ACW Aug 2014 NY Feature

The weekly newspaper for air cargo professionals Volume: 17

Issue: 32

18 August 2014

Alitalia relaunching cargo service

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tihad Airways’ investment of 560 million euros ($748.5 million) in Alitalia is going to see the relaunch of the troubled Italian airline’s cargo operations.

The freight business will operate out of Milan Malpensa Airport and the hub will also be used by Etihad. At the 8 August announcement, Etihad president and chief executive officer, James Hogan, said: “We are a major cargo business. We will move our own cargo operation through Malpensa, to build the Alitalia cargo business is a key part of our strategy.”

The joint Etihad-Alitalia statement says: “To better serve the Italian cargo market, which is the third largest in Europe, Alitalia’s cargo business will be relaunched and expanded, with the establishment of a centre of excellence in Northern Italy, investment in handling capabilities at Italian airports, and the optimisation of an integrated cargo network.” No further information was available from Etihad or Alitalia. At one time Ali-

talia had operated Boeing MD-11 Freighters (see picture). According to the joint statement, long-haul flights from Malpensa will more than double to 25 flights a week by 2018 and Alitalia’s widebody fleet is planned to grow by a third. The airline already operates widebodies with substantial belly hold capacity.

For long haul it has the Boeing 777300 extended range and the Airbus A330-200. There will also be new long haul routes from Rome. The

statement adds that there will be, “joint procurement in the areas of aircraft, engines, maintenance-repair-operations, training, catering, ground-handling and fuel.” Etihad’s fleet also has 777-300s and A330300s, like Alitalia.

However, Alitalia’s narrowbody fleet will be, “rightsized,” according to Etihad, to meet the requirements of the, “new network plan”. The agreement includes a three-year plan to return Alitalia to profitabil-

ity. The total being invested in the airline is 1.7 billion euros. This sum consists of the 560 million from Etihad, 300 million euros from Alitalia shareholders, up to 598 million euros in short and medium term debt restructuring, provided by financial institutions and existing bank shareholders, and new loan facilities extended by Italian financial institutions worth 300 million euros. Etihad’s 560 million euros will be provided through equity injections, asset purchases and what it calls, “other financing facilities and funding arrangements,” to re-structure the airline’s balance sheet. With its investment, Etihad will take a 49 per cent shareholding in Alitalia for 387.5 million.

Its investment includes a further 112.5 million for a 75 per cent interest in Alitalia Loyalty, which operates MilleMiglia, the airline’s frequent flier programme, and the purchase of five pairs of slots at Heathrow Airport, valued at 60 million euros. The slot pairs will be leased to Alitalia on what Etihad calls, “an arm’s length basis”.

IATA: 2013 was ‘weak’ year for airfreight Airfreight saw weak growth in 2013 with only 1.8 per cent more volumes overall compared with 2012, according to the International Air Transport Association’s (IATA) 58th edition of its World Air Transport Statistics.

Possibly reflecting the trend of on-shoring, where manufacturing is kept close to its market, domestic freight tonnes carried and freight and mail tonne kilometres both saw domestic growth outstrip international increases.

Tonnes carried saw a 3.4 per cent domestic increase, but internationally it only rose 1.3 per cent. Freight and mail tonne kilometres were up by 2.9 per cent domestically and only 1.6 per cent for international traffic. Overall, the freight load factor shrank by minus 0.6 percentage points to 46.9 per cent, which reflects

the increases in belly cargo capacity due to growing passenger fleets. Despite the marginal increases, IATA’s director general and chief executive officer, Tony Tyler, says that in 2013, almost, “48 million tonnes of cargo was carried on about 100,000 flights a day.”

One positive sign in the statistics is that the average price of jet fuel decreased by 3.9 per cent in 2013, compared to 2012. This year, however, jet fuel has slowly become more expensive. Between 2005 and 2013, IATA adds, fuel efficiency improved by 11 per cent. The association qualifies its fuel statements by saying that the figures are, “preliminary estimates of fuel efficiency performance in 2013”.

In a July IATA survey of airline executives (Air Cargo Week, 28 July 2014), respondents told the

association that they could not cut costs faster than the rate of rise in oil prices. In 2013 the cost of fuel was 31 per cent of airlines’ operating costs and the total annual industry bill was about $210 billion.

According to the World Air Transport Statistics, the top 10 airlines for tonnes carried, in ascending order are, Asiana Airlines, Lufthansa, Qatar Airways, Singapore Airlines, China Airlines, Cathay Pacific Airways, Korean Air, United Parcel Service, Federal Express and the number one airline is Emirates. For freight tonne kilometres, Cargolux appears in the top 10 at eight, displacing Asiana. Of the top freight carriers by tonne, only Lufthansa and Emirates are in the top 10 passenger airlines.

chicago o’hare boasts halfyear 8.5% jump

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diversity in markets and infrastructure big apple a juicy prospect despite drop the view from central asia

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Carnet victory for US air forwarders THE Airforwarders Association (AfA) has declared victory over the proposed tax and levy exemption changes for Admission Temporaire/Temporary Admission (ATA) Carnets which the AfA had said would hike up industry costs.

