The weekly newspaper for air cargo professionals Volume: 19 Issue: 50 19 December 2016
Amazon makes first delivery with a drone
Cambridgeshire in the coming months. Amazon says it delivered a TV streaming stick and a bag of popcorn directly to the garden of a nearby customer. The delivery took place last week and involved fully autonomous flight, with no human pilot involved in the process. Amazon chief executive, Jeff Bezos broke the news on Wednesday (14 December) tweeting via the social platform Twitter: “First ever #AmazonPrimeAir customer delivery is in the
books. 13 min—click to delivery.” He also posted a video of the delivery, which lasted about two miles and can be seen on the Amazon website. The pilot is part of Amazon’s tests on drones with the UK Government, which was announced in July. The tests are looking at the best way to allow drones to fly safely in UK airspace. Amazon is conducting the trials in the UK, because the regulations are more flexible than in other countries and it is aiming for them to be fully operational by 2020. In the US, aviation regulations forbid the kind of delivery made in Cambridge. UK Government ministers say they want to look into the opportunity for businesses to start using the technology in future, but they will still have to assure the public having automated drones flying is safe and won’t invade people’s privacy. The government says the work will help it draw up new rules and regulations for the future, so all companies can take advantage of drone technology, which it says could eventually be worth billions.
Wildlife trafficking getting severe, IATA says
Key appointment by ACS
$19 billion annually. IATA’s head of cargo border management, Gordon Wright says wildlife trafficking has got “so severe” in the last few months and it has become a growing problem in the last 18 months. He notes seizures account for only 10 per cent of the illegal trade. Wright says the pangolin – a scaly anteater – is the most trafficked animal, while rhinos and elephants are also high on the list of the most trafficked animals by smugglers. IATA has launched a video for aviation staff, highlighting the important role front-line workers can play to catch wildlife traffickers and in June it endorsed a resolution denouncing the illegal trade in wildlife and wildlife products. In March, it was among signatories to the Buckingham Palace Declaration supporting the United for Wildlife Transport Taskforce initiative of the Duke and Duchess of Cambridge and Prince Harry. Among airlines signing up are Qatar Airways, Etihad Airways, and Emirates.
Air Charter Service (ACS) has promoted Dan Morgan-Evans to global cargo director after six years as London cargo director. Morgan-Evans joined ACS in 2002 and will start his new role with immediate effect. ACS chief executive officer, Justin Bowman says the appointment will help to grow the company’s cargo division globally.
O
nline retail giant Amazon has launched its drone fleet after it made the first successful Prime Air drone delivery service to homes in Cambridge – in the UK. The trial is only open to two customers in UK who have huge gardens, live close to an Amazon depot and want items that weigh less than 2.6 kilogrammes, but Amazon says it hopes to expand the service to dozens more homes in
The International Air Transport Association (IATA) has started carrying out airport wildlife trafficking assessments - working with the World Customs Organization (WCO) - as it looks to combat the growing illegal trade. Last month, IATA launched its Airport Wildlife Tracking Assessment tool with a pilot at Maputo International Airport in Mozambique before rolling it out to Hanoi in Vietnam. It will do a further five more in 2017, likely to be in Africa, South America and Asia. Wildlife trafficking is the fourth biggest illegal trade behind drugs, counterfeit/pirated goods and human trafficking. It is worth around
E-COMMERCE TO DRIVE GROWTH + CARGO TO DOUBLE DEMAND FORECASTED TO RISE 3.5% IN 2017 VOLUMES AND YIELDS PREDICTED TO GROW IN 2017 FLEET UPGRADES, NETWORK AND PHARMA FUEL AA
6
7
9
10
Boeing signs bumper deal with Iran Air IRAN Air and Boeing have signed an agreement for 80 aircraft valued at $16.6 billion, with the first units scheduled for delivery in 2018. The order consists of 50 737 MAX 8s, 15 777-300ERs and 15 777-9s, and is expected to support tens of thousands of jobs directly associated with production and delivery, and nearly 100,000 jobs in the aerospace value stream for the full course of deliveries. Boeing says the 737 MAX is 14 per cent more fuel efficient than today’s most efficient next generation 737s, and is scheduled to enter service in 2017. The manufacturer says the 777-300ER is the most fuel and cost efficient aircraft in its class with the highest cargo capacity of any passenger aircraft. It says the 777X will include new engines, an all-new composite wing and will leverage technologies from the 787 Dreamliner when it enters service in 2020. Iran is set to be an emerging air cargo market over the next decade and one which presents all parts of the supply chain with significant opportunities, as the Persian country with a population of more than 80 million opens up to the world and its middle class grows.
