks at some airports. ACSA says the vast majority of the TIACA Air Cargo Forum in 4,200 IACs nationwide don’t have the Kuala Lumpur, Malaysia o mitigate this possibility, ACI-NA financial resources to do this. Tmembers have been asked by some Wirsing comments: “In response to last month that the current manufacturers for either on or off-airport a recent question regarding the options Administration’s policy for facilities to screen their shipments. that a company which doesn’t partici- Bidwell expects some manufacturers to go pate in CCSP would have to ship their screening international ahead next year. Meanwhile, on Sep. 30, cargo, TSA stated that the company inbound cargo is based on the EU and the TSA reached an accord to could ship their cargo using FedEx, ship securing agreements with harmonize their cargo screening processes their cargo using a company that partici- in order to ensure that both the 50% and pates in CCSP, or don’t ship. foreign governments for 100% rule apply in both directions within “Such a response is senseless and the the process. the mandated timeframe. attitude that it reveals towards the thou- European governments have their own sands of small businesses that make up the processes for U.S-bound cargo. The object air cargo industry nationwide is reckless.” of the new accord is to ensure an equiva- According to the 2007 Act that cre-

42 AirCargo World December 2008

442F4-SecurityINT.indd2F4-SecurityINT.indd 4242 111/20/081/20/08 4:24:064:24:06 PMPM ated the screening requirements, Con- gress instructed the TSA to establish an air cargo screening program “commen- surate with” the passenger screening program already run by the TSA. Wirsing believes the word “commen- surate” is open to interpretation. His group thinks the TSA should provide screening at airports where cargo on narrow-bodied aircraft is already subject lACs to face insurmountable costs and ger carriers already screened and secure to screening and allow the screened logistical hurdles. will not require further screening, and cargo to go onto any airline that is ship- “For many, the TSA proposal is a thus can bypass the anticipated airport ping air cargo. The program should also threat to their very existence.” backlogs and potential delays. While reimburse an airline that is currently this program will have some impact in conducting screening for the costs of s an airport representative, assisting carriers in attaining the 50% such screening and should work in con- ABidwell’s concern is that despite milestone, its key impact will be to- junction with the CCSP program. the canine legion, if the new technol- wards attaining 100% by August 2010. “Such a program would ensure that the ogy doesn’t arrive before February, “However, the ultimate responsibil- entire air cargo industry would retain the bottlenecks are going to become a prob- ity to ensure that cargo uplifted on ability to service [its] customers and maxi- lem at various U.S. airports. He won’t passenger aircraft in the U.S. meets the mize the flow of cargo at U.S. airports. say which. Wirsing wants to ensure this screening requirements remains with “Airfreight forwarders are as diverse doesn’t happen by getting the TSA in- each carrier.” as the shipping community they serve. volved in the airport screening process Meanwhile, nobody really knows They come in all sizes and offer ‘niche’ and have it paid for by a levy on each what will happen in February next services as well as a full menu from shipment. year—will the new technology be avail- managed global transportation to ware- Currently, the TSA will certify any- able? Will the TSA get involved? Will housing, distribution, trade compliance, one appropriate for the role rather than enough IACs manage the pre-airport and even financial services. have to do the work itself. screening to avoid Bidwell’s bottlenecks? “The small to mid-size forwarder with At the moment a combination of Wirsing and his group would like an entrepreneurial bent can provide an airlines, shippers and IACs are screen- Congress to cut the industry some slack equally competitive service as a multina- ing cargo on passenger aircraft at 18 by revisiting the law and its implemen- tional given a level playing field. Howev- U.S. airports. TSA Air Cargo Manager tation timeframe. But with a Presiden- er, TSA’s proposed cargo screening regime Doug Brittin thinks this is a successful tial Inauguration just weeks away, most will take away that level playing field and first step to meeting the new screening eyes will be on the musical chairs in force the small to mid-size forwarders and mandate as “cargo received by passen- Washington. ■

Mosul ErbilErbi

Did You Know? Sulaymaniyah KirkukKirkukrkk Coyne Airways Tikritt now also operates BaladB Fallujah BaghdadB all-cargo services Basraasra to Northern Iraq

www.coyneair.com Tel: +9714 299 3922/3, +9714 299 5927 Fax: +9174 299 3924 Email: [email protected] Dubai

December 2008 AirCargo World 43

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Airports also appointed Howard Hall to the APL Logistics: The supply chain role of senior vice president and chief services company appointed Peter Chicago Rockford fi nancial offi cer. Knapp to the role of vice president International Airport: British Airways of contract logistics. Knapp previously RFD hired Kenneth Ryan World Cargo: BA spent 12 years with DHL. as director of cargo develop- Cargo appointed Aviapartner Cargo: The aviation ment. The 30-year industry Stephen Eagle to services provider brought Henning veteran previously was vice the role of global key Dieter on board as general manager, president of Cargo Connec- accounts manager. cargo services in Germany. Associat- Ryan tions Logistics International. The 18-year industry ed Global Systems: AGS tapped Ja-

