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The weekly newspaper for air cargo professionals Volume: 20
Issue: 12
27 March 2017
EU court readopts price-fixing cartel decision
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he European Commission (EC) readopted a decision on 17 March for fines totalling €776 million ($833m) previously made against 11 air cargo carriers over a price-fixing cartel. In December 2015, the General Court of the European Union annulled a decision on procedural grounds made by the EC in November 2010 against the airlines who had appealed, but never denied the cartel existed. The EC’s competition directorate claims it has now addressed the procedural error identified by the court and reimposed the fines as said they did take part in the cartel. The case was originally brought by the EC
against the carriers, as said they participated in a price-fixing cartel between December 1999 and February 2006. The EC says the 11 had all been operating in the airfreight services market on flights from, to and within the European Economic Area and cartel arrangements saw numerous contacts between airlines, at bilateral and multilateral level, to fix fuel and security surcharges. Fines have been relevied to the following carriers: €79.9 million to Cargolux, €21 million to Air Canada, €182.9m to Air France, €127.2m to KLM, €104m to British Airways, €57.1m to Cathay Pacific Airways, €35.7m to Japan Airlines, €8.2m to LAN Chile, €15.4m to
Martinair, €70.2m to SAS and €74.8m to Singapore Airlines. Qantas accepted the decision of the court at the time. Lufthansa, and subsidiary, Swiss International Air Lines, received full immunity from fines as they brought the cartel to the attention of lawmakers. Commissioner, Margrethe Vestager who is in charge of competition policy at the EC, explains: “Millions of businesses depend on air cargo services, which carry more than 20 per cent of all EU imports and nearly 30 per cent of EU exports. Working together in a cartel rather than competing to offer better services to customers does not fly with the Commission.” She adds the decision ensures companies that were part of the cartel are “sanctioned for their behaviour”. Cargolux and AF-KL-MP are to look at the new decision and may apply for a new annulment. Cargolux explains the development did not come as a surprise, adding: “At this stage Cargolux is reviewing the decision and has not yet decided whether to lodge an application for annulment with the General Court.”
ACI: volumes up 5.7% in January FedEx connects TNT’s hub to its own The Airports Council International (ACI) says air cargo volumes grew at airports across the globe year-on-year (YOY) by 5.7 per cent in January. Africa saw growth of 9.6 per cent, Europe 8.3 per cent, North America 5.1 per cent, the Middle East 8.2 per cent, Asia Pacific 4.5 per cent and Latin-America Caribbean 2.5 per cent. International freight was up 9.5 per cent, but domestic volumes fell by 2.8 per cent. ACI explains that heightened business confidence through inventory build-ups and increased export orders remained apparent for the near term, “despite the looming uncertainty of trade policies in the face of protectionist sentiments that swept many countries. The political uncertainty in
the second half of 2016 waned”. ACI says volumes continued to gain momentum in January, with a spillover effect in 2016, and the Chinese New Year had a “tremendous” impact on shipments but distorted the figures and yearover-year comparisons. The association explains thatthe drop in domestic traffic was largely the result of business closures in the Asia-Pacific region during the Chinese New Year.
FedEx Express will connect TNT’s European air hub in Liege to the FedEx World Hub in Memphis in April 2017. FedEx will use a Boeing 777 Freighter with 116 tonnes of capacity and TNT will be injected into the FedEx network for delivery across the US and Canada. The aircraft will continue on a RTW trip from Memphis to Shanghai via Seattle and Anchorage, before returning to Liege. FedEx president and chief executive officer (CEO), David Cunningham says: “This new flight by FedEx Express is a tangible example of the customer benefits that the acquisition of TNT will bring. By combining our strengths, particularly the FedEx Express air network and TNT’s strong European road capabilities and Liège
hub, we will connect even more people and possibilities.” Meanwhile, FedEx revenue grew to $15 billion in the third quarter of the 2017 fiscal year, with growth in all business segments while net income was up to $562 million. Revenue was up from $12.7 billion and net income was up from $507 million, despite the operating margin falling to 6.8 per cent to $1 billion. FedEx is expecting that integrating TNT Express will help growth.
DFW COOL CHAIN FACILITY ON TRACK FREIGHTERS STILL ESSENTIAL TO AIR CARGO CARGOLUX ITALIA FLYING HIGH RIO ON THE RECOVERY PATH AFTER TOUGH 2016
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Pharma acquisitions made by K+N
KUEHNE + Nagel (K+N) has acquired two specialised pharmaceutical logistics companies as it continues its drive on providing GxP compliant end-to-end services to pharma and healthcare customers. In Turkey, K+N has acquired Zet Farma, which manages 56,000 square metres at four pharma warehouses in Istanbul. This transaction marks K+N’s entry in the fast growing Turkish pharma logistics market. In Italy, K+N has expanded by acquiring Ferlito Pharma Logistics. The company is a major player in pharma logistics, offering GxP compliant warehousing and forwarding services including local distribution. K+N International member of the management board responsible for contract logistics, Gianfranco Sgro says the pharma logistics market is expected to significantly grow due to global demographic changes and increased consumer spending. The forwarder says the two acquisitions underline its strategy to continuously grow in future proof industries and its focus on specialised, niche acquisitions. The transaction in Turkey is subject to the approval by the Turkish regulatory authorities and both transactions are subject to customary closing conditions. All parties agreed to not disclose the purchase price.
