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The weekly newspaper for air cargo professionals Volume:18 Issue: 20 25 May 2015

Loss in 2014 for Asia Pacific airlines

irlines in Asia Pacific made a loss of $50 million in 2014 compared to a $2.2 billion profit in 2013, despite cargo revenue rising, according to the Association of Asia Pacific Airlines (AAPA). The loss in 2014, based on 26 carriers, follows the profit decline seen in 2013, which was down from $5.6 billion in 2012. The cargo revenue for the region increased by 2.7 per cent to $20.8 billion over 2013, but 2013 had seen a 4.2 per cent decline due to what were described by AAPA as “persistently soft global trading conditions” at the time. The overall loss comes despite operating revenue increasing by 1.9 per cent to $176.6 billion in 2014. AAPA director general, Andrew Herdman says: “Asia Pacific carriers faced a number of significant challenges in 2014, with capacity growth slightly outpacing market demand leading to intensely competitive market conditions across all segments of the industry.” The association says airlines

faced overcapacity, high fuel costs and currency volatility, which it says affected profits despite rising cargo volumes. Herdman says: “The strengthening of the US dollar against many Asian currencies had some effects on travel patterns as well as increasing the burden of dollar obligations.” In 2014, cargo volumes across Asia Pacific increased by 5.3 per cent compared to 2013 to 63.1 billion freight tonne kilometres (FTK) because of increasing exports from manufacturing hubs, following a number of weak years.

Available freight tonne kilometres (AFTK) increased by 4.1 per cent to 97.3 billion and the load factor was up by 0.8 percentage points to 64.9 per cent. Commenting on the outlook for 2015, Herdman says: “The operating environment remains highly competitive, even though airlines have been carefully reviewing their route networks and closely matching capacity with the expected growth in demand.” He also says though oil prices are lower than this time last year, the benefits airlines will see will

depend on fuel hedging policies. AAPA says fuel expenditure fell by 1.1 per cent to $60 billion, while global jet fuel prices dropped by 7.8 per cent to an average of $113 per barrel for the year. For the first three months of 2015, AAPA says FTKs increased by 8.4 per cent to 16 billion, because of a particularly strong month in February, thanks to the seaport strike on the US West coast. In January, FTKs rose by seven per cent year-on-year (YOY), followed by a 20.5 per cent surge in February and a modest YOY increase in March of 1.7 per cent. From January to March 2015, AFTK rose by 6.1 per cent to 24.6 billion, and the load factor increased by 1.4 percentage points to 65.1 per cent. March was the first month of 2015 to see the load factor fall, dipping by 0.4 percentage points YOY to 68.3 per cent. Last year was a challenging year for Asia Pacific carriers. Last week, Singapore Airlines Cargo announced losses of 22 million Singapore dollars ($16.6 million) in 2014 (see page four).

Call for US Open Skies agreements to be kept

THE Cargo Airline Association has called on the US Government to maintain its policy of promoting competition by continuing to negotiate and abide by Open Skies agreements. This is the first time the association, which represents cargo carriers, has weighed into the debate and it released a statement on Thursday. Delta Air Lines, United Airlines and American Airlines have accused Gulf airlines Emirates Airlines, Qatar Airways and Etihad Airways of receiving more than $40 billion in government subsidies. They say it creates an unfair advantage and have asked the US government to limit the number of flights Gulf airlines make to the US. The association says it wants the government to reject any attempts “turn back the clock to

a bygone era of government protectionism”. It urges the administration to continue Open Skies agreements it negotiated with 115 countries around the world, which promote world trade. “These carriers employ over 760,000 individuals and these jobs will be in jeopardy if any action is taken to limit competitive opportunities and restrict the ability of carriers to operate, not only between countries that are parties to Open Skies agreements, but also beyond those countries to other areas of the globe,” the association adds. The association explains the debate over international air transportation opportunities is being framed as a dispute about alleged government subsidies to Gulf state carriers, but ‘beyond rights’ themselves are under attack,

which it says cargo carriers depend on in Open Skies agreements to achieve worldwide coverage. Cargo Airline Association president, Stephen Alterman, says: “It is not an overstatement that, absent Open Skies agreements existing worldwide air cargo networks could not exist as we know them today. Unilaterally freezing foreign carrier services or otherwise acting at odds with Open Skies agreements would invite retaliatory measures and threaten US commerce.” The US Departments of Transportation, State and Commerce is jointly reviewing claims that Emirates, Etihad Airways and Qatar Airways are benefitting from subsidies to determine if they are “distorting the global aviation market”. A review is set to be published later in 2015.

