Erik Fraenkel has been leisure Cargo’s Man in Havana and everywhere else in Latin American for some time now.
     We caught up with Erik recently as he offered an inside look at a growing and diverse market that connects cargo aboard a group of air carriers that make up the leisure family.
     “Latin America has been developing quite well for leisure Cargo during the past two years.
     “We have increased our capacities with new carriers.
     “We are building excellent air cargo connections all over the place but especially into Latin America via Miami,” says Mr. Fraenkel, leisure’s Regional Director based in San José, Costa Rica.
     “Our business throughout Latin America is building on the strength of our worldwide reputation and with the addition of new service partners into the leisure family,” Erik said.
     Erik works for Ralf R. Auslaender (pictured together in 2007) who founded the company in January 1, 2000 for parent LTU.
     Today leisure Cargo is part of the giant Air Berlin and serves as both an important house resource and an ongoing success story for an impressive and growing list of airlines, the majority of which feature either discount or tour-based business.
     Keeping it simple has been job one ever since this long time cargo executive decided to focus exclusively on a completely overlooked market segment.
     In a nutshell, this “better idea” leisure cargo GmbH provides all carriers represented with the full logistical know-how from sales and handling contracts to road feeder services on a worldwide or regional basis.
     Erik however sees great advantage to focusing on a part of the world that is moving from sleeping giant to center stage.
     “Our business concepts have been very well accepted, we have been increasing our capacities and capabilities across the region and we have been successful in establishing good working partnerships with our customers and other carriers throughout Latin America.
     “As example, our partnership with DAE, a regional carrier based in Curacao, has worked well as a feeder from Colombia and Ecuador into leisure partner Arke Fly network, which of course serves Amsterdam among other places.
     “Also Air Europa that came on about two years ago as a leisure partner carrier for our total cargo services program has impacted our business flying mainly into Argentina, Peru where the exports have just been outstanding.
     “We are moving over a million kilos a month out of Peru with five A330 weekly flights, including perishables such as asparagus and mangos to Spain and elsewhere.
     “Our presence in the market is long standing, as prior to carriers such as Air Europa we had already been offering off-line services via Air Berlin Miami flights.
     “So our established relationships are now moving to the next natural step with the opportunity to offer direct service to many Latin destinations.”
     Erik Fraenkel is a twenty-year veteran of the air cargo business.
     In addition to DAE and Air Europa in Latin America, he is also the point man for the cargo operations of Condor, Air Berlin, Arke Fly and the 19 carriers that are part of the leisure Cargo family.
     He has been with leisure since LTU and the beginnings of the “total air cargo solution” concept, meaning that when this well-seasoned air cargo executive went to work, he was building his business from nothing, right from the ground up.
     His office base is Costa Rica, which is currently expanding staff to handle all manner of activities as business continues to build.
     “Our secret is really no secret at all.
     “We stay in touch with all our customers, staying close to GSAs whilst making sure that all customer needs and expectations are well satisfied.”
     We wonder if there are some things that Erik might like to see develop ahead.
     “Obviously the capacity leisure is bringing across the market afford us opportunities to build our services as never before.
     “We are looking at freighter feeders and de-feeders in some areas to interface with our main-line flights—Colombia to Curacao, as example, to feed Arke Fly back to Amsterdam, Mexico to Dominican Republic to interface with our 50 weekly flights that we have into four gateways in the Dominican Republic.
     “Upgrading communications is also a top priority right now.”
     On a to do or wish list, Erik confides:
     “I would like to rebuild our hub in Caracas, Venezuela with cargo from Colombia.
     “Strictly speaking, Venezuela is not an exporting country, but our services there and one way traffic into the country can be developed for air cargo.
     “leisure Cargo, it should be mentioned, is a lean operation and quite adept at adapting to any situation.
     “There aren’t layers of people at leisure so we get to issues and solutions quickly.”
     “Through the leisure Cargo network, we offer Latin shippers 175 destinations and via our hubs in DUS, AMS and UK we can basically connect easily with anywhere in the world.”
GeoffreyFlossie