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NEWSWEEK Brussels cargo rises, Fraport profits grow in 2016
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russels Airport’s cargo tonnage grew by 7.7 per cent in February compared to the same month in 2016, which was fuelled by the freighter segment. The gateway handled 40,696 tonnes, up on the 37,771 tonnes handled in the same month in 2016. Freighter traffic grew by a significant 42.4 per cent to 13,822 tonnes, up on the 9,710 tonnes in February 2016. Integrator cargo was 17,141 tonnes, up 7.1 per cent on the 16,004 tonnes in the same month last year. Belly tonnage did though fall 19.3 per cent to 9,733 tonnes, down on the 12,057 tonnes in February 2016 – put down to the leap day effect and the departure of Jet Airways in March 2016. For the first two months of the year it has handled 85,648 tonnes, up 14.6 per cent on the same two months the year previously. Meanwhile, profits at Frankfurt Airport’s operator, Fraport rose 34.8 per cent to €400 million ($429 million) in 2016 despite revenue dipping 0.5 per cent to €2.59 billion. Fraport executive board chairman, Dr Stefan Schulte says: “Despite the challenges of the 2016 business year, we have achieved our best annual result ever. The sale of the 10.5 per cent share in our Pulkovo Airport subsidiary in St. Petersburg has
demonstrated that we are able to develop international airport concessions even amid difficult market environments. “We will therefore continue to consistently pursue our strategy of operating a broadly diversified international portfolio.” Cargo volumes at Frankfurt Airport were up 1.8 per cent in 2016 to 2.1 million tonnes helped by strong growth in the second half of the year.
Strong month in Hong Kong
TONNAGE and the load factor climbed for Cathay Pacific Airways in February compared to the same month last year. Cathay Pacific and Cathay Dragon combined carried 137,674 tonnes of cargo and mail last month, an increase of 17.4 per cent compared to February 2016. The cargo and mail load factor rose by 6.2 percentage points to 64.2 per cent. Capacity, measured in available cargo/mail tonne kilometres, was up by 1.2 per cent while cargo and mail revenue tonne kilometres (RTKs) increased by 12 per cent. In the first two months of 2017, the tonnage rose by nine per cent against a 0.9 per cent increase in capacity and a 5.9 per cent increase in RTKs. Cathay Pacific general manager for cargo sales and marketing, Mark Sutch says: “As expected, the first half of February saw volumes significantly affected by the Chinese New Year holiday. “However, trade in the region was quick to rebound from the middle of the month, which was soon followed by a pickup in long-haul trade, leading to a full recovery by month-end. Hong Kong International Airport (HKIA) is off to a strong start in 2017 with 7.7 per cent cargo growth in the first two months, with a double-digit surge in February. The airport handled 666,000 tonnes in the first two months of the year, with 11 per cent growth in transhipments. Cargo was up 14.1 per cent in February to 294,000 tonnes and by 5.3 per cent to 4.57 million tonnes on a rolling 12month basis.
Profits up, cargo down at LATAM
LATAM Airlines Group has returned to profit in 2016 despite cargo revenue and volumes continuing to struggle. It made a net profit of $69.2 million in 2016, its first profit since 2011, compared to a loss of $219.2 million in 2015, despite revenue falling by 5.9 per cent to $9.7 billion. Cargo revenue was down 16.5 per cent to $1.1 billion for the year, with tonnage falling 6.4 per cent to 944,000 tonnes. Revenue tonne kilometres declined 8.7 per cent to 3.4 billion and capacity in available tonne kilometres were down 5.3 per cent pushing load factors down 1.9 percentage points to 51.7 per cent. LATAM says: “Exports to North America were mainly impacted by lower production in the salmon industry as well as a decrease of certain products as flowers and Asparagus, partially offset by an improvement in imports from North America and Europe to Brazil, as a result of the appreciation of the Brazilian Real.” LATAM says it is adjusting freighter capacity and maximising belly-hold utilisation of its passenger fleet, reducing freighter operations by 13.2 per cent in the fourth quarter, helping bring the load factor up 1.7 percentage points to 57 per cent during the period. Net profit in the fourth quarter was $54.3 million compared to a $16.2 million loss in the same period of 2015.
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NEWS WEEK Cool chain expansion started by Lufthansa
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ufthansa Cargo has started work on expanding its cool centre, which will nearly double its capacity for temperature-sensitive cargo at Frankfurt Airport. Following completion, as of late summer of this year, 8,000 square metres will be available for cool chain cargo at its Lufthansa Cargo Cool Center (LCC) up from the current 3,500 square metres. After the extension, the entire infrastructure of LCC will be further improved. It was opened in December 2011 and currently offers 4,500 square metres in four different temperature-controlled chiller rooms (2 to 8 degrees Celsius, 15 to 25°C, -12 to -20°C and 5 to 15°C) as well as a deep-freeze room and direct access to the apron. As a result, it is currently the largest hub for temperature-sensitive freight in Europe. Board member of operations, Sören Stark says at a ground-breaking ceremony to mark the start of work: “We’ve gained a great deal of experience in the worldwide transport of sensitive medications. CEIV certification from IATA has recently highlighted this. “The excellent collaboration with numerous shippers from the pharmaceutical and chemical industries has prompted demand for our service to grow consistently.“
In late 2016, IATA awarded the CEIV Pharma to Lufthansa Cargo and the LCC. Meanwhile, Dr Alexis von Hoensbroech has had his contract at Lufthansa Cargo extended for a further five years until 30 November 2022. He joined Lufthansa Group in 2005 and became board member product & sales in December 2014, and the supervisory board has extended his contract early and unanimously until 2022. As part of corporate-wide restructuring, von Hoensbroech repositioned his department at the start of 2017 to increase efficiency and ensure even greater flexibility and closer customer relations.