GLOBAL REACH FOR TIACA TEAM

Region of opportunity

8 TOUGH TIMES DESPITE OPTIMISM MANAGING RAPID SUCCESS

Cargo drone campaign relaunched KROSSBLADE AEROSPACE SYSTEMS has relaunched its crowdfunding campaign to build its Skyprowler vertical take-off and landing drone, which can carry cargo, so the company can start shipping it by December 2015. Krossblade is hoping to raise $200,000 using the crowdfunding platform, Kickstarter, by the end of June. The company is hoping to begin manufacturing the airframe this July, work on the cabling and integration of components by September with the final assembly to be carried out in November. Krossblade claims it can takeoff like a multicopter, pick up speed using its thrusters and cruise using high-speed wings before the take-off mechanism folds away for more efficient aerodynamics. The company says it can be configured in two ways, ‘Hornet’ or ‘Blade’. In Blade configuration, it will have a payload of 550 grams, a cruising speed of 65 miles per hour (mph) and a range of 43 miles. In Hornet configuration, Krossblade claim it will have a payload of 450 grams, a cruising speed of 49 mph and a range of 14 miles.

NEWSWEEK

Businesses demand UK runway action

he UK government has been warned by over 100 business leaders that failure to expand runway capacity is risking future economic growth and the country’s global competitiveness. A statement published by the Let Britain Fly campaign group was signed by business leaders and calls on the new Government to expand capacity. It says while no new runway has been built in the South East of England since 1945, China is due to build 17 by 2036. It says Heathrow Airport is running at capacity and Gatwick Airport is expected to be full by 2020. The statement says: “Expanding our international connectivity is fundamental to ensuring Britain remains open for business and would give a much needed boost to trade, tourism, investment and economic growth right across the country.”

Business leaders who signed included Selfridges Group managing director, Paul Kelly and British Chambers of Commerce director general, John Longworth and London First chief executive officer, Jo Valentine. The government appointed Airports Commission has shortlisted, a third runway at Heathrow (plans pictured above), extending an existing runway at Heathrow or a second runway at Gatwick. The commission is expected to publish its report

in either June or July this year. Let Britain Fly director, Gavin Hayes says: “This will be the one of the first big issues that will test whether the Government is capable of making a strategic decision in the national interest.” The Freight Transport Association (FTA) is urging the government to make a decision. FTA director for Global and European Policy, Chris Welch says: “This will be seen as an important test by Britain’s exporters and importers, who depend on air cargo services, of the government’s commitment to boosting the UK’s competitiveness in international markets.” A poll commissioned by Let Britain Fly suggests the UK public are in favour of runway expansion. The Populus poll of 2,159 respondents surveyed on 6 and 7 May says 45 per cent support new runways and 16 per cent oppose.

MP says Manston could open mid-2016

MANSTON AIRPORT could be operational by mid-2016 if Thanet District Council (TDC) acts quickly and carries out a compulsory purchase order (CPO), UK member of parliament (MP) for North Thanet, Sir Roger Gale tells Air Cargo Week (ACW). Sir Roger, whose constituency includes the former airport, tells ACW it is likely to be a long process to reopen the airport but he is hoping it can be done by the middle of next year, if the CPO is approved. He is expecting the owners of the airport, Chris Musgrave and Trevor Cartner, to object to the CPO and insist their plan of redeveloping it for housing and industrial use is of better use for the community. Sir Roger tells ACW: “I think we are looking at 12 months. Let us assume that by mid-June the CPO process has started, it is possible aircraft could be flying by June 2016.” He explains to ACW a CPO is not a quick process, RiverOak Investment, the company offering to fund it, must establish a fund in a UK bank account. TDC needs to serve notice of the CPO, which the owners are expected to oppose, meaning the government will appoint an inspector. An inspector will hold a public inquiry to assess the evidence, and then write a report, to submit to the secretary of state for transport. If the inspector approves of RiverOak’s plans, the airport would also need to be refurbished. Manston Airport closed on 15 May 2014, since then there has been a campaign to reopen it.

Cargo revenue fall at Latam Airlines LATAM AIRLINES has seen cargo revenue fall by 16.7 per cent in the first quarter of 2015 to $350.3 million, because of weakness in Latin America, despite the airline as a whole reducing its losses. This continues the downward trend the airline has suffered from over the past year. In the first quarter of 2014, cargo revenue was down by 12.5 per cent year-on-year (YOY) to $402.6 million. During the second quarter of 2014, cargo revenue fell by 12.7 per cent YOY to $424.9 million. The third quarter saw cargo revenue drop by 5.9 per cent YOY to $410.5 million followed by a 4.7 per cent decline in the fourth period to $457.2 million. The airline says in the first quarter, cargo volumes were down 9.6 per cent to 969 million revenue ton kilometres and capacity was cut by 3.3 per cent 1.7 billion available ton kilometres. Tonnage was down by 12.6 per cent to 238,000 tonnes, and the load factor fell by 3.8 percentage points to 54.9 per cent. It says imports and exports to South America were weak, as was the domestic market in Brazil. LATAM says yields were down by 7.9 per cent compared to the first quarter of 2014, which it blames on competition from regional and international carriers, as well as weakness of currencies, particularly the Brazilian real and the euro. The drop in cargo revenue comes despite the airline reducing its losses during the quarter by 3.4 per cent to $39.9 million. This first quarter result is still down on the same period of 2013, when LATAM made a profit of $42.7 million.