     Anyone skeptical about the power and trading implications of China’s ‘Go West’ program need only listen to UPS’ Derek Woodward welcome the launch of the company’s new freighter service from Chengdu Shuangliu International Airport (CTU) at the end of July.
     The president of the company’s Asia Pacific business said the approval of Chengdu-Chongqing as an official economic zone had made the region highly attractive as a location for manufacturing. “We believe the area is poised for accelerated growth in logistics and transportation needs,” he added.
     He is not alone in that view. The capital of Sichuan province has a population of some 13 million people, not a huge city by Chinese standards. But foreign trade surged 36 percent in 2010 to US$32.8 billion as Chengdu rapidly emerged as a hi-tech manufacturing center. Chengdu Shuangliu International Airport is now the busiest airport in western China and China’s sixth busiest airport overall for both cargo and passenger traffic.
     Less than 200 miles away from Chengdu is Chongqing, a sprawling city-municipality. It boasts a population close to 30 million and the fast growing Chongqing Jiangbei International Airport (CKG), which handled around 180,000 tons in 2009, the last year for which figures are available. Already a center for the automotive industry, huge incentives were put in place to encourage its industry to move up the value chain. In the first eight months of 2010, exports from Chongqing rose 62.1 percent to $4.2 billion. The city’s GDP increased by 17.6 percent in the first half of 2010 to $54.51 billion.
     Both Chengdu and Chongqing are now attracting more dedicated freight capacity as demand soars. UPS’ “around-the-world” MD-11 flight through Chengdu, for example, originates in the U.S., flies through the company’s European hub in Cologne, Germany, makes a stop in Warsaw and then transits CTU before flying onto UPS’s Asia hub in Shanghai.

     TNT, meanwhile, launched a thrice-weekly freighter service between CKG and its air hub in Liege, Belgium, in October last year.
     Cathay Pacific is also looking at boosting its services to China’s fast growing interior industrial centers. At present the carrier operates two cargo flights per week to Chengdu using a passenger aircraft but uplifting only cargo, while for Chongqing, Cathay operates a twice weekly charter service on behalf of a freighter forwarder, a deal that was due to end in early August.
     “We are looking into operating scheduled cargo flights to both Chengdu and Chongqing,” said a spokesperson.
     Other regions will soon be on the radar as the Chinese government entices industry with lucrative incentives, and builds new and upgrades existing airports and other infrastructure in the interior, giving a vital ‘pull’ to businesses already being pushed away from the coast by rising land and labor costs.
     “For manufacturers with tight budgets for overhead costs, promises of lower land and labor costs in central provinces are quite alluring,” said one analyst. “Many big name manufacturers are already located or relocated in the region; Hewlett-Packard and Cisco have bases in Chongqing, while Intel’s assembly and testing facility and Motorola’s research and development center are located in Chengdu.”
     Claus Schensema, Managing Director of GAC Shanghai, said central Chinese cities were growing as manufacturing bases and were now offering higher wages to keep migrant labor in their areas. “Unlike 10 years ago, where all went east, now manufacturing is moving westwards,” he told ACNFT.
     “The future as I see it is the development of central China due to the prohibitive costs and near on 15-20 percent cost of living adjustments needed to keep professionals working on the eastern seaboard.”
     This will gradually see more foreign airlines follow the lead set by the integrators and carriers such as Cathay Pacific by setting up dedicated freighter capacity into central China’s leading gateways.
     Christian Hein, Vice President, Product Management - Air Freight, Asia Pacific at DB Schenker, predicted the “strong shift” of consumer electronics assembly into the Western regions in China, particularly cities like Chengdu and Chongqing, would continue to gain momentum through 2012.
     “However,” he added, “due to the lack of import volume in these markets, which are primarily export oriented, these markets will still have much room to grow to become major air hubs, and this will restrain foreign carriers from establishing comprehensive services out of these two cities.
     “At this stage, component supply logistics facilities for the consumer electronic assembly are being replenished by [Vendor Managed Inventory] VMI hubs in the coastal area.
     “Hong Kong, Beijing and Shanghai are used as a backup for overflow cargo originating from Western China. We expect this to continue for 2012 at least.”
     Thereafter, however, once imports do pick up as anticipated, the more balanced trade witnessed at coastal hubs would be replicated inland. “Increasing import volumes into the Western China airports will definitely lead to decreasing export rates,” said Hein.
SkyKing