WORLDNEWS AMERICAN Airlines (AA) Cargo has chosen Lorena Sandoval as its managing director for its Florida, Caribbean and Latin America division, taking over from Carmen Taylor who retired at the end of 2016. Sandoval joined AA 26 years ago in Quito, Ecuador and has held positions in passenger sales, reservations and operations, and most recently as sales operations manager responsible for 43 ticket sales centres across the region. STOCKHOLM logistics software provider CargoIT AB has opted to integrate with Traxon cargoHUB using IATA Cargo-XML version 3.0. By connecting with Traxon cargoHUB and adopting the newest standards, CargoIT says it is now ready for the next stage of unified air cargo communication. Traxon cargoHUB is CHAMP Cargosystems fully automated host-to-host communication solution that links more than 100 airlines with 3,000 forwarders, GSA, GHA and shippers.
Expansion at Changi for Agility
AGILITY has acquired a two-story warehouse close to Singapore Changi Airport – giving it more than 600,000 square feet of warehouse space in total in Singapore. The newly acquired 177,000 square foot warehouse is located in an area with access to an array of logistics services and two major expressways. Agility has operated in Singapore for more than 40 years and employs more than 400 people there. It owns four other warehouses in Singapore. With an expanded footprint, Agility will be offering more services: automated quality inspections; a container-management e-system; a large-scale recycling program for packing materials; and enhanced warehouse management systems with regional data back-up and business-continuity features. Agility chief executive officer for Singapore, Mykell Lee says the decision to invest S$25.5 million ($18.25 million) in the warehouse is a sign of its long-term commitment and belief in Singapore as one of the world’s foremost transportation and shipping hubs. He adds the acquisition gives it more capacity to add to its service offering, which includes testing, assembly, configuring, labelling and packing.
Africa calling for AF-KL-MP
AIR France KLM Martinair (AF-KL-MP) Cargo will launch its summer schedule on 26 March with 1,125 weekly services on its fleet of 170 passenger aircraft and six freighters. The carrier started thrice-weekly Paris Charles de Gaulle Airport – Accra services on 28 February, using a Boeing 777200 to connect with the capital of Ghana. AF-KL-MP will also start new African flights from Amsterdam Airport Schiphol with thrice-weekly Airbus A330 flights to Freetown in Sierra Leone and Monrovia in Liberia. The carrier will also start thrice-weekly Boeing 787 Cartagena, Colombia services and three flights a week to Minneapolis, US on an Airbus A330 and offer main-deck capacity using Boeing 747-combi and freighter aircraft from Amsterdam and Boeing 777 Freighter flights from Paris, and continue to deploy cargo on routes between Europe and Latin America and to/from Africa.
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NEWSWEEK
DFW building a cool chain facility and going for CEIV
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allas Fort Worth International (DFW) Airport has big cargo plans and is building a new cool chain facility along with working on gaining the International Air Transport Association’s (IATA) CEIV Pharma certification. The gateway’s executive vice president for global strategy and development, John Ackerman (pictured) spoke to Air Cargo Week at IATA’s World Cargo Symposium in Abu Dhabi. He says DFW has for too long just been an “after thought” as an air cargo option in the US and is looking to change that perception. “We are starting kind of from the ground floor as two years ago we had no cargo strategy. A lot of US airports just take whatever cargo turns up, passengers are the focus, but we looked at the airport and half of the economic impact is cargo at DFW,” Ackerman says. DFW is the fifth busiest US cargo hub not
including Memphis, Anchorage and Louisville, behind Miami, Los Angeles, New York JFK, and Chicago. In 2016, it handled 794,000 tonnes, up eight per cent on 2015 and Ackerman says tonnage was flat until a year and a half ago until it started focusing on freight, and it is on track to grow further in 2017. He says a big part of growing is having the lift and it has welcomed three cargo carriers this
year in the shape of Qantas Freight, Qatar Airways Cargo and Air Canada Cargo. “The other thing we identified in talking to customers was we were lacking a proper cool chain facility for perishables and Dallas can get hot so that is a big problem. By this summer (June/July) we will have one and our board has approved us investing from the airport’s capital and we are partnering with an existing cool chain operator,” Ackerman explains. The state-of-the-art cool facility will cover 4,000 square metres for the main facility, and include a 1,500 square metre chilled area for perishables, and other cool chain cargo and have multi-temperature zones. It is to be built in an existing structure so will cut the costs down. DFW is investing $2 million, and the operator $1 million. DFW is the hub of American Airlines Cargo, and the carrier is expected to move large amounts of cool chain produce through the new facility. Ackerman says it is also taking the community approach to getting CEIV Pharma certified: “There are not a lot of airports in the US that have that and we have got commitments from partners on the handling and airline side – and soon after opening the new cool chain facility
we will be a CEIV certified community.” DFW is aiming to be the bridge for cargo between the Americas and Asia, and long-term Ackerman say the goal of DFW is to “own” the Asia to Latin America trade lane. “Many airports in the US over the last 20 years have looked at Miami and said all I have to do is to take half of Miami’s volumes that will be enough for me, but there are a long list of airports that have failed and Dallas was on that about 15 years ago. “For connecting Asia and LATAM we are talking about transshipment being the gateway to connect those as there really is nothing direct going from LATAM to Asia and it makes sense to go through the US so that is what we are after.” The automotive sector is another area of opportunity and a key target sector Ackerman notes: “The other thing we are big in is there has been a lot of investment in northern Mexico in automotive manufacturing and a lot of those parts are trucked to Dallas and then flown out of DFW. We own that lane so that is a big part of our strategy. We are taking advantage of that and have seen a big uptick in that sector.” The future is certainly bright at DFW and it looks a safe bet to be the next hub to be handling more than one million tonnes.