ACW 25 MAY 2015

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NEWSWEEK

Singapore losses decline in 2014

ingapore Airlines (SIA) Cargo has reduced its losses to 22 million Singapore dollars ($16.6 million) in 2014 because of recovery in airfreight volumes. The figure is down from 2013, when it made a loss of 100 million Singapore dollars. Singapore Airlines Group saw its operating profit increase from 359 million Singapore dollars in 2013 to 368 million Singapore dollars in 2014. The airline as a whole saw profits rise from 256 million Singapore dollars in 2013 to 340 million Singapore dollars in 2014. The airline says: “Despite global air cargo demand showing early signs of recovery, cargo yields are expected to remain under pressure due to excess capacity in the market. SIA Cargo will continue to manage capacity prudently and actively pursue demand opportunities in special product segments.” In 2014 cargo volumes remained static at

1.1 million tonnes. Cargo tonne kilometres fell in 2014 to 6.3 billion from 6.4 billion in 2013. The capacity in available tonne kilometres fell to 10 billion in 2014 from 10.3 billion in 2013. The load factor rose by 0.8 percentage points from 62.5 per cent in 2013 to 63.3 per cent in 2014. The airline says that for 2015 it expects conditions to remain challenging due to weakness in main markets such as the Americas and Europe. It says there is also increased competition from other airlines and currency challenges. SIA says: “Competition remains intense as other airlines continue to inject capacity with aggressive pricing. Depreciation of key revenue-generating currencies, such as the Australian dollar, Japanese yen and euro, will place further pressure on yield and demand.” It also says the strength of the US dollar will increase operating costs.

Cathay Pacific sees volumes rise

CATHAY PACIFIC saw cargo increase 5.2 per cent in April compared to the same month last year as it continued to benefit from the US West coast seaport congestion. The figures include its wholly owned subsidiary Dragonair. Volumes reached 144,579 tonnes in the month. This was down on the March figure of 157,688 tonnes, up on February’s total of 130,467 tonnes, but down on the 147,275 tonnes in January. The year-to-date (YTD) volumes for the first four months of 2015 are 580,000 tonnes, a 10.5 per cent surge on the same period in 2014. Cathay Pacific general manager cargo sales and marketing, Mark Sutch, says: “Our cargo business benefitted from a modest rush in demand out of the home market before Easter and the pick-up after the holiday was reasonably swift. Demand out of

the key manufacturing centres in mainland China fluctuated throughout the month and we faced intense competition out of Western China cities.” Sutch explains that transpacific business held up well and Cathay Pacific continued to benefit from the logjam of freight in seaports on the West coast of the US, even after the industrial dispute was resolved. He adds: “We saw robust demand out of Southeast Asia, and Vietnam in particular, in April while strong traffic to India remains a key focus.” In April, Cathay Pacific’s cargo and mail load factor was the lowest it has been this year and fell by 0.5 percentage points to 62.6 per cent. In April, cargo and mail revenue tonne kilometres were 848.9 million, up 6.3 per cent on April 2014. Capacity, measured in available cargo/mail tonne kilometres, rose 7.3 per cent to 1.3 billion.

Slowdown in Asia Pacific Asia Pacific airports saw a slowdown in airfreight volumes of 1.4 per cent in March compared to the same month in 2014, according to the Airports Council International (ACI) Asia Pacific. This was significantly down on February, when airports in Asia Pacific saw an increase of 14.3 per cent. This was driven by a strong boost leading up to the Lunar New Year and the modal shift to air transport by retailers and manufacturers due to congestion at sea ports on the US West coast. In January, the Asia Pacific region saw year-on-year growth of 3.4 per cent.

The association says the March figures were due to a mix of factors, but explains that the region maintained a positive growth of 4.7 per cent for the first quarter of the year in relation to the same quarter last year. ACI Asia Pacific explains: “A correction of the upsurge growth impacted by the timing of the Lunar New Year holiday that took place one month later in February, easing off of the increase in freight volume resulting from congestion at major US sea ports last month, and weaker demands from Europe.”

Hong Kong posts volumes fall

HONG KONG INTERNATIONAL AIRPORT (HKIA) continues its trend of fluctuating monthly cargo figures in 2015, as it saw volumes fall by 0.7 per cent in April compared to the same month in 2014. The airport handled 360,000 tonnes in the month; a decline on the 362,000 tonnes that was processed in April last year. It says that the drop was due to a decline in the number of transhipments. In April, the airport exported 232,000 tonnes and imported 129,000 tonnes of cargo. April’s figure was down on the figure in March when volumes reached 364,000 tonnes, which was a fall on the 397,000 in March 2014. The monthly total was above the 303,000 tonnes handled in February and the 356,000 recorded in January. HKIA says: “The decline in cargo throughput last month was mainly attributed to a five per cent year-on-year (YOY) drop in

ACW 25 MAy 2015

transhipments. Imports and exports both registered a one per cent increase compared to the same month last year. Traffic to/from North America outperformed other key regions in the month.” For the first four months of 2015, cargo volumes at HKIA grew by 1.9 per cent YOY to 1.4 million tonnes. On a rolling 12-month basis, 4.4 million tonnes of cargo have been handled, which represents an increase of 4.9 per cent.

