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The weekly newspaper for air cargo professionals Volume: 20

Issue: 17

1 May 2017

Asia Pacific leading air cargo’s optimism in 2017

ir cargo’s largest market Asia Pacific continues to post strong year-onyear (YOY) growth in 2017. According to figures for the first quarter (Q1) released by the Association of Asia Pacific Airlines (AAPA), freight tonne kilometres (FTKs) were up YOY by 9.6 per cent for the period to 16 billion. This was driven by a double-digit surge of 12.7 per cent to 6.1 billion FTKs in March that AAPA says was helped by steady manufacturing production in major Asian economies. Capacity in available freight tonne kilometres grew 2.4 per cent in Q1 to 25.6 billion and by three per cent to nine billion in March. Load factors improved across the region, up 4.1 percentage points to 62.7 per cent in Q1 and 5.8 percentage points in March to 67.6 per cent. AAPA director general, Andrew Herdman (below) says: “Air cargo markets experienced a strong start to the year, with a firm 9.6 per cent increase during Q1 of 2017. Elevated consumer and business confidence levels in some developed and emerging market economies translated into increased orders, thus supporting demand for airfreight shipments.” He adds the outlook is mostly positive: “The airline operating envi-

PEMCO LAUNCHES 737-700 P2F PROGRAMME THREE NEW MEMBERS AT WACO SYSTEM ronment has become increasingly challenging, with oil prices off historic lows, and increasing cost pressures due to rising input costs. Asia Pacific carriers will continue to strive for cost efficiencies whilst launching new destinations and maintaining customer service innovation.” Last month, the International Air Transport Association (IATA) said Asia Pacific made up 37.5 per cent of the air cargo industry. Success in the region is paramount and to a certain extent it is the industry’s engine with its huge population, growing middle-class and where a number of emerging markets are situated. AAPA’s Q1 results also corresponds with growth in Asia Pacific reported by IATA in April for the first two months of the year. IATA said Asia-Pacific airlines posted the largest year-on-year demand increase among regions in February 2017 with freight volumes growing 11.8 per cent (more than 15 per cent adjusting for the leap year) while FTKs were

also up six per cent in January. IATA said the rise in demand is “captured in the positive outlook from business surveys in the region and is reflected in the increase in trade across Asia-Pacific’s main freight lanes to, from, and within the region, which have strengthened considerably over the past six months”. IATA noted seasonally-adjusted volumes dipped slightly in February, but remained up considerably since early 2016 and are back to the levels reached in 2010 during the postglobal financial crisis bounce-back. An example of how well Asia Pacific is performing and also fuelled by the rising number of route connections is shown by its key gateways in Q1. Two of the region’s busiest freight hubs Singapore Changi Airport (above) and Hong Kong International Airport reported volumes grew 6.2 per cent to 494,200 tonnes and 11.5 per cent to 1.1 million tonnes, respectively.

LAX handling contract wins for WFS Net profit fall in 2016 for Cargolux

Worldwide Flight Services (WFS) has integrated the cargo handling operations of three new airline customers at Los Angeles International Airport (LAX). The contracts with AirBridgeCargo Airlines, Swiss WorldCargo and LOT Polish Airlines will increase WFS’ cargo volumes by over 55,000 tonnes a year at the Californian gateway. With these latest contract wins, now provides services for 23 carriers at LAX. WFS vice president of business planning in North Amer-

4TH PHARMA FLIGHT FOR QATAR FROM BASEL

ica, Rinzing Wangyal says: “We handled 280,000 tonnes of cargo for customers in Los Angeles in 2016 so it is a major airport operation for us already, and these new contracts strengthen our position even further.”

Cargolux Airlines International net profits fell from $49 million in 2015 to $5.5 million in 2016 with scheduled freight tonne kilometres growing 10 per cent. The Luxembourg-based airline says it saw a robust fourth quarter, registering 12,000 block hours flown and sold 96,000 tonnes in November alone, and was utilising aircraft for an average of 16.74 hours a day. Cargolux Group carried 964,131 tonnes of freight across its network, with available tonne kilometres increasing to 11.3 million.

Load factors were 66.7 per cent. Cargolux carried over 105,000 tonnes of freight to and from Zhengzhou in 2016, up on the 66,000 tonnes in 2015. Cargolux has an all-Boeing fleet of 26 aircraft after taking delivery of its 14th B747-8F last year.