aircargoweek.com
NEWSWEEK
Strong November growth at UK airports
A
irports in the UK have registered strong growth in November, helped by growing trade with Asia and emerging markets. In November, Heathrow Airport grew 4.4 per cent to 138,050 tonnes, with particularly strong growth across the Middle East, East Asia and Latin America. Gatwick Airport was up 12.2 per cent to 8,099 tonnes and is expecting strong growth next year when Cathay Pacific increases its recently launched fourtimes a week services to daily from June. The news was mostly good at Manchester Airports Group operated airports, with Manchester Airport and Stansted Airport growing strongly, but East Midlands Airport declining due to weekend runway closures. Manchester was up 14.5 per cent to 10,757 tonnes, Stansted by 4.3 per cent to 22,983 tonnes while East Midlands was down 7.9 per cent to 25,535 tonnes. Elsewhere in Europe, Brussels Airport is continuing to recover from the terrorist attacks in March. Cargo volumes grew 15.2 per cent to 45,564 tonnes with freighter traffic surging 55.5 per cent to 16,725 tonnes helped by strong volumes from airlines including Eti-
had Cargo, Ethiopian Airlines Cargo and Qatar Airways Cargo. Bellyhold cargo was down 11.4 per cent to 10,650 tonnes with growth from United Airlines and Brussels Airlines struggling to make up for Jet Airways moving to Amsterdam Airport Schiphol. Over in Germany, after a number of good months Frankfurt Airport’s freight and mail volumes were down 2.1 per cent in November to 191,461 tonnes, but were up 1.3 per cent to 1.96 million tonnes on a year-to-date basis.
Boeing chooses EGAT for BCF program EVERGREEN Aviation Technologies (EGAT) has been chosen by Boeing to perform its Boeing Converted Freighter (BCF) program for the 767-300. EGAT will modify and convert the aircraft at its maintenance repair and overhaul facility in Taiwan, with the first one to be inducted in 2017 and redeliveries anticipated for 2018. The 767-300BCF will have the same capacity as the production 767-300 of 50 tonnes and a range of 3,000 nautical miles with 24 pallet positions. Boeing Commercial Aviation Services vice president for fleet services, Mike Fleming says: “The customer demand we’ve received for Boeing Converted Freighters is a testament to the quality and value of our products. Boeing-managed conversions
provide dependability, reliability and operational efficiency advantages that will help our customers adapt and succeed in the evolving air cargo marketplace.” EGAT chairman, Michael Chang says: “We look forward to continuing to build on our strong relationship with Boeing through our partnership on the 767-300BCF program. Airline customers who order Boeing’s 767300BCF will benefit from the outstanding, high-quality products engineered by Boeing, as well as an on-time conversion performed at an award-winning facility in EGAT.”
AFS wins Turkish handling contract TURKISH Airlines has extended its cargo handling agreement in South Africa with Africa Flight Services (AFS) – part of Worldwide Flight Services’ (WFS) global airport services group – with the awarding of a new contract in Johannesburg. AFS already provides cargo handling services for the airline in Cape Town, and expects to handle more that 2,500 tonnes a year for Turkish Airlines in Johannesburg. The airline operates daily Airbus A330-300 flights between O.R Tambo International Airport and Istanbul. AFS general manager for cargo in South Africa, Malcolm Tonkin says: “Having served Turkish Airlines in Cape Town since July
2
ACW 19 DECEMBER 2016
aircargoweek.com
2015, we have been able to demonstrate the quality and reliability of our cargo handling services and this has clearly given the airline confidence to award us this additional contract in Johannesburg. “We now look forward to serving their cargo customers at both of our airport locations in South Africa.”
