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The weekly newspaper for air cargo professionals Volume: 19
Issue: 39
3 October 2016
ECS wins prestigious contract with Jetstar Asia
FLACKE WARNS OF THE NEED OF DIGITISATION heathrow third runway essential industry must look beyond london Competition high but Hermes still adds an office
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he ECS Group has pulled off a major coup in Asia by winning a general sales and service agent (GSSA) contract with Singapore-based airline Jetstar Asia. From 22 October, ECS will look after the carrier’s cargo business through Singapore Changi Airport and the 25 stations across its vast network - as Jetstar Asia seeks to bolster its freight business in the region. Jetstar Asia is especially prominent in emerging and fast growing air cargo markets like Vietnam, Cambodia, Indonesia and Myanmar, and has extensive connections into China, Japan, Hong Kong and Taiwan. Excited ECS Group chief operating officer, Adrien Thominet (pictured below left) tells Air Cargo Week it will be setting up a dedicated office in Singapore to meet the needs and demands of the contract. He says it took four to five months for the total cargo management deal to be agreed and ECS will look to boost cargo sales with existing and new customers, while it will also manage freight enquiries, reservations and processes on behalf of the carrier to ensure smooth movement of cargo.
Asia is a key part of the ECS growth strategy, and in June it bought a majority stake in the AVS GSA Group, which has a strong presence in the Asian and South East Asian region. Thominet notes the region is “quite active” with “a lot of opportunities” and the contract with Jetstar will give it a lot of connections across Asia on the carrier’s expansive network with many on widebody aircraft. He says Jetstar Asia also has a number of “interesting” and exciting interline agreements with the likes of Air France, British Airways, Lufthansa, China Southern, Turkish Airlines, KLM, Fiji Airways and Air Mauritius. Thominet says Jetstar Asia’s major strength is South East Asia, which is an especially interesting region for interline agreements and it has agreed a “strong co-operation” with the carrier, adding ECS will need to “speak and be like an airline”.
Timely appointment
Jetstar Asia’s head of commercial, Francis Loi says the appointment of ECS is “timely” due to the increasing intra-Asia cross-border trade driven by a growing middle-class in the region. Loi notes: “The rapid growth of the e-commerce marketplace in Asia is shaping the demand for airfreight as e-sellers and e-buyers prefer airfreight for expedited deliveries. Demand for fresh perishables and special cargo across the region is expected to grow as con-
sumption in Asia Pacific rise. “Our partnership with ECS will be built on the solid base of customers already established with Qantas Freight since 2011. “Existing freight customers will continue to enjoy our reliable scheduled services across the network via Singapore and beyond, while the new capabilities from ECS will allow us to tap into new cargo business segments.” ECS Group chief executive officer, Bertrand Schmoll (pictured below right) adds the contract confirms its “solid presence” in South East Asia, and says ECS is “equipped to deliver the network and support for the final mile distribution for freight customers today”. Qantas Airways holds a 49 per cent stake in Jetstar Asia, which will continue its partnership with Qantas Freight for interline arrangements for cargo through the Jetstar network across Asia Pacific. Qantas Freight continues to manage cargo services for the Qantas and Jetstar Airways networks. Jetstar Asia has 18 Airbus A320 aircraft in its fleet, and it operates more than 600 weekly return flights across 25 destinations in 13 countries. The ECS Group now has a total of 118 offices spread across 42 countries of the globe.
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FAA bans recalled lithium battery shipments AMAZON has been found guilty in the UK of shipping dangerous goods by air following a prosecution by the Civil Aviation Authority (CAA). The online retailer was found guilty at Southwark Crown Court on 20 September 2016 on four counts ‘of causing dangerous goods to be delivered for carriage in an aircraft’ under the Air Navigation (Dangerous Goods) Regulations 2002. The offences took place between January 2014 and June 2015 when shipments including lithium ion batteries and flammable aerosols were found by Royal Mail screening staff. Amazon UK Services will be sentenced at on 23 September. The CAA’s general counsel, Kate Staples says: “We work closely with retailers and online traders to ensure they understand the regulations and have robust processes in place so their items can be shipped safely. Whenever issues are identified, we work with companies to make sure those issues are addressed appropriately. But if improvements are not made, we have to consider enforcement action.” The CAA prosecution follows legal action in the US, with the Federal Aviation Administration proposing fines of $480,000 for hazardous materials violations in June.