UK-CHINA TRADE TO GROW WITH QINGDAO FLIGHTS

John Lloyd to leave Virgin in September

VIRGIN Atlantic Cargo’s senior vice president for cargo, John Lloyd (pictured) is to leave in September for a fresh challenge. Lloyd has spent 30 years at Virgin and progressed within the company from supervisory and management positions based at Heathrow and Gatwick airports. The airline explained in a statement: “We can confirm John Lloyd has decided to leave Virgin Atlantic Cargo for a fresh new challenge at the end of September. “We will certainly be sad to see John go, but one of the many contributions he has made is to build a strong team with an amazing reputation for customer service and incredibly strong customer relationships, driven by an honest and straightforward style which our customers trust and find easy to do business with. “We would like to thank John for his tremendous contributions and accomplishments over the 30 years he has been with us and we wish him all the best in the future.”

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NEWSWEEK 4th pharma flight for Qatar Airways from Basel

atar Airways Cargo will start its fourth weekly Pharma Express freighter service from Basel, which will come into operation from 8 May. The additional freighter brings the total Pharma Express flights to 10 each week, providing dedicated uplift for pharmaceuticals and healthcare products. The carrier recently increased its Pharma Express flights from both Basel and Brussels in February this year. Chief officer for cargo, Ulrich Ogiermann (pictured) says: “There is a growing demand worldwide for the safe and reliable transportation of pharmaceuticals. By increasing capacity from Basel, the hub of the Swiss pharmaceutical industry, we are able to provide increased uplift to our customers as well as a seamless cool-chain for pharmaceutical exports out of Basel through our GDP-compliant hub in Doha. “Our global customers benefit from additional capacity to import medicines and healthcare products from this major pharmaceutical hub to mar-

kets where they are required swiftly, via Qatar Airways scheduled or charter services.” Qatar Airways Cargo started Pharma Express flights in 2015, which currently operate from pharma hubs such as Brussels, Basel, Mumbai, Ahmedabad and Hyderabad to bridge the world’s major pharma trade lanes. The routes are served by the Airbus A330 freighter aircraft, offering 65 to 68 tonnes of capacity each way. Qatar has seen a rapid rise in its pharma volumes, with a 39 per cent increase in temp-controlled shipments in 2016/17 over 2015/16. It recently added a 12th Boeing 777 freighter.

New cool facility opens at Leipzig

LEIPZIG Halle Airport has opened a new refrigerated warehouse to store temperature-sensitive cargo at its World Cargo Center. The facility has direct access to the apron area guaranteeing short transport routes to and from aircraft and trucks. The configuration of the refrigeration centre enables parallel storage of pharmaceutical items and perishable goods as well as temperature-sensitive products, which may not be stored or transported in frosty or hot conditions. The site is also certified according to European Good Distribution Practice (GDP) standards. Goods can be stored at temperatures ranging from +2 degrees Celsius to +25 degrees Celsius at the new refrigerated facility, which is operated by PortGround – a subsidiary of Mitteldeutsche Flughafen. Leipzig/Halle Airport is Europe’s fifth-largest air cargo hub and handled more than 1.05 million tonnes of freight in 2016.

PEMCO launches 737-700 P2F PEMCO World Air Services (PEMCO) has launched its Passenger-to-FlexCombi and passenger-to-freighter conversion programmes for the Boeing Next Generation 737-700 aircraft. The wholly owned subsidiary of Air Transport Services Group (ATSG) says the programmes will be marketed as B737-700FC (FlexCombi) and B737-700F (Freighter). PEMCO director of conversion programs, Mike Andrews (pictured) says: “We’re excited to finally announce the launch of our 700-series conversion programs for the Boeing 737. Over the past several months, we have worked closely with our customers to fully understand their requirements and implement a comprehensive solution.” The launch customer for the B737-700FC is Bahrain-based Chisholm Enterprises. Its subsidiary Texel Air, a non-scheduled cargo airline, will operate the B737-700FC from Bahrain International Airport. PEMCO will induct the first aircraft for B737-700 Passenger-to-FlexCombi modification at PEMCO’s facilities in Tampa, during the second quarter of 2017. PEMCO expects to receive US Federal Aviation Administration supplemental type certification (STC) by mid-2018.