Tabloid page trim.indd 1
01/11/2016 12:44
NEWSWEEK
IATA sets e-AWB penetration target of 62% for 2017
T
he electronic air waybill (e-AWB) penetration rate for October was 44.7 per cent – still some way of the 2016 year-end target of 56 per cent set by the International Air Transport Association (IATA). Next year’s target penetration rate also looks like a tough one to hit, as IATA’s head of cargo, Glyn Hughes (pictured) explained in Geneva at the IATA Cargo Media Day on 7 December, the target for 2017 is 62 per cent. In October, the top performing region by e-AWB volumes was the Middle East with 68 per cent, but the likes of Europe, the Americas and Asia Pacific are lagging behind, at 34 per cent, 40 per cent and 45 per cent, respectively. Hughes explained the three regions are behind
due to many air cargo operators having old legacy systems and a lack of technology, while Middle East companies is the highest as many have newer IT infrastructure and processes. The airport with the highest penetration rate by volumes in October was Hong Kong International Airport with 70.6 per cent. The top
airline was Cathay Pacific Airways with 78 per cent and the top freight forwarder was DHL Global Forwarding with 55.3 per cent. Hughes said there are obstacles to increasing the e-AWB penetration rate, including regulatory constraints, a lack of harmonisation, a lack of technological compatibility, and the complex processes that exist. E-AWB adoption showed a great surge in its initial introduction but this has slowed, which Hughes puts down to it now reaching a “maturity threshold”, meaning the next noticeable percentage increase becomes much more difficult to achieve. Hughes said IATA is looking to accelerate e-AWB growth through more e-freight trade lanes, airports SOPs – common standard oper-
More excellence programmes targeted by IATA THE International’s Air Transport Association’s (IATA) senior manager for special cargo, Andrea Gruber said the association is looking into anymore potential excellence initiatives like CEIV Pharma. Speaking at IATA’s Cargo Media Day on 7 December, she explained it is investigating opportunities within air cargo where it can strive for excellence. Possible programmes could include for live animals, high value cargo and the safety of lithium batteries. Gruber said perishables is another sector where it is evaluating such an initiative like CEIV as the fresh market is growing, but introducing any comes down to complexity
4
ACW 19 DECEMBER 2016
and compliance of the cargo product. But she said a perishables excellence programme may be pointless, as the expectation for the quality of perishable products is lower compared to say pharmaceuticals or live animals and the yields are lower. Gruber explained any initiative launched would be all about meeting the needs of shippers and industry on all levels, and CEIV itself was driven by both. “If the industry asks us to we will look into it (excellence programme) in order to meet the shippers and industry’s expectations,” she added. As for CEIV, Gruber said IATA is aiming to
grow the number of CEIV certified pharma trade lanes, which she noted is “the future” as shippers want reliable end-to-end transportation of pharma cargo. Some she said have been developed in Europe, Asia and to the US. Gruber also said some airlines and freight forwarders will look to get their entire networks certified, but only where pharma trade lanes were high, noting SDV is looking to get 17 of its stations around the globe certified. She added 43 companies are now certified at CEIV, 82 are in the process of attaining CEIV and around 99 are in discussion to gain the certficate.
aircargoweek.com
ational procedures, via its e-AWB Link initiative where SME freight forwarders can send and manage electronic shipments using over 120 carriers, its playbook e-AWB guide and by introducing e-AWB360 into key airports. IATA’s e-AWB360 campaign has been rolled out to 19 airlines and 21 airports and Hughes said it is a “critical” initiative as it involves various stakeholders at gateways and the association is aiming to run it at 35-40 airports by the end of next year. Hughes concluded: “Growth has been consistent, but not quite as fast as the industry wants it. There has been lots of challenges and obstacles. It will require quite a bit of effort, but I think we have a lot of traction and the airlines and freight forwarders are supportive.”
Trade agreement near THE Trade Facilitation Agreement (TFA) is closer to getting finalised as only a few more state ratifications are needed. The latest to sign up are Gabon, Kyrgyzstan, Dominica and Mongolia. Two-thirds (102) of the World Trade Organization’s membership of 164 is needed to ratify the accord for those members. The International Air Transport Association’s head of cargo border management, Gordon Wright said the TFA will create an extra $1 trillion in international trade, adding to the $15 trillion now. The TFA aims to make customs and border procedures easier to speed trade up and reduce costs.
NEWS WEEK
Amerijet working on IATA CEIV and other initiatives for 2017
A
merijet is in the final stages of attaining the International Air Transport Association’s Center of Excellence for Independent Validators in Pharmaceuticals (CEIV Pharma) certification as it looks to further grow its first quarter 2017 pharma volumes. This is just one of the initiatives and focuses for the all-cargo carrier, but senior vice president of business development, Pamela Rollins says meeting the needs of customers is ultimately what has enabled it to grow in challenging times. “Listening to the evolving needs of our customers and proactively adapting to provide the very best service,” Rollins says. Amerijet has in the past seen seasonal variations in airfreight demand with recoveries taking place soon after, but since the slowdown of the global economy it notes the industry continues to struggle. Rollins says even in its main service region, the Caribbean, Mexico, Central and South America, it sees an economic impact on tourism, and oil and gas in Puerto Rico and Venezuela. Providing urgently needed transportation to Dominica and Haiti, which have been affected by devastating natural disasters, has been challenging.
