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The weekly newspaper for air cargo professionals Volume: 19
Issue: 32
15 August 2016
Amazon shows off first branded freighter
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nline retail giant Amazon is shaking up the air cargo market in the US and it has showcased its first branded freighter aircraft, named Amazon One, at the Seafair Air Show in Seattle on 5 August. The Atlas Air provided Boeing 767-300 Freighter is the first of 40 aircraft the retailer has agreed to lease through Atlas Air and ATSG. The aircraft is branded Prime Air, the name of its experimental drone delivery service. There are currently 11 aircraft flying for Amazon with more to be rolled out
in the future. Amazon senior vice president of worldwide operations, Dave Clark is certainly confident that the freighter network will boost operations and speaking on his blog on the Amazon website, he says: “Creating an air transportation network is expanding our capacity to ensure great delivery speeds for our Prime members for years to come. I cannot imagine a better way to celebrate the inaugural flight than in our hometown at Seafair alongside Amazon employees and Seattle residents. Clark adds: “I’m very excited
to introduce Amazon One, a Boeing 767-300 that is our first ever Amazon branded plane which will serve customers by adding capacity to support one and two day package delivery in the US. “Adding capacity for Prime members by developing a dedicated air cargo network ensures there is enough available capacity to provide customers with great selection, low prices and incredible shipping speeds for years to come. Over the next couple of years, we’ll roll out 40 planes just like this one.” Amazon set up its own freighter
network in the US after reportedly becoming disgruntled with the airfreight service that was on offer and being provided, which reports claim was failing to meet its high demand and needs. What impact Amazon will have on the airfreight world, including for Atlas Air and ATSG is to a certain extent unclear at this stage, although many feel the biggest effect will be felt by the integrators FedEx, DHL and UPS. However, it seems ATSG (see page 2) has already been boosted. Atlas Air explained earlier this month it was hoping to provide Amazon with its first aircraft in quarter three after signing a deal earlier this year to provide 20 Boeing 767-300s by the end of 2018 and said profits were down due to the expenses in starting up the service, but it expects additional business to be created in future beyond its initial service for them. The industry awaits to see the impact Amazon has on air cargo in the US and beyond and for its next move in the marketplace.
BAE Systems looking to launch Avro RJ Freighter
BAE Systems Regional Aircraft is working towards launching a passenger-to-freighter conversion programme for the Avro RJ aircraft and is seeking customer feedback to help assess market potential. Building on the experience gained in the BAe 146QT freighter, of which around 30 aircraft were produced, BAE has spent the last 12 months assessing the suitability of the newer-build Avro RJ as a freighter. This work has created a full OEM-designed specification, which is now being offered to the market. The principal variant for conversion would be the RJ100 aircraft, which are coming out of passenger service and be available over the next few years. BAE is to help potential customers source suitable aircraft. BAE says typically, such aircraft can be bought for between $1-1.5 million and the freighter kit and conversion would cost between $2.2-2.8 million. Availability would be from the end of 2017. BAE is to provide a total support package, planned to last for at least a 15-20 year period. BAE says it will need an order book of 10 conversions to make the programme viable and three or four operators and lessors are showing “positive interest in the project”.
BAE will have an MRO partner who will provide the freighter conversion or working party support solution to suit any need. Typical lead-time from contract will be nine to 12 months and conversion time will take around three months at its Prestwick base. BAE says the Avro RJ Freighter can carry up to 14 tonnes of cargo, and fits the gap between the seven tonne freight capacity of large turboprops and the 18 tonnes of the bigger Boeing 737 Classic freighter conversions.
SLUGGISH FOR SAA CARGO BUT IT HAS GROWTH PLANS
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BUDAPEST POSITIONS ITSELF AS THE HUB IN EE
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LAX ONE OF THE KEY LANES FOR QANTAS FREIGHT
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60 SECONDS WITH STEVE HILL
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EU hubs growing, but non-EU struggling EUROPEAN airports saw freight volumes rise 2.1 per cent in the first half of 2016, with European Union (EU) hubs making up for non-EU ones struggling, Airports Council International (ACI) Europe reports. EU airports saw growth of 3.2 per cent in the first half of 2016 but non-EU hubs were down 3.9 per cent, seeing a significant drop of 13.5 per cent in June. Across Europe as a whole, freight volumes were up 1.7 per cent year-on-year in June. Airports in Turkey suffered big falls in June, with Istanbul Ataturk dropping 50.5 per cent to 36,026 tonnes, while Istanbul Sabiha Gokcen was down seven per cent to 3,825. In the first half, Ataturk saw a 13.6 per cent fall to 335,170 tonnes. Europe’s top four saw growth in June, with Frankfurt Airport seeing a 2.9 per cent rise to 169,487 tonnes, Paris Charles de Gaulle was up 1.4 per cent to 161,419. Amsterdam Airport Schiphol’s up 2.5 per cent to 135,528 and Heathrow Airport up 2.1 per cent to 125,536. In the first half, Frankfurt was up 0.2 per cent to 983,845 tonnes, Paris was up 5.2 per cent to 967,560, Amsterdam up 1.6 per cent to 796,801 and Heathrow was up 1.7 per cent to 754,597.
