Vol. 10 No. 108                                                                                                                                  Monday October 31, 2011

Strike Grounds Qantas Freight

     Qantas has ceased taking new cargo bookings after indefinitely grounding its entire passenger fleet on Saturday and announcing it would lock out large numbers of its Australia-based staff from Monday 8pm AEDT onwards because of ongoing industrial action by three unions.
     However, scheduled and charter freighter services operated by its Qantas Freight division using its fleet of one Boeing 767-300F and three wet leased B747-400Fs will continue.
     The B767 aircraft was introduced earlier this year and is currently operating six nights a week between Australia and New Zealand, while the B747-400Fs typically serve destinations in Asia and the U.S..
     “At this stage we are not able to say when normal operations will recommence and are therefore not taking new bookings on Qantas services,” said a spokesperson.
     “Contingency plans are in place to ensure our terminals are able to continue servicing our freighter operations and handled carriers.
     “Freight that is on hand in our terminals is, where possible, being moved on to other services including those operated by our alliance partners and JETS Transport Express [a truck feeder services for its air cargo business].
     “Customers may also arrange to collect export freight from any of our terminals where we are unable to provide a service.”
     Freighter operations under the Express Freighters Australia and Atlas Freighters brands will continue, as will budget Jetstar services, domestic QantasLink flights and trans-Tasman links operated by Jetconnect.
     “Our freighters, both our international B747-400 and trans-Tasman B767-300 services, are operating to schedule,” the spokesperson told FlyingTypers.
     “All employees covered by the three unions will be locked out of Qantas workplaces including our Freight terminals in Brisbane, Melbourne, Perth and the Express Handling Unit and Mail Handling Unit in Sydney.”
     Staff represented by the three unions – the Australian Licensed Engineers Union (ALAEA), the Transport Workers Union (TWU) and the Australian and International Pilots Union (AIPA) – will be barred from Qantas premises in Australia from 8pm on Monday.
     The decision to ground Qantas aircraft will affect 108 planes at 22 airports, according to the carrier, but the lock out does not apply to overseas staff.
     The move was taken in response to ongoing strikes by the unions, which Qantas claims have been costing the company over 15 million Australian dollars ($16 million) per week and have caused more than 600 flights to be cancelled. The unions have been protesting against the carrier’s plans to axe 1,000 jobs and refocus its operations on Asia.
     “Aircraft currently in the air will complete the sectors they are operating,” said Qantas yesterday (Sunday)      
     “However, there will be no further Qantas domestic departures or international departures anywhere in the world.
     “This will have an estimated financial impact on Qantas of $20 million per day.
     “The lock-out will continue until the ALAEA, the TWU and AIPA drop the extreme demands that have made it impossible for agreements to be reached.”