NEWSWEEK

Global reach for TIACA team

ringing efficiency to the supply chain is one goal set out by incoming chairman of The International Air Cargo Association (TIACA), Sanjiv Edward, whose occupation is cargo head for Delhi Indira Ghandi International Airport. In an exclusive interview with Air Cargo Week (ACW) at TIACA’s executive summit last week in Miami (US), Edward (See in picture above, left to right, Enno Osinga, Oliver Evans, Doug Brittin, Sanjiv Edward, Sebastiaan Scholte) says TIACA is to have a global reach and policy advocacy.

Promoting activities for sustainability is another goal Edward has. He is joined by Jan de Rijk Logistics’ chief executive officer, Sebastiaan Scholte, who will be vice chairman. The outgoing chairman, Oliver Evans, is staying on to help TIACA for the next few months until he retires from his role as cargo chief at Swiss International Air Lines in September. Evans says of his time leading TIACA: “We have demystified the industry. There is more discussion between the members of the supply chain. There is a lot of new energy.” Outgoing TIACA vice chairman, Enno Osinga, is about to retire as Amsterdam Airport Schiphol cargo director. He tells ACW that the association has added about 100 new members in the last eight months and that some firms have upgraded their membership. Talking to ACW about progress this year, TIACA’s secretary general, Doug Brittin, also pointed to policy recommendations for the US government’s Transportation Security Administration.

Aircraft makers to take lithium stand AIRCRAFT manufacturers are expected to take a broad policy position by July on lithium batteries following research by the US government’s Federal Aviation Administration (FAA) into lithium battery fires. The FAA lithium research found that batteries with the same chemistries, but with different manufacturers, failed in different ways. The International Coordinating Council of Aerospace Industries Associations (ICCAIA) had received many questions from aircraft operators and has been talking to Boeing and Airbus before coming to a common position. The ICCAIA was not available for comment, but the FAA’s hazardous materials safety programme deputy director, Janet McLaughlin, says that she expects the lithium battery position paper will be published in the next 30 days. Speaking during the lithium battery session of The International Air Cargo Association (TIACA) executive summit in Miami (US) last week, McLaughlin says: “There is a great diversity in batteries, the same chemistry from different manufacturers behave differently. Its hard to say there is one solution that fits all.” McLaughlin adds that FAA tests have shown halon fire suppression systems stop combustion, but the decomposing hot lithium will produce hydrogen gas, which could ignite. And she says, E-cigarettes, which use lithium batteries, have caused, “multiple [bellyhold] fires”.

US export pilot to be announced THIS week a federal register notice is expected to be published about a US government pilot electronic system for exports, with nine participants wanted, split between airlines and freight forwarders. The pilot participants will have to provide electronic data interchange filings, in addition to the existing automated export system (AES) - if they are an organisation that is already making them. The AES is used by the US government to collect data on exports for policy making. The pilot’s details were provided last week by the US government’s Customs Border Protection cargo security and controls division director, James Swanson, during the electronic manifest session of The International Air Cargo Association (TIACA) executive summit in Miami (US). But, industry has its concerns. Fellow session speaker, Ryan Tanner, who is Tigers (USA) Global Logistics national compliance manager, tells the audience that the export system could mean: “We are going to be asked for more information earlier. There is a liability issue of having that correct informnation and who is going to be penalised if that information is incorrect.” At the session, industry also warned about problems with the 1 November deadline for the US government’s Automated Cargo Environment (ACE) system for imports. Electronic manifest session members say that industry cannot meet the deadline as their software vendors do not have the code yet from the government to make their IT systems compatible with ACE in less than five months.

ACW 25 MAY 2015

Prepare for e-commerce or lose GROUND handlers must change for the electronic commerce revolution and realise the power they have in negotiating with the airlines, The International Air Cargo Association (TIACA) executive summit heard last week. Cargo handlers have freight forwarders alleging long waiting times to push for customs clearance, airport layouts that cause truck congestion, IT systems that can’t speak to the airlines’ technology because the carriers’ is so old and the airports are landlords to the warehouses while having completely different financial goals. To overcome these challenges more IT was viewed as the answer. But, there were also warnings of internet driven e-commerce bringing about a huge industry change, at the first workshop of the TIACA summit in Miami (US) on Wednesday 20 May. Strategic Aviation Solutions Internation-

al’s senior executive director, Stan Wraight, tells the workshop audience that, business to customer was once the retailer to the customer through airlines, but the future is from the manufacturer to the buyer through integrators. “Why are you worried about a three hour freight forwarder delay, with the e-commerce threat,” he says. Wraight also tells the audience, which has many handling companies, that their warehouse systems are designed to work with airlines, but the future is not how the airlines work, its how e-commerce works. In Wraight’s view, the airlines have outsourced handling and that gives handling companies a negotiating advantage. Other workshop participants pointed to a lack of IT investment, electronic data interchange using different languages, a need for a common data platform using datacentre storage and corporate data security worries that deter companies.