ACW 1 MAY 2017

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NEWSWEEK Revenue rise in Q1 for C.H. Robinson Dachser acquires Johnston Logistics

.H. Robinson Worldwide’s total revenues increased by 11.1 per cent in the first quarter (Q1) of 2017 compared to Q1 in 2016 – reaching $3.41 billion. The company says performance was driven by volume growth across all transportation services, while total net revenues rose by 0.9 per cent in Q1. APC Logistics, which was acquired at the close of business on 30 September, 2016, represented approximately two per cent of total net revenues in Q1 of 2017. C.H. Robinson’s global forwarding total revenues increased 33.5 per cent in Q1 of 2017 to $468.8 million from $351.1 million in Q1 2016 with net revenues up 14.7 per cent to $106.5 million in Q1 2017 compared to $92.9 million in Q1 of 2016. Air net revenues increased 17.2 per cent to $20.4 million in Q1 of 2017 compared to $17.4 million in Q1 of 2016. This increase was pri-

marily due to volume increases, including those from APC. Air sector revenues were up 18.5 per cent in Q1 to $21.8 million, compared with $18.4 million in Q1 2016. The Robinson Fresh line of business, which provides logistical services for perishables saw total revenues fall 2.4 per cent in Q1 to $550.4 million and net revenues were down 2.3 per cent to $56.8 million. These falls were due to declines in transportation net revenues, partially offset by increases in sourcing net revenues.

DACHSER has become the majority shareholder of its partner in Ireland – Johnston Logistics – allowing it to expand and strengthen its logistics network in northwestern Europe. Dachser chief operating officer for road logistics, Michael Schilling says: “Our customers in Ireland benefit from uniform services and quality standards, fixed transit times, and a tightly meshed network of Dachser branch offices throughout Europe. “In Johnston Logistics, we’ve acquired a well-established family company that we’ve worked with and trusted for a long time, and we see this investment as an exciting opportunity to further enhance our all-important European network.” Albert Johnston will remain a shareholder and managing director (MD) of Dachser’s new subsidiary in Ireland.

“Ireland’s tremendous economic growth makes it a key logistics region,” says Dachser MD of European logistics for North-Central Europe, Wolfgang Reinel. Dachser organises Ireland shipments at its offices in Cologne, Germany and Zevenaar, the Netherlands. There are also daily connections between Ireland and the UK. Johnston Logistics has three locations in Ireland near Dublin, and in Cork, and Limerick. It generated 24 million Euros of revenue in 2016.

Profit fall for Panalpina MARGINS remained under pressure in the first quarter (Q1) for Panalpina with consolidated profits down to 12.4 million Swiss francs (CHF) ($12.4 million), but air volumes grew eight per cent. Across the group, net revenue fell from CHF1.3 billion in Q1 of 2016 to CHF1.27 billion this year, with gross profit falling from CHF17.3 million to CHF12.4 million. Airfreight volumes grew eight per cent driven by Far East trade lanes, but gross profit per ton fell 10 per cent to CHF620 year-on-year though this was an improvement on the fourth quarter. Gross profit was marginally down, CHF144.7 million in 2017 compared to CHF148.6 million in 2016 and EBIT decreased slightly to CHF17.1 million from CHF17.8 million. Panalpina chief executive officer, Stefan Karlen says: “As expected, margins remained under pressure, however, they are slowly recovering since we saw an upturn in unit profitability in both Air and Ocean Freight compared to the last quarter of 2016.” As for the future, he says: “While the challenging market dynamics are expected to continue throughout 2017, we are well-positioned in the market and cautiously optimistic we can keep up the strong volume growth in air and ocean freight, further gaining market share.”

Three new members at WACO THE WACO System has appointed three new members across the Americas and along the Silk Road who were officially welcomed at its Annual General Meeting (AGM). ITN Logistics is the new Canadian member, Trans Global Projects (TGP) is the new member in Azerbaijan and ACE Logistics Bel has been appointed in Belarus. They were welcomed during the AGM which took place at Hotel Balneario Las Arenas in Valencia from 24-26 April. WACO System executive director, Richard Charles says: “The WACO System is proud to be the oldest independent network in the world, and we continue to grow our presence globally with the addition of local experts with a proven track record in the world’s most dynamic economies.” Trans Global Projects regional director, Azer Aliyev (pictured) says: “TGP looks forward to being a member of the WACO network and the opportunities it brings for us in Azerbaijan and globally, as part of this extensive network.” The WACO System includes 112 independent forwarders in 109 countries.

ACW 1 MAY 2017

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NEWS WEEK

UK-China trade to grow with Heathrow-Qingdao flights

eathrow Airport has gained a new direct link to China with three flights a week to Qingdao (pictured) operated by Beijing Capital Airlines. The new route was put in place following the UK and Chinese governments negotiations to significantly increase the number of permitted flights between the two countries last year, and the agreement lifts the previous restrictions limiting airlines to serving six destinations in each country, opening up the potential for more trade with Chinese powerhouse cities. The Qingdao flights will provide 4,000 tonnes of cargo space for British exports to Shandong province, an economic powerhouse of China with a population of nine million people. Qingdao is ranked as a ‘golden city’ by the World Bank due to its investment climate and is a major port, manufacturing base and home to Tsingtao beer. Heathrow Airport chief executive