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NEWSWEEK
New Californian centre opened by UPS
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PS is to invest $70 million in a package centre in Compton, California, giving it access to multiple airports, port and rail connections, helping it cater for growing demand for e-commerce. The centre, located in a former brick factory site being redeveloped, will be modified to dispatch more than 300 vehicles and 50 full-time jobs when it is operational in late 2017. UPS says state-of-the-art package sorting equipment combined with other automation technology will be integrated into the building, increasing accuracy and efficiency. UPS Southern California district president, Tom Cuce says: “UPS continues to see commercial and residential growth in
and around the greater Los Angeles area. Expanding in Compton puts the UPS delivery fleet closer to this growing demand, enhances our processing capability, and drives improved efficiency and service for our customers throughout the area.” The 521,000 square foot building will serve customers in Los Angeles and Orange
Norway office for Air Logistics
GLOBAL general sales and service agent (GSSA) the Air Logistics Group opened a new office in Norway on 1 September – bringing its network to a total of 88 offices across 48 countries. Air Logistics represents 12 airlines in Norway including American Airlines, Cargolux (pictured), Icelandair and Pakistan International Airlines. The office located in Oslo is being overseen by Henrik Spove, regional director for Scandinavia and Finland, and on a local level the office is managed by Frank Da Cruz, sta-
Counties with access to multiple airports, port and rail connections, which it says makes it well positioned to cater for e-commerce flows in Southern California. UPS adds that the Compton centre will add to the 32 package buildings serving Southern California employing more than 19,400 people.
tion manager in Norway. Spove says: “We have identified the need for a local Air Logistics presence in this growing market. All sales in Norway were previously managed by our office in Denmark but now we will now have a local sales presence on the ground in Norway working in co-ordination with the support team in Denmark. “With the growth in business we feel it is the right time to open a dedicated office in Oslo. We are excited by what the future holds for us in Norway and look forward to expanding our presence here.”
Gatwick submits ‘evidence’ GATWICK Airport has submitted fresh new ‘evidence’ to support its case for a second runway – to members of the UK Government’s Government’s Economy and Industrial Strategy (Airports) sub-Committee. As the sub-Committee starts to consider where to expand capacity in the South East, Gatwick says its new report contains “substantial additional analysis” – including information obtained under FOI request – that supersedes the Airports Commission’s Final Report. The gateways says the Commission’s final report “drastically” underestimated Gatwick’s growth as it said Gatwick would not serve 42 million passengers a year until
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2030, or fly to 50 long-haul destinations until 2050 (with a second runway) – whereas both were achieved this year. The airport says the Commission’s final report ignored new trends in aviation – as new generation aircraft are now flying further more cheaply – a trend that has seen the growth of direct long-haul routes from local airports and removed the need to fly through hub gateways. And economic benefits of expanding Gatwick are above developing Heathrow Airport – as the Commission counted economic benefits brought by international transfer passengers who never set foot in the UK and when removed from calculations, its economic case is the “strongest”.
Antonov gets US charter permit and flies AN-22
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he US Department of Transportation has granted Ukrainian operator the Antonov Company (Antonov Airlines) a broad air charter exemptions for flights to and from the US. These exemptions follow the US-Ukraine Open Skies agreement, which became effective earlier this year. The US DOT has also tentatively granted the Antonov Company a foreign air carrier permit. This means Antonov no longer needs obtain US DOT statements of authorisation, following non-objections from US operators, but normal US Customs notifications and approvals are required for flights. Antonov Airlines specialises in air transportations of oversized and superheavy cargoes worldwide. Antonov became the first airline in the world that started operation of the AN-124 aircraft type on the commercial market. The company’s main fleet consists of seven
AN-124-100 Ruslan, one AN-225 Mriya and one AN-22 Antei (above), which recently completed its renewal programme and performed its first commercial flights from Switzerland to the UAE. The AN-22 carried a coil reef for charterer Karpeles/DB Schenker on behalf of the shipper, Hyundai from Zurich to Abu Dhabi with a refuelling stop in Tbilisi, Georgia. Antonov engineers designed a special transport frame to distribute the 31.5 tonne load across the aircraft floor. The company says the coil’s dimensions of 461x352x417 cm meant it could only be loaded
in the AN-22, AN-124-100 or AN-225, with the AN-22 proving the most economical solution. Antonov executive director, Konstantin Lushakov notes this was a very important flight for reintroducing the AN-22 into the commercial market, adding: “Antonov Airlines is ready to perform new flights for the delivery of oversize and heavy cargoes around the world.” Karpeles Flight Services Asia Pacific regional manager, Patrick Senn says: “The procedures at both airports in Zurich and Abu Dhabi were running like a clockwork and without any fail or delays.”
