GSSA Goes All In Rates

     The list of mandate airlines served by general sales and service agent ECS Globe Air Cargo Germany is quite impressive.
     It includes Brussels Airlines Cargo, Delta Cargo, Mexicana, El Al, Ukraine International Airlines, Gulf Air and Hainan Airlines just to name a few clients. Most of them are important accounts that opted for collaboration with sales agent European Cargo Services for filling the freight compartments of their aircraft with shipments. But having contracted a customer doesn’t necessarily mean having the catch on the hook for a longer period of time. For many cargo carriers tend to change their GSSAs now and then.
      A normal habit and market behavior, confirms Flavio Renfer, VP Business Development & Customer Relations at GSSA European Cargo Services (ECS). “Adding a new client to a GSSA’s portfolio is one task, keeping the partners on board for a longer period is another and often a much more difficult topic,” states the manager.
     So far no single carrier has ever quit Globe Air Cargo Germany. The only exception one might consider was Brussels-based Cargo B. The carrier however, went broke last year.
     “We are very proud having long binding relations with our customers. These ties are evidence of a trustworthy and obviously successful relationship,” the manager says.
     However, he also raises his voice to criticize the price policy of many air freight carriers. Instead of dividing their revenues into rates per kilogram, plus fuel and security surcharges, they should offer all-in rates, he urges.
     By doing so air freight pricing would become much more transparent along the supply chain. “If I go to a supermarket to buy some food or beverages they don’t charge me any extra money for the transport of the goods from origin to their facility due to higher fuel costs or securing them from theft. These and all additional services and costs are included in the price that’s printed on the package.”
     Cargo airlines should take supermarkets as example for their future billing, suggests Flavio. Especially since the “holy cow” fuel surcharge is becoming increasingly negotiable nowadays. “Many airlines offer major forwarders that contribute high and steady volumes some interesting discounts either with special rate agreements or lower surcharges. Whereas smaller players with comparably little tonnage get no reductions on fuel surcharge but have to pay the full amount instead.”
     ECS is not the only GSSA urging the carriers to rethink their price policy. The entire guild of sales agents is in favor of this reform. One good argument for all-in rates is the improved cost visibility for shippers, forwarders, sales and service agents and consignees, the other, more cash for the GSSAs.
      “Presently we only get commission on net rates, not on any surcharges,” complains manager Renfer. A matter of fact that led to a severe financial bleeding of the GSSAs due to dwindling transport rates since the outbreak of the global crisis in mid-2008 and hence less income. Certain areas are sold for 10 cents per kilogram plus surcharges.
      “Our earnings have declined substantially ever since, but we remain profitable,” confirms Flavio.
     It should be in the airline’s own interest to cooperate with sales agents, he says. In the first place because more and more air freight carriers tend to outsource their sales business. The second argument is that the per capita revenue which each sales and service agent generates for a mandate airline beats by far the revenue which the carrier’s own sales personnel contributes.
     “That’s evident and a strong argument on the GSSA’s side when partnering with an airline,” emphasizes Flavio.
Heiner Siegmund

     UPS Intra-Asia Hub at South China’s Shenzhen Airport opens tomorrow February 9, and with no doubt, the airport expects a remarkable growth of its mail and cargo volume in this new year, especially on international routes.
     During a telephone interview with Mr. Luo Yi, Board Secretary of Shenzhen Airport Co. Ltd, Air Cargo News FlyingTypers had a chance to get a full picture of the airport’s cargo business.
     “Our neighbor airport, Guangzhou Baiyun Airport has seen big growth brought by the opening of Fedex Asian Pacific hub at the airport in 2009, and we think this will also happen in Shenzhen Airport after the UPS hub is put into use this month.”
     According to the plan released before, UPS Intra-Asia Hub will execute no less than 108 all-cargo flights per week at the airport, but is there any change when this day really comes?
     “The actual flight numbers at UPS hub will be less than what had been precously announced. UPS is moving a complete cargo network to Shenzhen Airport, and how many flights will be launched really depends on the Marco-economic environment. Unfortunately the air cargo business in the world has endured tough times in the past two years.”
     “But I believe the number will reach the original target step by step, as the economy recovers.”
     To the airport, UPS means much more than increased all-cargo flights landing and taking-off at the airport.
     “UPS is a leading player in the industry, not only its scale of fleet, but also its efficiency. The operations of UPS at Shenzhen Airport will motivate other cargo carriers at Shenzhen Airport to improve their efficiency.
     “The increased efficiency of these carriers will bring more cargo business for the airport. And this is what the airport expects most from the coming of UPS.
     “To tell the truth, in economic terms, the UPS hub itself would not bring much revenue to the airport, as the carrier will handle everything by itself.
     “We also hope the coming of UPS will help to improve the efficiency of local customs clearing.
     “We had planned for a 24-hour customs clearance operation but were unable to provide enough air cargo goods to persuade local customs to launch this service. The opening of UPS hub will make this happen in 2010.”
     The economic downturn has not only affected UPS at Shenzhen Airport, but also Shenzhen-based Jade Cargo International, a joint-venture all-cargo carrier of Shenzhen Airlines and Lufthansa Cargo.
     Instead of expanding its fleet as originally planned, the carrier has deployed some of its existing six Boeing 747 freighters out of Shenzhen, to exploit more cargo need at Shanghai and Tianjin, Mr. Luo told ACN Flying Typers.
     The airport is currently launching a great expansion package with a total investment of RMB8.47 billion (USD1.24 billion), including its third passenger terminal and also a large cargo zone.
     Mr. Luo introduces the layout of the cargo zone in this expansion plan.
     “The expansion project is scheduled to be completed in August 2012, part of which includes a plan for an area of 1 million square meters for air cargo development. And in the long run, let’s say by 2020, a larger cargo zone will be reserved for carriers based in Shenzhen Airport, with land reclaimed from the sea. By then, the airport will have a designed capacity of handling 2.4 million tons of cargo a year.”
     “However, unlike the passenger terminal which will be a one-off construction process, warehouses on the cargo zone will be built step by step to cater to the demand.
     “The exact scale of warehouses to be built in this three-year expansion project still is not clear, but I expect that new warehouses capable of handling around 400,000 tons cargo per year is a reasonable estimation.

