Looking at these actors re-enacting Rembrandt’s “Nightwatch” painting at a soccer match in 2005, we are reminded that unlike air cargo, ocean shipping has enjoyed special protection to set rates for quite a long time.

     Following lengthy investigations in a number of jurisdictions, forwarders and airlines have been racking up some seriously large fines after being found guilty of price fixing during the 2000s. In the U.S. a number of executives have also been handed prison terms.
     The long-running international investigations serve to remind that it is not only bankers who have an aversion to abiding by the law, although very few bankers have faced incarceration.
     The message has certainly hit home: any breach of anti-trust law will be eagerly seized upon by prosecutors only too happy to mine this new source of positive publicity and easy revenue. Appropriate safeguards have since been put in place across the industry to prevent a recurrence.

     Shippers were the first to laud the actions of prosecutors for taking such strong action on anti-competitive behaviour (although some also wonder if the levies rushing into government coffers will ever be funnelled back to those who actually suffered from anti-competitive practices). More pertinently, some also ask why anti-trust laws are applied so differently to the airline and ocean shipping industries?
     Unlike the airline industry, container shipping has a long and successful history of sailing clear of anti-trust legislation. Lobbyists have argued for centuries that the high cost of investing in ships, and the valuable services they render in the name of smooth global trade, makes liner shipping a special case. Their success in convincing legislators they were right spawned the ‘conference’ system, which allows lines to join together to discuss rate levels and capacity management – in short, exactly the sort of collusion that is costing forwarders and airlines so dearly.
     "Maritime shipping is the only industry that allows a price-fixing body to establish charges which are anti-competitive," points out Sunny Ho, executive director of the Hong Kong Shippers’ Council.
     For shipping lines, however, the regulatory tide is slowly changing. Back in 2008 the EU banned carriers from colluding on freight, fuel and terminal charges on trades to and from the EU. This was a huge body blow to the liner industry, with august bodies such as the Far Eastern Freight Conference (FEFC) and the Transatlantic Conference Agreement (Taca) immediately consigned to history. Since then lines have been allowed to collaborate through consortia and alliances to co-ordinate EU routes and schedules, but banned from signalling their pricing intentions.
     Many predicted the ban would lead to a swift end to conferences as other legislators took similar steps.      However, in the U.S. the Federal Maritime Commission continues to allow lines to signal pricing intentions through ‘Stabilization Agreements’. Elsewhere, particularly in Asia, the conference system has continued largely without reform.
     But the liner conference system is now under further attack outside Europe. Both Chile and New Zealand are looking to revise anti-trust laws for merchant shipping, much to the consternation of shipping bodies.
     The International Chamber of Shipping, which represents more than 80 percent of the world’s merchant shipping tonnage, has urged Chile to shelve reform plans and continue to allow ocean carriers to cooperate in rate-setting conferences and consortia. Antitrust immunity “yields net benefits to shippers, exporters and consumers in Chile”, said the ICS.
     John Lu, Asian Shippers’ Council chairman, disagrees claiming conferences are a simple tax on shippers and consumers. He also believes antitrust exemptions prevent the liner industry from addressing structural issues by unfairly protecting weaker companies from free markets, thereby building in rate volatility and encouraging over-investment in capacity.
     Lu has called on Asian governments to follow the EU and abolish liner exemptions from competition laws.      “We feel this is the only way we can stop lines acting as cartels,” he said.
     If his call is heeded shipping lines could soon find themselves in a very peculiar boat - squashed in with their forwarder and airline peers and with far lighter wallets.
SkyKing

