Vol. 8 No. 104                                                                  WE COVER THE WORLD                                 Wednesday September 30, 2009

 

Editor’s Note:
     Now comes the traditional Christmas year-end business rush and next comes the first quarter of 2010.
     To answer the question of how has the yearlong business slide impacted air cargo and looking ahead what is likely to happen—Air Cargo News FlyingTypers begins a new series where we talk to everyone we can, to get the word up and out.
     To begin with, we hear from three industry giants, American Airlines Cargo President Dave Brooks, Emirates SkyCargo Divisional Senior Vice President Ram Menen and Chapman Freeborn CEO Russi Batliwala who answer three direct questions, directly.
     Our second piece, tracking what’s up and likely to happen is from Gordon Feller in the form of a brief overview of Hub Panama and what the gateway has done to take advantage of a tough situation by being ready as business prospects brighten.
Rise Of Fall In Air Cargo


Russi Batliwala


Ram Menen


Dave Brooks

Dave Brooks—President American Airlines Cargo

FT:   How has 2009 been so far?
DB:   Business-wise, awful.
     Beginning about a year ago, traffic started to stall at an accelerating rate. We tried to hold onto already depressed rates until the 2nd quarter, but then were forced to make very unrewarding rate adjustments owing to competitor folly and shipper pressure on forwarders.
     When it came to pricing, it was equally painful saying “yes” and it was to say “no.”
FT:   What lies ahead for Q4?
DB:   We’ll see some inventory rebuilding, and some firming where freighters once were.
     But we’re at the mercy of our dumbest competitor when it comes to pricing and I’m not optimistic we’ll see rates becoming compensatory this year.
FT:   How does early 2010 look?
DB:   We’re always spooked when the new year’s numbers come in, and I expect nothing different in 2010.
FT:   What is something(s) AA Cargo has done to weather this business climate?
DB:   We’ve had to close down a number of domestic airport locations and capture that traffic at lower cost shared trucking facilities.
     Customers don’t really see an impact but we’ve had to lay off nearly 400 employees due to lower freight volumes.
     On a more positive note, we launched a new temperature controlled product called ExpediteTC which has been very well-received by the market.
     The pharma customer group has shown more resiliency in this economy so we hope this product will help stabilize our volumes.

Ram Menen —Divisional Senior Vice President Emirates SkyCargo

FT:   How has 2009 been so far?
RM:  Given the economic challenges that the world is going thru, the lesser said about this year the best!! Our volumes have been quite flat compared to last year, which is not bad given the circumstance, however, the revenues are down in double-digit percentage terms.
     Excess capacity with lower demand has created a competitive environment that the air cargo industry… in fact, the entire transportation industry… has never witnessed before. Interestingly these challenging times have also clearly established who our real friends and partners are. I am glad we have more good friends and partners and we are looking forward to a great future with them as we come out of these tough times.
FT:   What lies ahead for Q4?
RM:  The markets, so far, have done exactly what we had predicted and we are seeing some green-shoots, which we hope, will lead to a gradual turn around. At this stage we are still holding on from getting very excited and are hoping the current activity is not a short term one. I am a bit concerned about the current parity of the U.S. Dollar with other world currencies and the effect it could have on oil prices. Having said that I am still cautiously optimistic that last Q will be a lot stronger than last year and it will help us to come closer to parity after having tracked negative growth worldwide for the last 3Qs.
FT:   How does early 2010 look?
RM:  I am hoping that the recovery process will continue that by 1Q 2010, the air cargo market will be in positive territory compared to 1Q 2009. I expect the overall 2010 to be positive on 2009. This will take out the excess capacity in the market and we can all start seeing sustainable growth/existence. The worst is definitely over.
FT:   What is something(s) EK Cargo has done to weather this business climate?
RM:  Like everybody else, we have been on a major cost containment programme to ensure survival thru these difficult times. We have been working closely with our partners and customers to ensure that the quality of our product does not suffer in any way. In fact, with all what we have been doing, our product quality has been at its best ever. This has been achieved by optimizing efficiencies and productivity, which has also given us fresh cost efficiencies. We also rationalized our capacity deployment via reduced freighter operations. All in all, we have taken a long-term view and managed the short-term challenges as we are determined and will be there in the future.