     “Shenzhen airport currently has an annual capacity of processing 1 million tons of cargo, while the actual volume handled in 2009 is slightly higher than 600,000 tons, a number that is 1.2 percent higher than that in 2008.
     “There are now three cargo terminals at Shenzhen Airport, Mr. Luo told ACN Flying Typers.
     “One terminal is for domestic cargo, which currently is the largest percentage of cargo business at the airport, with the proportion in 2009 amounting to over two thirds.

     “Another is for China Southern Airlines, which exclusively uses the terminal to handle its own cargo, consisting of around one sixth of the airport’s cargo volumes in 2009
     “And the third is joint ventured cargo terminal of Shenzhen Airport and Lufthansa, processing all international cargo of the airport. But this part experienced a sharp downturn in 2009.”
     Another news of note is that Shenzhen Airport just put into use its first non-local cargo terminal at its neighbor city Dong Guan on January 21, 2010.
     “The Pearl River Delta Region is now emerging as an integral cargo market, with cargo resources to the airport that own well-developed cargo flight networks.
     “Typically, international cargo tends to flow from north to south, pooling at Hong Kong Airport; while domestic cargos flow just in the opposite direction. Shenzhen Airport geographically is located in the middle of this cargo flow route, so we must set up ground services to attract more cargo resources to Shenzhen.
     “This is much like what we have done for passengers in other cities, establishing more than ten non-local passenger terminals in neighbor cities to facilitate and attract passengers to Shenzhen Airport.”
     Looking forward, Mr. Luo said:
     “Construction of the expansion project will not affect the operation of existing terminals and runway at Shenzhen Airport, but the limited capacity of only one runway has become more of a bottleneck.
     “Since there is no more capacity to launch more flights during daytime hours, we will encourage airlines to employ larger jets on some routes, offering more bellyhold capacity for air cargo.
     “Meanwhile, we will continue to stimulate interest to attract new all-cargo flights, especially on international routes, which require service only at night. We still have plenty of capacity to accommodate these services.”
David

Why China Is On Upswing Now

      China’s National Bureau of Statistics reports November industrial output rose 19% y-o-y in real terms. On-year growth accelerated sharply from the previous month (16% in October). Industrial output also increased more than 1% m-o-m. Recoveries in the domestic economy and the global economy helped boost industrial growth.
      Retail sales, an indicator of domestic consumer demand trends, rose about 15 % y-o-y in real terms last month, although November retail sales were down slightly month-to-month. Official figures for retail sales are notoriously suspect, because measuring is difficult as companies in the retail sector tend to be small and street selling is common in China. Moreover, official figures include a certain amount of wholesale business.
      The soaring growth in fixed capital investment in 2009 had been largely supported by the government’s massive stimulus package. Although the pace of investment growth remained high, it had slowed a bit from September’s peak. On a positive note, official figures suggest private firms are gradually increasing their investment in capital assets; in the first half of the year 2009, capital investment was largely state-driven.
      Steadier growth was registered in Chinese exports and imports in October and November. The value of imports in November was approximately $95 billion. The seasonally adjusted value of imports remained at this level for the period September through November.
      On-year growth was 26%, reflecting the collapse in China’s external trade last year. Although the value of imports end of year 209 was still 10% below pre-crisis levels, import volumes are already higher than in the final months of 2008. The revival of imports to China has mainly come from raw material markets. Several investment banks have raised their forecasts on iron ore contract prices for 2010 to reflect a huge jump in Chinese demand.
      The value of China’s exports climbed to $114 billion in November. Over the 4th quarter, however, the seasonally adjusted value of exports had remained flat. Exports were in a tailspin in November 2008, so the current level shows a return to roughly the same level as December 2008, but still well below pre-crisis peaks.       The trends in Chinese exports over November-December period, however, indicate a slow and halting recovery of international markets.
      China’s trade surplus for the first eleven months of last year was about $180 billion.
      While the surplus is still impressive, it was nearly $80 billion less than in the same period a year earlier.
GF

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