veteran is charged with Eagle son Wells for the position of regional Airlines managing the strategic manager sales and service, Southeast. development of BA Cargo’s key client CEVA Logistics: The European Aloha Air Cargo: The Hawaiian portfolio. He comes to BA Cargo from supply chain company named John carrier named Mike Malik to the role Continental Airlines. Klompers managing director for Cen- of president. He previously was chief in- tral Europe. formation offi cer of Aloha Airlines. Third Parties Associated Global Systems: AGS Atlas Air Worldwide: AAWW tapped Jason Wells for the position of tapped Raymond Sisson to lead its Menzies Aviation: The Scotch regional manager sales and service, South- aircraft leasing division, Titan Avia- airport services provider tapped Neal east. Wells previously held positions with tion Leasing. Sisson assumes the title of Moran as vice president of cargo for its Eagle Global Logistics, Sea-Land Service president and CEO and will be based in operations in America. Moran previously and Tazmanian Freight Systems. Dublin where Titan is headquartered. was engaged with He comes to the company from GE Cargo Airport Services Technology Commercial Aviation Services where he and DHL Express at spent several years as senior vice presi- JFK Airport. CargoWise: The dent and regional manager for Russia, Singapore Air- supply chain logistics Africa, and the Middle East in addition port Terminal Ser- management systems pro- to handling sales and marketing for vices: SATS recruited vider appointed Andrea Asia-Pacifi c. Sisson has a background in Lim Chuang to the Robinson to the position corporate law with special experience in role of senior vice Chuang of business development aviation fi nance. president, fi nance. manager, U.K. She brings

American Airlines Cargo: AA Trans Global Logistics: The third- 21 years’ experience in the Robinson Cargo named Roger Samways to party logistics provider tapped Paul freight forwarding soft- managing director of global accounts Yip for the position of executive direc- ware industry to the role. and sales strategy. He started with AA tor of ocean freight and logistics. Yip FreightScan: The freight and lo- Cargo in 1998 as a London-based cargo previously co-founded and was execu- gistics technology solutions company regional manager. tive director of Wako Logistics Group. appointed Larry Fullerton to the role Air Jamaica: TranSystems: The transportation of chief scientist. The Caribbean car- design and security fi rm hired Robert rier named Subodh Bielek to run its Aviation Practice Consultants Karnik to execu- in Ft. Worth. Bielek tive vice president, brings 39 years’ ex- Seabury Group: The transporta- commercial sales. In perience to the role. tion consultancy appointed David this role, Karnik will The company also Turnbull to chairman of its newly

oversee marketing, Karnik brought on Charles formed Seabury Aviation & Aerospace planning and sales. He Everett, Jr., as vice Asia subsidiary in Hong Kong. Turnbull previously was engaged with Delta Air president of its avia- previously served as CEO and deputy Lines, ATA Airlines, Global Aero Logis- tion consulting group chairman of Cathay Pacifi c Airways for tics and Continental Airlines. The airline in Alexandria, Va. Everett eight years. ■

44 AirCargo World December 2008

444PeopleINT.indd4PeopleINT.indd 4444 111/20/081/20/08 4:24:154:24:15 PMPM Events

Dec 10-12 Feb 24-25 fi cials to discuss key concerns facing the industry. Washington, D.C.: The 2nd An- Miami: The World Mail and nual Global Infrastructure Lead- Express Americas Conference March 30-April 2 ership Forum unites members of the 2009, at the Hilton Miami, the annual public and private sectors to discuss meeting for all elements of the mail Dubai: SCM Logistics Middle the future of the biggest infrastructure and express industries across North, East 2009, the weeklong conference projects around the world in light of Central, South America and the Carib- focused on solutions to supply chain reduced credit availability and shrink- bean. For information, e-mail: john. and logistics challenges in the Middle ing investment banks. For information, [email protected] or nigel.ashton@ East. For information, call +65 6322 call 202-776-0990, or visit: www.cg-la. triangle.eu.com 2737, e-mail [email protected] or com/global2 visit: www.terrapinn.com. Feb 26 April 1-2 2009 Frankfurt: The Lufthansa Cargo Feb 18-20 Environmental Conference, in its Brussels: 7th Annual Cargo Air- inaugural presentation, addresses the craft and Operations Conference, Bangkok: The World Air Cargo issues of aviation emissions and other the two-day meeting illuminates key Event gathers representatives from environmental effects created by the air issues facing air cargo operators. For airlines, airports, freight forwarders and cargo industry, and discusses solutions information, call +44 (0) 207 579 other cargo players for networking and for carriers going forward. For informa- 4856, or e-mail: alicem@aviation-indus- more. For information, e-mail: p.cooper@ tion, call +49 69 696 911 23, or visit try.com. ■ aircargonews.net, +44 (0) 1784 255000, www.lhcargo.com or visit: www.worldaircargoevents.com GLOBAL PARTNERSHIPS March 2-5