The ATA Carnets are an exemption from taxes and levies for items which are being shipped to the US, but are going to be leaving again after a short period. Carnet’s were designed by the US government’s Census Bureau’s foreign trade regulations for temporary shipments, such as trade show exhibits.

In July, the AfA said the ending of the exemption is likely to cause an administrative problem for freight companies in the US. Last week AfA announced that: “The Carnet exemption for goods leaving the US will remain in place.”

An example AfA had given was an unnamed AfA member that claimed it would need to hire seven or eight additional members of staff at an annual cost of $455,000 to deal with the change. At the time, AfA executive director, Brandon Fried, said: “Companies probably know what is coming, but do not know how much of a hardship it will be.”

New York REPORT

Big Apple a juicy prospect despite volume drop

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ew York has long been considered an important hub for cargo travelling in and out of North America with four international airports. Despite having John F. Kennedy International Airport (JFK) and LaGuardia Airport in the city, Newark International Airport in neighbouring New Jersey and Stewart International Airport upstate, New York has been going through tough times in the past few years. Freight volumes are down significantly on a decade ago and there have been complaints that the airports are not up to the standards customers would expect from the US. In New York governor Andrew Cuomo’s state-of-the-state address in January he said LaGuardia and JFK had been voted some of the worst airports in the US. He said: “That is a disgrace, my friends and it is unacceptable and it is going to change.” At the time of the state-ofthe-state address, an $8 billion investment was announced. It is to be spent over the next 10 years on New York’s airports including $3.6 billion redeveloping LaGuardia’s central terminal building and $2 billion for Newark’s Terminal A.

Room for improvement

American Airlines (AA) managing director of global accounts and sales strategy, Roger Samways, admits some of New York’s infrastructure needs work. “There are infrastructure issues, some of the roadways are not in the best shape. Some cargo facilities [at JFK] are pretty dilapidated, we moved a couple of years ago to new facilities at JFK which are much better.”

Between 2003 and 2013, total cargo handled for all four airports fell from 2.7 million tonnes to two million tonnes. International cargo fell from 1.5 million tonnes to 1.3 million tonnes while domestic dropped from 1.2 million tonnes to 700,000 tonnes. In the aftermath of the economic crisis of 2008, there is an increasing shift to belly operations. Station manager for JFK at CAL Cargo, Ruth Lamden says: “There has been a move from passenger narrow body to widebody, which is affecting yields, it is making freight operations much more expensive. It is a change we have seen over the past five to six years.”

Despite this, Lamden believes 2014 will be the year when the market picks up again, as developed countries come out of recession and consumer confidence gradually increases. She says: “2013 was a very difficult year. There has been some improvement, it leads us to believe 2014 will be a better year.”

Samways also believes 2014 will be a better year. He says: “We are optimistic, GDP [gross domestic product] figures for Europe and the US, unemployment is falling, performance in China in the last couple of months are encourag-

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ACW 18 august 2014

ing.” He says American Airlines has seen revenue grow by seven per cent with capacity growing four per cent. AA’s cold chain is proving to be so popular at JFK, it says, it is offering new facilities at Heathrow Airport and Philadelphia International Airport, while demand for automotive parts to Sao Paolo (Brazil) is growing faster than capacity. Vice president of cargo at Air Charter Service North America, Richard Thompson has noticed improvements in the past year. He says: “We’ve seen a 93 per cent rise in the number of flights, but for 36 months the market has had a positive upwards trend anyway, with volume increasing year-on-year. I believe the reason for the overall positive movement in the market is the upturn of the economy.”

Carriers need to specialise

CAL Cargo is focusing on live animals, particularly live eels and lobsters from Canada, pharmaceuticals and outsized cargo. Lamden says: “More and more businesses require freight at a high frequency, they need it fast and directly.”

CAL is upgrading its fleet with Boeing 747-400 extended range and Boeing 777 Freighters, which Lamden describes as a, “quantum leap” for efficiency, payload and fuel consumption.

American is updating its fleet with the introduction of 14 Boeing 777-300. Samways describes it as an, “incredible aircraft,” with a 45 tonne belly capacity, as well as passengers and luggage, which is proving to be invaluable, according to him. Even though freight figures are declining in New York, it remains a vital hub for the northern US and Canada. Lamden says: “We consider New York to be our home, JFK is the airport to be at, it has been good to us.”

Thompson says: “New York has no major issues when it comes to successfully conducting business.” Samways says: “It is very well situated, based on our experiences, we are satisfied.”

Despite the problems New York has gone through in the last decade, it is still a vital hub for the US and world economy. Doing business in the big apple remains a mouth-watering prospect.

samways

We moved a couple of years ago to new facilities at JFK