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WORLD AIRPORTS Sponsored.COM by FREIGHTERS.COM
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The weekly newspaper for air cargo professionals Volume: 19
Issue: 29
25 July 2016
Tonnage rises in first half of 2016 for Panalpina and K + N
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reight forwarding powerhouses Panalpina and Kuehne + Nagel (K+N) both handled more airfreight tonnage in the first half of 2016 compared to the same period last year, but say it is a difficult and challenging marketplace. Panalpina’s volumes increased year-on-year (YOY) by eight per cent for the six months up to 30 June, while it says the market decreased by an estimated three per cent during the period. The forwarder notes volumes from acquired companies made up six per cent of air cargo growth and it saw higher tonnage in the perishables sector, but lower volumes in the oil and gas sector. Rival K+N’s tonnage was up YOY by 1.3 per cent in the first half of 2016, despite reporting shrinking demand and excess capacity. The Swiss-headquartered firm was boosted by strong export business in Asia, the Middle East and Africa and boosted by the second quarter tonnage YOY rise of 2.9 per cent, offsetting the YOY fall in the first quarter of 0.3 per cent. Financial results were quite sta-
ble for both and Panalpina’s gross profit for its airfreight division was 304.5 million Swiss Francs ($308 million), up on the 293.6 million Swiss Francs in the first half of 2015. Overall group gross profit was stable at 736.3 million Swiss Francs, compared with the 736.1 million Swiss Francs last year. Panalpina chief executive officer (CEO), Peter Ulber says: “During the second quarter it became evident that the oil and gas business will not bounce back any time soon. Therefore we decided to realign our capacities with the current volumes and not wait for the market to recover. We took the full restructuring costs in the second
quarter instead of later. “The encouraging news is the rest of the business continued to show considerable robustness against the backdrop of receding markets in air and ocean freight. The underlying profitability remained stable.” K+N saw profits rise by 9.2 per cent in the first half of the year to 356 million Swiss Francs despite turnover dipping 0.9 per cent to 8.1 billion Swiss Francs. Airfreight turnover was down slightly from 1.98 billion Francs in the first half of 2015 to 1.90 billion this year. Airfreight earnings before interest and tax increased from 136 million Swiss Francs in 2015 to
147 million in 2016. K+N CEO, Dr Detlef Trefzger says: “The first half of 2016 has been shaped by different regional economic development trends. Global trade showed a lack of growth momentum. “Our strategy to focus on organic growth and gaining market shares by offering industry-specific solutions once again led to increases in volumes and results. Our Group delivered a strong performance and has significantly improved gross profit, and therewith increased profit.” Data analyst WorldACD says K + N is the world’s second largest forwarder behind DHL Global Forwarding. Panalpina is ranked fifth, behind DB Schenker in third and Expeditors in fourth.
Decision on Heathrow runway to be taken in ‘due course’
The UK Government’s new Prime Minister (PM), Theresa May says a decision on the whether Heathrow Airport gets the go ahead to build a third runway will be taken by the Cabinet “in the proper way, in due course”. She was speaking at her first PM Questions at the House of Commons in Westminster on Wednesday, 20 July. Many commentators do not expect a decision to be made on runway expansion until September, at the earliest. The Airports Commission recommended last year that Heathrow gets a third runway, but a decision was put on hold by the last UK PM David Cameron until after a study of pollution was carried out and the European Union Referendum. Gatwick Airport is still in the mix. Last week, Grimshaw was chosen as the con-
cept designers to bring Heathrow’s vision for its £16 billion ($21 billion) expansion project to add a third runway and develop facilities. The airport says it sends the clear signal to the government it is “ready-to-go”. Shareholders in Heathrow said in a letter last week to May
they are ready to invest the £16 billion needed if the government chooses it for expansion. UK-based Universities Superannuation Scheme, which owns a 10 per cent stake in Heathrow, said the airport’s shareholders were prepared to put up the money to pay for a new runway – the first time the investors have publicly confirmed their readiness to fund it. Meanwhile, the British International Freight Association (BIFA) says it is time for the new government to get on with making some decisions on runway capacity expansion. BIFA director general, Robert Keen says: “In the few weeks since the Brexit vote, the UK has entered a period of great uncertainty on the political front and we hope that the new cabinet are ready to confront the massive decisions that now need to be taken.”
60 seconds with zhi liao
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yields continue to be pressured
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focus firmly on maintaining clients
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ups sees e-commerce growth
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Lacklustre cargo in May, ACI reports THE Airports Council International (ACI) says airfreight volumes remained in a “lacklustre state” in May, due to the backdrop of sluggish global trade growth. ACI says while the industry was vulnerable to the macroeconomic context, it was also competing with other modes of delivery and freight load factors were weak. Total global freight through gateways was up year-on-year (YOY) by 0.6 per cent in May, and so far this year it has risen YOY by 0.2 per cent for the first five months of 2016. On a 12-month rolling basis it is up YOY by 0.7 per cent. ACI says international freight was up 0.5 per cent YOY in May, but for the first five months it is down 0.8 per cent YOY, while domestic freight is up 0.9 per cent in May, but up 2.4 per cent YOY so far this year. The Middle East saw YOY growth of 3.3 per cent, Europe was up 2.7 per cent and Asia-Pacific up 1.4 per cent. North America, Latin America-Caribbean and Africa saw declines of 1.5 per cent, 3.9 per cent and 5.7 per cent respectively. Eight of the top 20 largest cargo hubs saw falls including Hong Kong (-1.1 per cent), Frankfurt (-1.7 per cent) and Beijing (-5.1 per cent).