Rollins says: “Regardless of fluctuations in our industry, the most important response we can have is to listen to our customers. As they tell us the challenges they face, we work with them to create solutions. Because we have an established, personal relationship based on regular communication, when an issue happens, we can adapt quickly by adjusting our schedule, route pairings, and arrivals/departures. “In response to their needs, we have increased value-added services like door-pickup and delivery, cross-border trucking solutions, packing and crating.” Modernising systems for customers to save time, move to paperless processes and reduce errors are other key focuses.
The carrier has been connecting directly to customers through electronic data interchange (EDI) messaging, into their own back-office systems or through Descartes, CHAMP Cargosystems and other providers, which use the Cargo-IMP standard for exchanging cargo data. It will also soon launch a new website to give better tracking, quotes, bookings, and account information for customers. Amerijet recently announced a partnership with Starcom Systems to use their Kylos Air GPS Tracking Device, where customers can track and monitor high value and temperature sensitive products on their smartphones, desktops or own tracking platforms. Next year, it is to invest in two Boeing 767-300 aircraft with more to follow in 2018 and new partnerships in Africa, Asia, Australia, and New Zealand have strengthened its global presence. Rollins says: “We plan our growth carefully and in conjunction with our customers, to ensure that we maintain the flexible transportation solutions they want and need.” Amerijet operates Boeing 767 and Boeing 727 aircraft from its primary hub at Miami International Airport and regional hub in Port of Spain, Trinidad serving the Caribbean, Mexico, Central and South America with direct all-cargo flights.
PACTL to start Nantong company
SHANGHAI Pudong International Airport Cargo Terminal (PACTL) has signed an agreement to establish a joint venture with Nantong Xingdong Airport offering handling services to airlines and forwarders in Nantong. Registration of the new company, PACTL Nantong Xingdong Airport Cargo Terminal (PACTL NTG) is scheduled to be completed by the end of December 2016, registering a capital of RMB 18 million ($2.6 million). Nantong Airport will be the largest shareholder with 51 per cent, and PACTL will have the other 49 per cent. PACTL NTG will also launch passenger baggage handling and loading services when it goes live, and further services will be added in line with development and demand of joint venture customers in Nantong. PACTL says this enables it to commence management of multiple cargo terminals and continue to expand its scope of business while Nantong Airport will benefit from significantly enhanced cargo handling capabilities, strengthening its position within the domestic air cargo market.
Yusen to expand into Switzerland YUSEN Logistics is to expand its European network by launching operations in Switzerland on 1 January 2017. The operation, close to Zurich Airport will offer the full range of integrated supply chain solutions including air and ocean freight services, land transportation and customs clearance. Further services including storage and domestic distribution can be offered on request. Yusen Logistics Europe chief regional officer, Ian Veitch says: “This expansion in Switzerland represents an important strategic step for us.” “As well as serving our customers better with a personal contact on-site, we will be in a position to create new solutions throughout our global network, efficiently getting our customers’ products to their end destinations on time.” Yusen Logistics is to double storage capacity in Singapore having selected Swisslog Warehouse & Distribution Solutions’ AutoStore Automated System. The storage system, where autonomous robots sit on top of an aluminium grid, is set to go into operation in 2017. The Tuas Warehouse will be equipped with the AutoStore system to serve multiple customers under one roof. Swisslog will be responsible for implementation of the system that includes approximately 16,595 spaces for stored items.
aircargoweek.com
ACW 19 DECEMBER 2016
5
MARKET FORECAST E-commerce to drive growth, cargo to double by 2035
E
-commerce is expected to be the major driver of growth in the coming years, while air cargo is predicted to grow by 4.2 per cent annually over the next 20 years, according to Boeing. In its biennial World Air Cargo Forecast, Boeing predicts that the e-commerce market will be worth $3.6 trillion by 2020, and the Chinese express market will register a five-year growth rate of 55 per cent in volume and 39 per cent in revenue. Boeing forecasts that China’s e-commerce market will be bigger than the combined existing US, UK, Japanese, German and French markets by 2020. Markets linked to Asia are expected to lead all other international markets, and dedicated
6
ACW 19 DECEMBER 2016
freighters will remain the leading cargo capacity provider. Boeing Commercial Airplanes vice president marketing, Randy Tinseth (pictured) says: “The air cargo market has faced several years of below trend growth. As trade continues to recover, we’re confident the air cargo market will see growth over the long-term.”