officer (CEO), John Holland-Kaye (pictured left) says: “As the UK’s gateway to the world, we are delighted to welcome Beijing Capital Airlines and the tremendous, previously untapped opportunities of the Qingdao market for British business. In the future, the UK’s ability to trade in the world will rely on direct access to new, expanding markets like these.” He says a third runway will help British exports further, adding: “With expansion, Heathrow will provide British exporters access to up to 40 new long-haul destinations across the globe –

including more Chinese cities- and send a powerful message that Britain is open for business and our future is stronger as a global, outward looking, trading nation.” Beijing Capital Airlines CEO, Xu Jun says: “With the launch of the Heathrow route, we hope to contribute to the economic and culture exchange for the benefits of both countries.” This will be the fourth direct flight to mainland China following Beijing, Shanghai and Guangzhou, but there are 10 others with links to rival European Union hubs. The 10 important Chinese cities with links to other European airports but not Heathrow are Chengdu, Hangzhou, Kunming, Nanjing, Shenyang, Shenzhen, Wuhan, Xiamen, Xi’an and Changsha. Heathrow says UK air exports to China were $4.6 billion, compared to over $29 billion from Germany, but the Qingdao will route will provide extra capacity for UK businesses to be able to compete more effectively with European rivals. Figures from HM Revenues & Customs, Overseas Trade Statistics say China is the UK’s sixth biggest trading partner with over £11 billion carried out from January to October 2016.

Western Global flies 11 rhinos to US conservation centre WESTERN Global Airlines has airlifted 11 endangered white rhinos from Johannesburg to an undisclosed wildlife conservation centre in the Eastern United States. The 11 animals were accompanied by a vet for the 15-hour flight on board a Boeing MD-11 Freighter, and then transported to a sanctuary where conservationists are working to increase their population. Western Global was contracted by Network Airline Management on behalf of the International Rhino Federation to relocate the animals due to severe poaching and habitat loss in Africa. Western Global Airlines president and chief executive officer, James Neff says: “Since our inception it has been a top priority of the company to operate humanitarian relief and animal rescue flights in addition to the commercial charter and wet lease flights we operate in the general cargo sector.” “In this particular case, it is an honour for us to have participated in the conservation effort of a rare and vulnerable species whose existence is being threatened.”

DHL Chile starts B2C services DHL eCommerce has launched a B2C domestic delivery operation with tailored and customer-centric solutions in Chile. The integrator says that the Chilean e-commerce sector is set to double its size to $2.3 billion by 2020. DHL eCommerce chief executive officer, Charles Brewer says: “The future is incredibly bright for the e-commerce sector across Latin America with a forecasted growth of 21 per cent CAGR and is expected to reach $54 billion by 2020. “Chile is number one in the region for online shopping with rising incomes, improving digital connectivity and seven out of 10 shoppers already shopping online. “With e-commerce in Chile growing at such a rapid pace we see a fantastic opportunity for high quality solutions that will offer a great customer experience and more choice, convenience and control for Chile’s online shoppers.” DHL eCommerce offers next-day delivery in Santiago and other major cities within Chile, and two to three day delivery across the rest of the country. “The opportunities in e-commerce are enormous and companies that succeed in getting it right will win in this exciting space. Fulfillment and last mile delivery are the new game-changers in e-commerce. Brands and e-tailers must aim to deliver the best experience for their shoppers in this highly competitive sector,” says Brewer.

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ACW 1 MAY 2017

PHARMACEUTICALS

DHL acquires control of life sciences specialist in Brazil

HL Supply Chain – part of the Deutsche Post DHL Group – is to acquire control of the Brazilian road carrier Polar Transportes. The transport service provider for the life sciences and healthcare industry is a specialist in temperature-controlled transportation.The company has been working as a service provider for DHL for over 15 years and runs a fleet of more than 300 trucks with national coverage. The acquisition will support DHL’s growth ambitions in a key emerging market and strengthen its end-to-end offering for the life sciences and healthcare industry in Brazil. “Both parties have agreed to keep the transaction value confidential. The transaction is still subject to approval from the Brazilian competi-

tion authorities. DHL Supply Chain for Latin America chief executive officer, Javier Bilbao says: “Acquiring control of our longstanding service provider Polar Transportes is a great opportunity for us in offering an integrated end-to-end solution for the pharma industry in Brazil. “We are taking one more step to further foster our strong position in a key emerging market, that supports our Strategy 2020.” DHL Supply Chain for Brazil president, Mauricio Barros says: “This investment will allow us to expand our life sciences and healthcare capabilities in the Brazilian Market. “The temperature-controlled transport segment is one of the key elements in this industry. “We strongly believe that Polar Transportes is the best player to support us in growing the

business in this important area.” Brazil forms the biggest economy in Latin America and the national healthcare sector

grew substantially in 2016, achieving 5.1 per cent growth in volume and 13.2 per cent growth in sales.