Russi Batliwala—CEO, Chapman Freeborn

FT:   How has 2009 been so far?
RB:  2009 has been difficult but we are keeping our heads above the water.
     We have had to cope with reduced volumes, lower margins and increased global competition. That made the charter business tougher for us.
FT:   What lies ahead for Q4?
RB:  In air freight charter we see a positive trend in various locations. Transports from China to Europe are picking up, charter activities in and out of the U.S. are becoming more satisfying and Europe is getting stronger, too.
     Generally, we do have a positive feeling for the coming months.
FT:   How does early 2010 look?
RB:  Unfortunately we cannot predict anything at this point.
     So far we don’t possess sufficient indicators for cargo charter demand in 2010.
     Therefore, it’s too early to predict the market environment next year.
FT:   What is something(s) you have done to weather this business climate?
RB:  We increased our creativity even more which led to enhanced tailor-made solutions for customers in different local market environments. Furthermore, we stressed our focus on global operations and enlarged our network by establishing a new station in Uganda’s capital Entebbe to better cover the African continent.
     An office we will set up in Johannesburg, South Africa soon will complement this.
     In addition our Istanbul staff did a remarkable job by setting a foot into the Central Asian door where we were able to step up our activities continuously be it in Kazakhstan, Uzbekistan, Azerbaijan, or Turkmenistan.
Geoffrey/Heiner


     

     It is no secret that trade hubs around the world have been pummeled by the global recession.
     World trade flows are forecast to fall 12% this year, many times the drop in global GDP.
     One wouldn’t expect this context to be very kind to Panama.
     But the country whose tiny size is its greatest asset is holding its own.
     Panama rode the rising tide of international trade in the boom years.
     Average annual growth reached 7.8% in the 2003-07 period, cresting at 9.2% in 2008.
     This is well ahead of average South American growth of 5.4%, and even further ahead of the 4.7% increase seen in Central America and the Caribbean. Near-term prospects for the region are much lower, and Panama is no exception.
     But the trade-dependent republic will continue to outperform its neighbors. What is Panama’s secret?
     Capitalizing on world growth in the good years was natural.Trans-Pacific shipping exploded over the past decade with the surge of China-U.S. trade.
     Traffic through the Canal intensified in the fall of 2004 as West Coast ports hit capacity limits.
     Frenzied retailers re-routed ships to ports on the U.S. Gulf Coast and up the eastern seaboard through the Panama Canal.
     To avert future capacity shortfalls, West Coast ports invested immediately, but the spurt of expansion was short-lived.
     And for the coming five years, the bulk of U.S. port investment will be in the south and the east.
     As such, global recovery is likely to further intensify bi-directional shipping activity in the Panama Canal.
     Geographic attributes and heightened global trade activity are key to Panama’s past, present and future success.
     But sound economic management is also playing a critical role. Steady revenues and spending restraint generated a decent public surplus in 2008, and reduced public debt from 70% of GDP in 2004 to 46% last year. Moreover, debt maturities were lengthened and average interest rates lowered during the high liquidity years, reducing interest payments significantly.
     This has reduced Panama’s vulnerability to the economic downturn, and contributed to lower market volatility.
     In addition, Panama is paving the way for future growth by negotiating and signing multiple free trade agreements.
     Since 2002, Panama has signed trade deals with El Salvador, Taiwan, Singapore, and Chile, and just this year inked a deal with Guatemala.
     To top this activity off, a free trade agreement with the U.S. has been negotiated, and is currently awaiting Congressional approval.
     Sharply lower global trade has hit Panama, but it will still post modest growth, thanks to huge public stimulus.
     The $5.3 billion canal expansion project is well underway, and completion is slated for 2014.
     Also, new credit facilities totaling $800 million will tide the economy through the lean years.
     The bottom line?
     Panama has capitalized on the global trade boom, and is adding capacity during the recession to gear up for global recovery.
Gordon Feller


 

Air China Cargo Goes VIE

     Air China Cargo, an all-cargo subsidiary of Air China, officially launched its third all-cargo route between China and Europe, as one of its Boeing 747 Freighters arrived at Vienna International Airport on September 23.
     This new route, from Shanghai-Beijing to Vienna-Milan, is Air China Cargo’s first route between China and Austria, expanding the carrier’s coverage to Middle and South Europe.
     In the future a Boeing 747 freighter will serve the route three times a week, with 110-tons load capacity each flight.
     Before this, the two existing routes of Air China Cargo in the European market were from Beijing to Frankfurt and Copenhagen.
     "We have seen a recovery in the global cargo business, so we plan to enhance our presence in Middle and Southern Europe," said Yao Jun, General Executive of Air China Cargo.
     "But it's still too early to predict when the route will be profitable because freight rates are still 20 percent to 30 percent lower than a year earlier despite recovering demand," he added.
     Just one day before Air China Cargo started its new routes, the Civil Aviation Administration of China (CAAC) issued draft-for-discussing measures on stimulating the development of air cargo.
     According to the proposed measures, newly launched international all-cargo routes will be granted a three-year protection period, during which no other cargo carriers would be allowed to operate on this route.
     And Air China Cargo’s new routes will get support from this policy.
     As China’s largest all cargo carrier, Air China Cargo currently operates nine B747-400 freighters, and has exclusive use of the freight capacities on 247 Air China passenger aircraft.
David

 

Air Cargo Germany
Debuts Schedules

 (Left to right)—VP Strategic Development Andrey Goryashko and Managing Director Thomas Homering.