NEWS WEEK WorldNews CARGO tonnage across airports in Germany rose year-on-year (YOY) by 4.2 per cent to 364,205 tonnes in August, according to the German Airports Association. The association says it is the ninth consecutive month of growth and the strong August lifted YOY cargo growth for the year so far to 2,959,047 tonnes – a 2.1 per cent YOY rise on the same eight months last year. AIR Canada is to start its first direct service to China from Montreal-Trudeau Airport with daily Boeing 787-8 Dreamliner flights to Shanghai Pudong International Airport from 16 February 2017. Air Canada says flight times are optimised for connections with its Eastern Canada and US network of cities including Ottawa, Quebec City, Halifax, New York and Boston.
ACI: 2.4% growth until 2025
THE Airports Council International (ACI) predicts cargo volumes will grow “modestly” at 2.4 per cent up to 2025. This forecast was made in ACI’s World Airport Traffic Forecasts 2016–2040 at the ACI-NA/World Annual General Assembly, Conference and Exhibition in Montreal last week. ACI World director general, Angela Gittens says: “The weakened global economy and a sluggish global trade environment were definite deterrents to growth in air cargo volumes. There also continues to be a structural substitution effect in the delivery of goods across modes of transport, even in the face of strong economic fundamentals. “While the shipment of raw materials and perishables have been affected the most by a move away from air cargo services to ocean freight, the modal shift can also be seen in shipments of high-tech and machinery parts. “The largest trade flow from Asia has experienced the weightiest shift away from air cargo. Thus, in the short to medium terms, global air cargo volumes are expected to increase modestly, in the realm of 2.4 per cent on annualised basis up to 2025.”
Belly switch for Finnair and IAG
FINNAIR Cargo and IAG Cargo are to enhance connectivity for its customers with five weekly Airbus A350 flights between Helsinki Airport and London Heathrow Airport. This is an additional three extra widebody aircraft flights per week as there was previously only two and the new frequency will start from 3 October. The carriers will share capacity on five flights per week on an A350 aircraft and both say the new arrival times into Heathrow and Helsinki will allow better connectivity for both partners onto their respective transatlantic and Asian networks. Finnair and IAG had previously operated a freighter between Helsinki and London alongside two bellyhold routes, but have made the switch to an all bellyhold offering using the extensive cargo capacity on the A350.
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NEWSWEEK Emergency shipment product launched by DHL Global Forwarding
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HL Global Forwarding has launched DHL SameDay Speedline for emergency shipments, which it predicts will be particularly popular in the aerospace & aviation, automotive, electronics, energy and life sciences sectors. It says this new airfreight product will offer benefits including 24/7/365 pickup and delivery, collection within 120 minutes and quotations
within 60 minutes. DHL says its network of over 50 stations will cover geographical demand and the core strength will be the 24/7/365 SameDay Contact Centers in the US, Singapore and Ireland where each shipment is proactively monitored from origin to destination. DHL Global Forwarding global head of airfreight, Ingo-Alexander Rahn says: “The need for
mission critical shipment delivery to avoid line down situations continues to arise and requires a partner that has the global reach combined with the technology to provide transparency to each sector-specific logistical challenge. DHL SameDay Speedline fills this gap and provides added value through its many service features.” Dedicated customer service representatives will handle the majority of quotes and routing option for door-to-door transits in less than 60 minutes and customers will receive customised milestone updates of their shipments movement. Meanwhile, a DHL survey has found that online shoppers value choice of delivery times and locations over the speed of their deliveries - and want greater visibility of their orders, including easily-accessible shipment tracking and the delivery company responsible. DHL eCommerce chief executive officer (CEO), Charles Brewer explains: “Speed isn’t everything. Through the survey of more than 1000 online shoppers in Germany, we found out that 78 per
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cent of e-commerce customers wish to specify the time for their deliveries, while 68 per cent want control over the date when their orders arrive. “Online shoppers also gain satisfaction from a greater choice of delivery location as 94 per cent of respondents said they were very happy when they could specify parcel lockers like DHL’s Packstations as alternative delivery addresses, while one in every two said they would like the option to deliver to their trusted neighbors in their absence.” Drawing similarities with the trends in Asia Pacific, DHL eCommerce Asia Pacific CEO, Malcolm Monteiro notes: “In a region where fast deliveries have become the norm, Asian e-tailers can no longer differentiate themselves on speed alone. “We’ve also seen a growing number of e-tailers in Asia seek greater customisation and flexibility in the range of delivery options we offer to their customers.”