Top horses flown to Dubai for $10m race
EMIRATES SkyCargo flew some of the world’s best racehorses to Dubai for one of the most prestigious global racing events – the Dubai World Cup – which took place on 25 March. Champion thoroughbred horses have been arrived from all parts of the world into Dubai on freighters over the last few weeks. One of the most recent arrivals for the Dubai World Cup on Emirates SkyCargo was
Arrogate (pictured left), currently the world’s highest rated racehorse. Arrogate won the Pegasus World Cup earlier this year in Florida and is one of the prime contenders for the $10 million Dubai World Cup prize. Arrogate was joined by stable companion Hoppertunity, another contender for the Dubai World Cup, for the journey from the US to Dubai. The carrier worked with the international equine transport specialist Janah Management Company, to ensure successful and safe transportation. Emirates SkyCargo also operated a charter flight from Japan to transport some of the leading contenders for the top prize on race night including Apollo Kentucky.
Freighter number 21 for Qatar Airways
QATAR Airways Cargo has received its latest Boeing 777 Freighter in Doha – taking its freighter fleet to 21. Chief officer for cargo, Ulrich Ogiermann says: “The arrival of our newest Boeing 777 freighter comes at a time when we are consciously strategising our freighter network expansion this year, above and beyond the unprecedented demand and growth in our charter services. “Through our expanding fleet of 21 freighters, we offer increased capacity and flexibility
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to our customers, providing them access to any major air trade markets across the world.” The B777F has a payload capacity of 102 metric tonnes, and is capable of flying 9,070 kilometres. Qatar Airways Cargo operates the B777F on long-haul routes to the Americas, Europe, the Far East, Asia and some destinations in Africa. The airline will receive another B777F later this year, increasing its freighter fleet to a total of 22 aircraft by the end of 2017.
NEWS WEEK Montevideo targets pharma traffic Drone innovation wins IATA award
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arrasco International Airport (MVD Free Airport) Carrasco International Airport (MVD Free Airport) is set to join the Pharma. Aero organization over the next month, the gateway’s managing director Bruno Guella tells Air Cargo Week. Speaking at the International Air Transport Association (IATA) World Cargo Symposium in Abu Dhabi, he says the Uruguayan airport in Montevideo only has to tie up a few details of its membership before it is officially announced. Guella says the airport is undertaking IATA CEIV Pharma certification, which it aims to complete by mid 2017 and developing pharma business is a key part of its growth plans as there are extensive opportunities to grow traffic. Pharma.Aero was set up by Brussels Airport and Miami International Airport last year, and aims to improve pharma handling and quality in the air cargo industry. CEIV is the pillar in which the Pharma.Aero organization is founded on and all members have to be fully CEIV certified before being able to join up. While Brussels and Miami led the foundation of Pharma.Aero, other stakeholders of the supply chain include Mumbai International Airport, Changi Airport, and Sharjah Inter-
national Airport. Others include Brussels Airlines, Singapore Airlines, Brinks Life Sciences and Johnson & Johnson. MVD Free Airport has built a 9,000 cubic metre cool chain facility, while it also has a free trade zone type concept in operation – the only such one in South America at an airport. Connections include freighters by Avianca Cargo, LATAM, Centurion and Lufthansa Cargo. Belly operators include Air France, Iberia, Air Europa, Avianca, Copa, Gol and American Airlines. Guella says the airport proactively works on developing connections, and emphasizes that the airport is also a multi-modal gateway through a nearby thriving port and extensive trucking services to neighbours Brazil (southern), Paraguay, Argentina and Chile. Montevideo is well situated and its geographic situation provides an opportunity as within two hours flying there is 150m people and 75 per cent of South America’s GDP is generated. Carrasco is operated by Corporacion America, a holding operating 53 airports across Latin America and Europe. These include Ezeiza and Aeroparque Airports in Argentina, Brasilia and Natal International Airports in Brazil, Guayaquil International Airport and Galapagos Airport in Ecuador, Carrasco and Punta del Este Airports in Uruguay, and several in Peru, Italy and Armenia. Guella says it plans on growing pharma across its South America network: “We have plans to roll it out (CEIV Pharma) to other airports as well. We are sure there is a good opportunity to grow this business across SA. Based on our experience at Montevideo, we may add more airports in our network.”
ASTRAL Aerial Solutions won the 2017 IATA Cargo Innovation Award at the World Cargo Symposium (WCS) with its ‘UTM Concept for Africa’, a project to use drones in remote areas with insufficient infrastructure. Kenya-based Astral Aerial Solutions is a subsidiary of Astral Aviation, and says the concept seeks to answer the questions surrounding safe, secure and effective drone operations and integration into existing airspace. Astral believes integrating UAS into the existing airspace will solve an “array of UAS
traffic management issues” such as UAV-Aircraft collisions and congestion, which will open up the continent to new technologies and associated benefits of UAS operations. IATA picked five finalists this year instead of the usual three, saying the submissions were of such high quality. The other finalists in Abu Dhabi were Etihad Cargo’s ‘Smart Electric Cool Dolly’, Gatechain’s ‘Redefining trade with blockchain’, ‘Innovative Decision Support System’ by Jettainer, and ‘SkyBreathe Fuel Efficiency’ by Openairlines. The IATA Cargo Innovation Award was first held at the 2015 WCS in Shanghai and was won by CHEP Aerospace Solutions with its CanTrack solution, an energy enhancing tracker for ULDs. IATA has also announced WCS 2018 will take place in Dallas, Texas from 13-15 March.