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NEWSWEEK
IATA-FIATA cargo program signed
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he International Air Transport Association (IATA) and the International Federation of Freight Forwarders Associations (FIATA) have signed an agreement to implement the IATA-FIATA Air Cargo Program (IFACP). The agreement was signed by IATA director general and chief executive officer, Tony Tyler, and FIATA president, Huxiang Zhao, and IFACP will replace the IATA Cargo Agency Program. Canada will be the pilot country for IFACP, with the phased rollout starting in early 2017 and completed by the end of 2018. The public signature of the agreement will take place at FIATA’s World Congress, which will be held in Dublin this October. IATA senior vice president, financial and distribution services, Aleks Popovich says: “The IFACP also provides a framework to
ensure that industry standards are relevant, pragmatic and fit for purpose. These standards cover the endorsement of freight forwarders and more broadly the safe, secure and efficient transportation of air cargo shipments.” FIATA airfreight institute chairman, Rudi Sagel says: “IFACP will eliminate unnecessary administrative procedures and costs as well as free up valuable resources to tackle the complex challenges that today’s
global trade presents. These include regulatory compliance, safety and security and the introduction of new technologies.” The associations say the structure of IFACP “better reflects the new business models and the buyer-seller relationship that exists today between forwarders and airlines”. Both say the industry will be better equipped to achieve key goals including e-cargo priorities of greater efficiency and shared values, clarification of supply chain liability and improved compliance through the establishment of a global IATA-FIATA Governance Board. The associations also say the new program moves airline-forwarder decision making away from an airline-led conference to a governance body jointly managed by forwarders and airlines.
Viaduct to MIA West Cargo area opened
Trucks can now drive directly to and from Miami International Airport’s West Cargo area avoiding local congestion with the opening of the $63 million N.W. 25th Street Viaduct. The viaduct allows the 5,000 trucks that travel to and from the West Cargo area a day to drive above street lights and avoid local traffic on N.W. 25th Street. Westbound traffic connects directly to Northbound State Road 826 and it connects with the previously constructed East viaduct, which goes over the 826 expressway, touching down East of N.W. 82nd Avenue. Miami-Dade aviation director, Emilio Gonzalez says: “Modernising our cargo area is critical to maintaining our position as America’s busiest international freight airport and one of the busiest in the world. N.W. 25th Street is the main artery for ground traffic between MIA’s cargo area, the busy warehouse district west of MIA, and Florida’s highway system, so the completion of the viaduct is a major milestone for our airport and ultimately, our local, state and national economy.” Pictured from left, Miami-Dade Aviation department chief of staff Joseph Napoli, City of Doral Mayor Luigi Boria, Miami-Dade County Commissioner José “Pepe” Diaz, City of Doral councilwoman Ana Maria Rodriguez, Florida Department of Transportation district secretary James Wolfe and City of Doral vice mayor Christi Fraga.
Boeing: India will need 1,850 aircraft by 2035 India will need 1,850 new aircraft, valued at $265 billion over the next 20 years, the majority being single-aisle, Boeing predicts in its Current Market Outlook. According to the outlook, 1,560 of the aircraft will be single-aisle including the Boeing 737 Next-Generation and 737 MAX, worth $180 billion. Boeing predicts 280 widebody aircraft worth $85 billion will be needed and 10 regional jets valued at below $1 billion. The single-aisle aircraft including the 737 will drive low-cost carrier expansion and replace older units. Boeing Commercial Airplanes senior vice president Asia Pacific and India sales, Dinesh Keskar says: “With the new aviation policies in place, we see even greater opportunities and remain confident in the market and the airlines in India.”
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Network expansion on the cards at CargoLogicAir
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argoLogicAir sees an opportunity to expand its network as other European carriers like AFKLMP, Lufthansa Cargo and British Airways have either downsized or abandoned their freighter fleets, while their is no direct competition in the UK. The UK cargo carrier is looking to develop its network into North America and South America later this year. It has earmarked the West coast of the US, in Seattle and Los Angeles, while Quito in Ecuador and Mexico are on the radar further south in South America. CargoLogicAir, a subsidiary of the Volga-Dnepr Group took delivery of its first Boeing 747-8 Freighter at the Farnborough International Airshow earlier this month, which will boost its growth plans. Chief executive officer,
Dmitry Grishin received the ‘keys’ to the aircraft from Marty Bentrott, vice president for sales in the Middle East, Russia and Central Asia for Boeing Commercial Airplanes, in a ceremony onboard the aircraft. Grishin says it plans on growing despite the UK’s exit from the European Union (EU), but says he has no idea at this stage what impact the UK leaving the EU will have on CargoLogicAir, but says there will “probably be no change”. He says the carrier is also looking into poten-
tially setting up a base in the Netherlands (Amsterdam Schiphol) or in Germany (Leipzig) in the future, as a contingency plan in case business suffers. Grishin would also like to see Heathrow Airport get the go ahead for a third runway as cargo is a vital part of business for the hub and says the carrier would be “knocking on the door” for a slot. Stansted Airport-based CargoLogicAir received its UK Air Operator Certificate at the start of 2016 and in February commenced twice-weekly Boeing 747-400 ACMI services connecting the UK, Europe and Africa as well as air charter services. The airline’s growth strategy is based on operating a fleet of five Boeing 747 freighters within its first five years of operations. Grishin says the 747-8F offers a 16 per cent increase in payload over its 747-400, increasing its capacity on a single flight to 137 tonnes.
