A late November snow fell gently on the tree branches and rooftops of Frankfurt yesterday, dusting the landscape with a light sugar coating and recreating the ancient image of Germany approaching Christmas.
     It may be a bit early yet to start singing Stille Nacht although the traditional Christmas Market is in full swing here, but one look around the countryside explains how that most treasured of traditional verses came to fruition.
     For Lufthansa Cargo, another tradition that has continued now for several years is the pre-Christmas, year-end gathering of several members of the press, as the fourth estate gets a look back and ahead titled, ‘Meet      The Trends’ from Dr. Andreas Otto, Executive Board Member Product and Sales.
     While the gatherings are inspired by the business, the season is not overlooked.
     Planners in past years have held this event is various ways – as a “make-it-yourself-dinner” one year, and as a evening in a storied castle on another.
     For 2010, the ‘Meet The Trends’ venue was The Skylounge of Roomers Hotel, which is located in downtown Frankfurt in the financial district.
     Roomers Frankfurt is part of a chain of boutique hotels where modernist designers hold sway, combining form and function in sleek venues.
     It’s all gee-whiz stuff, including a Spa and Gym, where work out and beauty treatments are conducted in spaces where management collaborated with big name designers and even biorhythm architects.
     The Lufthansa gathering in Skylounge, with floor to ceiling windows, offered a stunning view of The Main River and the surrounding bank district from an elevation where you can see plenty of detail.

     ‘Meet The Trends’ offered some revelations and solid news.
     Summing up the carrier's current position in the air cargo business in late 2010 as the world financial crises continues to fade, Andreas Otto said:
     “I guess we are a crises winner.”
     Dr. Otto revealed that members of Lufthansa Cargo’s Supervisory Board will be presented a list of additional freighters when they come together in their regular meeting next March.
     “Since we grow at least with the market, we need a freighter capacity of up to six more MD-11Fs, or equivalent cargo planes, by 2015,” he exclaimed.
     Currently, the German cargo carrier’s fleet is comprised of eighteen MD-11Fs, one down from the original nineteen after a recent crash in Riyadh, which left one aircraft fully destroyed.
     In his presentation, however, Otto didn’t reveal which freighter model his airline was favoring.
     It could either be six MD-11s, five B777Fs or some passenger-to-cargo converted aircraft.
     Also undecided is the future production platform of the aircraft, which ultimately doesn’t have to be LH Cargo itself but could also be AeroLogic or Jade, both members of the Lufthansa Cargo Group.
     “We are currently evaluating all pros and cons before we opt for a certain freighter model for further fleet growth,” stated LH Cargo’s speaker, Michael Goentgens.
     The recommended capacity push is needed since the German Cargo Crane forecasts an annual increase of tonnage by five percent on average until 2015.
     On major trade lanes such as Europe-Asia, volumes are expected to leap seven percent per year.
     On the way back from Asia to Europe, six percent stand on manager Otto’s chart.
     Roundtrips Europe to Africa to Europe account for five percent both ways, whereas Europe-North America falls way behind average with an annual plus in tonnage of only two percent until 2015.
     As far as network changes are concerned, Otto announced twice weekly service to Manaus at the Amazon River as of January 24.
     His airline will be the first and only cargo carrier from overseas landing at this Brazilian city. The flights will be routed via Viracopos airport near Sao Paulo.
     Looking beyond the horizon, LH Cargo predicts an average yearly volume growth of 4.6 percent in the decade between 2016 and 2026.
     “In our market and growth estimation we included major down and upturns of the air freight biz that might happen within that time period,” says Goentgens.
     Major divergences from this prognosis are therefore unlikely to happen.
     Next on the carrier’s agenda stands a memorandum of understanding that will be signed between LH Cargo executives and the management of Hyderabad’s Rajiv Gandhi International Airport in central India on Friday this week.
     The carrier’s biggest hub on the planet for pharmaceuticals and generics is going to be established at that site. “Hyderabad is becoming our biggest Asian hub for pharmaceuticals,” exclaimed Herr Otto.
     In his presentation he stressed that India has swung itself up to become the world’s largest producer of generics.
     That’s the main reason why his airline will base a fleet of cooling containers and personnel there in the coming months.
     These efforts are welcomed and supported by the airport authorities who this coming Friday will announce construction of a state-of-the-art warehouse containing different rooms for a broad variety of temperature sensitive air freight products.
     A similar project will be realized in Frankfurt, where LH Cargo plans to build a cold-storage facility of 4,500 square meters within its own Cargo Center in the northern part of Rhein-Main airport.
     The exact expenditure was not revealed, but Lufthansa Cargo’s head of communications Nils Haupt spoke of a euro amount “in the upper single digit millions.
     The construction work in Frankfurt is scheduled to begin next spring, with the inauguration expected to happen sometime in fall 2011.
     Pharmaceuticals are currently going through Lufthansa Cargo’s roof, manifested by an increase of 35 percent in 2010 year-on-year.
     “They are crisis resistant and very profitable,” praises speaker Goentgens of pharma.
     Otto concluded the press meeting by announcing that the initiative “Air Cargo Needs the Night” won more than one hundred enterprises as active supporters from the logistics and other industries.
     In addition, more than 10,000 people followed a call for maintaining adequate night-flight regulations at major German airports.
     These flights are at stake since a number of courts have recently decided to restrict flying between midnight and early morning at major domestic hubs, or have placed high obstacles for night operations.
The results of the initiative will be presented to Germany’s Transport Minister Ramsauer at an Aviation Summit in Berlin today, Tuesday, November 30.
     Summing up his feelings of the future as 2011 approaches, Dr. Otto said, "we are facing challenges, however compared to previous years and coming out of the worst financial crisis in history, when things were uncertain, right now I have never been more confident about the future. All signs are positive."
Heiner/Geoffrey. Edited by Flossie