ACL reveals ambitious expansion plans ULD firm ACL Airshop has revealed plans to double its number of stations from 37 to 75 in the next five to seven years and upgrade facilities across the globe. The US-based firm is to build a new HQ in Greenville, South Carolina, upgrade its New York JFK International Airport facility and Amsterdam Airport Schiphol facility. ACL Airshop management detailed their strategy at the International Air Transport Association’s World Cargo Symposium on
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14 March. Expansion will be driven by the needs of customers which total more than 200. The Far East and South America are the main target markets, but facilities in Europe and North America will also be upgraded. Last year, ACL Airshop opened ULD repair station sat Tokyo Narita, Hong Kong, and Bogota. ACL Airshop is aiming to have 10 repair stations and increase the number of ULDs it manages from 40,000 to 100,000.
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IATA WCS REVIEW
Industry can still do more to improve value
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he opening plenary at the International Air Transport Association’s (IATA) World Cargo Symposium in Abu Dhabi from 14-16 March saw a focus on issues impacting the industry today and how they are shaping it going forward. The ‘Transform Today Shape Tomorrow’ panel debate was moderated by IATA’s head of cargo, Glyn Hughes. He explained shippers’ are looking at the quality value proposition more and more which is “very encouraging for the industry” before asking Global Shippers’ Forum (GSF) secretary general, Chris Welsh who was panelist what feeling he was getting from GSF members. “There are positive signs the industry is genuinely trying to work collaboratively to solve its problems and make the products more attractive. Shippers are saying the industry can do
better, and demonstrate greater value,” he said. But Welsh added on a positive note in the modal battle: “In a way for example it (collaboration and talking to customers) does not happen in maritime, there are a lot of positives, but I am still worried about the broader economic outlook. The air cargo industry will not go back to the levels pre-financial crisis as we are living in a different age for the industry. “Shippers themselves are struggling in their markets. Inevitably the pressure is still on the air cargo industry to demonstrate that value. There is a lot more we can do to improve value.” Hughes then pressed Atlas Air chief commercial officer and executive vice president, Michael Steen on his thoughts. Steen said he believes the “axis” for the industry in the future to spark growth revolves around tapping into rising
global consumer consumption and e-commerce and the opportunities it presents. He noted the e-commerce market for air cargo is seeing double-digit growth, well above traditional/general air cargo at about three per cent and the express sector at about six to seven per cent. He added the e-freight penetration rate for e-commerce is at eight per cent so still very low. During the discussion, Hughes also asked Worldwide Flight Services chief operating officer, Barry Nassberg his views from a cargo handler’s perspective about shippers’ demands of today and how he sees this going forward. Nassberg said the role of the cargo terminal operator and cargo handler is changing and they are more of an integral part of the supply
chain. “The notion of a warehouse has gone - we have become a full fledged air cargo terminal for cargo in having to offer a full range of products and services. We have to be able to continue develop the needs to meet the wide ranging of needs of shippers,” he said. Nassberg added: “Where we are at the end of the supply side. We get to see those inefficiencies starting from the shippers’, the packers, truckers, forwarders agents, and it all comes together at the cargo terminal and is where you can see so many inefficiencies are. “We get saddled with it. The cargo handlers that can drive change are going to succeed working with agents, and shippers to extract some of the inefficiencies and costs.”
THE power of data exchanging and how digital innovations have disrupted the air cargo industry and logistics were in the spotlight in a track at the World Cargo Symposium. The ‘Digital transformation disrupting the air cargo industry through digital transformation’ session saw supply chain decision-makers give their thoughts about hotly debated subject. Among them were McKinsey & Company associate partner, Emma Loxton who said digital disruption is having an economical impact, but this is not unique to air cargo as sea freight is fighting the same headwind. Loxton said inefficiencies in freight logistics make it prone to disruption and these include operational elements such as lack of data integration with the likely disruption real-time tracking as a new standard to increase prediction and also include structural elements – including a high degree of fragmentation with a likely disruption improved market transparency. “In a heavily fragmented industry data collaboration maybe a win-win. Sharing and exchanging data provides an opportunity,” she said. Mercator chief technology officer, Brendan McKittrick then gave his thoughts about the digital platform as a foundation for a successful digital transformation journey. He said challenges for organisations in their goal to digitally transform include a
lack of data and visibility, outdated and complex legacy systems, inaccurate sub-optimal pricing, poor customer relations, capacity utilisation and lack of operational efficiency. Also discussed were drones, which present a new era for air cargo, but how they will take-off is still not known. Dronamics chief executive officer, Svilen Rangelov told delegates drones present a great opportunity for airfreight and is sure they will have a future in various areas and will further improve connectivity. He said the future is all about being “agile” and drones are just that as can be used to reach many destinations for the last mile to deliver cargo and are cheaper to run as have no fuel and labour costs. “The biggest growth service will be e-commerce as packages needs to be delivered fast and cheaply,” Rangelov added. A panel discussion entitled ‘Uberization of the air cargo industry: myth or reality?’ finished off the track. Among panelists were IATA’s head of cargo transformation, Celine Hourcade explained: “It (digital) is endless in terms of potential as we really want to make digital the norm. It should just be the way it is.” She said moving to digital platforms is a challenge but companies need to be ready to adapt while the new way of doing business is the exchange of information.