NEWSWEEK

Airbus conversions to be started Relief effort in Nepal continues

acavi and Guangzhou Aircraft Maintenance Engineering (GAMECO) are to start Airbus A320 and A321 passenger to freighter (P2F) conversions in China, with deliveries expected from the beginning of 2017. The companies are hoping to start converting A321s in Guangzhou (China) by the end of 2015. GAMECO will also convert A321 LITE prototypes. The two partners will also collaborate on marketing activities, with a centre in Guangzhou, targeting P2F customers in the region, which includes aftermarket support. Pacavi chief executive officer, Stephan Hollman says: “We want to have the conversion available for both the A320 and A321 almost simultaneously, beginning in 2017, to hit the marketplace when demand is at a peak.” GAMECO general manager, Norbert Marx says: “China currently combines swift growth

for cargo and express carriers with the domestic availability of quality Airbus feedstock. Our doing the first A321 freighters here in China adds new designs, manufacturing and service capabilities.” In September 2014, Pacavi announced it was to start the A320 and A321 P2F programme, to satisfy demand in emerging economies. At the time it said AerCap subsidiary, AeroTurbine, was to carry out the conversions at its Goodyear (US) facility, where it already does P2Fs for other aircraft and maintenance, repair and operations services for A320s. In January 2015, Pacavi delivered its first prototype A320 to HAITEC Aircraft Maintenance, to finalise regulatory approval from authorities including the Federal Aviation Administration and the European Aviation Safety Agency. The companies hope to get approval in 2016.

DHL says its Disaster Response Team (DRT) is to remain in Nepal until the end of May to deal with the aftermath of the 25 April and 12 May earthquakes. The team was deployed after the first earthquake to improve logistics at Tribhuvan Kathmandu International Airport. The DRT have been handling incoming supplies, sorting and moving to airside warehouses run by the United Nations (UN) World Food Programme, to be further distributed around the country. Tribhuvan Kathmandu is the only international airport in Nepal. It can process nine aircraft at one time, and has limited resources and equipment. DHL director of humanitarian affairs, Chris Weeks says: “Working closely with the civil aviation authorities, local military, international aid organisations and the UN, we have

clarity on the daily flights coming in.” DHL says it has been using any available resources, including forklifts, tractors, and dollies to speed up logistics efforts. It says since the initial earthquake on 25 April, the DRT has handled over 2,000 tonnes of relief. Since the first earthquake struck, a number of companies have provided humanitarian aid. Airbus used an Airbus A350 eXtraWideBody test aircraft to transport 21 tonnes of food and medical aid from Paris and worked with Nepal Airlines using an Airbus A320 for medical supplies and personnel. Charter brokers such as Air Partner have been transporting search and rescue teams, shelter and medicines to Kathmandu. The UPS Foundation committed $500,000 for urgent supplies with the offer of logistics support for the long term.

BACA survey is all positive THE Baltic Air Charter Association (BACA) says a survey of its members points to a “very positive future”. The association surveyed 80 of its members, which is 37 per cent of its membership, which it says was completed mainly by brokers, operators and fixed based operators. Nearly 72 per cent of members advised during the last 12 months their sales revenue has increased or stayed the same. The same percentage had either increased or maintained their levels of profitability during the last year. The results show that 70 per cent put their increased profitability down

to a rise in sales while 12.5 per cent reported falling fuel prices had improved results. But 77 per cent advise increased competition is a key factor in driving their needs for efficiencies and vigilance in maintaining profit margins. The survey found the Russia/ Ukraine crisis had minimal impact with 59 per cent of respondents saying it had no effect on their business. BACA chairman, Tony Coe, says: “It is particularly pleasing to see that many of our members are planning to grow their businesses either by recruiting more staff or through mergers and acquisitions.”