NEWS WEEK WorldNews QATAR Airways has signed a contribution and shareholders agreement with Alisarda, the parent company of Meridiana. Qatar will purchase 49 per cent of Meridiana fly’s shares, subject to the fulfilment of certain conditions, before the closing, which is planned for early October. Meridiana is the second largest carrier in Italy, with an extensive national and European network, and its fleet consists of Boeing 737s, 767s and MD-82s. AERONAUTICAL Engineers (AEI) has completed the maiden flight of its CRJ200 SF, and is hoping to get Federal Aviation Administration certification “imminently”. IFL Group, based in Michigan, is the launch customer for the CRJ200 SF, and AEI has 45 firm orders and commitments for the aircraft.
Cuba services for FedEx
FEDEX is to become the only US all-cargo carrier to provide services to Cuba with Miami – Matanzas flights starting on 15 January 2017. The US Department of Transportation approved FedEx’s uncontested application to operate daily services from Monday to Friday, and FedEx was the only all-cargo carrier to seek authority. Under an agreement signed by the US and Cuban governments, each country has the opportunity to operate up to 20 daily roundtrip flights between the US and Havana, and up to another 10 between the US and each of Cuba’s other nine international airport. Eight US bellyhold carriers have already been given permission to fly to Havana by the US Department of Transportation, filling the 20 daily flights agreed by the US and Cuban governments. Twelve airlines applied to serve the island’s capital, and Alaska Airlines, American Airlines, Delta Air Lines, Frontier Airlines, JetBlue Airways, Southwest Airlines, Spirit Airlines and United Airlines have received the go ahead.
Rio ready for the Olympics
RIO de Janeiro-Tom Jobim International Airport’s cargo terminal – RIOgaleão Cargo - has built a warehouse especially for imports and exports related to the Games. RIOgaleão Cargo expects to see an increase of 2,000 tonnes in cargo imports during the event from 5-21 August. The Olympic Warehouse is 2,800 square metres with additional areas available especially during the busy period immediately after the Games and operates 24/7. Rio has received 700 tonnes of broadcasting equipment, merchandising and other materials destined for the Games. Emirates, LATAM Airlines, Lufthansa, Cargolux Airlines and Atlas Air have already operated Olympics charters into Tom Jobin, while 12 charters will bring in the 300 plus horses that will participate in equestrian events. RIOgaleão Cargo director, Patrick Fehring says: “The Olympics are a great opportunity to demonstrate our new capabilities and show the global market all that we have done to become one of the most modern and efficient gateways in Latin America.” Since August 2014, almost 30 million Brazilian Reals ($9.1 million) has been spent to improve infrastructure and operational performance.
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ACW 25 JULY 2016
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NEWSWEEK
Zhi Liao
60
Seconds with
Justin Burns, ACW: How important is effective management of ULDs? Liao: It’s important for carriers to meet flight safety and airworthiness requirements as well as achieve economic and operational efficiency. ULDs are classified as aircraft equipment similar to engines. Their design, testing, manufacturing, operations as well as repair and maintenance are all subject to stringent
Zhi Liao
Unit load devices (ULDs) have often been a neglected part of the air cargo business, but many carriers are now paying more attention to managing them as it presents an opportunity to cut costs. The International Air Transport Association’s (IATA) manager of processes and standards, Zhi Liao spoke to Air Cargo Week about why effective management of ULDs is important.
airworthiness requirements. Internationally, the rules applicable to all aircraft equipment, including ULDs, are defined by the International Civil Aviation Organization and incorporated into national legislations and regulations by each Civil Aviation Authority. Mismanagement of ULDs put carriers in breach of regulatory requirements. Furthermore, the incorrect onboard position or restraint of ULDs can result in an unbalanced aircraft load or load shifting with catastrophic consequences. Mishandling of ULDs also has economic and operational repercussions. There is no doubt the costs associated with mismanagement of ULDs such as ULD and aircraft repairs and flight delay, etc. are enormous to the industry. Justin Burns, ACW: How much does mismanagement of ULDs cost the industry? Liao: It is estimated annual ULD repairs cost the industry about $330 million. According to IATA Ground Damage Database (GDDB), ULD damage is ranked the number one cause of aircraft damage on ground by equipment. The associated costs include aircraft repair costs as well as operational disruptions caused by flight delay, cancelation, and AOG. - total number of ULDs: 900,000 units - total replacement value: $1 billion - total ULD repair costs: $330 million - total costs of unaccountable ULDs: $64 million - expenditure on repairs of aircraft damaged by ULD operations: $100 million - estimated flight delay costs: $150 million
Justin Burns, ACW: What are the negative effects of poor ULD management? Liao: At the extreme end of the scale the most negative effect of poor ULD management is a fatal crash. There have been two fatal accidents involved in the mishandling of ULDs. On 7 August 1997 a Fine Air DC-8 freighter crashed shortly after take-off in Miami resulting in the death of all four people on board and one person on the ground. On 29 April 2013, a National Airlines B747-400 freighter crashed in Bagram, Afghanistan killing all seven crewmembers on board. Safety investigators found ground handlers involved in the loading and securing of the cargo had received inadequate training on ULD/cargo restraint resulting in deficient loading procedures with catastrophic consequences.