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NEWSWEEK
Revenues rise of 19% in Q2 for ATSG
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ir Transport Services Group (ATSG) has seen revenues rise 19 per cent to $176.5 million in the second quarter (Q2) ending 30 June, compared to the same quarter last year. ATSG says the increase included 35 Boeing 767 cargo aircraft leased to external customers at 30 June, six more than a year earlier. Eight of those 35 leased 767s were operating for Amazon Fulfillment Services, a subsidiary of Amazon.com, which ATSG began serving in September 2015. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations, increased two per cent to $52.1 million. ATSG’s cargo aircraft management (CAM) leasing and related revenues surged six per cent to $48.4 million for Q2. Revenues from externally leased freighters and aircraft engines rose 23 per cent, driven by six more
Boeing 767 dry leases. CAM owned 56 Boeing cargo aircraft as of June 30, two more than Q2 last year. Eight CAM-owned 767-300s were awaiting, or in passenger-to-freighter modification. The 20 767s CAM will lease and operate for Amazon include 12 Boeing 767-200s and eight 767-300s. Ten of the 12 767-200s are now in operation for Amazon; the two others will be delivered in the fourth quarter. Three of the 767-300s will be leased to Amazon and placed into service by year end, and the remaining five by the end of the first half of 2017. CAM began an eight-year lease of a 767-
300 freighter to Amerijet in July and expects to lease a 767-300 to DHL under an eightyear term starting in September, making it 17 the total 767 leased to DHL. ATSG president and chief executive officer, Joe Hete says: “Our operating performance across the board in the second quarter was strong, and yielded financial results that met or exceeded our targets. “We expect margins to improve substantially in the second half as we approach our year-end 2016 target of 43 dry-leased 767 freighters, and increase from 22 to 30 the number of those we operate for customers under multi-year CMI agreements.”
TAPA: cargo crime escalating CARGO crimes in the Europe, Middle East and Africa (EMEA) region continue to spiral with 598 new freight losses in the second quarter (Q2) of 2016 - a 92.9 per cent year-on-year rise, says the Transported Asset Protection Association’s (TAPA) Incident Information Service (IIS) database. In Q2 there were crimes in 18 countries in the EMEA region, including 21 major thefts involving a loss value of 100,000 euros ($111,565) or more. The average loss for cargo thefts in Q2 was 74,941 euros. Product thefts shows 91.4 per cent in Q2 2016 occurred in six countries; the UK, Netherlands, Germany, Sweden, Russia and Italy. There were 21 major thefts involving a loss value of 100,000 euros or more. Thefts were in 18 separate product categories, including tobacco, tyres, clothing and footwear, cosmetics, building materials, pharmaceuticals and others. In EMEA in the first six month of 2016, TAPA says there has been a loss to firms through cargo crimes of 27 million euros. TAPA EMEA chairman, Thorsten Neumann (pictured above) says: “These figures should be a great cause for concern for all manufacturers and logistics service providers because they clearly show the escalation of cargo crime.”
US-CBP to use IATA’s Cargo-XML THE International Air Transport Association (IATA) Cargo-XML messaging standard will be utilised by the US Customs and Border Protection Agency (US-CBP) to collect advance cross-border data on US export shipments. The format makes electronic communication between the US-CBP’s Automated Commercial Environment (ACE) system, airlines and other air cargo stakeholders simpler and more efficient. IATA says it will facilitate growth in trade, ensure cargo security, and improve participation in global commerce through advance electronic data submission for shipments. IATA senior vice president for airport, passenger, cargo and security, Nick Careen says: “Airlines, freight forwarders, shippers and border agencies share the common goals of simplifying processes, enhancing efficiency and maximising safety and security. The key to achieving this is industry collaboration and standardisation on a global scale. “Having support for Cargo-XML from the US-CBP will positively contribute towards industry achieving its objective – the global adoption of a standard air cargo messaging system.”
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Lufthansa takes over time:matters and starts myAirCargo
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ufthansa Cargo has taken complete ownership of its time:matters subsidiary and has launched myAirCargo. time:matters, the sameday delivery and time critical international spare parts logistics company was spun-off as a subsidiary in 2002 with Lufthansa retaining a 49 per cent share. The takeover is part of Lufthansa Group’s ‘7 to 1: new concepts for growth’ strategy. The 51 per cent shareholding had been held by financial investor Aheim Capital and time:matters management. time:matters will remain an independent company. Lufthansa Cargo chief executive officer (CEO) and chairman of the executive board, Peter Gerber (pictured) says: “time:matters has established itself in recent years as the leading specialist for sameday delivery and emergency logistics in Europe. With time:matters, we are aiming to grow our business in the special segment as well. Our focus is all about maximum
reliability, exceptional service and customised solutions.” time:matters CEO, Franz-Joseph Miller says: “With its technology and service platform, hardly any other logistics company can match time:matters in terms of service and flexibility. Since 2006, we have more than tripled our revenue to over 65 million euros.” Lufthansa Cargo also has launched ‘myAirCargo’, giving private customers the chance to
move bulky items internationally by air. The logistics subsidiary of Lufthansa says it will organise the transportation from door-todoor, taking care of customs formalities along the way, and will be useful for goods such as sizeable souvenirs from exotic holidays. The service is only available online and can be booked in five steps, with the price of the shipment and expected customs fees displayed directly and can be settled by credit card. Gerber says: “We are excited that private clients can now benefit directly from our many years of air cargo experience. By doing so, we are occupying an innovative niche in the market between postal services and forwarders. Book air cargo quickly and easily online, at first hand – only we can do that.” The service is available between most European countries and the USA and will be introduced across Lufthansa’s network in the coming months.
NEWS WEEK WorldNews Emirates is to deploy a third daily Airbus A380 from Dubai International Airport to Manchester Airport and has also adjusted its A380 schedule into Birmingham Airport from Dubai. As of 1 January 2017 into Manchester the carrier will run a third A380 replacing a Boeing 777-300ER. From the same date above, Emirates will swap its current A380 service at Birmingham from the morning to the afternoon departure slot. AMERICAN Airlines and United Airlines have both posted strong growth in cargo ton miles flown for the month of July. American’S system cargo ton miles rose 5.7 per cent in July to 201 million and United saw cargo revenue ton miles increase by 10.1 per cent year-on-year to 238.1 million.