Growth to return by 2018
Describing the last few years, Boeing says air cargo has struggled to maintain sustained growth since the global economic downturn in 2008 and 2009. The industry bounced back in 2010 before stagnating in 2011 and 2012, with growth returning in mid-2013 to early 2015,
before remaining flat for the rest of the year. The market has gathered strength since the first quarter of 2016 and Boeing is predicting growth to return by 2018. Boeing says despite the weak growth, more than half of air cargo is still carried on freighters. Air cargo traffic is forecasted to double by 2035, and the worldwide freighter fleet is expected to grow by 70 per cent, adding 2,370 freighters to the market by 2035. Of these, 1,130 will replace retiring aircraft and the rest will meet traffic growth. Boeing predicts 550 of these will be large production aircraft such as 747s and 777s, 400 wide-body conversions including 767s, 747s and 777s, 380 medium-body production units such as 767s, and 1,040 standard-body conver-
aircargoweek.com
sion including 737s and 757s. It says the introduction of aircraft with bellyhold capacity has not significantly reduced the freighter share over time. Bellyhold capacity increased 27 per cent from 2010 to 2015 while the number of large freighters rose eight per cent, though freighter’s share of cargo remained high on the Asia-North America and Asia-Europe trade routes where more than 70 per cent of traffic is carried on freighter aircraft. Over the next 15 years value per ton of total traded goods is forecast to rise as world GDP grows and world population demands higher value goods. Boeing predicts a larger percentage of trade will become addressable by air cargo as the average value per ton of traded goods rises. It says air cargo will remain the preferred option to transport higher value goods which are time sensitive and economically perishable. Highlighting the importance of freighters, Boeing says 85 per cent operate out of the top 50 cargo airports, and only 30 per cent of bellyhold capacity has served primary cargo airport routes over the last five years. Boeing says freighters will continue to carry more than half of the world’s air cargo for the next 20 years, as the majority of players continue to rely on them for cargo operations.
MARKET FORECAST
Demand forecasted to rise 3.5% in 2017
T
his year has been a tale of two halves for air cargo with struggles across the supply chain in the first half of 2016, while the second half has seen strong performances notably in Asia and Europe. Weak global trade and falling yield prices have led to an overall revenue plunge of around six per cent so far this year in the industry, but there have been positive signs of a strong fourth quarter and peak season, which is providing some positivity moving into 2017. But how will airfreight perform next year and what is in store? The International Air Transport Association (IATA) believes there is optimism over the prospects for air cargo in 2017. IATA forecasts a break in falling yields and a “moderate uptick” in demand of 3.5 per cent next year, which it says will lead to volumes reaching a record high of 55.7 million tonnes – up from 53.9 million tonnes in 2016. And the airline association predicts air cargo revenues across the industry will rise slightly to $49.4 billion (still well below the $60 billion level of annual revenues experienced in 2010-2014), but notes trading conditions will remain challenging. IATA’s director general and chief executive officer, Alexandre de Juniac (pictured below) explains: “Connectivity continues to set new records. We expect nearly four billion travellers and 55.7 million tonnes of cargo in the coming year. And almost one per cent of global GDP is spent on air transport—some $769 billion. Air transport has made the world more accessible than ever and it is a critical enabler of the global economy.” He calls on governments to do more to help air transport as says billions of dollars are wasted in direct costs and lost productivity due to efficient infrastructure. “These are only some of the hurdles which confront airlines. Our aim is to work in partnership to help governments better understand and fully maximise the social and economic benefits of efficient global air links,” says de Juniac. IATA expects the global airline industry to make an overall net profit in 2017 of $29.8 billion through total revenues of $736 billion, representing a 4.1 per cent net profit margin. The association also forecasts that expected higher oil prices will have the biggest impact on the outlook for 2017. Falling oil prices have given a boost to air cargo in 2016, enabling freighters confined to the desert to be operated and provided a cost saving. IATA says world GDP is projected to expand by 2.5 per cent in 2017 (up from 2.2 per cent in 2016) and along with changes in the industry, this is expected to help stabilise yields for air cargo, which have fallen each year since 2012.
capacity increasing by 5-6 per cent as well as the delivery of new freighters due in 2017, Seabury says overcapacity will dominate the industry next year too.