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ACW 25 JULY 2016
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Justin Burns, ACW: How has IATA’s ULD initiative been going? Liao: The campaign is delivering results. Companies confirmed officially by writing include Air Canada, Qantas, ULD CARE, Zodiac Aerospace, Nordisk Aviation Products, United Cargo, Emirates, Cathay Pacific Airways, Shanghai Pudong Int’l Airport Cargo Terminal (PACTL), DoKaSch, Air India, SATS, and the Ground Handling Operations Safety Team (GHOST). There has been seven requests seeking customised versions of the campaign, in addition to the 287 stakeholders requesting artwork packages.
Justin Burns, ACW: What are the market trends in ULD management? Liao: There is enormous diversity when it comes to approaches taken to ULD management. There are differences from party to party, and carriers for whom the cargo/freighter operations are a priority will generally put management at a higher level. One trend exists is carriers outsourcing their ULD asset management to third-party specialised companies, relieving them of the challenge of managing the ULD logistics, supply as well as repairs. Another significant trend is the increased scrutiny by the governing Civil Aviation Authorities (CAA) into all aspects of cargo operations. This includes significant focus on ULD operations. The US Federal Aviation Administration (FAA) Advisory Circular (AC) 120-85A on Air Cargo Operations applies to both US carriers and to any non-US carrier operating through a US airport and has wide reaching impact on ULD standards. The FAA is in the process of having its ramp inspectors trained in air cargo course and the impact of this FAA activity is expected to be felt during 2016 and onwards. The European Aviation Safety Agency (EASA) is also evaluating including ground handling services provided at aerodromes into the European Union Basic Regulation. It is believed ULD handling should at least be covered in the ground handling services such as baggage, freight and mail handling, aircraft handling, load control, and supervision. IATA is actively engaging and collaborating with EASA to facilitate industry compliance.
NEWS WEEK European freight drives Schiphol growth
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msterdam Airport Schiphol (pictured) has seen cargo volumes increase by 1.6 per cent in the first half of 2016 to 796,801 tonnes, with European freight seeing the strongest growth. In the first six months of 2016, European freight was up 41.7 per cent to 90,991 tonnes helped by new carriers including Silk Way linking Amsterdam to Asia via Baku, and AirBridgeCargo Airlines increasing services to Moscow. Both Baku and Moscow are classified as European. Asia remained Schiphol’s biggest market but dipped 5.8 per cent to 276,312 tonnes during the period. North America grew by 1.1 per cent to 152,149 tonnes and Africa was up 2.3 per cent to 90,870 tonnes. Schiphol head of cargo, Jonas van Stekelenburg (pictured) says: “Compared to the other main European hubs
Lufthansa offers basic option
we had a good first half year in terms of volume: we attracted some new carriers such as Jet Airways, and experienced growth of some existing carriers such as DHL.” Freighter movements increased by 7.1 per cent to 8,801 in the first six months of 2016. Volumes increased by 2.5 per cent in June to 135,589 tonnes, and April was the strongest month, seeing year-on-year growth of 6.8 per cent to 137,666 tonnes. Van Stekelenburg says: “Our strong Cargo Community at Schiphol continues to implement forward thinking initiatives such as Pharma Gateway Amsterdam, and our Milk Run scheme, because we are focused on delivering the best service possible to our customers.” He adds: “We are looking forward to more growth over the rest of the year.”
Lufthansa Cargo is to offer a new online service for standard air cargo from September called td.Basic – as it looks to boost business. The carrier says td.Basic will provide customers with simple background processes, booking via the cargo airline’s online channels only and a somewhat longer duration. Lufthansa says the new basic product will be suited to any shipments where the customer is happy to accept a transit time of
three days more on average than with the familiar td.Pro standard product, which will still be offered. Lufthansa Cargo board member of product and sales, Alexis von Hoensbroech says: “We are now adding a price offensive to our long-standing quality offensive. Our customers will be able to benefit from Lufthansa quality with particularly price-sensitive cargo as well from September. “With this innovative basic offering, we are enhancing our product range and charting a path for growth in the standard cargo segment.” The new product is part of the company’s new CARGO eVOLUTION strategy, which Lufthansa Cargo is hoping to advance digitisation and become the number one in the world for air cargo services.
AF-KL-MP expands at New York JFK Air France-KLM Martinair Cargo (AF-KL-MP) has opened a new cargo handling facility at New York John F. Kennedy International Airport (JFK). The facility, which accommodates all types of cargo, offers a number of features to cater for premium products. For temperature sensitive cargo, it offers split cool chain enclosures with 72 cubic metres for 2-8C and 108 cubic metres for 15-25C. Live animals will benefit from sharing a building with The ARK at JFK, with additional services including dedicated climate
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controlled vehicles from aircraft, terminals, cargo facilities and other airport locations. AF-KL-MP Cargo regional director, Andy Newbold says: “it is very exciting to be able to present the AF-KL Cargo brand at this high level. Together with the North East Commercial and Customer Service teams we will be able to ensure that the unique features of our new facility will exceed the expectations of our customers.” To cater for general cargo, AF-KL-MP has utilised technology to continue working during power outages and without risk of mechanical breakdown.