Recovery continues at Finnair Finnair Cargo continues to recover after a difficult year in 2015, with volumes growing 15.9 per cent in July 2016. The airline handled 12,925 tonnes of cargo, a year-onyear increase of 15.9 per cent, making up for July 2015 seeing a fall of 16.2 per cent to 11,150 tonnes. Between January and July, volumes were up 14.9 per cent to 83,925 tonnes, making up for the 16 per cent fall in the same period of 2015, when cargo fell to 73,055 tonnes. In July, European cargo was up by 37.1 per cent to 2,330 tonnes, North Atlantic saw an increase of 18.6 per cent to 849 tonnes, and Asia saw volumes rise by 11.6 per cent to 8,184 tonnes.
Weak yields hit ANA profits
All Nippon Airways (ANA) has seen profits fall by 20.7 per cent in the first quarter of the 2016 financial year, due to a number of factors including international cargo. Profits in the quarter were down to 6.6 billion yen ($65 million) and revenue dipped by 2.3 per cent to 404.4 billion yen. Domestic cargo revenue dipped by 1.5 per cent to 7.1 billion yen and international services saw a more dramatic drop of 29.1 per cent to 20.4 billion yen. Domestic freight fell by 1.3 per cent to 103,000 tonnes despite efforts to capture demand in the home parcel delivery business, and because of a reduction in volumes of fresh produce from Hokkaido. International freight grew by 15.6 per cent to 221,000 tonnes as it captured demand from China and other Asian destinations to North America via Japan. The appreciation of the yen and declining unit prices due to slowing demand, particularly from China, and change of agency commission settlement scheme caused revenue to drop. The airline explains: “Revenues and profits for the period were affected by Kumamoto earthquake and terrorist incidents in Europe in addition to exchange rates and crude oil market conditions, changing in commission scheme for agency and unit price decrease in international cargo business.”
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NEWSWEEK Express network ramped up by UPS UPS is expanding its UPS Worldwide Express Freight service to nine new countries for urgent, time-sensitive and high-value international shipments over 70 kilogrammes. The service is now available in Bahrain, Bangladesh, Kuwait, Malta, Morocco, Pakistan, Qatar, Sri Lanka and Tunisia. UPS says the number of companies using the service has increased 250 per cent since its launch in 2013. The company says benefits of the service include reduced transit times, improved visibility, reduced inventory safety stock, enhanced customer service levels and shorter order fulfilment times.
UPS president US international exports, Bill Seward says: “Companies in the healthcare, retail and automotive industries have grown their international volume, 18, 11 and five times more, respectively, using UPS Worldwide Express Freight service than their peers over the last three years. “The growth of the UPS Worldwide Express Freight service in a relatively short time period shows it is fulfilling a critical market need for a reliable, urgent heavy freight international shipping service. We will continue to invest in service expansions as customer and industry needs evolve.”
Sluggish for SAA Cargo but it has growth plans
THE South African economy has been going through tough times this year along with other African economies, which has been impacting air cargo. Much of this has been put down to the lull in the oil & gas sector and slow global trade. South African Airways (SAA) Cargo general manager, Tleli Makhetha (pictured) tells Air Cargo Week the air cargo market has been “sluggish” due to the weak global trade activity in the first two quarters of 2016. He also notes: “The weakness of the Rand and other regional currencies has resulted in poor import performance into the region.” The economic slowdown in South Africa has definitely negatively affected business in Makhetha’s view. He says: “It has due to the reasons stated above and it is important for us that both the global and South African economies start gaining traction as soon as possible.” SAA Cargo is one of Africa’s biggest air cargo carriers and has a wide global network, which equips it better to handle any troublesome times. Makhetha says the best performing trade lanes in intra-Africa are into Accra, Lagos, Lusaka and Harare, while outside of the con-
tinent it is to London, Washington and Hong Kong, while the strongest cargo sectors are pharmaceuticals and electronics. SAA Cargo is currently investing in expanding its routes in southern and West Africa where it has high demand for cargo capacity and is planning to implement new routes in southern Africa once its freighter replacement phase has been completed. The carrier is looking at further investments in modernising IT management systems, which is is line with its focus on e-freight and speeding up logistics processes. As for the African air cargo market, Makhetha says SAA Cargo would like to see better appreciation of the value propositions of airfreight, which he says will lead to more cargo being channelled to air from road. There are challenges, Makhetha explains: “The challenges relate to optimising our fleet, the competition from international operators (airlines) who are deploying more and more capacity on the main routes and destinations in Africa.” West Africa is growing and he sees opportunities, mainly in strengthening SAA Cargo’s presence in West Africa to connect to more markets within that region and beyond.