Data exchange pivotal for a bright future
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IATA WCS REVIEW
Calls for more modern air cargo facilities to be built
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he air cargo industry needs more modern air cargo facilities incorporating the latest technological advances, delegates at the International Air Transport Association’s World Cargo Symposium in Abu Dhabi heard. The cargo facility of the future and those being built now are very different to ones constructed previously, and in the track ‘Cargo facility of the future’ there was call for more investment in facilities and for them to be fitted with new technology such as automated vehicles, sensory devices, and advanced analytics. Siemens chief executive officer for the Middle East, Michael Schneider who was on the panel explained: “We need modern facilities that are more interactive and responsive to what is happening around them and that support the end customer, creating transparency.” And Unisys’ industry director of freight solutions, Venkatesh Pazhyanur felt the air cargo industry can do better in developing facilities that are more up-to-date and use the latest technology. He said: “For an industry of this size it still happens that a valuable shipment gets lost in the warehouse and there is peo-
Freighters still essential
ple running around trying to located it before it is finally located on another runway on the other side of the airport. That is a shame and I think we can do much better.” Technology set to be used in cargo facilities of the future are wearable devices the panel explained and Pazhyanur said these will include glasses that look at the unit load device (ULD) and can tell whether for example, an AK47 is in the ULD. He felt that is the next logical step in facilities of the future, although he believed the collaboration between manufacturers is still lacking to develop the suitable technology and for it to be rolled out. The use of IT platforms in cargo facilities in future years was also vital and will be a “game changer” in the opinion of BeCon Projects managing director, and track moderator, Uwe Beck who said it will speed up facility processes, but he noted IT needs to be more integral in the planning of cargo facilities of the future.
He also explained the need for more data to be used at cargo facilities to create more transparency and improve processes. “Data quality in all streams needs to reach a completely different accuracy level to react on the streams for the clients. We are still I am sorry to say in the Stone Age. This is an issue which is overlooked and needs to be addressed,” Beck added.
FREIGHTERS are “here to stay” – Boeing Commercial Airplanes regional director and airline market analysis for marketing and business development, Tom Crabtree told delegates at the International Air Transport Association’s World Cargo Symposium. He explained in a session how air cargo demand would affect the freighter market that freighters are essential and airlines operating them are generating 90 per cent of industry revenues. These include express carriers, which make up 40 per cent at $33.7 billion, combo-carriers at $33.1 billion, all-cargo carriers at $8.5 billion and belly-only carriers $8.5 billion. Crabtree says: “This has not changed in the past decade and it is not going to change. Air cargo is a niche and a vitally important niche industry.” He says this is despite air cargo only accounting for 14 per cent of the aviation industry’s revenues. He says many carriers like AirBridgeCargo Airlines (ABC), and Ethiopian Cargo – 6th freedom carriers – are using their geographical location and new widebody freighter capabilities to open up new markets – using the Boeing 747-8F with a payload of 133 tonnes and the B777F (102 tonnes). Carriers are operating across Europe, Russia, Africa, the Middle East and Asia, which Crabtree says is where 86 per cent of the population lives and 65 per cent of the economic activity for the world is taking place. And he says a number of airlines are pushing diverse cargo growth strategies including Silk Way West Airlines, Turkish Airlines, Qatar Airways, Etihad Airways, ABC, Emirates, China Southern Airlines, and Cargolux. Crabtree explains the strongest freighter trade lanes are Europe to Asia/Far East and Asia/Far East to North America. On the Asia to Europe lane 80 per cent of cargo is carried by freighters, while on the Asia to North America lane the figure is 75 per cent, but North America to Europe is now only 40 per cent. Crabtree says: “Dedicated freighters will continue to carry most of the air cargo traffic and will continue to carry above 50 per cent of traffic by 2035.” Freighters currently carry between 50-60 per cent of airfreight traffic. Boeing forecasts 930 new and 1,440 converted freighters will be delivered into the marketplace by 2035 of which 500 will be large production freighters, 400 widebody conversions, 380 medium widebody and 1,040 standard body. In 2015, there were 1,770 freighters, but by 2035 Boeing predicts there will be 3,010 while standard widebody freighters are the fastest growing. Freighters make up eight per cent of aircraft in the world. Crabtree says Boeing predicts air cargo will grow by 4.2 per cent a year until 2035.
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ITALY
13% growth at Malpensa and more to come in 2017
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reight volumes have grown 13 per cent in the first two months of 2017 at Milan Malpensa Airport (pictured), following three years of growth averaging eight per cent, operator SEA Group tells Air Cargo Week. Volumes were up 7.4 per cent in 2016 to 537,000 tonnes, and the positive momentum seen in the last quarter of the year is continuing into 2017. In 2016, Malpensa was the second fastest growing airport in Europe after Madrid. SEA says: “Thanks to a very positive economic trend for air cargo transport, especially in the last part of the year and in the peak winter season, most of the freighters operating in Milan Malpensa showed good results forecasting positive expectations for their
investments in terms of flights and capacity offer.” SEA is confident that cargo traffic will keep growing in 2017, with a stable economic situation and strong imports and exports, and recovering road feeder service volumes. It says: “The leading operators already based in Malpensa, both courier and full freighters, will consolidate their presence and their performance with an increase in average payloads.” “Moreover we are expecting a new cargo airline to commence soon while MNG Airlines has just started their new operations with two weekly flights to Istanbul.” As well as new airlines, Malpensa has been expanded facilities with the inauguration of FedEx’s 15,000 square metre Southern Europe
logistic hub, and a second 15,000 sq m warehouse to be ready by next autumn, to be rented to cargo handlers WFS and Beta Trans. DHL Express is to commence construction of its new Italian gateway totaling 46,000 sq m to be operative by the end of 2018. SEA says: “The medium term plans foresee “second line” warehouses dedicated to freight forwarding companies and e-commerce operators (an area of approx. 100,000 sq m is available) that will help in making more efficient the Italian air cargo logistics chain.” It says there has been an increase in small packages driven by e-commerce and growth from more heavy packages and a greater number of pieces per shipment.