ACW 25 July 2016
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UK GSAs
Yields continue to be pressured and e-freight adoption slow
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he air cargo industry will see continued pressure on yields as cost appears to “take a back seat ” – in the opinion of Globe Air Cargo managing director, Michelle House (pictured). The general sales agent (GSA), is part of the ECS Group, and House says she is seeing some of carriers adding capacity onto already saturated routes, while she feels further consolidation as mergers and acquisitions seem to be the “watch words” in the industry right now. Most of the destinations Globe Air Cargo serves are trading up in 2016, and it is moving lots of volume into Central and Latin America, and, House explains: “Far East is strong, in particular Vietnam and China. Middle East has been growing despite strong
competition out of the UK and we do extremely well into Turkey and Morocco too.” In her view, Globe Air Cargo has done a good job of improving its market share over the past 12 months, so when load factors are stable, it moves into a yield improvement strategy, while it deploys different strategies for different carriers, depending on what their aspirations are. House says: “We have seen a rise in the under declaration on chargeable weights and the effect on service, while it still talks a good game in this industry, but it doesn’t really seem to play as much of a part as it should do, considering we are actually in a service environment.”
There are challenges, the main one is overcapacity, and House says another battle is “unprofessional competition” using tactics instead of focusing service. House says the GSA is “focusing on the fundamentals” regime of doing the simple things well and using expertise to help airline customers achieve targets, but at the end of the day, what customers want most is a cheap rate. She feels being the only player in the supply chain that has to get it right from end-to-end, e-freight hasn’t really transformed the air cargo industry from Globe Air Cargo’s perspective. House says: “Whilst our system can certainly
Impact of Brexit on GSAs still not known
THE UK’s exit from the European Union (EU) - the so-called Brexit – is odds on to have an impact on general sales agents (GSA), although which way it goes is still unknown. Airbridge International Agencies (AIA) general manager for Europe, Mark Andrew (right) says there will be an effect “for sure” but says until we know what new trade deals are set up, it is too early to say either way. He explains: “We would of course preferred to remain in the EU as a company and we have drafted plans for staying and leaving the EU. “Yet there is still plenty of time for things to change as we all know until Article 50 is invoked so for us the eyes are still firmly fixed on the current months coming with the new PM to see what actions we need to take. We have pre planned for both and will action when we feel is the right time.” Andrew says in the first half of 2016, business has been fine with the usual tonnages and revenue, but it has not seen much growth this year compared to last. AIA picked up a new contract with Pakistan International Airlines in the UK, Ireland, France and Austria this year and has opened up an office in Paris off the back of this while contracts it has already handled gave permission for AIA to sell in France. The region Andrew says has been the most buoyant is Australasia, and even with a drop in yields due to increased capacity, it has continued to sell well. He says AIA will look for niche markets, which sometimes can take time to find, but it is working on a few projects that will
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ACW 25 JUly 2016
handle the messaging we can assist our airlines in implementation, we don’t see a demand from the customers, I would guess there is a great deal of skepticism in the industry still. I am sure it will come, but like Cargo iQ - in its own time.” House feels there are no easy e-tools to implement and it’s a costly process to start-up and when margins are small and everyone is doing more with less, anything extra is the last thing on the priority list. She says: “We are still a paper heavy environment and some of us enjoy the familiarity of what they can touch and feel. Perhaps the next generation will make more progress and have a clearer vision of the benefits.” And some airlines are not simply ready for e-freight, House says, as processes, systems and integrations need to happen, while some forwarders and shippers are holding back from adoption due to cost and time.
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assist opportunities for growth and not just in the cargo GSA business. Andrew notes: “AIA is a group of companies and we are always looking outside the GSA business at ways to expand and thus assist all our group companies. GSA is our core business but we look at ways to supplement the core business.” The operating challenges continue and like many, he says the biggest impact has been the drop in yields/commissions due to overcapacity in the market on many routes. Andrew notes this can be due to new carriers starting new routes or existing carriers placing newer better aircraft on routes like the Boeing 787-900 or the Airbus A350: “Our challenge is to ensure with all these new routes or aircraft that we maintain our market share.” But what for the future of GSAs? He feels there will always be a need for them and believes the future is good, as they provide a pivotal service for airlines and every year the market grows on all levels. Andrew says: “The level of service a GSA can now offer an airline is far better than a few years ago, not only do we offer the sales, marketing, reservations and accounts packages, but we offer ‘total cargo management’ solutions from claims to sales to manuals you name it we can do it. “The airlines can really outsource every detail needed to run a smooth cargo operation at very little overheads for them.”