Etihad reappoints ACP as GSSA
ACP Worldwide continues to grow its Australian and New Zealand operation with the re-appointment of its general sales and services agent (GSSA) contract with Etihad Cargo to now also include Brisbane. Effective from 1 October 2016, ACP will extend its representation in Sydney, Melbourne, Perth and Auckland to include Brisbane. Etihad Cargo has appointed ACP to partner with to support its team across all major freight hubs in Australia and New Zealand. ACP Worldwide regional director for Aus-
tralia and New Zealand, Ross Di Lizio says: “We now have the opportunity to work with Colin and his team to continue providing success and growth for Etihad Cargo throughout all our offices on a truly national basis.” Etihad Cargo manager for Australia and New Zealand, Colin Nicholls says: “Our longstanding partnership with ACP Worldwide has been a key factor in Etihad Cargo’s success in the Australian and New Zealand markets. Together we have been able to provide shippers with swift, reliable movement of their cargo to markets around the world. The addition of Brisbane to ACP’s representation of Etihad Cargo means our customers will receive the same seamless service right across Australia.” Etihad Cargo provides freight capacity via its Abu Dhabi International Airport hub.
ANA launches new temp services ALL Nippon Airways (ANA) and Innovation thru Energy have launched PRIO IB Fixed Temp services, allowing temperature-controlled shipments to retain necessary temperatures for up to 100 hours. Using the PRIO IB Fixed Temp’s IceBattery, temperature ranges can be maintained for up to 100 hours if the range is between 2C and 8C. The other temperature ranges are -20C – -15C and -25C – -20C using LD3 size cargo containers and two different sizes of chill box. The IceBattery is described as an
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eco-friendly product, and unlike dry ice, there are no dangerous handling or environmental issues associated with the emission of carbon dioxide. ANA says the technology makes it possible to transport air cargo at stable temperatures for products such as fresh food, pharmaceuticals and semiconductors, which it says customers had given up on airfreight due to difficulties maintaining temperatures. The Japanese carrier adds the service will be available on flights departing from Japan on 28 September.
NEWS WEEK
CHAMP’s Flacke warns of the need to digitise for e-commerce
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igitisation across the air cargo supply chain is something most within the airfreight industry will agree is fundamental to tap into the wealth of opportunities in e-commerce and to also improve operational efficiency and reduce costs. CHAMP Cargosystems is working with stakeholders to improve their systems and technolgy and offers various products to the marketplace. The firm’s managing director, Markus Flacke (pictured) observes like many, the industry must “collaborate” more on digitisation: “There must be collaboration across the supply chain and we must develop data integrity so each stakeholder gets the right information about the shipment or the handler. “Collaboration across the supply chain needs to see each participant share and reuse the data – there must be higher data integrity across the chain. It is key to securing inter-operability - so we can improve the air cargo industry.” Flacke says full digitisation within the airfreight supply chain is vital in order to meet the demands of e-commerce and win business and not lose out to other modes, but warns: “But will the air cargo industry be met with a disruptive player or a huge game-changer? This is a discussion to be had. There is a world of opportunities that e-commerce brings. “E-commerce is that next big thing like pharmaceuticals and the pre-requisite for forwarders and carriers is to engage in the wealth of opportunities of e-commerce and the inter-operability of systems is so important to this. “Those that do not do this will find it will be difficult to do well in e-commerce. Those that do, will do much better and take advantage of opportunities that exist in e-commerce.” As for the electronic air waybill (e-AWB),
Flacke says it is just a “baby step“ to the wider digitisation of the industry and it goes a lot further than this, adding: “How do we work with data in the industry to make it better work, is what we need to look at.” But he feels e-AWB has progressed well in the last few years and its use in the industry is growing, while there is now an increasing uptake in the recognition of the need to digitise between carriers and freight forwarders, which is very positive. Flacke explains: “I think e-AWB is moving in the right direction and it is increasing and the data volume is increasing. Could the penetration be faster? Yes, of course, but it is accelerating a great deal at the moment.” In his view, it becomes easier to talk about other things in the digital sphere once you have the e-AWB in place and it is working well across the supply chain. Among CHAMP’s own products are its cloudbased solution Logitude, a solution for small and medium sized freight forwarders. This enables companies to run their entire day-to-day operations - managing quotes, shipments, bookings
and consolidations more efficiently and cost-effectively without any major financial outlay or IT commitments, while firms can also send an unlimited number of e-AWB to their airlines of choice. This was recently introduced into the Pakistan
cargo community through Penta Solutions, and CHAMP is now working with UK-based Pangea Logistics Network, which gives its customers access to Logitude and it is especially doing well in emerging and developing countries. Flacke explains: “Logitude is a very successful product in developing parts of the world such as in Africa and it is being used in Senegal, Morocco and Kenya and a technology leap here. There is not a wealth of legacy systems in Africa – which makes it much easier to roll it out over there.” Flacke certainly sees the need for high digitisation standards across the supply chain as the key to success of the industry in the future - to enable more collaboration, data sharing and so lead to better transparency across the chain.