    Shanghai and Hong Kong are the first scheduled routes newly established air freight carrier ACG Air Cargo Germany will serve. The flights will commence beginning of October after the Chinese civil aviation authorities have basically given the carrier green light for regular traffic rights.
     “Our idea is to utilize 70 percent of our two Jumbo freighters’ B747-400SF capacity for line haul services and 30 percent for charter missions,” announced Managing Director Thomas Homering. That leads to a linking of ad-hoc flights with scheduled services.
     It’s illustrated by a possible future mission with the aircraft flying from Frankfurt-Hahn on charter to Almaty in Kazakhstan. After offloading the shipments the plane ferries to Hong Kong and returns from there as a scheduled flight to Frankfurt-Hahn airport.
     “Many of our future international services will be offered the markets as a mixture of charter and scheduled flights,“ stated VP Strategic Development Andrey Goryashko. This enhances the load factor and reduces the financial risks, stressed the manager.
     In addition to their announcement of upcoming line haul flights Homering and Goryashko present a record of the carrier’s operational first two months. This interim result is quite remarkable due to the increasing utilization of the aircraft and the growing load factor.
     “The capacity of our freighters is physically booked out till the end of the first week in October,“ emphasized Homering.
     Since the maiden flight of ACG Air Cargo Germany’s first B747-400SF July 28, the more than 90 orders the carrier was entrusted with by different customers have been accomplished. Meanwhile the combined flying record of the two aircraft – the second B747-400SF joined the fleet only at the beginning of September – achieved 400 hours.
     “Both freighters have successfully undergone c-checks and are in a technically formidable condition,” stated CEO Michael Bock.
     New is a regular weekly service (day 6) on charter conditions that links Frankfurt-Hahn with Beirut and Dubai.      Commencing October this round trip will be offered to customers twice a week (days 4 and 6).
     Further the carrier was successful in getting a foot into the sea-air traffic between the Gulf region and Frankfurt-Hahn.
     “After having accomplished a number of flights we have to give Frankfurt-Hahn credit since the handling of goods, customs clearance and the road feeder service offered by truckers at Hahn is just excellent,” lauded Homering about the favorable business conditions offered to ACG Air Cargo Germany at its home-base.
     Meanwhile the list of charter destinations the carrier landed is quite long. They include Tashkent, Abu Dhabi, Karaganda, Macao, Hong Kong, and Yerevan and are growing steadily.
     One of the highlights consisted of a transport of 66 horses to Tripoli on behalf of an Arab customer. “This was the first animal flight in our short history and it went exceptionally well,” said Goryashko. While there was enough time to prepare this sensitive transport another challenging order had to be finalized within hours – the flight of a B757 turbine from Frankfurt-Hahn to the Canary Island of Tenerife due to a technical failure an airline suffered. AOG – aircraft on ground – is one of the costly problems carriers eventually are confronted with.
      “By accomplishing this transport in a very short time we could prove to the market that we are a flexible, reliable, and innovative capacity provider,” manager Homering emphasized.
Heiner Siegmund

 

Air Cargo News FlyingTypers leads the way again as the world’s first air cargo publication to connect the industry to the broadly expanding and interactive base for social commentary—Twitter.
     Here are updates from Twitter so far this week. To be added to this 24/7/365 service at no-charge contact: acntwitter@aircargonews.com

September 29:   RFID Security Alliance elected new officers. Chair is Michael McCartney, vice chair is Neil Mitchell, sec./treas. is Anna Haight.

September 29:   DXB pax up 10.7 % August after gains of 10.3 % June & 12% in July/ Abu Dhabi traffic up 2.5% August follows 10.3% plus in July & 7.9 % in June.

September 29:   New book "A Week at the Airport" by Alain de Botton (Profile) reports several people die at Heathrow every week: around two a terminal.

September 29:    Rescue Plan? Japan's Transport Minister said government will not force Japan Airlines into bankruptcy. Seiji Maehara said "It's just impossible.”

September 29:   "If the creek don't rise." SAA said profits this year continue into ’10 if pax & cargo levels continue & yield & rand & kero remain stable. Carrier joined Cargo 2000 earlier this month.

September 29:   IATA said business is better but airlines are "profitless". Air cargo in August dipped 9.6 % YOY while pax fell 1.1 %.

September 28:   "Cancer Alley" is what enviromentalists call rail lines LA/Long Beach Ports to Carson, Compton, Huntington Park, Riverside & San Bernardino.

September 28:  FedEx Charter was awarded $1,510,516,838 firm fixed-price contract by US DOD for airlift services with a minimum guarantee of $222,565,273.

September 28:  Venice Port Authority wants to spend 1.5 bil Euro to dredge port & attract biz but opponents say the effort could cause the world heritage city to finally sink.

September 28:  Windsor Canada wants to turn airport into cargoport - even hired Lufthansa Consulting to make the case but politics could derail the dream.