UK GSAs
Focus firmly on maintaining and servicing clients
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t is challenging times for UK general sales agents (GSA) and indeed most GSAs across the globe, along with all facets of the supply chain. As yields fall, the commission GSAs gain has dwindled and the outlook is not too optimistic moving forward. Air Logistics Group chief operating officer, Stephen Dawkins (pictured) says so far this year, business has been in line with International Air Transport Association expectations and it has seen a slight increase in kilos, but there is a continued pressure on yields. He explains the focus of Air Logistics Group: “Our highest priority in this challenging market is maintaining and servicing our current clients. “While the market remains flat, our key strategy is to maintain market share and to keep costs under control.” Many GSAs are looking to grow their business by offering different services and tapping into other services, and as a result the GSA business is branching out. Dawkins says he sees opportunities for
growth: “We can continue to add value to airlines by offering additional services such as customer service centres, revenue accounting, and total cargo management solutions.” Operations have been challenging for the likes of the Air Logistics Group and the biggest one Dawkins feels, is the continuing downward pressure on yields, which has having a significant impact on business. UK GSAs also now face more pressure due to the UK’s impending exit from the European Union and Brexit is only leading to more uncertainty and adding another challenge, but its potential impact on the future is still unclear. Dawkins notes: “It is too early to make that judgement, a depressed pound could increase exports however manufacturing
remains stagnant at this moment in time.” The future of GSAs certainly seems to be bright as they offer more to carriers and the traditional model is being ripped apart. Dawkins says he was asked the same question about their future back in 2001 after the 9/11 terrorist attacks in New York City and in 2008 after the financial crisis, but as for now, he observes: “This sector of the industry continues to grow and consolidate, it is clear that airlines require professional outsourcing companies who can control costs and bring significant contribution to an airline’s profitability. “We will continue to consolidate this business and being among the top three cargo airline outsource companies worldwide.”
Difficult times but opportunities THE marketplace is a difficult one for general sales agents (GSA) says HAE director for UK and Ireland, John Ward. He says overcapacity into many markets creates downward pressure on rates, which means GSAs need to generate significantly more cargo to earn the same commission. But there is a silver lining, Ward says: “However, more products mean more opportunities. Customers want options on price and service for almost every shipment. “There is a need to diversify into value added services which complement our portfolio, also to increase our expertise in the fast growing vertical markets in order to enhance the airline’s own capability. “We also need to continue to embrace the technological advancements possible and integrate our activity into the airline forwarder relationship.” The first half of 2016 has been extremely competitive for HAE, Ward notes, as a rising number of carriers forego cargo yield for improved cargo load factor. He says it posted year-on-year volume growth of 10 per cent in the period - a reflection of significantly increased volumes at lower yields. In 2016, HAE has won new lanes of perishable business into Asia, automotive cargo into North America, postal product into Africa, and e-commerce cargo into China and Russia. Ward says geographically it has seen mixed results: “Trucking continues to be tough competition to airfreight within Europe, volumes to many oil producing nations are in decline as a result of fewer operational rigs, and the countries typically affected by overcapacity from the UK continue to be so. “Our most positive results have been achieved into Asia, non-oil producing African nations, and North America.” For the rest of 2016, it is aiming to ensure the strengths of partner airlines are well communicated to freight forwarding customers, it delivers more personal customer service to maximise sales opportunities, while increasing IT systems. Ward sees opportunities in vertical markets such as pharmaceuticals and e-commerce, which grows at a faster rate than other sectors. He says: “Their need for high visibility and control throughout the supply chain lends itself to increased IT integration from manufacturer through to consumer. With our bespoke operating system, I see this as being somewhere that HAE can add value to the freight forwarder, the airline, and the GHA.” The biggest challenge is managing costs and yields declining means any GSA is doing more for a reduced return. HAE is investing heavily in its own bespoke technology to meet the challenge, allowing commercial teams to give customers more options, and airlines more ways to get a sale. As for Brexit, Ward says: “I expect things to change over time, how remains to be seen, but I don’t expect a dramatic impact. Currency performance will affect whether volumes increase or decrease in the short term, as well as if there is a shift in the directionality of cargo in the longer term. “If Brexit results in increased controls at ports and Channel Tunnel we may also see an increase in the attractiveness of air cargo services when compared with road transport.”
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ACW 25 july 2016
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FAR EAST
Good news for Cathay Pacific as tonnage surges 7.1%
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athay Pacific Airways has seen a surge in the amount of cargo and mail uplifted in June compared to the same month last year. Cathay Pacific and Dragonair combined - handled 151,130 tonnes of cargo and mail in June, an increase of 7.1 per cent compared to the same month last year. The cargo and mail load factor rose by 1.6 percentage points to 64.3 per cent. Capacity, measured in available cargo/mail tonne kilometres, rose by 2.1 per cent while cargo and mail revenue tonne kilometres (RTKs) increased by 4.8 per cent. In the first six months of 2016, the tonnage carried fell by 0.3 per cent to 865,870 tonnes against a 0.6 per cent increase in capacity and a 2.3 per cent drop in RTKs, while the load factor was 62.2 per cent, a fall of 1.6
percentage points on 2015. The airline’s chief executive, Ivan Chu says cargo tonnage has stabilised but yield continues to decline and adds foreign currency movements have also been adverse. Cathay Pacific general manager for cargo sales and marketing, Mark Sutch (pictured) says: “Helped by the half-year end rush, the overall tonnage for June was healthy, thanks to growing feed from Asia. The Americas saw a surge in the export of seasonal produce into Asia, particularly from the West Coast. “Our new Madrid service was well-received by the cargo community and we filled the west- bound leg with consumer goods and carried fresh produce on the return leg. However, overall yield remains challenging, as market supply continues to outstrip demand. We will continue
to diversify and develop special products, some of which have shown encouraging results.” Cathay Pacific will increase its coverage in the Americas with a twice-weekly Hong Kong – Anchorage – Los Angeles – Portland – Anchorage – Hong Kong round trip on Thursdays and Saturdays from 3 November 2016, subject to
government approval. It will use a Boeing 747-8 Freighter and the airline says it is expecting to carry high volumes of semi-finished footwear and apparel, electronics and perishables from the Portland area to Asia. Cathay Pacific also says Portland is one of the fastest growing e-commerce hubs in the Pacific Northwest region.