AAPA: 2.5% rise in August
THE Association of Asia Pacific Airlines (AAPA) says air cargo demand in freight tonne kilometres (FTKs) grew by 2.5 per cent for carriers in Asia Pacific in August. AAPA notes average international freight load factor edged marginally higher by 0.1 percentage points to 60.5 per cent in the month, on a 2.3 per cent increase in available freight capacity. AAPA director general, Andrew Herdman says global freight markets remained subdued, noting: “Asia Pacific airlines saw generally lacklustre international air cargo demand for the January-August period, registering a 0.7 per cent volume decline compared to the same period last year, although the shortfall has narrowed following a modest uptick in recent months.” Looking ahead, Herdman adds: “For the air cargo markets, the persistent weakness in global trade conditions remains a concern, with rates remaining depressed despite the recent uptick in air cargo activity.”
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UK Heathrow third runway essential following Brexit vote
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ollowing the UK’s vote to leave the European Union (EU), Heathrow Airport head of cargo, Nick Platts (pictured) insists trading links to growing markets are now more essential than ever, further strengthening the case for a third runway. Platts says the result of the EU referendum has not had a noticeable impact on business so far and that Heathrow continues to make its case for expansion to Prime Minister May and local communities. The government appointed Airports Commission released its report in July 2015 recommending that Heathrow should build a third runway, and the government is expected to formally respond this year. He tells Air Cargo Week (ACW): “Leaving the EU means that it’s more essential than ever that we create trading links to the growing markets
of the world and that Britain controls its own trading routes by expanding Heathrow.” Platts says Heathrow looks forward to the announcement so it can start the planning process and connect the trading links as soon as possible. Heathrow forecasts that a third runway would create 180,000 new jobs across the UK and £211 billion ($275 billion) of economic growth. It would also create 10,000 apprenticeships and add up to 40 more long haul destinations. Platts tells ACW: “Our plans set out how we can do all that and still meet tough environmental and noise limits. Expanding Heathrow is the right choice.” He points out that Heathrow handles 35 per cent of the UK and Ireland’s trade value and 72 per cent of air cargo, with links all around the world, with some cities served by several flights a day.
Platts says no other airport in the UK can match Heathrow’s network, explaining to ACW: “It is this capacity that has drawn the UK’s aircargo industry to establish its heart around Heathrow. Shippers and forwarders from all points of the UK can utilise Heathrow’s capacity. Heathrow handles more cargo (by value) in a bank holiday weekend than Gatwick does annually.” Between January and August, Heathrow has registered year-on-year growth of 1.7 per cent to just over one million tonnes, with every month except March seeing an increase. North America remains Heathrow’s largest market by weight and Asia is still top for O&D. The Middle East, Latin America and South East Asia have been growing strongly, which Platts says has partially offset falls to Ireland and Oceania. Platts says the EU referendum has not impacted Heathrow’s business and it is still aiming for annual growth of 1.5 per cent over 2015. There have been hints that the peak season could be weak but Platts comments: “We’ll be watching the volumes during Oct/Nov to see if the rumours of a weaker peak materialise but to be honest, I don’t think it will be as bad in the UK as elsewhere in Europe.” While Heathrow waits for a government decision on expansion, it has other projects underway to make processes more efficient. It has three key projects in progress, installation of stillage in the cargo area to store over 800 unit load devices, developing an airside facility for transferring cargo between aircraft without returning it to the cargo area and call-forward technology for a more efficient deliv-
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ery and collection process in the Horseshoe estate. Platts says: “My colleagues in security continue to review their processes so we can speed up the movement of cargo on and off the airfield.” In November 2015, Heathrow announced it was to invest £180 million in doubling cargo volumes, and Platts says the plans are going very well. “I’ve been really impressed with the willingness of the local industry to engage and debate our plans. We’re about to start developing detailed plans and remain on-track for the investment decision by the end of the year.” Platts is considering the responses for last year’s strategy launch and Heathrow is developing plans for the next regulated period, known as ‘H7’, starting in 2019. He says Heathrow is engaging with industry to seek input for H7 priorities, commenting: “I’m excited about the future and believe you will see emerge next year a bold plan to continue the transformation of cargo at Heathrow.” Platts believes it is vital the UK takes advantages of the opportunities Brexit presents, and Heathrow is supporting UK Trade & Industry to grow exports, saying the response from businesses “has been fantastic”. He is unconcerned about the exchange rate as airlines will benefit from the growth in passenger traffic if the pound weakens, even if currency weakness hits imports. Platts tells ACW: “We’re unique in Europe and we continue to build on our network strengths. Expansion would allow us to increase the direct access of the world to the UK and for our exporters to grow trade faster than today.”