Volumes rise in April at Aeroflot

THE Aeroflot Group has seen cargo volumes in April increase by 9.2 per cent to 14,598 tonnes, but the total for the first four months of the year is still significantly down on the same period in 2014. This was positive a month for the Russian carrier after an unstable start to the year. Volumes for the airline in April rose on the 13,365 tonnes that was handled in April 2014. April’s figure was the busiest month this year for the Group, up on the 12,702 tonnes in March, the 9,576 tonnes in February and the 8,390 tonnes in January. For the first four months of the year, cargo volumes are down 6.1 per cent to 48,431 tonnes from the 51,580 tonnes in the same period in 2014. International cargo has seen the biggest fall of 12 per cent to 24,697 tonnes this year from the 28,063 tonnes that was recorded during the same four month period

ACW 25 MAy 2015

last year. Domestic cargo is up 0.9 per cent this year to 23,733 tonnes, compared to the 23,517 tonnes for the four months in 2014. Revenue cargo tonne kilometres were up 8.5 per cent to 62.6 million in April. For the first four months of 2015 are 7.7 per cent down to 203.6 million, compared with 220.7 million in the same period last year. During April, the Group added six Boeing 737-800s, one Airbus A319, three SSJ100s and two Boeing 777-300ERs to its fleet.

CENTRAL EUROPE REPORT

Region of opportunity

ompetition is fierce for airfreight operators in Central Europe as they look to increase volumes and make the most of their location. Hungary, Poland, and other countries in the region are ideally positioned to be regional cargo hubs and to also act as feeders to other parts of Europe. Budapest Ferenc Liszt International Airport cargo manager, Jozsef Kossuth, tells Air Cargo Week (ACW) the airport has the opportunity to grow its volumes. “Budapest has a great geographical location in Central and Eastern Europe to be a regional distribution hub. There is an extensive road network to the neighbouring nine countries and 20 countries within trucking distance,” he explains. Kossuth says Budapest is running an incentive scheme for landing charges to attract operators

to start services. Carriers get a 100 per cent discount in the first year of operations on any new route. In 2014, he explains the airport handled 90,000 tonnes of cargo and is a “steadily growing market”. In quarter one (Q1) 2015, Budapest handled 14,509 tonnes, up 4.4 per cent on Q1 2014. Growth is being achieved through growing freighter, bellyhold and integrator traffic. Poland’s busiest airport by volumes Warsaw Chopin Airport (pictured) processed more than 70 per cent of airfreight in the country last year. Warsaw Chopin deputy director, Radosław Paruzel says the airport is expanding its cargo operations, as there are opportunities and its location is favourable. In August 2014, a new cargo apron opened, which has been built to handle an increasing amount of traffic and meet demand for freighter services. Paruzel explains the most frequently

carried goods in and out of Warsaw Chopin are consumable parts, materials for heavy industry, pharmaceuticals and books and newspapers. Paruzel notes the long-term objective is to become an important point for cargo operations in the region: “For the last several years cargo traffic at Warsaw has been growing by 5-10 per cent annually.” In 2014, the airport handled 53,500 tonnes, up 11 per cent on 2013. Imports exceeded exports, with 29,400 tonnes and 23,400 tonnes, respectively. The year has started slowly and volumes fell in Q1 2015 to 13,000 tonnes, a nine per cent fall on Q1 2014. LOT Polish Airlines’ director of cargo and mail bureau, Mariusz Kuczek, tells ACW, Central Europe is a region of opportunities. He says the carrier has seen double-digit growth in the last six years, and markets will develop as investments, mainly from Asia, come to the region.

Challenges

Despite the optimism he says there are challenges. “We see the market diversifying and getting more demanding from the service point of view and with stronger and stronger competition,” Kuczek says. Other factors are the weak euro and the strong US dollar, but Kuczek says the Ukraine conflict has not affected volumes, and there is a big currency challenge in Russia due to the declining value of the rouble. Kuczek feels a key part of LOT Cargo’s business is utilising the location, by providing road feeder services (RFS) to move cargo to nearby cities across Europe. “We cover by RFS the whole European Union (EU) and also extended the regular two weekly connections to Russia to Moscow and St. Petersburg.” LOT will start RFS to the Balkans with connections to Belgrade and Sofia and plans on more out of the EU. According to Kuczek, Poland and Central Europe’s main trading lanes are the US, Europe, the Middle East, and China, but North America and Asia are the “pullers of volumes”. Airfreight growth in Central Europe is being lead by the development of industries, he explains. “The most in demand commodities are food, machinery, spare parts, fashion and products in the arms industry. Automotive and electronics production and assembly is a huge part of the industrial focus of all countries in Central Europe and logically then one of the very important portions of air business.” This is also the view of Kossuth, who says