B737F overshoots runway in Italy
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n ASL Airlines Hungary Boeing 737 owned freighter overshot a runway and crash-landed on a road just outside the Orio al Serio International Airport in Italy in the early hours of Friday, 5 August. The aircraft was arriving in at the gateway which serves the city of Bergamo at around 4am
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local time from Paris Charles de Gaulle Airport. No passengers or crew were injured in the accident. The 737 freighter was being operated by DHL and media reports in Italy claim that the incident occurred as a result of bad weather across the Italian region. (Picture Credit: Twitter/ Elliot Wagland)
NEWS WEEK Calgary plans on further developing air cargo facilities
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ollaboration and close working relationships with air cargo and logistics companies played a significant role in the dramatic growth at Calgary International Airport (YYC) in recent years. Calgary, situated in the province of Alberta, is the fourth-largest city in Canada, and home to the energy industry and located at a nexus point for transportation infrastructure. The city, located just east of Canada’s Rocky Mountains is connected to the rest of Canada and North America via the TransCanada Highway and the CANAMEX north-south trade corridor, and two national railway systems. The region is also connected to the world through one of the largest air cargo hubs in Canada at YYC. This geographic configuration means almost 5,000 companies now operate in the transportation and logistics sector in the city. The major north-south provincial highway runs adjacent to the gateway. This provides excellent highway and road access to the airport, and ensures goods coming into Alberta can easily be distributed throughout the region. The significant investment The Calgary Airport Authority has made in its cargo platform in the last 15 years means Calgary is the largest air cargo hub in Alberta, and a major player nationally.
WFS wins in France
Growth of facilities and services at YYC has been dramatic. In 2000, the airport had 200,000 square feet of warehouse capacity on-airport. That figure is now 3.1 million square feet on 330 acres, including more than 250,000 square feet of apron accessible warehousing with office space, and specialised cargo facilities. Another 100,000 square feet of apron-accessible space will be
completed this autumn, with an anchor client already signed on. The development of the airport’s Global Logistics Park, in consultation with shippers, freight forwarders and cargo carriers, is focused on providing strong connectivity between commercial, airside and logistics businesses. The multi-tenant buildings focused on flexible facilities allowing businesses to customise space to meet their specific needs now and into the future. YYC’s Global Logistics Park is now the largest on-airport business park in Canada. Airside, YYC now has 1.6 million square feet of dedicated cargo apron space. The construction of quick turn-around cargo aprons along with the adjacent airside access facilities was identified as critical for international freighter service operators if they were to more fully access the Alberta market for additional top-up business on their flights back to Europe and Asia from the US. The addition of more apron space and associated services has been a large factor in seeing tonnage at YYC increasing from 66,000 tonnes in 1999 to more than 135,000 tonnes in 2015. The province of Alberta and the City of Calgary say they are focused on diversifying the regional economy further, with a strong emphasis on growth in transportation and logistics; a conversation which YYC will continue to be collaboratively engaged.
WORLDWIDE Flight Services (WFS) has won three new cargo handling contracts in France with Rossiya/Aeroflot, Air India and Icelandair. The contracts cover handling at Paris Charles de Gaulle Airport as well as at WFS’ other airport locations across France. WFS commenced operations for Air India and Icelandair on 1 August and they will be joined by Rossiya/ Aeroflot on 1 October. WFS now handles cargo for more than 180 airlines in France, including 100 online customers. WFS chief executive officer for Europe, John Batten says: “The decision of these three airlines to award contracts to WFS in France is testimony not only to the size of our operation but, more importantly, the quality of service our teams across the country consistently deliver for our customers.” WFS handles over four million tonnes of cargo per annum for some 300 airline customers. It is present at over 145 major airports in 22 countries.
Tonnage up in July at Frankfurt
FRANKFURT Airport has continued to see cargo volumes recover, with a 1.5 per cent year-on-year increase to 180,425 tonnes in July. The July figure follows growth in June, having suffered from weak demand in previous months. Year-to-date, cargo volumes at Frankfurt have increased by 0.8 per cent to 1.2 million tonnes. Other Fraport operated airports saw mixed results in July, with some seeing strong growth and others struggling. Among them, Slovenia’s Ljubljana Joze Pucnik International Airport fell by five per cent to 838 tonnes and Peru’s Jorge Chavez International Airport saw a 0.3 per cent dip to 24,373 tonnes. China’s Xi’an Xianyang International Airport increased by 1.9 per cent to 17,168 tonnes.
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EASTERN EUROPE
Budapest positioning itself as the hub for Eastern Europe
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udapest Airport is positioning itself to be the air cargo hub of Eastern Europe having seen growth of 11.3 per cent so far in 2016. The growth has come from both freighter aircraft and passenger services with bellyhold capacity. Cargo development manager, József Kossuth (pictured) says a significant proportion of the growth has come from Qatar Airways Cargo re-launching flights between Budapest and Doha in March. Qatar Airways Cargo uses an Airbus A330 Freighter with 60 tonnes of capacity on the route. The hub serving Hungary’s capital city has also benefitted from passenger services including Air China flights to Beijing and Air Canada Rouge to Toronto. Air Canada’s seasonal Boeing 767-300ER service to Toronto Pearson International Airport operates on Tuesdays, Thursdays and
Saturdays, and will run until 15 October. Korean carrier, Asiana Airlines has started weekly Budapest – Seoul services, which are expected to give Hungarian exports to East Asia a significant boost, having grown 42 per cent in 2015. Kossuth says: “It is also an indication of the performance of the Hungarian economy that on the Air China flight to Beijing almost the full cargo compartment is booked, which means 10-12 tonnes per flight.” “According to our forecasts, all conditions are pointing towards Budapest evolving into the air cargo hub of Eastern Europe within a short period of time.” In addition to the new services, Kossuth says existing cargo airlines such as Cargolux and Turkish Cargo are performing strongly in Budapest. As part of the airport’s 50 billion Forint
($178.5 million) development programme, BUD 2020, Budapest has started constructing a new logistics base next to Terminal 1 for a major European parcel service company, valued at three billion Forint.
Budapest Airport is also preparing itself for the construction of a new cargo base – the Cargo City – close to Terminal 2, with warehouse and office capacity to handle up to 200,000 tonnes of cargo per annum.