UK
Industry must look beyond London for capacity
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he aviation industry needs to look beyond London as other airports in the UK have ample capacity, Manchester Airports Group (MAG) head of cargo and business aviation, Conan Busby (pictured) tells Air Cargo Week (ACW). MAG operates Bournemouth Airport, East Midlands Airport, London Stansted Airport (pictured) and Manchester Airport and has been seeing strong growth, with volumes increasing four per cent to 672,000 tonnes across the airports in 2015, and Busby says MAG is on track to continue growing. He says: “During these turbulent times for the global economy it is pleasing to see consistent growth and gives us hope of a strong finish to the year and delivering record levels of throughput at both East Midlands and Stansted airports.” For the rest of the year Busby says: “There are some exciting prospects which we hope to deliver but of course everyone is looking to see if we have a more pronounced peak this year in Q4.” He predicts e-commerce has potential to drive the growth and MAG is increasingly focusing on perishable imports. Busby tells ACW: “We have seen considerable growth in perishables imports in recent years as consumers have increasingly sought out a healthier lifestyle and requested a wide choice of fruit and vegetables 12 months of the year.” He also describes the rise of e-commerce as “a seismic shift” which “is driving a change in the way the whole air cargo industry thinks and works”. “It is an incredible time to be a part of the industry and adapt our own businesses to
ensure air freight remains a competitive and value added mode of transport. This requires us to work with our supply chain partners and even
our peers closer than ever,” he notes. The UK government is expected to make a decision about whether either
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Heathrow Airport or Gatwick Airport should receive approval for an additional runway, but Busby points out the industry and the UK cannot afford to wait for the 10 to 15 years until the new runway is built. He tells ACW: “For the time being London Stansted offers the only realistic intercontinental runway capacity in the South East, and what carriers, shippers, forwarders and any other stakeholders need to consider is ‘what happens until any new runway capacity is delivered?’” He adds: “We should also be looking beyond the London aviation system – to airports up and down the country that have capacity today and can support freighters and point to point services.” Busby believes MAG airports offer advantages, as it is a proactive company and a reactive landlord, with its longstanding relationship with integrators and scheduled freighter operators proof of its ability. “Cargo has been important to MAG for a long time and certainly before many competitor airports started to rely on cargo as an additional source of revenue from the runway,” he says. As for countries showing potential, Busby says: “Iran is the obvious target as trade sanctions are removed and bilateral agreements strengthened. That said, most markets remain an opportunity given the current capacity constraints in London against a backdrop of growing trade conditions with many markets – developing through to mature.”
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US GSSAs
Competition high but Hermes still adds an office
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eclining yields has put pressure on general sales and service agents (GSSAs) across the US and indeed much of the globe. Hermes Aviation, whose clients include the likes of South African Airways (right), Icelandair Cargo, Brussels Airlines Cargo and ANA - is no exception. The GSSA works in partnership with Air Logsitics and its president, Clive Langeveldt (pictured) says 2016 has been a “challenging year” despite stronger tonnages. He explains: “Yields have continued to drop to most regions being served from the US. With the re-opening of the Boston, Massachusetts office earlier this year, Hermes Aviation now has 10 office locations throughout the US.” Hermes has nine other offices across the US in Washington DC, Miami, Los Angeles, San Francisco, Chicago, New York, Houston, Atlanta and
Seattle. Langeveldt says overall, volumes have been on target but revenues, due to the declining yield, have been tracking below expectation through July. When asked how he would sum up the current US GSSA marketplace he believes it is both challenging and competitive, with airlines “looking to get more for less”. There has been much consolidation of GSSAs around the globe, but Langeveldt says there has not been a lot in the US market, but there have been some new players who have entered the market and who are willing to work for less. However, it is as competitive as ever: “It is very competitive, with airlines willing to make changes based on the promise of increased tonnage and GSSAs willing to drop their commissions to secure new business.” The strong US dollar has impacted much of
the US air cargo market and all parts of the supply chain have been affected. Langeveldt feels it has only been really felt in certain regions where it has had an impact, reducing buying power and forcing consignees to push for lower airfreight rates, irrespective of service levels. Hermes he explains is making investments in the US and North America to meet the changing needs and demands of its clients: “ Most recently, we have made some investments in upgrading our IT and telecommunications systems throughout the US.”
Hermes also has an extensive client base in Mexico where it has offices in Mexico City, Guadalajara, and Cancun and its airline clients include Cargolux, Cathay Pacific Airways and Nippon Cargo Airlines. Langeveldt says it is looking at Asia, Europe and Africa for growth for the immediate future with new airline clients that have been added, but how does he sees the future of the GSSA marketplace: “More challenges and in order to remain viable, the GSSA will have to constantly look for new revenue streams by offering value-added services.”