June results boost HK hub
HONG Kong International Airport’s (HKIA) (pictured) cargo volumes rose by 5.3 per cent to 368,000 tonnes in June helped by strong growth in transhipments. Transhipments increased by 11 per cent in June, with exports up five per cent and imports two per cent compared to June 2015. HKIA says South East Asia and Mainland China recorded the strongest growth. Cargo volumes during the first half of 2016 were down by 0.8 per cent to 2.1 million tonnes, with transhipments reducing the decline in volumes. On a rolling 12-months basis, volumes fell 0.6 per cent to 4.4 million tonnes. HKIA operator, Airport Authority Hong Kong general manager of strategic planning and development, Julia Yan says: “Looking towards the second half of the year, passenger traffic is expected to grow steadily,
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while cargo tonnage is expected to consolidate for the rest of the year. “Meanwhile, we are closely monitoring whether there will be any impact on external economic environment and air traffic figures in the medium-term caused by Britain’s referendum to leave the European Union.” During the first half of 2016, flight movements were up 2.6 per cent to 204,750 and increased by 2.7 per cent to 33,770 in June. In July, Hong Kong Airlines started twice-weekly flights to Saipan in the North Mariana Islands, and HK Express began four-times-per-week services to Kagoshima in Japan’s Kyushu region. HKIA saw profits increase by 15.2 per cent during the 2015/16 financial year to 8.3 billion Hong Kong dollars ($1 billion) and revenue was up 11.1 per cent to HK$18.2 billion.
aircargoweek.com 22/07/2016 14:10
FAR EAST
American expands trans-Pacific fleet and network
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merican Airlines Cargo is focusing on expanding its network and fleet on trans-Pacific routes, having more than doubled its network in four years, managing director Asia & Pacific sales, Keijiro Ishii (pictured) tells Air Cargo Week (ACW). American serves eight Asia Pacific destinations with over 100 flights per week, with new services from Los Angeles including Tokyo Haneda and Hong Kong. The airline has applied to connect Los Angeles and Beijing, which is still subject to final approval from the Department of Transportation and the Civil Aviation Administration of China, and Ishii expects this route to be launched by the end of 2016. Ishii says: “Overall, it should be a great year for our network, with the launch of three to four new routes, all for LAX, American’s biggest gateway on the West coast of the US.” Customers will be able to benefit from American serving both of Tokyo’s airports, Narita and Haneda. Ishii comments: “We have two great options for our customers in the greater Tokyo area and can serve multiple destinations, including additional interline and trucking options to ever more points of service within Asia and beyond. There are a lot of great options we can offer our customers!” Customers have also benefitted from American upgrading Dallas Fort Worth services to Beijing and Shanghai and Chicago – Tokyo Narita flights to Boeing 787-800s, which offers a more stable payload due to greater fuel efficiency than
the Boeing 777-200. Ishii tells ACW: “Having such an efficient aircraft allows us to continue to expand our network, offering customers more and more choices out of Asia every year.” “The ability to move cargo more frequently and efficiently from Asia to the US and beyond helps us offer customers more opportunities, especially for the shipment of temperature-controlled commodities.” The Asia - Latin America trade lane is very important for American. Perishable and temperature sensitive shipments have benefitted from three temperature controlled rooms at Dallas Fort
Worth, with one dedicated to pharmaceuticals, one to perishables and the other a transitioning room for shipments connecting quickly to their final destination. Ishii says: “With these new options, we have the ability to ship a lot of new ad-hoc and regular business out of Hong Kong, Shanghai, Tokyo, Seoul and Beijing. The commodities we transport through these facilities include pharmaceuticals, semiconductors, material-moulding compounds, etc.” Though there was strong export demand out of China last year, Ishii says there has been a shift to West Asian countries such as Indonesia, Vietnam, Myanmar, Cambodia and Laos due to cheaper labour costs. He says American will adapt to these changes, telling ACW: “Under such an unpredictable market in Asia/Oceania, we continue looking for more suitable export opportunities, and will also keep expanding our market territories with our GSA teams and interline partners to find new ways to feed the American Airlines network with more options within Asia, to the US and into Latin America.”