     HACTL says air freight performance is indicative of the global economy, but the long-term future is coming up roses.
     FlyingTypers recently had the pleasure of chatting to Lillian Chan, Executive Director of Hong Kong Air Cargo Terminals (HACTL), just after HKIA’s largest handler released its half-yearly tonnage figures.
     Given that HACTL handles around 80 percent of the cargo received at the world’s largest cargo airport and meets the needs of some 100 airlines, she said the negligible growth achieved in the first half of the year was indicative of global economic health.
     “Airfreight continues to be a barometer for world trade, and the needle has now swung back,” she said.
     “All trade comes and goes in cycles, and this is a down-cycle. It will be followed by upswings in the future.”
     She said that while exports had shown some growth in the first half of the year, different markets had produced vastly different results. “The weak areas have been Europe and the USA, which continue to be our largest markets, but happily other markets have counteracted this,” she added.
     “A small surprise has been that Europe’s weak Euro has not boosted their exports.”
     Imports received from Europe contracted by -13.3 percent year-over-year in the first half of the year and total imports fell by -7.8 percent, with lower Chinese demand a major factor.
     “There is no question that the first phase of China’s consumer revolution has passed,” she said. “Demand is still strong, but was never likely to continue at such a pace.”
     The fastest growth was evident in the Middle East and South East Asia, which saw export tonnage increases of 10.4 percent and 13.4 percent year-over-year, respectively. Imports followed the same trend, with the Middle East and South East Asia showing increases of 27 percent and 12.1 percent respectively in the first half of the year.
     “Stronger economies and increasingly-sophisticated consumer tastes driven by increasing disposable incomes are clearly driving demand for typical airfreight commodities [from these regions],” said Chan.
     “When you look at the world’s most successful airlines, many are based in these regions—always a sign of economic strength.”
     Chan remains positive about long-term growth at HKIA. On that basis, HACTL recently invested some USD$31 million in COSAC-Plus, its new bespoke cargo management system. She said the system would not only help improve HACTL’s performance, but also make its airline customers more efficient and customer-friendly.
     “It is multilingual and comes with a full web interface, online help, and personalization capability,” she said.      “It handles images for the first time, and has comprehensive cargo tracking features. Its modular and open architectural design facilitates e-Freight, ease of customization, and integration with airlines' own systems.”
     Chan also supports the construction of a third runway at HKIA, which she believes is critical to HKIA maintaining its position as a gateway for Mainland China and a regional hub for Asia.
     “It is less a matter of what benefits we will reap, and more a matter of what is essential for the future of Hong Kong,” she explained.
     “For a major airport to be successful, it must give airlines the infrastructure and capacity to grow. If they feel constrained through restricted operating hours or slots, or they get negative feedback from passengers regarding terminal congestion or flight delays, they look for better alternatives.
     “Unless Hong Kong receives a third runway, it will be unable to accommodate airline growth. It will not simply stand still. It will lose its international hub status to other airports in the region.
     “The impact on Hong Kong’s economy and employment, and on HACTL, would be dire.”
Although the completion of Hong Kong Zhuhai Macao Bridge and the Hong Kong Shenzen Western Express in 2016 will further improve connectivity with South China and could give rival airports access to HKIA’s core customers, Chan said it was more likely that HKIA would emerge the winner from any cargo scramble.
     “Where are airlines more likely to place their services in the future?” she asked. “Because of its location, range of destinations served, regional hub status, interline opportunities and English language we think they’ll go to Hong Kong.
     “Any improvement in communications with Hong Kong’s hinterland can only be good for the airport and HACTL.”
     To that end, HACTL has been improving its services offered via Hacis, its added-value logistics subsidiary, which operates daily express road feeders to and from IATA-designated Inland Cargo Depots at six key locations throughout the highly-industrialized Pearl River Delta and Fujian Province regions.
     “This enables carriers to add six destinations to their tariffs and so make better use of their capacity to and from Hong Kong,” she added.
SkyKing

     In case you missed it, the big game changers of Summer 2012 were not only the athletes at the Olympics, but also Lufthansa German Airlines, which put on daily A380 flights between New York’s JFK International Airport and Frankfurt Am Main.
     Lufthansa’s A380 moving every day across one of the most heavily traveled air lanes in world is a hopeful and uplifting example of building the future for commercial flight.
     While lifting spirits, today it is also a spacious traveling experience; the interior layout trades in the slotted, impersonal, “gimme my space” cabin concept, preferring instead a more relaxed, expansive atmosphere where fellow travelers are in touch, but with plenty of elbowroom.
     For example, translucent blue screens separate the cabins on the upper deck of the Lufthansa A380, offering a break in the long tube layout while also revealing what is going on elsewhere—human shadows dance fore and aft, revealing couples in conversation—laughing, drinking, sleeping or buying a watch.
The experience adds spirit to the ride as we cruise along at 575 mph.
     Apparently Lufthansa, spirited by the success of A380, already has a second-generation, business class interior in the works that will elevate comfort even further, with lie-flat seating and other enhancements.
     But however the interiors evolve, the aesthetic and feel aboard this airplane is like the social network at work—a voyage of face-to-face discovery.
     Imagine what that might mean to the generations and cultures of people flying between cities everywhere in the world today.
     Outstanding crews aboard the new A380 are a definite plus, as obviously Lufthansa has promoted from within, bringing a combination of seasoned professionals alongside the best and brightest of the airline.
     The menus are also worth some recognition—standard fare is kicked up a notch, delivering a lip-smacking, culinary selection from Toni Robertson, Executive Chef at the Mandarin Oriental in New York.
     As we pushed back from the gate in New York, we noticed another Lufthansa plane nesting amongst all the little birds at Terminal One JFK.
     After buckling up, we quoted an old vaudeville gag to no one in particular:
     “Look at all those people—they look like ants.”
     A flight attendant within earshot looked out a window and said:
     “Those are ants—we haven’t left the ground!”
     That’s how it goes when you fly Lufthansa’s A380 game changer.
Geoffrey/Flossie

RE: High Times For India

Hi Geoffrey,

     Just I thought I should bring it to your notice that the article published on August 09th under heading “High Times for India” that showed a project cost in Rs. of 3,77,275 crore only showed ($66,900) in bracket; it should have clearly mentioned equivalent to i.e. $66,900 million or simply $66.9 billions.
     As usual the article is informative in providing knowledge of the upcoming project.
     Thanks.
Best Regards,
Gajanan Golatkar
Vice President , Clearship Group
Dixons Cargo Consolidators Pvt. Ltd,

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