American expanding GSSA network
THE US is one of the world’s biggest air cargo markets, but there are a wealth of other global markets and American Airlines Cargo has recently appointed general sales and service agents (GSSAs) outside the US. The carrier recently linked the US and New Zealand with daily nonstop services between Los Angeles and Auckland and appointed GSA Cargo Services to seek cargo on the Boeing 787 route. Cargo flown includes perishables and consolidated freight, while the return is made up of cmedical supplies and mining machinery. The flights are expected to handle a variety of goods including e-commerce,
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perishables, horticulture products, meat and fish. American is expanding its reach into totally new markets with the appointment in the summer of its first GSSA in Africa after HAE was chosen to cover sales across a number of countries in central, east and north, as well as South Africa. HAE is responsible for selling on the carrier’s services from Djibouti, Ethiopia, Ghana, Gabon, Nigeria, Tanzania, Tunisia, Uganda and South Africa. The outbound market from Africa splits roughly 50/50 between perishable and general cargo and the airline will be looking at both inbound and outbound traffic.
US GSSAs
Declining revenue proving a challenge for ATC
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TC Aviation is one of the main players in the US general sales and service agent (GSSA) marketplace and continues to grow. Last year, it was awarded a contract to represent DHL Aviation’s ACS International GSSA work, and in 2016 it added Air Serbia Cargo across the US, as well as Solar Cargo in the Midwest and West Coast. In the US, ATC also represents Etihad Cargo, NCA Cargo, Air New Zealand Cargo, SAS Cargo, MNG Cargo, Egypt Air Cargo, Air Astana, Air Niugini, CAL Cargo Airlines and Solar Cargo. ATC has 10 US offices - two in New York, one in Chicago, Dallas, Atlanta, Miami, Washington DC, Los Angeles and Houston. ATC’s vice president and managing director in the US and head of global compliance, Timothy Pfeil (pictured) says 2016 has been a “challenging year” and for the US market in general: “I think it is very safe to say that there is no longer a market that is safe from the plague of overcapacity, or declining yields. Depending on which set of data you wish to believe, the gross composite yield for global air export from the US to the world, has dropped by nine per cent or so, from a high of approximately $1.63/kg in January, to $1.49/kg as recently as July. “For ATC, our composite yields have tracked in-line with what CASS and others are showing, and we follow these KPIs very closely. Overall our tonnage growth has performed in-line and slightly above our internal forecasts.” Pfeil says tonnage has continued to perform well against ATC’s internal forecasts and expectations, however on the whole, it is revenues that are down for several of its partners, and comes in the face of “withering competition” for less overall cargo. He says this is especially true across the North Atlantic and to the Middle East, the latter of which has witnessed a compounded annual growth in departures from the US of some 24 per cent since 2006. Pfeil notes: “At the end of 2015, global air cargo volumes from the US were close to where they were at the end of 2008. Seasonally, US air exports in 2016 have mirrored 2009 rather well, but it is evident that performance this year is significantly below any of the previous two years as measured by the US Government, so it would seem to be the case that we are all competing - with more frequent and higher capacity aircraft - for significantly reduced air cargo volumes. I am moderately hopeful that if we track as the industry did in 2009, we will see a strengthening of volumes in Q4.” In the last 10 years, there has been a lot of GSSA consolidation in the US, and he feels ATC is a good example of the benefits industry consolidation can bring for even the strongest regional GSAs as Platinum Air Cargo’s merger with ATC was a “true win, win for both companies” and the industry as a whole. “It permitted Platinum to gain access to a global network of IT and capital resources, which in turn allowed us to answer the increasing demands for our services and overcome the financial hurdles these larger scope contracts bring with them,” Pfeil adds. He feels it remains to be seen just how much more competitive the US market will become, as yields drop and more airlines begin to call into question their current cargo product strategies: “My view is quite simple; if the current revenue declines continue unabated, there may well be several big name airlines who consider the merits of total outsourcing.” The strong US dollar he notes has certainly had some impact on exports, however, it is the crisis in energy prices that has probably done more to harm overall export performance. Pfeil says: “Overcapacity itself is an issue that is not going to go away anytime soon, and when coupled together with low fuel prices, the impact is noticeable. “The lack of purchasing power seen in the Gulf region, which is tied to the price of oil the same way Houston and Texas are, is also noticeable by the reduction in the exportation of heavy machinery and drilling related capital goods by air, as well as a similar reduction in discretionary spending on consumer commodities. “As a result, we are seeing the same overcapacity that has plagued the Atlantic eastbound markets for years, now beginning to appear in the Gulf region at a time of reduced export volumes. “The impact on ATC has driven us to find ways to reduce our own costs, including outsourcing some ‘far-back-office’ functions to cope with the revenue declines. Generally, that plan is working well and we anticipate other lean initiatives to be implemented next year to cope with the revenue shortfall.” Pfeil says ATC is examining several areas for investment in
2017, including IT and facilities as improving and strengthening IT is a big priority as it sees a need for increased automation for reporting and forecasting being demanded by partners, adding: “Being able to provide such information without unnecessarily burdening face to face selling or marketing activities, is a big priority for ATC in 2017.” There are future opportunities: “I would say the opportunities for more airlines to examine the merits of partial or even total outsourcing of cargo sales and service functions are increasing.