Lufthansa Out Front
And Pulling Away

ACNFT:   Herr Otto, your airline claims industrial leadership. Where do you consider LH Cargo being a leader, where does your carrier still lack a pole position?
AO:   You’re right: Our clear aim is Industry Leadership and in many areas we have already reached this.      
      Even in the crisis year 2009 - with a huge loss - we ended up in comparison in good shape. Such a low loss in comparison to our competitors can be, of course, no gratification to us. However in 2009, we set up the conditions for the record profit in the first half of the current year. Similarly, we want to further improve our quality.
     One thing is clear to us: As a premium carrier we must offer an exceptionally high quality- here again also: Industry Leadership.
ACNFT:   Security is an ever increasing topic in air freight. A selling point for LH Cargo?
AO:   Security is the top theme of this decade. The security requirements above all in the USA have risen markedly since 2001. Our costs for security have increased tenfold since then. Demands like 100% screening had the industry facing major challenges. For us as a company, this represents at the same time, however, also an opportunity.
     To go back to your previous question: For me there is no doubt that we are the clear industry leader in the field of security. We have given our customers in the USA early planning security in complying with 100% of the screening requirements one month before the deadline.
     Our security chief Harald Zielinski was, by the way, the first representative of a foreign airline who earlier this year was allowed to speak on this subject before the U.S. Congress as an expert.
     We want to secure this leading position and further enhance it.
ACNFT:   Considering long-term economic growth Europe seems to fall behind rapidly emerging markets like China, India and some others. How is LH Cargo coping with this challenge?
AO:   The imbalance in the traffic flows is no new subject. Filling airplanes out of China to Europe has never been a feat - in the other direction, it becomes demanding. This imbalance will certainly continue. Whether it will intensify is hard to say. Just this year we have also seen a reverse trend. Among other things, the growing Chinese middle class and the countless new factories in China have led to the fact that our freighters were also well filled from Europe to Asia.
     Lufthansa Cargo has reacted to the growth markets in Asia early and today is positioned very well, for instance, with our share in JADE, which even in the crisis year 2009 worked at a profit.
ACNFT:   Your German market share fluctuates between 23 and 25 percent approximately. Do you focus too much on the multinational agents and pay too little attention to the local small and medium sized forwarders or why do you fail to up this portion despite all efforts?
AO:   First and foremost: Share of market is not everything for us. It is above all about profitability. From that perspective this means that every customer in Europe who needs access to our capacity can have it.
     There is no bonus for German forwarders or customers. Besides, how one looks at the market has changed: There is no isolated view of Germany anymore. The German competition encompasses in particular our Western European neighbors and for the majority of the forwarding agents, a use of the German capacities that overlaps national borders is taken for granted.
     Of course our global partners are of utmost importance to us. However, we concentrate by no means only on the big customers. Smaller and medium-sized forwarding agencies are looked after intensively by our sales colleagues in Germany and around the globe.
     For every agent all booking channels are open and small and medium sized agents as well have full access to our services
ACNFT:    Forwarders constantly ask for all-in rates for getting higher commissions. How do you answer them?
AO:   We do not hear this wish of ten. We don’t offer classic all-in rates that are -using the terminology of the forwarder- rates in which all the surcharges are included. We hold the transparency of single positions like the surcharges for security and fuel as important.