Brussels to use transporter for all shipments

BRUSSELS Airlines Cargo is to include the pharma transporter in its default service for all pharma shipments requiring temperature control. The airline is the launch customer for the Airside Pharma Transporter, a pilot project initiated by Brussels Airport to offer reliable controlled temperature transportation between the warehouse and aircraft for the movement of pharmaceutical goods. Real-time data about the temperature is made available to the customer and shipper in order to guarantee instant follow-up, offering full transparency, as part of the project managed within the Brucargo Pharma Hub. The Airside Pharma Transporter uses a new type of cooling technology and relies on solar power technology to operate autonomously for several days.

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The technology also allows for energy neutral transportation of pharmaceutical shipments at Brussels Airport. Brussels Airlines business development & product manager, Reinout Puissant says: “Brussels Airlines Cargo has decided to include the pharma transporter in its default service offer for all pharma shipments requiring temperature control. “We herewith respond to the request of the industry to take the lead in quality improvements throughout the entire supply chain, including the part we don’t operate ourselves.” Four Airside Pharma Transporter vehicles are now available and approved for operational use at Brussels Airport. Brussels Airlines Cargo will operate all available transporters as an integral part of its pharma product and routes.

PHARMACEUTICALS

Standardised pharma trade lanes becoming a reality

he air cargo pharmaceuticals sector continues to grow strongly at double-digit rates while the global pharma industry is also expanding strongly. Industry players are meeting demand by investing heavily and putting plenty of resources, whether that be through gaining International Air Transport Association’s (IATA) CEIV Pharma certification, building specialist pharma facilities, or cool dollies to move goods on the tarmac. Pharma growth is set to continue as the thirst from emerging markets grows and the charge is being led by the Pharma.Aero organisation, set up in May last year. Speaking to Air Cargo Week at IATA’s World Cargo Symposium in Abu Dhabi in March, Pharma.Aero chairman Nathan de Valck says it is a little early to see the true impact of the organisation and the boost it has given the air pharma sector. “There is a lot of ground work that has to be done so we set it up and expanded the membership. We have had our general meeting with members and decided on short and long term priorities and launching project groups to collaborate,” De Valck says. He explains three short-term priorities were identified: “First of all identifying potential solutions to mitigate the risk of temperature excursions airside at airports and implementing those solutions at our members’ airports. “Secondly, identifying a clear set of KPIs together with the shippers on what their expectations are and also what the expectations of the air cargo industry is towards the shippers – so it works both ways, which should in the longer run evolve into more transparency and capabilities at airports. “The third priority was a request from the shippers to launch a project to endorse the IATA checklist so that if an entity is cer-

tified by IATA that for a shipment this would mean that it gives them more confidence and they would do less audits at the entity so a true endorsement of the standard by the shippers.” Growing the membership base to other stakeholders in the pharmaceutical supply chain was the initial top objective of Pharma.Aero and this is gathering pace. Last month it welcomed an additional eight companies, taking its membership to 16. Joining were pharmaceutical shippers Pfizer, Johnson and Johnson, Merck Sharp & Dohme, as well as DHL Temperature Management Solutions, Expeditors,

EuroAirport Basel, 4Advice and e-CARGOWARE. These add to founding members Brussels Airport and Miami International Airport, and Singapore Changi Airport, Mumbai International Airport, Sharjah International Airport, Brussels Airlines, Singapore Airlines, and Brinks Life Sciences. The long-term objective of developing standardised end-toend global trade lanes is now well on track and the five airports and their communities form the core part of the lanes. “When we set up the structure we decided to set up 15 distinct regions of the world with one strategic member per region, the idea is to have broad representation around the globe to have communities that are committed to air pharma shipping and for the CEIV programme,” explains Miami-Dade aviation department chief aviation for marketing, Dimitrios Nares. And more members are set to follow in the future as De Valck adds: “Pharma.Aero welcomes other IATA CEIV airport communities, shippers, airline carriers, logistics companies, and other pharmaceutical stakeholders with like-minded goals to become members.”