Bratislava grows 10% in the first half of 2016 and aiming for further uplift
Volumes at Bratislava Airport have increased by 10 per cent in the first half of 2016, and it expects to keep growing this year. The airport, located nine kilometres from the Slovakian capital’s city centre, handled 10,915 tonnes between January and June 2016 compared to 9,917 tonnes. Exports mainly consisting of automotive parts, with foreign teas and pharmaceuticals proving popular imports. Bratislava Airport tells Air Cargo Week: “Expectations in 2016 are handling more freight in comparison to the last year due to higher demand in cargo segment via BTS Airport.”
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It also says: “The biggest challenge for us is to build in a future, new and our own cargo terminal which we miss so far. “Thanks to a new cargo terminal we would be able to handle much more freight than nowadays and stay in competition with very close Vienna Airport.” The growth this year follows volumes rising 8.5 per cent in 2015, making up for 2014, which it had described as an “unsuccessful” year in its 2015 annual report. Of the 21,098 tonnes Bratislava handled in 2015, 17,987 tonnes were from DHL, an increase of 4.8 per cent. Ad-hoc cargo was also up by a signficant 36.4 per cent to 3,111 tonnes last year.
EASTERN EUROPE
New carriers give Prague a 42% boost in first half
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rague Vaclav Havel Airport (pictured) has seen cargo volumes surge by 42.6 per cent in the first half of 2016, with carriers attracted to the hub helped by its incentive programme. The airport serving the Czech Republic’s capital handled over 33,000 tonnes of cargo in the first six months of 2016, and the arrival of new carriers means it expects to handle about 68,000 tonnes by the end of the year, 35 per cent higher than 2015. Prague has benefitted from a number carriers expanding services or starting flights to the airport, including Qatar Airways Cargo starting Airbus A330-200 Freighter services and UPS upgrading its Cologne route to a Boeing 757. The airport tells Air Cargo Week: “The overall cargo business results were mostly influenced by the capacity of new carriers such as UPS and Qatar Cargo, by supplementary cargo loads on the new service to Beijing and by the increased capacity of the Seoul route.” It adds that Cologne, Doha, Budapest and Beijing are the routes with the fastest growing cargo volumes. There are also new routes with bellyhold capacity, with Air Canada launching Toronto – Prague services and China Eastern Airlines starting a Shanghai – Prague route in June. Prague Airport is continuing to expand freight operations by collaborating with partners at the facility and providing incentives to cargo carriers. It aims to attract new carriers and support airlines already operating at the airport to encourage further expansion: “It includes an attractive concept of discounts on landing fees for new destinations, on use of bigger aircraft and on operations at
off-peak times. The incentive programme also motivates carriers which frequently operate charter cargo flights to schedule their flights regularly.” Companies operating at Prague Airport can also benefit from the Czech Republic’s geographical position in the centre of Europe, providing road connections from both East and West to cities including Berlin, Munich, Vienna, Warsaw and Bratislava. “Most European cities are within a two-hour radius, which also gives us the potential of serving as an important gateway, mainly to Central and Eastern Europe,” the gateway explains. Prague Airport believes it could become a major regional airport in the future, commenting: “Construction of new highways provides an easy market access and makes the region an obvious location for a distribution centre. Prague Airport thus has the potential to become a major airport in the region and is able to raise the freight volumes in the near future.”
Half year record for Czech
Czech Airlines made a profit of 72.4 million Koruna ($2.9 million) in the first six months of 2016, compared to a loss last year. The first half result compares to an operating loss of 154.1 million Koruna in the same period of 2015. Czech Airlines chairman of the board of directors, Jozef Sinčák says this was the best profit record in the last 10 years, primarily driven by better use of its fleet. “We continue to profit from the results of the company restructuring process and are able to control operating costs.” In March, Czech Airlines announced it would acquire seven new Airbus A320neos to replace seven Airbus A319s. It will take delivery of the aircraft around 2021. Czech Airlines Cargo has been appointing new general sales agents (GSA) for Finland, Russia and Croatia. HWF Finland is now representing Czech in Finland; Delta Cargo Shipping Service was chosen as GSA for the Russian destinations of Kaliningrad and Kazan; with Premium Ruta covering Croatia.
Warsaw welcomes new services Warsaw Chopin Airport has welcomed new services in 2016 including seasonal services to Toronto, increased capacity to Doha and flights to Tokyo, which will be joined by a direct route to Seoul later this year. LOT Polish Airlines started Boeing 787 services to Tokyo in January, the only direct link between Poland and Japan, and it will start flying to Seoul from 17 October. In June, the Polish carrier’s chief executive officer, Rafał Milczarski said: “Korean companies have invested over $1.7 billion in Poland, and they have invested many times more in the whole Central and Eastern Europe.” Air Canada Rouge launched seasonal flights between Toronto and Warsaw, which started on 15 June will operate four times a week until 1 October. Qatar Airways upgraded its Doha – Warsaw route on 1 July, using an Airbus A330 instead of an A320, and Warsaw Chopin said the new widebody service is proof the connection has a huge growth potential and Warsaw is becoming more and more important destination for Qatar.
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CARGO GATEWAY LOS ANGELES
Facilities the biggest air cargo headache at LAX
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os Angeles International Airport (LAX) is the busiest and key air cargo gateway on the west coast of the US. In 2015, LAX handled 1.9 million tonnes, which was almost as much tonnage as the next five highest ranked North American west coast airports combined (Oakland, San Francisco, Ontario, Seattle, Vancouver). The hub was ranked the fifth in the US in 2015 behind Memphis, Louisville, Anchorage, and Miami, but along with Miami is arguably the most important due to its network. The operator is Los Angeles World Airports (LAWA) and coordinator for cargo and international trade at LAX, Ross Vitale, who also sits on the board of the Los Angeles Air Cargo Association (LAACA) says a key part of success is that the airport has a very well established and maintained air cargo community that manifests itself in a thriving LAACA.
