Vol. 11 No. 19                                                                                                                Friday March 2, 2012

     Throughout 2011 and now into 2012, Air Cargo News FlyingTypers has led the way in tracking the latest changes impacting air cargo lanes in China. As last year progressed and finally concluded, some trends became more pronounced, particularly the rising demand for imports, which enabled carriers to partially offset the bearish export market.
     But pinning a uniform tag on export lanes has been difficult. While southern China, the traditional manufacturing powerbase, has generally struggled this year, volumes out of central, northern, and western China have been surprisingly perky. With 2011 drawing to a close, we asked leading air freight forwarding executives to explain what were the causes behind the structural changes in air freight flows to and from China, and whether we’ll see these trends accelerate or slow as 2012 moves along.
     We spoke with Alwyn Mendonca, GAC Managing Director, South China and Hong Kong; Wenjun Li, Head of Air Freight at DHL Global Forwarding China; Robert Timmerman, Panalpina Area Manager, Greater China; and Claus Schensema, Managing Director, GAC China, about how air cargo service demands to and from China fared in 2011 and how well they would fare in 2012.
     Both Mr. Li and Mr. Mendonca were optimistic regarding demand in 2012. Mr. Mendonca saw volumes increase from Central and Northern China; however, “It is a very different story for Southern China and Hong Kong, where there has been a drastic drop in volumes this year,” he said. He forecasted that drop to continue in 2012, adding, “Customers are generally more cautious and are keeping their inventories to a minimum.”
     Mr. Timmerman expressed that China “has seen a much higher growth rate on its imports,” and believes that the trend will continue “given the strong domestic demand and the 5-year plan of the Chinese government.”
     “Over time, there will be a balance in trade on the outbound versus inbound volumes and, ultimately, even an imbalance with higher imports than exports,” said Mr. Timmerman.
     For now, it seems imports are a stronghold in China. “Import is our primary source of revenue growth. For the foreseeable future, we are continuing to focus on imports for niche markets such as the automotive, oil & gas and tooling industries,” said Claus Schensema.
     More balanced trade is beneficial to both companies and customers in a number of ways, not the least of which is in freight rates.
     “Greater balance of payment between countries gives GAC better cash flow. Our customers who rework products before exporting them to third party countries also stand to benefit,” said Mr. Schensema.
     Mr. Timmerman sees balanced trade as one hand washing the other, with balanced trade helping carriers “as a higher yield opportunity will exist on both inbound and outbound.
     “To date, carriers have to a large extent depended on the outbound yield. Increasing revenue streams on the inbound may make the carriers apply more lenient export rates.
     “However, the presently applied rate levels are far below the cost of the carriers. Hence, upward adjustments will be needed to ensure the carriers’ survival,” said Mr. Timmerman.
     Wenjun Li sees capacity imbalance as a primary cause for freight rate hikes in outbound cargo. “With more balanced trade, the cost for outbound transportation can be lower. “Carriers will also be able to invest in new aircraft that are more cost-efficient such as the B747F-400 and the B747-8, which can help save on unit costs with optimized loading and round-trip volumes,” said Mr. Li.
     With increasing demand from areas other than the coast, many are working hard to ensure capacity is being met for these inland areas.
     “We’ve seen demand from west and inland cities increasing. We are working closely with both carriers and customers to handle the increasing capacity. The surge is primarily in outbound and not inbound,” said Mr. Li.
     “GAC has achieved phenomenal growth over the past two years, especially in Chengdu.
     “We shall continue to focus on Central China, especially Chengdu and Chongqing,” said Claus Schensema, Managing Director, GAC China.
     The real challenge faced by those moving more and more goods in and out of China is adequate capacity in terms of both cargo aircraft, designated cargo facilities, and flight permits.
     “The lack of wide-bodied cargo or passenger aircraft permitted to fly on domestic routes represents a real challenge,” said Mr. Schensema.
     “This issue was again raised at the recent Shanghai Freight Forwarders’ Association forum, and the Civil Aviation of the People’s Republic of China has made a commitment to look into the matter.
     “Once wide-bodied aircraft are permitted to fly these routes, pricing and cargo facilities will become more competitive,” concluded Mr. Schensema.
     “Airports like Chengdu, Chongqing, Wuhan and Zhengzhou will see an increased main deck capacity to support the export demand,” said Robert Timmerman, Panalpina Area Manager, Greater China.
     “To some extent, the yield a carrier can gain in operating from these airports is higher than operating from the main gateways on China’s coast.
     “Carriers are looking for new revenue streams because the slow global economy has led to a shortfall in volumes and the present rate erosion.
     “Panalpina has set up offices in the aforementioned cities. We are thus in a very good position to support the business development of our customers,” said Mr. Timmerman.
     Mr. Li is optimistic that capacity needs are being met: “Plenty of aircraft capacity has been injected into China markets. Local carriers have increased capacity for the west and inland lines, as government policy has encouraged local carriers to develop transportation for the western and inland cities.”
     Fortunately, the increasing volume of shipments is not being negatively affected by equally increasing rates.
     “With the Chinese government’s Go West Policy, the rates for the west and inland China lines will be reduced with more carriers coming into the market.
     “With favorable local customs policies, more direct shipping to final destination is also encouraged,” said Mr. Li.
     The final step in making China run like clockwork will be in refining freight hubs so that they meet the standards required by modern supply chains.
     “At present only air freight hubs such as Shanghai, Beijing, Tianjin and Guangzhou (PVG/BJS/TSN/CAN) can meet the requirements of short lead times, with airports in inland and west China still in need of further development to meet time critical requirements,” said Mr. Li.
     All in all, the future for China is looking good, and 2012 being the year of the Dragon, one can only imagine it will get better and better
Sky King/Flossie