AAT gains CEIV Pharma

ASIA Airfreight Terminal (AAT) has gained the International Air Transport Association’s (IATA) CEIV Pharma certification. The terminal becomes the latest air cargo operator to receive CEIV which is spreading across the globe and opening up an ever larger network of standardised pharma trade lanes that all have the same high cool chain handling standards. This CEIV Pharma initiative was started by Airport Authority Hong Kong (AAHK) to make the world’s busiest airfreight hub Hong Kong International Airport (HKIA) - a preferred gateway for pharmaceutical products. The certification takes into account all aspects of cold chain handling in the AAT warehouse, including the upgrade of cold room facilities, operational processes and manpower training. AAT general manager, Kuah Boon Kiam explains: “Nowadays, cargo terminal operators must constantly improve their ability to handle special cargo. “Pharmaceuticals is an important market segment that is growing rapidly and AAT is proud to receive this certification that validates our capabilities to effectively handle this type of freight. “We applaud AAHK’s drive to establish HKIA as a preferred hub for handling.” IATA’s general manager for Hong Kong and Macau, Yvonne Ho says: “CEIV Pharma ensures that facilities, equipment, operations and staff comply with all applicable standards, regulations and guidelines expected from pharmaceutical manufacturers and I am glad that AAT has achieved this standard of excellence.” AAS is a wholly owned subsidiary of AAT, providing a range of extended logistics services to the shipping public beyond the core business of an air cargo terminal operator in Hong Kong. In February, Hong Kong Air Cargo Terminals Limited gained the CEIV Pharma certificate - becoming the first cargo handler in Hong Kong to obtain the certification.

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ACW 1 MAY 2017

KOREA

New cargo facilities to be constructed at Incheon

ncheon International Airport is adding more cargo facilities to its already impressive roster so it can meet rising local demand and increasing competition. Korea’s main cargo gateway is to extend its offering for the airfreight community in the next few years as growth continues at a fairly rapid pace. “We are currently developing additional space in second phase (to be provided in 2018) and also plan to develop the third phase of LogisPark by the year 2019,” explains Incheon International Airport Corporation vice president of the hub strategy division, Byung-Kee Lim. “In order to cope with growth of fresh goods cargo, we plan to build a Cool Cargo Terminal by the first half of 2019,” Lim adds. Incheon International Airport is responsible

for attracting investment in the Incheon Airport Free Trade Zone, which consists of the Cargo Terminal Area and the LogisPark and it needs it. In the past year, the occupancy rate of LogisPark has grown considerably to record 100 per cent in first phase of LogisPark and 93 per cent in second phase as freight traffic expands. This it should be pointed out is happening in the world’s fourth busiest cargo airport in 2016 by tonnage, according to the Airports Council International. Incheon is Asia’s third busiest and handled 2.71 million tonnes last year, up 4.6 per cent on 2016, and was only behind Shanghai Pudong International Airport in third at 3.44 million tonnes, Memphis Airport at 4.32 million tonnes (FedEx’s hub) and Hong Kong International Airport at 4.61 million tonnes.

Incheon though does not seem to concerned on taking the number one slot as it already enjoys a good working relationship with China. “In the past five years, cargo to and from China has increased from around 430,000 tonnes in 2012 to 530,000 tonnes in 2016. We expect continuous growth on routes to China, and conduct regular joint marketing activities with airlines to attract more cargo volume in the region,” notes Lim. China, with its 36 connected cities is not Incheon’s largest market – that is the Americas, generating 21.3 per cent of the throughput with links to 28 cities, including four in the Southern continent. China by contrast generates 19.4 per cent. The third largest market is Europe with 18.2 per cent for 22 cities. Another part of this is consulting. Incheon has a consulting to business to help airports by selling them its expertise. “We have not had any formal consulting contract with Chinese airports but are willing to make efforts to make a contractual agreement with Chinese airports,” explains Lim.

Intense competition

That said Incheon is clear about the challenges it faces and points out the competition to be the North East Asian hub is intense and development has a long way to go. “Aggressive expansion of Chinese airports looms as the biggest threat to Incheon Airport,” Lim says. The background to this and indeed the broader picture is South Korea is the world’s 11th largest economy one with a great deal of industrial capacity and a good number of upper end consumers to cater to. True there is a political problem on the Korean Peninsula but South Korea is a big-time spender and international trader. Incheon Airport reflects this having an extensive network connecting 182 cities in 54 countries, via 88 airlines. Although most of what is moved through the facility is carried by local carriers. What is moved it befits a major trading econ-

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omy with a clear emphasis is on industrial things such as semiconductors, electronic devices and parts, machinery and clothing. “Around two-thirds of all cargo at Incheon Airport is handled by our national carriers; Korean Air and Asiana Airlines. The remainder is carried by foreign airlines,” Lim explains. Incheon itself also helps matter by having facilities and incentives to get them used. “We have eight cargo terminals in operation in the Cargo Terminal Area and 31 entrants in the LogisPark, including forwarders and manufacturers” says Lim. “We do have a variety of incentives for new airlines, new routes, frequency increase, and etc. Total incentive for cargo paid in 2016 amounted to around $3.4 million.”