He says the cargo community in general across all modes in Los Angeles is doing even more to increase the synergies: “Recently, the operators of LAX and of the Port of Los Angeles have begun coordinating more closely to jointly address challenges – such as truck congestion – common to both air and sea cargo, as well as to jointly market the region’s cargo assets.” Vitale notes this year has been challenging and tonnage is down two per cent through June 2016 in year-on-year comparisons for the same six-month period and despite a good result in 2015 tonnage was down five per cent last year compared with its peak year of 2000. He says in terms of total cargo share, international traffic first passed domestic in 2004 and has extended that trend ever since, accounting for 60 per cent of total cargo so far in 2016. LAX serves local and regional consumers, and as a hub for cargo flowing between Asia and the
Americas. Consequently, Vitale says at least 50 per cent of cargo has neither an origin nor destination in the nearby service area but rather is trucked or flown great distances to leverage the network access LAX offers to/from Asia. He adds: “Still, it must be noted that Southern California hosts a regional economy as large as most entire nations and LAX’s FedEx operation – a non-hub that largely serves regional demand – accounted for enough tonnage in 2015 to have ranked in the US top 20, by itself.” There are challenges in the LAX market and particular ones for Los Angeles being one of North America’s main international gateways. He explains: “LAX faces facilities challenges borne of its success and of an evolving industry that has different needs than when some of its facilities – cargo and otherwise – were first designed and built. “Whether to grow or just maintain the air cargo industry, LAX needs to modernise some of its existing cargo facilities, as well as optimise coordination of off-airport surface transportation (trucking) with major ongoing infrastructure projects that will eventually relieve some roadway congestion but must necessarily add to traffic issues in the near-term.” The future for air cargo is likely to be rocky at LAX as meeting demand and upgrading facilities will be big challenges to overcome.
Vitale says the principal concern for LAX’s cargo tenants revolves around facilities, which it has for years, but as a historically dominant gateway, LAX shares many of the same challenges that long-term success has similarly imposed upon its most applicable US counterpart, New York’s JFK International Airport. He notes: “Area development has long hemmed in the airport, such that any improvements must be made within a fixed envelope of land and any improvement therein must be accommodated within acceptable limits imposed by the competing needs of passenger operations and all other related activities. “While cargo tonnage actually decreased between 2000 and 2015 (inclusive) – as it did at all but a handful of US airports – this only slightly mitigated the need for cargo facilities improvements.” Vitale says the lack of overall cargo growth and the bankruptcy and/or acquisition of several former major cargo carriers has opened up capacity for new tenants, several facilities are “dated” and layouts decades earlier did not anticipate contemporary needs by cargo operators and the airport, in general. He adds LAWA is meeting with cargo tenants to form as much consensus as credibly possible with regards to chronic challenges and potential opportunities for relief.
Strong US dollar proving troublesome THE strong US dollar making exports more expensive is proving a challenge to members of the Los Angeles Air Cargo Association (LAACA). President Amy Grat says the ebbs and flows of imports and exports due to macroeconomic trends in trade have impacted LAACA members, and transportation pricing has become an important lever. Grat says: “The supply chain has become more integrated. This has been a benefit to larger companies, but at times smaller players get squeezed. Smaller freight forwarders need to be nimble to compete effectively. The trend toward integration and supply chain optimisation is well established in the LA Customs District, with LAWA and its ocean counterparts, the Ports of LA and Long Beach, actively seeking developing programs to unite the supply chain.”
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Grat says there are other challenges: “Against the backdrop of macroeconomic trends that impact goods movement, the other challenges our members face are congestion and waiting times at LAX. In a business climate where margins are thin, customer service is key. Our members are concerned about infrastructure limitations and 3rd party handling and overall cargo processing times.” LAACA’s membership is drawn from a variety of stakeholders, and Grat says: “New opportunities are emerging in clean technology, advanced manufacturing and aerospace. LA is known for creativity and innovation, and is home to some of the hottest new tech-oriented companies in the transportation and logistics sector, including Cargomatic and Hyperloop One. We are optimistic for our region and for our industry.”