Ex-Asia Air Cargo
Decline Holding Steady

     Or in this case, monthly tonnage figures.
     It’s true that numbers can be used to tell more than one story as Disraeli and others have famously noted through the years. But the latest round of public utterances from Asia’s airlines and airports confirm what FlyingTypers has been reporting for some time - ex-Asia lanes are, almost without exception, showing few signs of improving in the build up to the traditional peak season.
     Figures for September were certainly resoundingly downbeat. The Association of Asia Pacific Airlines (AAPA) said the region’s carriers saw volumes -measured in freight tonne kilometres (FTK) - contract 6.5% in September compared to a year earlier, with higher offered freight capacity pushing the load factor down 3.5 points to 63.8%.
     Cargo volumes at China’s airports fell 3.5% to 506,000 tonnes in September as international traffic contracted by 8.9% to 151,500 tonnes. And the pattern was confirmed at the world’s largest airport by tonnage in 2010, Hong Kong International Airport (HKIA), which also failed to buck the disappointing trend. HKIA saw yet another year-on-year decline with exports down 7.6% for the month.
     HKIA’s leading cargo handler, Hong Kong Air Cargo Terminals Limited (Hactl), said its volumes fell 11.5% year-on-year. Cathay Pacific, which hubs at HKIA, said its liftings for its services and those of Dragonair fell by more than 10% in September compared to a year earlier.
     "On the cargo side there was no significant change [in September] from the situation in August, with the key Hong Kong and China markets both remaining soft and demand to long-haul destinations, particularly Europe, below expectations,” said James Woodrow, (left) Cathay Pacific General Manager Cargo Sales & Marketing.
     Earlier this year executives at a number of airlines and airports were confidently predicting a silver lining in the late third and early fourth quarters despite the doomladen year-on-year monthly reports that have been gushing forth for much of 2011. Early 2010 had seen major restocking after the cuts of 2009, so the theory went, so comparisons with the relative normality of 2011 were misleading. A more ‘traditional’ 2011 with a late year surge starting in September and October was just round the corner, they believed.
     The September figures have removed what little doubt was left that a major recovery in demand was on the way. “There is no sign yet of the traditional year-end peak beginning,” admitted Woodrow.
     Indeed, if anything this year’s figures have been remarkably consistent, as consistent as the draining slurry of negative economic indicators that had been spewed forth by Europe and the U.S., whose under-performing economies are the main cause of the poor freight environment ex Asia.
     Tonnage uplifted by Cathay Pacific and Dragonair, for example, was down 6.4% in the first nine months of this year compared to a capacity increase of 9.8%.
     Over the same period cargo demand, as measured in FTKs by the AAPA, is 4.1% lower than in 2010 and this is now having a major impact on carriers, particularly those located in Asia, which tend to derive a larger proportion of revenue from freight than their peers in the West.
     “A slowdown in export demand, as a result of the ongoing European economic crisis and softening North American economies, contributed to the fall in overall cargo traffic,” said Andrew Herdman, AAPA Director General. “As a result, Asian airlines have seen only modest revenue growth this year.
     “At the same time, airlines have had to grapple with a 40% increase in jet fuel prices, squeezing what are typically already very thin margins.”
     It is hard to see any major bounce-back in the final quarter with most lead indicators suggesting that October will prove to have been as bearish as the rest of the year, a negative trend set to be exacerbated for airlines by the terrible floods that have beset Thailand and other parts of the South East which have already impacted air cargo volumes and are expected to have supply implications into next year.
     The General Administration of Civil Aviation of China (CAAC) said in late October that it expected air cargo tonnage handled at the country’s airports to total around 5.6 million tonnes this year, the same as in 2010, due to the poor global economic outlook. Previously CAAC had predicted year-on-year growth of 11.5%.
     Lilian Chan, Executive Director of Hactl, said that 2010 had been an exceptional year but admitted that it was now clear that the downturn this year was being caused by more than just unfair statistical comparisons.
     “Our traffic levels are still above the pre-recession peak of 2008,” she said. “But there is no doubt that throughput is now being impacted by global uncertainty, fuelling soft consumer demand for non-essentials.
     “We are confident this will ease in due course, but we believe the last quarter of 2011 will disappoint many, and 2012 Q1 will also be tough.”
     The one exception to the overall downward trend for cargo this year during September was to be found at Singapore.
     One exception to the negative growth trends evident across Asia in September was Singapore, with volumes at Changi growing year-on-year, albeit, not by much (2.2%). While those based in the city state will be pleased that they’re bucking the market, it should be noted that Changi’s year-on-year figures are skewed by its relatively poor performance last year. Indeed, as FT has previously noted, higher costs have seen its cargo performance remain static for much of the past decade.

RE: An Aerotropolis Too Far

Hi Geoffrey,

      Can you give me more information on the Missouri Export Act?
      This sounds like something that California should have that might bring business back to California rather than leaving it because of all of the regulations and taxes that have been heaped on California business.
      This would also help create jobs. I am also of the opinion that we should have a Federal tax credit for export, and it should tracked as a % of GDP instead of the President's idea of doubling exports on an unknown figure.
      It is time for business to stop complaining and come up with ideas that will help!
      We need to think out of the box, and start to make things happen!
      The mantra for the real estate industry is "Location, Location, Location". and the business mantra should be "Action, Action, Action"!
      Thanks for all of your great articles and comments that has some excellent ideas and wonderful information!

Best regards,

Guy Fox, MBA, LCB
President & CEO

Dear Guy,

      Thanks for writing.
      Although I am reluctant to heap labels on things, my immediate take on the “Missouri Export Act”(MEA) is that the name is an alias for yet another attempt by state politicians to revive an already defeated bill for $360 million to build an “Aerotropolis” tax payer funded initiative for air cargo at Lambert Field St. Louis Airport.
      But if it walks, talks and sounds like a duck—well Guy, you know the rest.
     People you might contact about the Missouri Export Act is: Rep. John Diehl, R-St. Louis (John.Diehl@house.mo.gov) or Missouri Governor Jay Nixon as both are working as this is written to get MEA inacted.


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