Incentives

Political issues aside, and it must be pointed out South Korea built its own economic miracle under the shadow of an armed and dangerous North Korea it is something they are used to, the general outlook for this year is best described as optimistic. “We expect a modest growth of around 10 per cent for air cargo at Incheon Airport,” says Lim. You read that right: ‘modest’ growth of 10 per cent despite a maybe faltering world economy and lots of harsh political talk. You are entitled to think if only. This will be done by a multipronged strategy that is led by those incentives but has a serious underpinning both in terms of the hardware but as importantly the software. “We will continue to offer incentives to induce our customers to expand their business at Incheon, build related infrastructure to cope with new business models and work closely with the government to enhance business conditions for our customers,” Lim adds. Where there is less bounce although it might be discretion rather than coyness is Incheon did not discuss new routes saying only, “we will cooperate closely with airlines to develop routes to where more cargo volume is likely to flow”.

KOREA

Fresh cargo markets boost Korean’s bottom line

orean Air’s cargo operations have a strong and beneficial influence on its bottom line as the company grows by developing new markets. Figures show during the fourth quarter of 2016 that freight generated 2,868 billion Won ($83 million) for Korean against 2,284 billion Won in the same period of 2015. Korean Air declined to comment directly when asked by Air Cargo Week. Cargo made up just under a quarter of the carrier’s total revenues at 24.6 per cent last year, again up on the previous year’s total which was still substantial at 23.1 per cent. The load factor was a buoyant 80.2 per cent last year compared with 77.8 per cent in 2015. This is an increase of 2.4 per cent the same margin by which yield increased to 290 Korean Won or $0.25. The sources for this income are varied as the company admits. The biggest, when measured by route is the Americas at 43 per cent clearly ahead of second-placed Europe who still take over a quarter with 28 per cent. Two

of the world’s hotspots China and South East Asia come on at 10 per cent and 13 per cent, respectively. By sales it is a very different picture with China the biggest market at 27 per cent narrowly pipping the home base Korean market into second at 26 per cent. South East Asia is third on 14 per cent beating the Americans and Europeans who generate 13 per cent and 12 per cent of sales, respectively. What is also happening is while there is growth in the total market, it is not across the board. Japan as a source of revenue grew by 23 per cent although its only four per cent by routes by eight per cent by sales. South East Asia grew by 17 per cent, Europe by seven per cent, the Americas by six per cent and China by five per cent. There was some contraction by four per cent and six per cent in the much smaller domestic and Oceania markets. Korean is also optimistic about the coming year and expects the recovery of global

economy pointing out growth of 3.4 per cent according to the International Monetary Fund and increasing world trade volumes, up 2.6 per cent by International Air Transport Association (IATA) estimates. This, it acknowledges is despite uncertainty such as protectionist policies in US. What it is also doing is keeping on with a strategy of developing markets overseas. Korean has previously said it would accelerate development of Vietnam market by operating direct flights in the Hanoi-Europe route. In addition, the carrier says it is continuously moving forward with major cargo business strategies such as the expansion of traffic between markets in Navoi, India, and Europe.

High yield focus

“Furthermore, Korean Air is expanding cargo traffic in various ways such as reaching out to markets including Washington, Las Vegas, Colombo and other regions without cargo airliners,” Korean adds. Within this are “plans to improve profitability by transporting high yield cargo items and providing flexible capacity,” it explains in an investor relations presentation. “We are constantly developing new demand including medical supplies, fresh goods, e-commerce and so forth while, at the same time, focusing the company’s abilities on developing total distribution service,” the presentation adds. This cargo product focus is similar to what

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Incheon International Airport expects to see moving through Korea in terms of volumes. The gateway is not expecting to see major shifts within the products carried but is, like so many other places, expecting to move more perishables and garments. “Due to the growth of e-commerce and fresh goods cargo, we are expecting a rise in volume of clothing and fruits,” explains Incheon International Airport Corporation vice president of the hub strategy division, Byung-Kee Lim.