     Some 500 people got together for this event, which was hosted by the Atlanta Department of Aviation, the Metro Atlanta Chamber, and the Atlanta Air Cargo Association at the North Cargo Building. UPS even made an MD11 freighter available for visitors and Atlanta mayor Kasim Reed was on hand to greet the crowd and honor the award recipients for freight forwarder, trucking company, and airline of the year.
     Mayor Kasim Reed and Hartsfield-Jackson Atlanta International Airport officials took the opportunity to announce that Air France-KLM Cargo and Martinair Cargo plan to begin twice weekly scheduled air cargo service into Atlanta on March 27, in addition to existing passenger service. Air France Cargo previously had service at the Airport from 1997 to 2009. The Boeing 747 freighter will fly directly from Paris to Atlanta.
     "I am pleased that Air France is choosing to grow its cargo business in Atlanta," Reed said. "Air France's decision to begin all-cargo air service into Atlanta furthers our position as one of the world's premier logistics hubs. Air cargo is important to Atlanta and the southeastern United States, and it is critical to our continued growth and success as a city and a region."
     The estimated annual economic impact of these flights is $8 million to $12 million on metro Atlanta and the Southeast, as well as the creation of six jobs.

Left to right—Adi Selimovic, manager cargo sales-Asiana Airlines and Alain Pages, vice president cargo, USA, Air France KLM.

     "We are very pleased to welcome Air France freighters back to Atlanta after an absence of three years," said Alain Pagès, vice president-sales USA.
     "These new flights are made possible through our close working relationship with Delta Cargo and will offer our customers in the southeast US greater access to our global array of products and services."
     Some twenty companies had stands at the exhibition to promote their services, including the Airforwarders Association, TIACA, Asiana Cargo, IAG Cargo (BA & IB), Delta Air Lines, Cathy Pacific, Cargolux, Lufthansa Cargo, Qatar Airways, Southwest Airlines, United Cargo, UPS, Virgin Atlantic and CBP, DGM USA Atlanta, Forward Air Globe Air Cargo, and JP Hall Express.
     Voting was conducted online and the envelope with the winning names was brought to the podium by a robot!
Ted Braun

     Come 2013, India will join the US, Japan, and Europe, as it steps into a select field of aviation with its GPS-aided, geo-augmented navigation system (GAGAN) in place. The system—being set up by the Airports Authority of India (AAI) and the Indian Space Research Organisation (ISRO), along with Raytheon—will be operational by late 2013 or early 2014. Once that is done, flights originating from India or overflying India, the Indian Ocean from Southeast Asia to Australia, will be safer and more environment-friendly.
     Gagan will ultimately comprise three geo stationary satellites, 15 reference stations, two master control stations and three uplink stations. The AAI recently linked more than a dozen ground stations to one of the ISRO’s geo satellites. Signals from the satellite are being tested for ‘standby testing’ or ‘redundancy testing.’ According to AAI officials, ‘standby testing’ in aviation is important because ground stations are needed (three of them) for positioning and routing an aircraft when it is in Indian airspace.
     This year, in March, ISRO is scheduled to send a GSAT-10 spacecraft that will transport 12 C Band and 12 Extended C Band transponders as well as a GAGAN payload. This will be followed in 2014 by another satellite with a GAGAN payload—the third one. GAGAN's geo satellites will use the C band that is usually used for telecommunication and the L band utilized by EU's Galileo satellite navigation system. These satellites and ground stations will keep track of an aircraft's speed, altitude, position, and route and cross check for accuracy.
     India would become the fourth in the world to adopt the GPs-aided system, which will enhance the accuracy and integrity of GPS signals to meet precision approach requirements in civil aviation. The system will be compatible with other SBAS like WAAS of the US, the European Geostationary Navigation Overlay Service, and the Multi-functional Satellite Augmentation System of Japan, providing seamless air navigation service across regional boundaries.

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RE: Man Bites Dog

Hello Geoff,

     Your "Man Bites Dog" story reminds me of where the priority historically lies with the airlines, and that is the movement of passengers.
     The exception is KLM that pioneered the transportation of animals by air.
     The Dutch airline treated both the two-legged and four-legged variety of flyers with equal aplomb, ensuring a safe and comfortable journey at competitive prices. With beef tongue in cheek, the airline internally circulated a doctored cover of an early eighties edition of Air Cargo Magazine (below) satirically underscoring where its priorities lay.
     I think airlines today are barking up the wrong tree when it comes to the movement of pets.

Don Palmer
KLM (GM ret.)

Dear Don,
     Great to hear from you.
     In 1997 when I created the picture book history of KLM Cargo for Jacques Ancher titled True Blue, which appeared in English and Dutch, I recall learning many things from several “Blue” KLMers like Jan Kok, who dated his operations service at Schiphol back to the 1950s.
     During that time we would sit in his home in Hoofdorp and drink Heinekens in the afternoons and oh, the stories Jan would tell.
     Like the day in 1924 when KLM carried Nico the bull on a Fokker F-7 from Rotterdam to Paris.
Guys like Jan (and later, Jacques) “bleed blue.”
     No doubt the KLM Animal Hotel at Schiphol, which dates back to the earliest days of air cargo, pioneered the form for animal handling everywhere.
     Once aboard the JFK/AMS run, while the night continued and passengers’ dinner was served, Combi handlers were laying out a main course meal for some thoroughbreds that were just behind a partition of our B747.
     There was contentment up and down the aisles and across species while the Flying Dutchman sailed through the air.
     Have always been quite proud to think that once upon a time, KLM operated a Fokker F-36 called “Arend,” a big airplane and the only one ever built just before the carrier moved over to Douglas DC2.
     Thanks for the memories and keep well,

Best greetings,

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