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Budapest is developing local air cargo related industries and there is strong industrial growth in Hungary. Those developing are mechanical engineering, automotive, electronics, telecommunications, and pharmaceuticals. He explains to meet expected demand; it is building a ‘cargo city’, which will have an 11,000 square metre warehouse and 5,000 square metres of office space. This will replace existing cargo facilities next to Terminal 1 and open in 2017. The freighter market is expanding in Central Europe and in Kossuth’s opinion it will develop further. In March, Silk Way Airlines started two weekly freighters flights to Budapest from Baku. Cargolux now operates three flights from Hong Kong International Airport. Turkish Cargo has increased its weekly frequency to Istanbul Ataturk Airport, from two to three flights. Bellyhold traffic is also rising and this month, Air China begun operating four weekly flights to Beijing. Paruzel sees a bright future for freighters at Warsaw Chopin. LOT and Cargojet collaborated to relaunch the cargo route to New York in January. It was operated from January to April, and will start again in October. “Other global cargo carriers also show interest in opening regular services from Warsaw. We hope for further dynamic development of this area of operation,” he says. LOT is eyeing neighbouring markets such as Czech Republic, Slovakia, the Baltics, Germany, Hungary, and Scandinavia. “We need to outstretch our wings and cover much more cargo volumes to be able to grow,” Kuczek says. Central European cargo operators are growing steadily as they look to maximise their location in the heart of Europe, but the marketplace is competitive with many challenges.

KOSSUTH Budapest has a great geographical location in Central and Eastern Europe to be a regional distribution hub.

MALAYSIA REPORT

Tough times despite optimism

alaysia is a country with a mixed picture, with some operators very optimistic about its prospects and others finding business conditions challenging. The national carrier, Malaysia Airlines, certainly was not helped in 2014 by the loss of two aircraft, with flight number MH370 disappearing mysteriously over the Indian Ocean in March, and MH17 getting shot down over Ukraine in July. The newest financial figures available, which were from the third quarter of 2014, say that in the first nine months of last year, the airline lost 1.3 billion ringgits ($363.6 million). The airline has had management changes, such as the resignation of director of commercial, Hugh Dunleavy, who will leave on 31 August. Chief executive officer (CEO), Christoph Mueller, took responsibility as chief commercial officer from 1 June. Ahmad Jauhari Yahya stood down as managing director and Group CEO on 30 April, and will be non-executive director on the board until 31 December 2015. Though the airline as a whole is struggling, its cargo division, MASkargo saw volumes it handled at Kuala Lumpur International Airport increase by 11.5 per cent to 154,000 tonnes in the first quarter of 2015. Other carriers operating into Malaysia are facing challenging conditions, Cargolux country manager for Malaysia, Len Chun tells Air Cargo Week (ACW) the airline decreased its market share by 20 per cent in 2014. He says 2015 is proving to be a challenging year so far and this will continue. “We expect the business environment to continue to be volatile as the GST [goods and service tax] implementation will tight down industry cash flow and also depends on the efficiency of the tax system, especially the refund portion.”

goods flowing in and out of countries timely, but they also face regulatory compliance issues.” Governments in the Association of South East Asian Nations (ASEAN) countries have launched the trade initiatives, the ASEAN Economic Community and Trans-Pacific Partnership to help boost trade in the region. Lim tells ACW, that UPS has launched two products, Worldwide Express Freight (WWEF) in 2013 and Trade Management Services (TMS) in 2015 to help businesses in the region grow. He explains: “WWEF is a freight product which allows our customers to ship palletised freight within our express network, making it easier for our customers to manage their growing supply chain needs in Malaysia.” He also explains to ACW that TMS is designed for companies trading with other ASEAN countries. “TMS will help our customers navigate intricate customs procedures that will arise as the ASEAN-member states further integrate their supply chains with each other, and with other parts of the world.” Doing business in Malaysia continues to prove challenging,

with manufacturing proving slow and the GST reducing cash flow. There are some bright spots; the weakness of the ringgit will increase demand for Malaysian products, and manufacturing in the region will help intra-Asian trade.

lim We are optimistic about Malaysia’s potential, as Malaysia and our neighbouring countries are ripe with young talent, resources and broad-based industries

Weak currency

Chun says the weakness of the currency, the ringgit, does give some hope for exports. He tells ACW: “Manufacturing remains moderate and we expect the business shall pick up later due to the weak currency. It will favour exports when the currency is weak.” Chun adds: “Weak currency will also tend to attract foreign investment and it creates opportunity for new sectors such as bio-science and pharmaceutical industries.” Chun says one opportunity is the fact that few freighters fly from Kuala Lumpur International Airport. He says: “With limited freighter availability in Malaysia, we stand good opportunities to tap into odd sized cargo with better yield since there is only limited options to choose from in Malaysia.” He says trying to remain competitive against Middle Eastern carriers, which have a lot of bellyhold capacity is a struggle but MASkargo withdrawing its freighter service to Frankfurt (Germany) gives Cargolux potential to gain in Europe. UPS, on the other hand, is very optimistic about the potential of Malaysia. Though the company does not release country or region specific data, its general manager for Malaysia, TH Lim, tells ACW: “We are optimistic about Malaysia’s potential, as Malaysia and our neighbouring countries are ripe with young talent, resources and broad-based industries.” Lim says the changes to Malaysia’s supply chain is posing challenges, as pressure to produce high quality goods at ever lower prices means production is scattered, rather than the traditional finished products made from raw materials. Lim explains to ACW: “Nowadays, raw materials, semi-finished goods and even expertise are scattered across the region, making supply chains longer and more complex.” He says this presents both challenges and opportunities for companies in the region. Lim says: “Not only does this mean intra-Asia trade will continue to grow, but it also means our customers will need more help managing the growing volumes of