E-commerce and pharma

E-commerce figures larger in Incheon’s plans than that. Korea is one of the first wave of e-countries as its young and techy population drive the economy and changes of type that do catch the eye and the imagination and cash in the wallets of South Korea’s growing middle-class population. “As for e-commerce, we are cooperating with the Korean Customs Office to simplify the B2B2C customs process. Also we are reviewing an O2O (online to offline) business model through which passengers are able to visit an offline mall near Incheon Airport to look at goods and afterwards buy them online when they get back to their home country and its vise versa,” says Lim. The other growth sector Incheon itself is moving to capture more of is pharmaceuticals. “In collaboration with airlines and forwarders, we plan to obtain IATA CEIV certification to accommodate more pharmaceuticals,” Lim explains.

ACW 1 MAY 2017

ITALY

Bankruptcy threat for Alitalia as workers reject plans

litalia is facing the threat of bankruptcy after employees rejected restructuring plans including salary cuts and layoffs. The board of directors met on Tuesday 25 April to discuss the decision of the workforce not to approve the pre-agreement signed on 14 April between the company and the union. Alitalia says: “The approval of the agreement would have unlocked €2 billion of recapitalisation including more than €900 million of new finance.” It adds: “Given the impossibility to proceed with the recapitalisation the board has decided to start preparing the procedures provided by the law.” Alitalia, which has its main hub in Rome and a secondary hub at Milan Linate Airport, met with shareholders on 27 April, but no decision had been announced by the time Air Cargo Week went to press. It planned to save €1 billion by 2019 with reductions in operating costs and manpower and become a profitable business, and

Alitalia said revenue would increase by 30 per cent from €2.9 billion to €3.7 billion in the same timeframe. In March, Alitalia chief executive officer, Cramer Ball said the aviation industry is “ferociously competitive” and radical measures are needed to turn the airline’s future around. At the time he said: “With the approval today by the board of directors of the second phase of our business plan we can now

accelerate our actions towards turning around Alitalia. “We re-built our brand in the first phase and invested heavily in staff training and technology so we are now able to move ahead and implement wide-ranging changes.” Ball added: “I am confident that the next phase of the industrial plan will represent the step forward needed, provided that all interested parties play their part. “The radical and necessary measures across the entire airline will secure our long-term sustainability which will only materialise if the airline is the right size, the right shape and with the right productivity and cost base.” Alitalia planned for the second phase of its business plan to consist of four pillars: a recalibrated business model, cost reductions and increased productivity, network and partnership optimisation and develop new commercial initiatives by utilising technology investments to drive revenue. Narrowbody aircraft for the short and medium haul would see increased utilisation and for a flagship Boeing 777-300ER to join the long-haul fleet in August 2017. Talks were underway with a number of airline suppliers to renegotiate contracts and drive down costs, with target companies in sectors including aircraft leasing, global distribution, airport ground handling and the airports themselves. Alitalia plans to reduce the narrow body fleet by 20 aircraft, with increased utilisation and a particular focus on short and medium haul aircraft. Alitalia plans to grow its number of flights from Italy to the Americas, which its says is one of its most underserved markets and build its presence at airports including Milan Linate. The airline says it will re-evaluate its transatlantic options to try and fly more often on existing routes and add new cities in the Americas.

Milan profits grow 11% in 2016

SEA Group’s profits grew 11.7 per cent in 2016 with strong growth across business sectors, including air cargo volumes. Operating revenue was up 1.7 per cent to €653.5 million ($709.4 million) while net profit grew 11.7 per cent to €93.6 million. SEA operates Milan Malpensa Airport (pictured) and Milan Linate Airport, and cargo traffic grew 7.2 per cent in 2016 to 549,400 tonnes, with an 18.4 per cent surge in December. Malpensa alone saw 7.4 per cent growth in 2015, with nearly 110 cargo-only direct flights departing every week for key markets in Asia, the Middle East and America, in addition to capacity on passenger aircraft. Two new handling agents are set to join the Cargo City with two new warehouses totalling 15,000 square metres to work with, while DHL will begin construction on a new warehouse on a 46,000 square metre plot, set to be in operation by the end of 2018. Malpensa says the winter season was very strong, handling more than 230,000 tonnes of cargo between November 2016 and March 2017, 14 per cent year-on-year growth. In March it handled 54,000 tonnes, 19 per cent more than the previous March. FedEx Express’ gateway to Southern Europe at Malpensa became operational in February, and the 35,000 square metre express logistics facility features technology boosting package sorting capacity by 25 per cent. FedEx Express start operations in Italy in 1986 and Malpensa became its primary gateway in 1992. More than 60 per cent of Italian export products are manufactured within a 250 kilometre radius of Malpensa, an area home to 40 per cent of all Italian businesses, generating almost half of Italy’s GDP.

ACW 1 MAY 2017

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ACW 1 May 2017