ACNFT:   The chemical and automotive industries lobby their cause very successfully by speaking with one voice. The German and European air freight industry doesn’t. What has to be changed?
AO:   It is in my opinion, not exclusively a problem of the air freight business, but rather of the whole aviation industry. We create it - as you say – because we do not speak with one voice. The pay-off for this comes at regular intervals.
     In Germany, for example, an absolutely counterproductive ticket tax was adopted, which massively weakens Germany as a business location. Instead of striving together for our industry, we observe daily the efforts of every association, every country trying to push through its own particular interests.
     I have already proposed – also in Air Cargo News FlyingTypers - a global forum based on the model of the CNS.
     The large resonance to this idea gives me a positive feeling. Even if there is still a long way to go, I think that more and more people from our industry have recognized the need. Our industry is simply too important to the globalized national economies, that we must not allow ourselves to renounce or to delay the implementation of such a forum.
ACNFT:   Your home base Rhein/Main is threatened either by a total night flight ban or severe restrictions for night operations possibly indicted by Germany’s Federal Administrative Court.
     What is Lufthansa Cargo in partnership with the air freight community doing to avoid the closing of Frankfurt and furthermore, what consequences would it have for your airline if Frankfurt has to switch off the lights between late evening and early morning?
AO:   Indeed, the possible night flight ban is a subject which is the cause of major stomach aches for us. A certain number of night flights is vitally necessary for us in Frankfurt. But Frankfurt is not only affected, increasingly stricter night flight regulations at other German airports also make an economically viable operation for cargo airlines more and more difficult.
     Hence, we have founded with wide support of the logistics partners and the manufacturing industry, the initiative “Air Cargo Needs The Night”. With this we will put forth the need for fair and competitive framework conditions at the major German airports. It is inconceivable to uncouple the Number 1 logistics nation from the international flow of goods for several hours daily.
     We therefore strongly call for the support of the industries and companies we serve.
ACNFT:   Looking back at Lufthansa Cargo’s major decisions in recent times: which ones have proven to be on mark, which has missed?
AO:   I think above all we have made many right decisions in the crisis. We have reacted quickly, for example, de- activated airplanes to lower the costs. Also the way we were able to navigate through the crisis with the help of our employees, I view in retrospect very positively. Through short-time work and other measures we structured a way which allowed us to keep the team intact and on board. Now, with the upward trend, these colleagues are available to us and are indeed urgently needed.
     The most courageous decision of the previous year was the rate increase in the crisis. From today’s perspective, it was perhaps the most important one.
     Of course, there are always things which didn’t go off as planned. An example is the foundation of the alliance WOW. These concepts simply did not function for us in the form we know from the passenger business. Then it was the right course of action to correct that decision and to go a new way.
ACNFT:   Finally, where is Lufthansa Cargo in five years?
AO:   I hope and am convinced that we will have developed our Industry Leadership in even more areas. We want to be attractive for our customers, employees, as well as our shareholder, the Lufthansa Group.
     Our goal is to reach this with the greatest possible quality and flexibility. I hope that in five years, on the 40th anniversary of Air Cargo News FlyingTypers, we can look back contentedly.