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“There are many successful best-demonstrated practices to look to, and I am pleased that ATC plays a major role in several such programs, both in Europe and here in the US. The barriers to entry for major outsourcing programs are, however, steep.” Pfeil says ATC’s approach is simple – invest in the best people and align processes around those of carrier partners, and ensure you know “as much or more about partners’ business as they do”while thinking and acting like an airline.
ACW 3 october 2016
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CENTRAL EUROPE LOT aims for growth through routes and fleet upgrades
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OT Polish Airlines has outlined its 2020 profitable growth strategy and set out its aim to become a leading carrier in Poland and Central and Eastern Europe. The crux will be by expanding its bellyhold route network and upgrading its fleet, which is in turn set to significantly boost its cargo volumes. LOT says its strategy is based on five pillars - taking advantage of potential that lies in a growing market, developing a network of connections and a hub, competition, boosting effectiveness and building a committed team. Chief executive officer, Rafał Milczarski explains: “Taking maximal advantage of the fact that the market of air services in Poland and the Central and Eastern Europe is bound to grow at a much quicker pace than in other European countries is a starting point for our plan of further growth.” LOT says it is going to regain its lost market share in Poland, and is aiming to gain approximately 25 per cent through developing its network of connections with long-haul flights at the heart to North America and the most important business centres in Asia with connections to Central Asia and to the Middle East it notes are particularly interesting.
The carrier says Warsaw’s geographical location allows it to develop an unmatched offering of flights to countries such as Kazakhstan or Iran. In just a few weeks LOT is going to launch a direct flight to Seoul and next year another connection to Newark in the US is scheduled to be opened with flights initially operated four and then 5 times a week, starting from the beginning of 2017. The Polish airline says it is going to announce more new destinations soon, but stresses as the network of connections keeps developing, Warsaw Chopin Airport must keep pace as well. To improve its product portfolio and develop its network of connections LOT is planning on expanding and upgrading its fleet and estimates in 2020 it will operate a total of approximately 70 aircraft, up from the 40 it has today, including 16 Boeing Dreamliners and around 15 new narrowbody aircraft. Milczarski explains: “LOT is able to develop its fleet on its own
thanks to operating leases in that way significantly reducing a burden on the company’s finances and improving availability and delivery time for the planes. “In 2017 the first few single-aisle aircraft are going to be added to our fleet. We are in the final phase of negotiations. We also expect the delivery of two new Boeing 787 Dreamliners. We are going to simplify and standardise our target fleet.”
Bud belly cargo rising
BELLYHOLD cargo tonnage is rising at Budapest Airport and is set to grow further as it welcomes new routes from different regions of the globe. Having already added 16 new routes in 2016, the gateway has further expanded its network in the shape of a direct link to Africa’s largest nation in relation to land size, Algeria. The Hungarian airport has seen Air Algerie take-off for the first time, utlising its fleet of Boeing 737-600s as part of a twice-weekly link to Algiers, complementing existing services to Hurghada, Monastir and Cairo. Budapest Airport chief executive officer, Jost Lammers says the service further enhances links to North Africa and he welcomed back the carrier as Air Algerie had previously run a route into Budapest. And cargo development manager, Jozsef Kossuth previously told Air Cargo Week the gateway is positioning itself to be the air cargo hub of Eastern Europe having seen growth of 11.3 per cent so far in 2016. Also giving volumes a boost have been Qatar Airways Cargo re-launching flights between Budapest and Doha International Airport in March using an Airbus A330 Freighter with 60 tonnes of capacity on the route. New bellyhold services started in 2016 have included Air China, Air Canada Rouge, and Korean carrier - Asiana Airlines, while the likes of Cargolux and Turkish Cargo are performing well in Budapest. As part of the airport’s 50 billion Forint ($178.5 million) development programme, BUD 2020, Budapest has started constructing a new logistics base next to Terminal 1 for a major European parcel service company, valued at three billion Forint. Budapest Airport is also preparing itself for the construction of a new cargo base – the Cargo City – close to Terminal 2, with warehouse and office capacity to handle up to 200,000 tonnes of cargo per annum. And in August, it was revealed that DHL Express had signed an agreement to develop a new 13,000 square metre base at Budapest, to be ready by July 2017.
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ACW 3 october 2016
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