Advertiser Index Bangkok: IATA World Cargo Aeronautical Engineering...... 6 Symposium 2009, the weeklong Agility Logistics ...... 38, CV4 compendium of seminars, meetings AIG UK ...... 40 and public discussions has become the AirBridgeCargo ...... CV3 strongest annual gathering focused on the key business issues of the global air Austrian Airlines ...... 39 cargo industry. For information, call Boeing ...... 24, 25 +41 22 770 2525, or visit: www.iata.org/ Cargolux ...... 7 events/calendar Cologne Bonn Airport ...... 17 Coyne Aviation...... 43 March 10-12 DB Schenker ...... 27, 29 Delta Air Logistics...... 32 Memphis: ACI-NA Air Cargo IATA ...... 16 Conference 2009, located at the Pea- Kansai International Airport...... CV2 body Memphis Hotel, attracts airport Lufthansa Cargo...... 15 directors and CFOs, air cargo managers and airlines, freight forwarders, termi- Saudi Arabian Airlines...... 3 nal developers and transportation of- Singapore Airlines ...... 35 Swiss World Cargo...... 12 For more events, visit: Ted Stevens ...... 13, 46 www.aircargoworld. Thai Airways...... 9 com/dept/events.htm Qatar Airways ...... 8

December 2008 AirCargo World 45

445EventsINT.indd5EventsINT.indd 4545 111/20/081/20/08 4:32:244:32:24 PMPM Corporate Outlook 2009 SPECIAL ADVERTISEMENT

Linda Close Angie Spear Air Service Development Director Air Service Development Director Ted Stevens Anchorage International Airport Fairbanks International Airport [email protected] [email protected] Tel: 907-266-2541 Tel: 907-474-2529

ALASKA – Air Crossroads of the World! Air cargo flights make more money when they stop in Alaska on flights between Asia and North America. It works like this — a nonstop cargo flight between China and Oakland can carry a payload of 65 tonnes … however, if they stop in ANC, the same flight could carry a payload of 110 tonnes … generating an additional $90,000 per flight. At five flights a week per year, that’s a whopping $2,340,000 in additional revenue. More than 30 major air cargo carriers and 15 passenger carriers serve the Ted Stevens Anchorage International Airport. Located 9.5 hours or less to 90 percent of the industrial- ized world, ANC is the No. 1 airport in North America for cargo landed weight and No. 3 in the world for cargo throughput. The airport has continually received the Air Cargo Award of Excellence for the airport category of 1 million tons of freight or more. ANC — together with its sister airport — Fairbanks International, compose the Alaska In- ternational Airport System. Sharing many of the same attributes, these airports combine to make an unbeatable combination able to give every customer exceptional and dependable 24-7-365 service. In fact, FAI recently opened a new cargo aircraft parking apron able to accommodate four wide body aircraft. Whatever your aviation needs may be — we have you covered.

December 2008

’’08CorporateOutlook_ACW.indd08CorporateOutlook_ACW.indd 4646 111/21/081/21/08 9:27:469:27:46 AMAM Service at the Speed of Flight!

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MM_OAGBACK_9691_8x10.875.indd_OAGBACK_9691_8x10.875.indd 1 110/30/070/30/07 2:44:372:44:37 PMPM AirCargo theBottom Line Sharing Markets U.S. Airlines International air cargo year-over-year change Monthly year-over-year percent change in domes- for the first nine months of 2008. tic and international cargo traffic for U.S. airlines. 12% Middle East Domestic 8% North America International

Europe 4%

Asia/Pacific 0%

Africa –4%

Latin America –8%

Total –12% 11/07 12/07 1/078 2/08 3/08 4/08 5/08 6/08 7/08 8/08 9/09 –12% –8% –4% 0% 4% 8% 12% Source: IATA Source: Air Transport Association of America

Carrying Asia Carrying Europe Monthly year-over-year percent change in capac- Monthly year-over-year percent change in ity, in available tonne kilometers, and traffic, in overall freight traffic and Asia-Pacific freight freight tonne kilometers, of Asia-Pacific airlines. traffic for European airlines. 6% 8%

4% Capacity 6% Overall 2% Traffic 4% Asia-Pacific 0% 2% –2% 0% –4% –2% –6% –4% –8% –6% –10% –8% 1/08 2/08 3/08 4/08 5/08 6/08 7/08 8/08 9/09 1/08 2/08 3/08 4/08 5/08 6/08 7/08 8/08 9/08 Source: Association of Asia Pacific Airlines Source: Association of European Airlines

Carrying International Monthly year-over-year percent change in total scheduled international freight traffic and capacity worldwide, in freight tonne-kilometers and available tonne-kilometers. 8% 6% 4% 2% 0%

–2% Traffic Capacity –4% –6% –8% 4/07 5/07 6/07 7/07 8/07 9/07 10/07 11/07 12/07 1/08 2/08 3/08 4/08 5/08 6/08 7/08 8/08 9/09 Source: International Air Transport Association

48 AirCargo World December 2008

448BottomLineINT.indd8BottomLineINT.indd 4848 111/20/081/20/08 4:24:414:24:41 PMPM Project4 11/17/08 11:30 AM Page 1 Project1 4/7/08 2:18 PM Page 1

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agilitylogistics.com