CARGO GATEWAY LOS ANGELES
LAX one of the key lanes in the Qantas Freight network
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perations into Los Angeles International Airport (LAX) and the US are an integral part of Qantas Freight’s network and business and it now runs 23 services a week into the West coast US hub. Qantas Freight’s executive manager, Alison Webster (pictured) tells Air Cargo Week the trade lane is of significant importance as the annual trade between Australia and the US is estimated above $40 billion Australian ($30 billion) and much of the goods are time-sensitive and moved via air. Every week Qantas services LAX seven times from Sydney using six Airbus A380s and one Boeing 747, nine time a week from Melbourne using seven A380s and one B747 and seven times a week from Brisbane using a B747. The carrier also operates four B747-400 Freighter services per week in a triangular route between Australia, China and the US. This includes stops in New York, Chicago, and Dallas Fort Worth and LAX (both added earlier this year) - giving it a good reach across key manufacturing and produce regions of the US. Webster says: “Each of these services enable Qantas to increase available freight capacity on the route and reflect our commitment to support the development of trade on the lane. “When Qantas introduces Boeing 787-9 Dreamliners into our international passenger fleet next year it will also introduce new possibilities into the US. “Our schedule hasn’t been released yet but it will likely bring a range of new cargo routes.” Qantas sees LAX as the prime West coast gateway as it plays a key role in the transfer of goods that move between Australia and the
US. Webster explains: “Qantas is the only airline operating daily return passenger services between Sydney, Melbourne, Brisbane and Los Angeles and customers can also utilise our extensive Australian domestic airfreight network to move cargo past the traditional Australian cargo gateways.” For Qantas Freight in the US, Webster says it has been a “good year” to date, as while global freight markets have been soft, it has experienced an increase in freight volumes between Australia and the US. Qantas owes much of this to having a well-es-
tablished presence at LAX since 1997 when it built and opened a dedicated international freight terminal, while it has a cargo sales and service teams based at the terminal, leveraging the commercial and operational strengths it has from operating a network of cargo terminals in Australia. Webster says this infrastructure ensures customers at each end of the trade lane experience a seamless customer service proposition. Qantas also had further expansion and investment plans at LAX to further grow business: “Construction is also underway on a brand new A380 hanger at Los
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Angeles International Airport. This facility demonstrates the ongoing importance that Los Angeles plays in the Qantas Group network.” An array of cargo is carried on the Australia and LAX trade lane including life-saving medical-related shipments, premium Australian produce, premium Californian produce,seafood, wine, online shopping (clothing, shoes, furniture, cosmetics), mining equipment, motorcycles, cars, aircraft engines, helicopters, bushfire retardant, horses, cats, dogs and more. LAX will certainly remain a key part of operations and it has recently extended the lease on its freight facility at the gateway, introduced a new ground handling provider and invested in a range of new technologies into its cargo terminal to help the operations work even more efficiently and effectively. Webster says: “We really see this market as one that continues to grow and develop and our aim is to ensure that our Los Angeles facility, like all other Qantas Freight facilities, is positioned to respond to evolving market needs and providing our customers with a solution that is attuned to the changing landscape.” Like many air cargo carriers competition is fierce, and Webster says it is now a global marketplace where growth is outstripping demand and customers have more choice than ever before with success driven by more than just traditional drivers of price and speed. And Qantas is clearly focusing much of its attention on meeting the needs of customers as Webster explains: “We’re focused on making it easy to transact with Qantas Freight and delivering exceptional service, and our customers are responding well to the differentiation that we offer.”
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NEWSWEEK
STEVE HILL Justin Burns, ACW: Is air cargo behind in the digital race? Hill: According to some shippers we are already falling behind in digitisation in comparison to other modes - particularly maritime. The call for action has become a routine agenda item on the event circuit - to tackle slow, low, and no adoption. It shows air logistics is lacking in its wider capability to support more digitised data - e-booking, e-AWB, HWB, and other commercial and ancillary documents have electronic versions. We
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Seconds with steve hill
The challenges facing air cargo are no more important than the digital transformation needed across the supply chain and further penetration of the electronic air waybill (e-AWB). CHAMP Cargosystems is at the forefront and working with operators to digitise processes and the firm’s principle consultant for industry matters, Steve Hill spoke to Air Cargo Week.
have wide support of e-Manifest and sharing of other flight related data via EDI is routine. While digitisation is an issue, ships are getting faster, cheaper, and more reliable, which fuels the growing dissatisfaction with air. For global trade, the need for increased digitisation and what should be a simpler, more effective, visible, and reliable is perhaps part of a wider frustration. In the end, full digitisation will have to rely on a change of attitude as the industry is still modelled on
paper-based processes. The future state of e-AWB and e-freight is full digitisation, yet we still treat it as the exception. We are not making it easy to digitise. Perhaps a 180 degree turn to have paper as the exception and digital the rule, may finally have the e-alignment it needs to progress.
Justin Burns, ACW: Is adoption of the e-AWB fast enough? Hill: Unfortunately not. Industry has consistently missed targets for e-AWB and e-freight. 2016 marks a decade of digitisation, but adoption remains a problem for e-AWB - let alone e-freight. What do we mean by adoption? The original expectation was for paper-free transport, end-to-end. To help achieve this, industry has deployed a number of measures such as agreements between forwarders, airlines and handlers to accomplish near 100% e-AWB delivery at export. Where necessary - such as for Warsaw trade lanes - paper AWBs would get printed under the IATA single process. This in itself requires agreement between all stakeholders and resulting changes in procedures, processes, and capabilities for the shift of AWB printing - let alone changes required in the supply chain to operate without a paper AWB. This takes time, effort, commitment, and sometimes investment. Justin Burns, ACW: How can the penetration rate improve? Hill: There is no single factor blocking progress. The ‘carrot versus stick’ approach requires not only the proactive collaboration and agreement of all stakeholders, but also positive, decisive, and tangible action to be proven to deliver its promises. Regrettably, the ‘stick’ approach has been backed by legal processes along with the modernisation of the business. Even with the increasing realisation digitising the paper-trail is not the best way forward. It is an approach that has been most obvious using today’s, or more accurately, yesterday’s platforms, procedures, and processes. We are talking about a transformation of the business to be fully digitally aligned.