UPS sees e-commerce growth
Despite the mixed macroeconomic environment, UPS Asia Pacific region president, freight forwarding, Sebastian Chan (pictured) says investments in the company’s network continues to drive positive results. Chan says UPS is seeing three trends giving it reason to remain positive about the region. He says Chinese manufacturers are demanding superior logistics, Association of South East Asian Nations are increasing integration and digital technology continues to transform business models. Business-to-business e-commerce is valued at $15 trillion while business-to-consumer is set to reach $2.4 trillion by 2018, and Chan says UPS research shows buyers are increasingly using e-commerce to buy directly from manufacturers. Chan says cargo growth has been soft in the first half of 2016 but demand should grow later this year. “One of the factors contributing to the pickup is the growth of e-commerce. We’re seeing more e-commerce products moving in a consolidated fashion as e-retail businesses get better at balancing inventory and managing fulfillment, while also meeting the demands of end consumers.” He adds: “As trade barriers are reduced and greater connectivity within intra-Asia is accomplished, trade will continue to flourish. What’s clear is that there will be opportunities for businesses to leverage logistics to improve their competitive advantage and drive business growth.” Chan says lowering trade barriers is bringing emerging markets into the supply chain. “As trade barriers lower and newer economies open up to global trade, manufacturers are increasingly incorporating emerging markets like Vietnam and Myanmar.” Intra-regional trade has increased as the traditional manufacturing model has evolved, and goods moved include finished goods like smartphones and tablets, to semiconductor components, prototypes, spare parts or radiators. Asia’s increasingly affluent middle class is a great opportunity for UPS. Figures from the Organisation for Economic Cooperation and Development say that Asia will represent 66 per cent of the global middle-class population and 59 per cent of consumption by 2030. Chan says: “Where e-commerce in Asia has been export-oriented in the past and focused on inter-regional trade, the rising affluence of Asian middle-class has driven consumption growth and contributed to growing intra-Asia trade.”
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TEMPERATURE SENSITIVE CSafe opens centre in San Juan
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old chain specialist CSafe Global has opened a new service centre in San Juan, Puerto Rico and also set up a new company - CSafe Puerto Rico. The centre is located adjacent to the island’s Luis Muñoz Marín International Airport and it held a ceremony to mark the opening, attended by more than 50 customers and partners. CSafe has a line of passive packaging and passive hand-held couriers to transport temperature-sensitive cargo for use in the pharmaceutical industry, biotechnology, military, disaster relief organisations, airlines and forwarding and logistics specialists. The service centres are the key to providing customers with the services the company says gives them high operational performance and a long service life. The opening of the new CSafe facility was prefaced by the arrival of over 100 CSafe active shipping containers. CSafe Global procured several full Boeing 747 Freighter charter aircraft to move CSafe RKN ULDs into Puerto Rico. The containers are being
utilised to support the country’s growing manufacturing industry and as part of a customer specific service. In addition to the CSafe RKN, CSafe’s passive and small active services will be available for use within and for shipments leaving Puerto Rico. CSafe will also provide conditioned and ready to use passive and active solutions from its own facility. CSafe president and chief executive officer, Brian Kohr says: “We pride ourselves on having the best maintenance program in the industry. Our rigorous inspection, monitoring and preventative maintenance program insures that no matter the length of time a CSafe RKN container has been in the fleet, its performance will be the same as the new units that are being produced daily in our US manufacturing facility.” CSafe has more than 30 service centres with around half in the US, and Canada. In Europe it has centres at locations including Amsterdam, Basel, Paris, Dublin, and London Heathrow, while in Asia it has them in Hong Kong, Incheon, Singapore and others, while it also has facilities in Dubai and Tel Aviv.
Siauliai targets cool chain cargo with new facility LITHUANIA’s Siauliai International Airport is looking to drive cool chain business after opening a 500 square metre facility especially for temperature-sensitive goods. The facility can store cargo at temperatures from two degrees Celsius to seven degrees Celsius while a 130 cubic metre freezer can store products from zero degrees Celsius to minus 20 degrees Celsius. Siauliai says this opens up new possibilities for air cargo services at the gateway, which is located in Northern Lithuania. The facility has been designed to protect the integrity of the Baltic region’s import and export of temperature sensitive milk production goods, meat, flowers and herbals, perishables, pharmacy, fish and seafood through the airport. Siauliai is situated right at the heart of all Lithuanian transport links including the rail network, major road highways and has good access to sea ports. Other facility features include a cross-dock station, handling and breaking down areas, palletising, and dry ice replenishment. The airport explains: “In the short and medium term, the ongoing improvement of service quality for freight forwarders along with improvements to compatibility to veterinary border inspection post requirements remains the focus of the airport’s future development.” Siauliai is one of the Baltic country’s main air cargo gateways and is looking to expand the amount of cargo it handles. The airport is looking to develop its facilities, particularly on the logistics side of the business.
ALITALIA and va-Q-tec have signed an agreement for transporting temperature sensitive goods, meaning the airlines’ customers can rent high-performance passive containers. As part of the deal, Alitalia customers now have access to containers, which can control temperatures between -60 and +25 degrees Celsius. Pharmaceutical shippers and forwarding agents can order the Load & Go service through the airline. Alitalia vice president cargo, Antonio Temporini says: “Due to an increase in the demand for transport of temperature-sensitive goods, such as medical products and biopharmaceuticals. For example, growing regulatory requirements and globalisation of clinical research, uninterrupted cold chains are becoming more important.” Va-Q-tec chief executive officer, Dr Joachim Kuhn says: “With Alitalia we added another strong partner for our network who provides an outstanding market coverage in its home country.”
Container deal signed by Alitalia
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