     Air India is sinking in quicksand with each passing day. While its passenger business—both domestic and international—seems to limp on, its cargo business, once a bright star, is nowhere to be seen.
     Air India cargo’s downward saga began early last year when plans were drawn up to spin off the cargo business into an independent unit. The then-Air India Cargo Special Business Unit (SBU) head, Anita Khurana, (left) who has since superannuated, had announced the spin-off plan.
     “We plan to hive off our cargo business into an independent, autonomous business unit within Nacil (National Aviation Company of India, which was overseeing the merger of Air India and Indian Airlines) from April 1, 2010,” she once said and had even pointed out that a five-year road map had been drawn up.
     At that point in time, the newly-set up cargo unit was supposed to hunt out new markets and look after the cargo division with its fleet of eight planes: six Boeing 737s and two A 310s. On its agenda was the restarting of the international cargo services—which had been discontinued in September 2009—to the U.S. and Europe within six months.
     The plans, alas, still remain on paper. As the carrier struggles to lift its head from the spiraling debt that it finds itself in (among a host of other problems) the cargo SBU remains on the backburner. In fact, no one in the airline talks about it.
     Towards the end of last year, the knockout punch came when Air India announced that it planned to sell six of its Boeing freighters. Even before that, the decision to sell the A 310s had been taken.
     As of August 2010, the carrier had nine freighters – three A 310s and six B 737s. Of the 310s, two were not being used while one was operated for Aryan Cargo Express for some time (Aryan is also in hibernation, trying to gather capital to restart services). As for the Boeings, all had been phased out. These planes were converted to freighters in 2007 in the hope that Air India would start a domestic air cargo service using the Nagpur hub as the base. In fact, four of the A310s underwent conversion as freighters at a whopping cost of $40 million.

Arvind Jadhav, AI Chairman and Managing Director, poses beside the statue of Air India's founder, J R D Tata at the headquarters in Mumbai.  

     Obviously, no one has bought the planes. Today, Air India is strangely saddled with a problem that it does not know how to deal with: the freighters are too large for domestic operations and too small for international flights. Apparently, Air India is reported to have around 40-odd planes that were supposed to be used for cargo operations – once it started. These planes have been sitting idle on tarmacs around the country.
     It is anybody’s guess when Air India will restart its cargo operations. Its first priority is to get its own house in order and that too seems a far cry, what with its Chairman and Managing Director, Arvind Jadhav, under a cloud. According to a former Civil Aviation Minister and present Member of Parliament, Rajiv Pratap Rudy (he is from the opposition Bharatiya Janata Party), Jadhav’s appointment as the Air India head was not proper.      Rudy has gone on record to state that the Prime Minister’s Office had "manipulatively subverted" the appointment process. He has shot off a letter to Prime Minister Manmohan Singh, saying that "a close scrutiny of the minutes for appointment (of Jadhav) are shocking or rather appalling on how this appointment for an extremely challenging job post-merger (of Air India and Indian Airlines) was executed manipulatively subverting all norms of appointment."
     Arvind Jadhav became Chairman and Managing Director (CMD) of Air India in April 2009. A career bureaucrat from the Indian Administrative Services, he was selected without possessing any "domain experience." Rudy also said that an earlier appointments committee had not chosen Jadhav in 2008 on the ground that, though he was the "best among the available candidates" in the panel of seven shortlisted persons, he had no experience. "However, in view of complex administrative issues in the area of personnel and finance management arising out of the merger of the two airlines (Air India and Indian Airlines) and the consequent need for experience in the civil aviation sector, the Committee decided that further deliberations be undertaken about the choice of the candidate," the letter to the Prime Minister stated.
     Even as all this is going on, the Indian government recently approved a cash aid of $269 million for the cash-strapped Air India, which has been in the red since 2007. This was in addition to the $111.62 million given to Air India sometime ago, at the beginning of this fiscal year – for India it starts on April 1. In the last fiscal year, Air India had a loss of $1.23 billion.
Tirthankar Ghosh

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