Changing geopolitical landscape
So it seems moderate growth is about as good as it gets and 2017 is likely to be as challenging as 2016, due to the rapidly changing geopolitical landscape, which is bringing uncertainty. How all the changes next year will impact world trade and the air cargo industry cannot yet be accurately estimated. Factors set to provide added challenges next year include Brexit, Donald Trump taking over as president of the US, and continuing conflicts in the Middle East, Ukraine, and in other corners of the globe. Air cargo industry operators will no doubt settle for growth in demand in 2017 of around two to four per cent, coupled with a decent rise in yield prices and revenues. Lets hope this is the case if not better.
Perishables to continue to grow
Meanwhile, the Seabury Group says global economic growth estimates are “moderately positive” for 2017 and in line with this year’s. The group says emerging air cargo markets will continue to outperform developed markets in terms of growth next year – forecasting South and South East Asia will be hotspots, while China will still see solid market expansion. Seabury forecasts the perishables market will continue to grow faster than other sectors, driven by rising demand for fresh flowers, fruit and fish across the globe. The pharmaceuticals sector is also set to continue to thrive as investments fuel growth, but the high-tech segment is likely to struggle again along with the oil and gas sector, which has been impacted by the low oil prices, although there is hope a rise in oil prices will boost the sector. E-commerce has grown by around 25 per cent a year in the past four years and this is set to continue to grow by a double-digit figure again. The sector is presenting a significant opportunity and challenge to air cargo operators as they seek to find the best way to capture e-commerce business. Seabury says US-based carriers can expect to enjoy some relief as currency exchange headwinds will continue to stifle outbound routes, but not as much as in 2016, while the European region should expect a rise in exports of perishable goods by air, helped by currency effects as well as by an increase in airfreight capacity. The group predicts overall demand for airfreight worldwide should show moderate growth in 2017, but with widebody belly
aircargoweek.com
ACW 19 DECEMBER 2016
7
ASIA PACIFIC Partnership set to be expanded between MAB and Silk Way
M
AB Kargo is set to expand its partnership with Silk Way West Airlines as it looks to increase the agreement it has on services. In March, the Malaysian Airlines cargo arm penned a memorandum of co-operation with Azerbaijan-based Silk Way West that sees both leverage on each other’s aircraft fleet and network in different regions of the world. The strategic partnership entails a block space agreement on a twice-weekly route to and from Kuala Lumpur (KL) and Amsterdam via Baku Heydar Aliyev International Airport. MAB Kargo chief executive officer, Ahmad Luqman Mohd Azmi explains: “Things are doing well and we are going to enhance this partnership. We are going to increase the current frequency from twice a week to three or four times a week to serve Europe and are also working closely with them to support their operations to the US into Chicago and New York JFK. That will be good as we are from Asia and need to spread our wings.” And Luqman sees it forming more co-operations in the future: “Being a oneworld member we are going to enhance some of
8
ACW 19 DECEMBER 2016
the relationships with other oneworld partners, maybe look at a similar relationship like we have with Silk Way West but with a different routing. “We have three aircraft from KL, but need more lift out of KL so we will enhance some of these co-operations on freighter routes – as part of a joint cooperation.” In the fourth quarter (Q4) of 2016, MAB Kargo expanded its presence in Thailand with the launch of an Airbus A330 Freighter service to Bangkok Suvarnbhumi International Airport from Kuala Lumpur. This has been launched to tap into the rising demand for air cargo shipments between Bangkok and KL. The freighter stops in Bangkok via Hanoi in Vietnam before heading back to KL. Cargo is expected to be lots of machinery and agricultural products from both countries along with general cargo.
Taking advantage of peak period
In Q4, MAB Kargo also started twice a week freighter services from KL to Guanghzou with perishables and general cargo making up much of A330F’s 60 tonne payload and also started a twice-weekly service to Chongqing, where services will mainly carry high value electronic goods. Luqman explains: “We initially operated with two A330s, but since we operate three now, that has helped us take advantage of the current peak we are seeing across our region. “We still remain very focused on South East Asia, China and India and that is looking good for us and we are seeing good loads in and out of China and India. “We think things are turning around for Malaysian Airlines on the passenger side and we are more active in the marketplace. “We are turning around and have been stabilising this year and have been growing in some secondary markets like China and India. It is looking better and we have ordered new aircraft on
aircargoweek.com
the passenger side and will remain with three freighters.” Luqman is happy with the performance of its A330Fs in 2016 and says it is doing well with the capacity it has. He adds: “It is what we expected and we should meet our revenue numbers this year, but yield is still a challenge for is, but we should be breaking even this year or making some profits in 2016 and are quite bullish about this.”