Pharma volumes growing
General cargo has remained largely the same in recent years, with goods including clothes, garments, shoes, sports cars, machinery, spare parts and perishables including fresh fruit and vegetables, wine and flowers. Pharmaceuticals have been a growth area, and cargo handlers Alha and BCube gaining International Air Transport Association Center of Excellence for Independent Validators in Pharmaceutical Logistics certification following investments to improve facilities and processes, resulting in huge traffic growth. SEA says: “Both them experienced a growth in import and export flows that, on average, generated in Malpensa in 2016 a year-on-year increase of 35-40 per cent for that kind of products demonstrating that, also in this sector, customers are trusting in our airport and in service provided by its operators.” Asia and the USA still account for more than 70 per cent of exports from Milan, with the former performing well in 2016 due to
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a recovery of import flows and more capacity on direct and indirect services. SEA is looking at South America and Africa, saying: “Other markets in South America or Africa could represent a target for the future, where an improvement in direct connections will be positive for the airport and its catchment area.”
Modest economic growth
Though Italy is forecasted to only see modest economic growth in the next few years, SEA is confident Malpensa will perform well, and that air cargo will continue to grow more than other modes of transport. It says: “Furthermore we are seeing a gradual recovery in Malpensa of a significant quantity of air cargo, formerly trucked to other European airports and a constant growth of couriers traffic pushed by e-commerce.” SEA also says that other countries think Italy is not an easy place to do business due to constraints, inefficiency and bureaucracy, and it must show this is not the case. “The main challenge for Italy in next years will be to demonstrate that these problems can be overtaken, attracting foreign company to invest in Italy and helping to recover the economic situation.” Malpensa also has the advantage of being located in the richest region of Italy and is the only Southern European airport among the top 10 European cargo airports. SEA says it must take advantage of the situation and simplify business with more efficient cross border commerce and for logistics in general. It says: “Malpensa Airport is doing its best in this direction and, in recent years, air cargo market has demonstrated its trust in us.”
ITALY
Cargolux Italia flying high after roller coaster 2016
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usiness in 2016 was a “roller coaster ride” ending with a very strong final quarter, something that has carried over into 2017, Cargolux Italia chief executive officer, Pierandrea Galli (pictured) tells Air Cargo Week. He says the first nine months of 2016 were weak but the final quarter was “exceptionally good”, pushing freight tonne kilometres up 25 per cent compared to 2015, while load factors grew 1.2 percentage points. In 2017, January was very strong followed by a slowdown in February, which Galli was not surprised about due to the timing of Chinese New Year. As for the rest of 2017, Galli comments: “We are still facing a number of challenges, such as overcapacity and continued weak yields, as well as fierce competition, especially from the Middle East. However, the market has a more positive outlook now compared to September last year.” Cargolux Italia primarily serves the
Hong Kong to USA market, and Galli says the airline is looking to develop transpacific routes. He says: “We have introduced a new service from Milan to Luxembourg – Kuwait – Hong Kong – Anchorage –Chicago – New York and back to Luxembourg and Milan. Our other services to Japan, Hong Kong, China and the US, as well as our fleet size will remain stable for this year.” Exports still mainly consist of products including fashion, cars and industrial machinery, and imports are largely electronics and textiles from Asia.
Cargolux Italia is based at Milan Malpensa Airport, the most important cargo hub in Italy. Galli says: “All the major cargo operators are present here. Other Italian airports mainly cater to belly carriers or specialised products such as pharma or perishables.” Galli says the air cargo market is extremely volatile and is impossible to predict how the market will develop over the coming years but he is optimistic about Italy. He says: “I remain relatively positive on the development of the Italian airfreight market.”
BCube plans stable growth
BCUBE Air Cargo had a positive year in 2016, and is expecting stable growth for 2017. BCube says investments in new facilities and specialised services are delivering good results, and it is planning to increase volumes on special cargo shipments with higher yields. It is also benefitting from additional freighter capacity from new and existing clients at its main station, Milan Malpensa Airport, where BCube is the only company providing integrated warehouse and ramp handling services. BCube says: “We expect the rest of 2017 will see stable volumes growth and better air cargo rates. This should reduce some of the pressure on the air cargo logistics chain allowing a better focus on new business development.” “We will keep our eyes wide open to new market requests and trends to be always ready to offer the maximum support to our partners.” Traditional Italian air cargo commodities including fashion goods, perishables and automotive parts remain the main goods but pharmaceuticals are very important, especially after gaining International Air Transport Association Center of Excellence for Independent Validators (CEIV Pharma). BCube says: “After the opening our new Pharma Centers in Malpensa and Fiumicino, we have become an important qualified referent for the Italian pharmaceutical industry. Now pharmaceuticals producers can rely on a safe and fully controlled airport supply chain that completely satisfies their quality requirements.” It adds: “Results have came afterwards as a consequence. And our pioneering vision on Pharma business development has led to a big increase of air cargo volumes handled at our Malpensa and Fiumicino airports instead of being diverted to other European stations.” BCube says after years of turbulence, the Italian air cargo is in good shape, and Malpensa is now has to compete with Northern European airports. “This need is stimulating the Italian air cargo operators to achieve higher standards, increasing KPI’s and efficiency and launching new services. As market leader, we need to support these challenges and the expansion of our partners offering always the best and most efficient logistics solutions.” “If the Italian air cargo system succeeds in increasing efficiency and specialisation, no doubt more cargo volumes will be directly handled in Italian airports instead of feeding other European hubs.”