Payback For Agent Reimbursement

     Recently, a reader letter in response to ‘EU Prix Fixed Carriers Fined’ was published in Air Cargo News Flying Typers, concerning how we should talk more about “how forwarders were disadvantaged and relegated to collection agencies for airline surcharges without any reimbursement.”
    This is not a new topic; we have heard it repeatedly over the years and we want to take the opportunity to put it into some context.
The IATA Cargo Agency Conference governs the airline/agent relationship—good, bad or indifferent. In order to participate in the Cargo Agent Settlement process, agents need to become IATA Accredited Agents. To quote from Resolution 801, Cargo Agency Rules: “Qualifications – any person may be registered as an Agent and be entered on the Cargo Agency List for a country by submitting an application in the form prescribed by the Conference to the Agency Administrator and by meeting the following requirements:”
    Any party signing up as Agent ought to read, understand and be familiar with the “Procedures,” particularly 3.2 Basis of Commission and 3.4 Duties of Agent. Just wondering if IATA is paying for consulting and having to explain their manuals and the facts of life?
    Anyway, the ‘Basis of Commission’ states that: “… the commission shall be calculated only on the carrier’s charge for air transportation (including valuation charges) and shall not be calculated on other charges…” And, among other things, ‘Duties of Agent’ stipulates the following: “…collects and accepts payment of prepaid transportation and other charges.” Other Charges, as referenced in the reader’s letter, include a fairly long list of items, such as fuel surcharge and security charge.
    Furthermore, Resolution 801a(II), 9. Monies Due by Agents to Members [airlines] – Remittance specifies: “the Agent shall be responsible for the payment of any and all monies due to the Carrier under this Agreement resulting from the issuance of any transportation documents in the name of the Carrier and/or from the sale of any ancillary services under this Agreement.”
    The writer of the reader’s letter alleged that: “…forwarders were disadvantaged and relegated to collection agencies for airline surcharges without any reimbursement.” In all fairness, reading Resolution 801 and 801a(II), the text is pretty clear; it is obviously perceived as unfair, but no one is putting a gun to someone’s head to enter into this agreement.
    This is not about taking sides or defending the airlines and IATA whatsoever. Having signed the agency agreement, it is difficult to reconcile these accusations with the reality. A party to an Agreement must conduct the due diligence necessary to grasp its terms and conditions.
    I can appreciate how it may have felt, but feelings are for the therapist’s couch. It seems the time has come to revisit the entire premise of these agency agreements. Many forwarders would prefer to be treated as customers instead of agents, and that is exactly where things may end up sooner rather than later.
    There is a sense of grievance that I think was reflected in the reader’s letter and especially the express outrage that: “We always suspected that something was going on but had no proof. Now with the EU and ongoing USA charges our worst suspicions seemed assured.” Right, like the bombshell in early October this year: “…six freight forwarders ready guilty pleas and will pay fines totaling $50.27 million for their roles in several conspiracies to fix a variety of fees and charges, U.S. Department of Justice said.”
    What is that saying ? People who live in glass houses should not throw stones. The price fixing scandal that has rocked the industry and continues to make waves is unsavory by any stretch of the imagination; it has no place in this business, regardless of which side it is on.

Lise Marie Turpin

Rachel Humphrey

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