ACW 25 MAY 2015

MIDDLE EAST REPORT

Managing rapid success

iddle East demand for fashion and electronics, to tuna and horses, contributes to a region, which according to the International Air Transport Association (IATA) saw freight tonne kilometres rise 10.6 per cent in March compared to the same month last year; helped by network and capacity expansion. By comparison, Asia Pacific rose that month by two per cent and Africa 2.4 per cent. Individually, the Middle Eastern carriers continue to post even more impressive double-digit growth rates. Etihad Cargo reported a 17 per cent rise in cargo last year to 569,000 tonnes, thanks in part to new freighter services to Tanzania and Uganda. The airline sees further growth being driven by the increase in the transport of temperature sensitive pharmaceutical and healthcare products through its hub

at Abu Dhabi International Airport. Etihad has launched a new cargo product called TempCheck to ensure that all pharma products are kept within a temperature controlled environment from the cold room facility, to the ramp and from the aircraft to customers. TempCheck includes a range of unit load device containers and pre-cooled thermo blanket protection. Emirates SkyCargo recorded a six per cent increase in tonnage to 2.4 million in the 2014 to 2015 financial year. It was boosted by new routes to the US, including Orlando and Columbus. The main products moved on these routes include fashion, pharmaceuticals, car spares and electronics. It also opened a new route to Bali and continued to see increased demand from the Philippines, particularly moving perishable goods, such as tuna, to markets in Europe and

the Middle East. During the last year, Emirates and other carriers, moved freighter operations from Dubai International Airport to a new cargo terminal at Dubai World Central’s (DWC) Al Maktoum International Airport. Al Maktoum terminal and cargo operations vice president, Jamal Zaal, says freight volumes surged 177.3 per cent in the first quarter (Q1) of this year, compared with Q1 2014, to 213,006 tonnes. “We are now in the top 20 of the busiest international cargo airports,” Zaal says. “Pharmaceuticals is a growing segment for Dubai especially with Emirates SkyCargo’s new perishable facilities catering specifically to this market.”

Relocation, relocation, relocation

International carriers are also relocating their regional bases to DWC such as Taiwanese carrier China Airlines. It uses the United Arab Emirates (UAE) as a stopover on its cargo flights between Taiwan and Amsterdam, Luxembourg and Frankfurt (Germany) using its fleet of Boeing 747. “The growth in cargo volumes has been very rapid and managing that growth, maintaining service quality for our customers and timing the expansion programme over the coming months and years will be our primary focus,” says Zaal. Staying in the UAE, air charter service firm Chapman Freeborn says another sector propelling the rise of cargo in the region is animal transport, particularly horses. “Dubai is the most important market for equine charters in the Middle East region,” says Chapman Freeborn’s commercial cargo manager for the Middle East, Lewis King. “We are looking to reinforce this by investing in state-of-the-art infrastructure. This includes our animal transport subsidiary, Intradco Global, being the first company to make use of the horse loading ramp at DWC. It’s designed to allow the increased import and export of live animal cargo.” The Middle East is also an important hub for humanitarian logistics. Chapman has been, “working around the clock since the earthquake in Nepal and we were able to quickly deploy a team of operations specialists,” from Dubai to Kathmandu. However, there are also challenges

ACW 25 MAY 2015

in the region, particularly the ongoing instabilities that mean that energy and infrastructure investment in markets like Iraq are down because they are dependent on there being stability. “In the last 12 months some of the big projects have been stalled and...we’ve actually been called in to do evacuation flights instead,” Lewis adds. Turkish Cargo is also seeing an impact. ”The geopolitical unrest in the Middle East and North Africa and economic recession is unfortunately having a negative impact on air cargo,” says the carrier. The airline, which recorded a 17.9 per cent tonnage growth in 2014, is aiming to grow again this year by 16 per cent to reach 775,000 tonnes. Movements within the Middle East region are playing a part. Turkish Cargo has just inaugurated services to Bahrain, its ninth dedicated freighter service in the Middle East region, including Kuwait, and sees more growth there when stability returns. It is also looking to develop its pharmaceuticals services this year and is rolling-out its cargo operations management and information system project to boost electronic air waybill use. Oman Air is also eyeing up cargo growth. In April it signed a joint venture agreement with Cargolux Airlines International which will provide the European carrier with access to the belly capacity of Oman’s fleet. Cargolux said it would help it expand its services this year from Oman to Asia, Africa and the US. The Middle East market is continuing to prosper despite turbulent times. It is eyeing growth in Europe, Africa, India, the US and within its own region.

KING We are looking to reinforce this by investing in state-ofthe-art infrastructure

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ACW 25 MAY 2015