Focus on e-commerce
The e-commerce sector is the main target market and new routes added to China should drive this objective, but with this changing and growing demand there is a need to invest in infrastructure. Luqman says: “We are focusing firmly on e-commerce as are seeing a lot more of it transiting in KL and we need to enhance that facility to meet the demand of e-commerce and right now, we are looking at that segment. “The problem with these type of movements is you need to screen goods individually for safety reasons so we are enhancing that part of the warehouse, but the rest will remain as it is.” The pharma market is also on the radar for MAB Kargo as Luqman explains: “We will look into gaining and working towards IATA’s CEIV Pharma certificate or GDP sometime in 2017, but our immediate focus is on e-commerce.” As for Malaysia as a whole, he says GDP should be up around 4-5 per cent in 2016, which is helping the carrier. He says MAB Kargo as an all-cargo carried needs to attract regional loads to consolidate in KL and is focusing more in Malaysia on high-tech industries, adding: “The problem is they are smaller and not as heavy as laptops and handheld, which creates some load issues for carriers like us, but being quite active in China and India and South East Asia is helping us win business to KL which is good.”
ASIA PACIFIC
Volumes and yields predicted to grow in 2017
2
016 has been a year of two halves, with a tough first half, but improvements in the second, Cathay Pacific general manager cargo sales & marketing, Mark Sutch (pictured) tells Air Cargo Week (ACW). Last year had an exceptional start, helped by the US West coast seaport disruption before tapering off while 2016 started off slowly, both in terms of tonnage and yield, then picking up in the second half. Sutch comments: “It’s not unusual in airfreight (particularly when based in Asia Pacific) to have a year of two halves and this has been very much the case.” September to December has been strong, but the transpacific market is slowing in the run up to Christmas, though Sutch says Westbound out of Hong Kong is expected to remain strong up to Christmas itself, giving him confidence that 2017 will start well. He tells ACW: “I am confident that 2017 will start on a significantly strong footing than 2016. Both yield and tonnage will grow – yield considerably.” Something else to look forward to next year is Cathay Pacific’s joint business agreement with Lufthansa Cargo, which is due to go live on 1 February 2017. Lufthansa has already moved to the Cathay Pacific Cargo Terminal, which Sutch says has been very smooth and forwarders now have a single pick-up and drop-off area for services. Sutch says: “CX/LH will offer a seamless metal neutral product to the market. We believe this will bring customer efficiencies in HKG/ FRA and other points between HKG & Europe.” The biggest benefits for customers, Sutch says include a single point of handling in both Frankfurt and Hong Kong, a greater choice of flights, a joint pool of capacity and a greater spread of flights across the week.
Nearer to home, Sutch says Cathay Pacific has a very extensive network across Asia Pacific and much of the future growth will come from passenger aircraft with the arrival of Airbus A350s. He also says: “We shall continue to look for new freighter opportunities as we have recently done with launching new ports of Portland and Wellcamp Brisbane West.” Hong Kong – North America remains Cathay Pacific’s busiest trade lane, followed by Hong Kong – Europe, with India proving to be a strong market in recent years. Sutch tells ACW: “IntraAsia is a growing market and given the number of widebody passenger services we offer we have room to grow in this key sector.” He believes the growing domestic markets in China and India, and the development of South East Asia will provide a base for air
aircargoweek.com
cargo to grow in the future. Sutch says: “At CX we believe in operational excellence, handling efficiency, network and frequency spread and a combination between freighter capacity and belly.” Across the network, electronic consumer goods have remained popular from Asia to North America and Europe, while mail driven by e-commerce and perishables have registered strong growth. Sutch says perishable demand is coming from China with good growth from North America, Australia and Europe. Outsized cargo is also performing well, with ExpertLift product. Sutch comments: “Although hard to predict this market it has been strong in recent months and we expect our expertise in this area will set us well for future growth on 2017.”