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BRAZIL
Rio on the recovery path after 12 months of turbulence
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IOgaleão Cargo is expecting a slight recovery of airfreight imports in 2017 driven by returning consumer confidence and a recovery of the O&G market in the second half of 2017. The cargo operator at Rio’s Tom Jobim International Airport (GIG) had a challenging 2016, due to the unprecedented economic and political crisis, which impacted all sectors of the economy. Cargo director, Patrick Fehring (pictured above) says as a result last year, import and export volumes dropped quite significantly, but the silver lining for Rio de Janeiro was the Olympics, which bolstered volumes between June and September. He notes the performance was expected, but the decline was probably more pronounced than it had expected.
Pharma leadership
Fehring says Europe as a whole remains its strongest import market, led by Frankfurt from where it has grown by 45 per cent in 2016, much of it pharmaceuticals, while best performing individual trade lanes, are Houston and Miami, reflecting Rio’s rise as an O&G market in last few years. Fehring adds: “We managed to significantly grow our share of the aero parts business in 2016 as we won a large strategic account and as a result grew our market share of this segment. “In a declining market, pharma also held up better than expected and this is where we have made significant investments in the past two years, tripling our capacity and being the first airport in the Americas to be awarded the IATA CEIV Pharma certificate at the end of last year,” Fehring says. In 2017, he explains pharma leadership is a key growth strategy, reaping the benefits from significant investments, and the creation of a CEIV Pharma community and a further expansion of cold storage facilities. Another important growth area will be exports Fehring says, as
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they have been neglected for a long time and it will be reaching out to the market and is incentivising the use of Rio as a gateway. One example is trucking where it has entered into a risk sharing agreement with West Cargo, enabling a new GRU-GIG trucking service to capture spill from Sao Paulo Guarulhos. “After just four weeks we have decided to add a second weekly frequency from GRU and another one from POA (Porto Alegre). Where customers had to pay a full truck rate in the past we now offer them per kg rates. We have seen such a positive response to our export initiative we feel a 20 per cent growth is feasible in the second half of 2017,” Fehring says. The airport is also looking at changing its business model and starting to offer general warehousing as many of customers need to perform value added services such as labelling, quality controls and picking, but cannot perform these at its customs warehouse. Fehring says in 2017, apart from further investments in its pharma centre and general warehousing facilities and the upgrading of parking facilities, the strategy focuses on reaping the benefits from the investments that we have made in the past two years. The airport became CEIV certified in December 2016 and its next goal is to win more partners in the logistics chain to be certified by implementing a CEIV community and offer the market a fully certified trade lane. “We are also planning to continue our investments into our infrastructure. Going forward, we are planning to expand cold storage capacity in 2017/18, adding areas for customs inspections in a temperature controlled environment, a dedicated facility for frozen goods und further temperature controlled docks. “We are also planning to invest in cool dollies to close a gap in the cold chain. We also key account manage most of our pharma shippers and work continuously with them to reduce dwell times, manage project shipments and reduce their overall logistics costs and risks,” Fehring says. On the route side, Fehring says it hopes to soon announce a second European freighter frequency to add to Cargolux while it sees an “obvious opportunity” as the O&G market bounces back to add another frequency to the weekly Boeing 777F LATAM
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Airlines service from Miami. Fehring says: “Our business model allows us to offer freighter operators very attractive incentives for starting a new route.” He says belly routes are also growing and Qatar Airways will start operating to GIG at the end of 2017, Lufthansa and KLM are adding back capacity, LATAM has announced a new Orlando route, American Airlines are considering a new DFW-GIG service, and Avianca will start operating a widebody between Bogota and GIG, something he says “pharma customers have been craving”.
Consumer confidence returning
But what impact has the tough economic conditions in Brazil had and will this continue? “We are seeing consumer confidence returning and a modest GDP growth is forecasted for the first quarter of this year. These numbers are reflected in our own performance where we are starting to see a modest recovery in some segments. The Brazilian economy is a roller coaster,” Fehring explains. He adds: “During the last recession, volumes dropped by 20 per cent only to bounce back with +50 per cent growth the following year. I am optimistic about 2017/18. In Rio de Janeiro, our O&G customers expect the market to come back in the second half of 2017, which will have a big impact on our business. “Pharma and medical equipment, which represent 30 per cent of our revenue, are expected to outperform the market.” Fehring notes a major challenge in Brazil remains the volatile performance of government agencies involved in the cargo clearing process. “Dwell times for import cargo in Brazil are well above those of comparable economies and mitigate much of the time gained by shipping by air. “Another challenge in Brazil are the varying tax benefits between Brazilian states, which do not encourage efficient supply chains and make it difficult for airports to compete with each other,” he adds.
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