Justin Burns, ACW: Is there still resistance to e-freight? Hill: Yes, of course. While there is resistance, there is also necessity to use more traditional methods in lieu of suitable alternatives. For example, the paper AWB is used in some countries as evidence of pre-departure security screening with a wet stamp endorsement of that screening. To eliminate the necessity to print and stamp, the regulator needs to have the tools and capabilities backed by the law to support the process electronically, and have the data securely and conveniently available for use and where necessary scrutiny. We have models of e-Screening were consignment data can be made available in advance to screeners and used as part of overall security measures - eliminating the need for the wet stamped paper AWB delivering in some respects the e-Stamp. And as we attempt to modernise and transform the business, which for some will be in conjunction with other modes While we like to think airfreight is special, in terms of global trade by volume - it is far less significant than the maritime sector. Justin Burns, ACW: Are there e-AWB adoption barriers? Hill: A hurdle forwarders still have to overcome is inconsistent standards from airlines. For industry to move forward with some level of consistency and confidence, a collective agreement must set a minimum standard message. This needs to include increased levels of data quality from the source. The paper safety net will be removed and all we have left is the data. In the new world of enhanced security with the likes of PLACI schemes, if the data is not right, the consignment won’t be shipped.
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Justin Burns, ACW: What is the consensus about the e-AWB? Hill: There is universal agreement e-AWB will be necessary to ensure the effective management of their businesses. e-AWB is a key and necessary component - but is a stepping stone to complete digitisation. For e-Customs, it has improved trade facilitation and for some customs pre-dates e-freight.
TRADEFINDER Airlines
Associations
Freight Forwarders
Turkey
Worldwide
India
Cargo Handling United Kingdom
Freight Forwarders Hong Kong
United Arab Emirates
Industry Events
USA
Contracts
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NEWSWEEK DSV puts profit and revenue rise down to acquisition of UTi
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anish logistics company DSV has achieved gross profit of 7,821 million Danish Kroner (DK) ($1.1 billion) for the first six months of 2016, up on the 5,569 million DK in the same period last year. DSV took over US-based UTi Worldwide for $1.35 billion earlier this year and puts the figures mainly down to the acquisition of UTi. Operating profit before special items came to 1,543 million DK, up on the 1,450 million DK for the same six months in 2015. Net revenue was 32,925 million DK, up on the 25,728 million DK for the period last year. Airfreight, which comes under the Air & Sea Division posted net revenue of 7,330 million DK for the first six months of 2016 against 4,500 million for the same period in 2015. This is attributed to UTi having contributed activities to the division worldwide, with the US as the largest single country, but also with major activities in Europe, APAC and Africa.
Gross profit for the first six months of 2016 in airfreight was 2,005 million DK, up on the 1,074 million DK last year, despite the acquired UTi activities initially running at a loss. For airfreight, the division reported a volume increase in tonnes of 84 per cent for the first half of 2016, handling 274,379 tonnes, compared to 148,895 tonnes in the same period last year. DSV says growth is mainly attributable to UTi, while management estimates the original DSV operations achieved organic growth above the market rate. DSV chief executive officer, Jens Bjørn Andersen says: “With earnings growth of more than 10 per cent, we are very satisfied with our performance in the second quarter. DSV continues the positive development, and UTi’s operating deficit has been neutralised only five months after the acquisition. “The integration of UTi is progressing faster than we had originally anticipated, and the merger of offices and IT systems is already more than
halfway complete. UTi’s and DSV’s employees and operations are being united step by step across the world, and it is great to see that our new colleagues are highly motivated to become part of the DSV culture — that is crucial for a successful integration.” DSV Air & Sea in the US has completed the office and IT integration of the former UTi Freight Forwarding division; and the divisions, DSV Road USA and DSV Solutions USA, have been added to its US
arm. The division now has 36 offices; with one in 19 out of 50 US states. With the acquisition of UTi, DSV says it further expanded its client base within the automotive sector as well as adding healthcare to its portfolio and expects to grow rapidly within this sector in years to come. It is targeting growth in automotives in the US and Mexico and has boosted cross-border business between the two.
Revenue fall for Agility AGILITY has seen revenue decline six per cent in the second quarter (Q2) of this year, but the Kuwaiti logistics firm saw a rise in profitability. The company’s revenue was 309 million Kuwaiti Dinar (KD) ($1.02 billion), which was a fall on the 328 million KD it achieved in Q2 of 2015. Earnings before interest, tax, depreciation and amortisation (EBITDA) grew 12 per cent to 29 million KD, up on the 26 million KD in Q2 last year, while net profit grew 11 per cent compared to Q2 last year reaching 15 million KD. Agility chief executive Tarek Sultan said: “We started the year on a good note and are sustaining momentum as the year progresses. “Within our global integrated logistics business, we are making gains, even in the face of a challenging freight forwarding market, because we have found ways to be more efficient, improve productivity, demonstrate financial discipline and make operations more responsive to the marketplace and customers’ needs.” Sultan adds there are subdued trade forecasts for the rest of the year, citing data from the World Trade Organization, and says it will continue to impact the freight forwarding market.
7.8% revenue fall for CEVA CEVA has seen revenue fall year-on-year (YOY) by 7.8 per cent in the first half of 2016 to $3.23 billion, after recording $3.5 billion in the same period last year. The freight forwarder’s earnings before interest, taxes, depreciation, and amortization (EBITDA) also fell 5.6 per cent in the six months to $118 million, down from the 2015 half-yearly figure of $125 million. Freight management EBITDA was $30 million. Airfreight volumes were up 6.6 per cent in the second quarter, while CEVA’s net loss has fallen to $69 million from $128 million last year. CEVA says its evolution continues against difficult market conditions, illustrated by above-market volume growth in air and ocean freight and resuming growth in contract logistics. Chief executive officer, Xavier Urbain says: “CEVA’s forward momentum continues in line with our strategy. Our half-year performance demonstrated stable net revenue in the first half driven by above-market growth in air and ocean freight and resumed growth in contract logistics. “This is good progress, however we won’t stop here. As the logical next step in CEVA’s evolution, a global operational excellence program was started in April to take the organisation to the next level.”
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