ACW 19 DECEMBER 2016
9
USA
Fleet upgrades, wider network and pharma fuel American
N
etwork expansion and fleet upgrades are driving cargo at American Airlines Cargo. The carrier’s president, Jim Butler (pictured) says he is encouraged by the figures and it is focused on operational reliability and investing in the business. He explains: “The last couple of months have been encouraging and we have seen good volumes across the system and have seen a little bit of peak. A part of that is we have invested in our network and with the aircraft we have brought in - we have been able to add a lot of destinations, which are really key to cargo. “The expansion of the network in Asia and other areas has enabled us to grow. We have added LA to Hong Hong and to Auckland and others, so the business is expanding nicely and one of
the main investments we are making is to grow cargo.” This year American has brought in more than $4 billion worth of new aircraft at a pace of one a week, including the first of 22 Boeing 787-9s, and the airline will have five by the end of 2016. Airbus A350s will follow in a few years, Butler says: “We have long road ahead of us for fleet renewal and expansion – the A350 is fantastic for cargo and we are excited about the 787-9 too – both are going to be great for us and complement the mini freighters we have on the 777-300ERs - it will continue to allow us to build up the network.” The carrier has seen strong demand in a number of areas of the globe, but Asia and Europe, especially France, are the strongest. In France it is flying more cargo than ever through 12 different stations and even moving some into Barcelona and other areas. Butler notes pharmaceuticals is the fastest growing sector, and the specialist facility opened in Philadelphia for its European network has boosted this. “We continue to invest in the general cool chain in other places and have a new drive through cooler in our Dallas hub and continue to find opportunities to grow that. Another area that has been good is Ireland and we have had more
than we ever had this year – it is one of big locations for pharma and we have invested there and continue to see good growth,” Butler says. But what about Brexit? Butler says: “It is in the back of my mind, but we have not seen an impact in a negative way. In fact we have continued to break records of traffic out of Heathrow (LHR). Every time we hit a record we then hit another one. LHR continues to expand. We have 20 flights a day into London. The biggest concentration of capacity we have in Europe by far is in London and I am very bullish about the continued growth in London and we will continue to invest going forward.” All in all, Butler says American is happy with how things have gone in 2016, as in 2015 it was tough to find “any peak in the numbers”. “We are encouraged by the business customers are bringing us and it is good because it is nice to see that coming and that comes from investments we have made such as in operational reliability. Our goal is to differentiate on the service we provide. We are pleased with the direction we are going.”
IAG growing in US market
THE US is more important than ever for IAG Cargo after its acquisition of Aer Lingus. IAG Cargo’s vice president for commercial in North America, Joe LeBeau says the takeover of the Irish carrier has given cargo a boost in a “hugely important market” and it is now moving more shipments than ever before. “The Aer Lingus acquisition has been phenomenal as it has a strong presence on Transatlantic routes. That will grow on the British Airways (BA) side and we are moving a lot of Dublin business that we can then transition. It has been an important addition to IAG,” he says. The strength of the US dollar is having an impact and LeBeau says the strong performance of the dollar is affecting a lot of markets, especially high value cargo sectors. He notes shipments of smaller consignments are doing well in the US, but some markets have taken a hit because of the dollar’s strength, notably machinery. LeBeau says the Cargo Connector service it started three years ago has made a big difference in the US market for IAG Cargo, where it has 10 vehicles that move express shipments between various gateways. In 2016, IAG announced network enhancements for 2017 into the US including new BA routes from Gatwick Airport to Fort Lauderdale and Oakland, and to New Orleans from Heathrow Airport. LeBeau says: “We have added a chunk of capacity and made investments in infrastructure. New Orleans on the import side is an untapped market into the region to Louisiana and Alabama, states likes this. It will give us access into these areas and we can also feed with the Texas market and can feed into Atlanta.” He says Fort Lauderdale will also boost its perishables volumes as it is close to Miami - the main entry point for fresh goods into the US from Central and South America. Overall, LeBeau says it has been a challenging year with weak global trade and the strong US dollar, but he believes IAG’s focus on premium products and network expansion has shielded it to a certain extent and he is optimistic 2017 will be even better. He explains: “The market use to move in 12 month increments, then it was moving in six month increments, but now it moves quarterly. “The supply and demand divide is leveling out. The forwarders are putting a lot of pressure on us to serve them better and to be as efficient for both. That can play a big part in the next 12 months. “We have to modernise and that is going to be an ongoing opportunity for us. We expect the market to be as challenging in 2017 as in 2016, but we are now more adjusted.”
10
ACW 19 DECEMBER 2016
aircargoweek.com
TRADEFINDER Airlines
Airports
Cargo Handling
Turkey
Lithuania
United Kingdom
Freight Forwarders Iraq
Spain
Freight Forwarders Hong Kong
United Arab Emirates
USA
Industry Events
aircargoweek.com 11 19 Dec 2016.indd 1
ACW 19 DECEMBER 2016
11 12/12/2016 12:41