Vol. 12 No. 18                             THE GLOBAL AIR CARGO PUBLICATION OF RECORD            Tuesday February 19, 2013

Good to see Johannesburg as the venue for Air Cargo Africa this week, but from my point of view a part of South Africa is still living under sanctions of the past.
     The other part is striving to make change.
     The contrast is stark and in the general scheme of things, certainly worth seeing.
     As a first timer at this conference, I am looking forward to the encounter whilst hoping that the gathering addresses two issues which are close to my heart that affect the aviation industry in Africa.

     The first is Open Sky policy.
     With just a few exceptions, Africa still applies very strict landing rights that are archaic in nature and designed to protect their small airlines.
     These restrictions are one of the major bottlenecks to growth as it suffocates imports and exports of the local produce.
     Just look, for example, to Kenya that has developed into a leader in cut flowers because of their Open Sky policy.
     Elsewhere, Egypt is a top exporter of green beans because of the right policies. Ghana is on top because of pineapples and allowing airlines and charter operators to fly in/out easily.”

     The second item that needs to be addressed if the Africa market is to move ahead is the need to open up secondary airports to relieve the main airports from pressure and to develop other regions of the continent.
     Just look at the numbers:
     Of the 56 countries in Africa, about 53 delivered positive GDP in 2012 and have done so consistently during the past 3 years.
     Consumer goods are anticipated to reach a trillion dollars by 2020 for a growing African middle class estimated at 350 million.

      Worth mentioning as well is that in almost every country there are ample supplies of either gas, oil, or both as well as vast real estate packed with minerals.
     Africa indeed is the last economic frontier.
     The main stars moving ahead in my opinion are Ghana, Botswana, Rwanda, and Tanzania.

     Right now political stability and the right policies are taking these countries into double-digit growth.
     And there are 33 other African countries that now have multi-party political systems and have held elections.
     So things are changing.
     The elections in Ghana in December of 2012 were historic.
     Very peaceful and the message across the country was clear: ballots and not bullets.

     Opening up the African market top to bottom will require a massive influx of trained specialists be brought to the fore.
     The hope is that conferences, such as Air Cargo Africa this week in Johannesburg, will raise this issue.
     Personally I would like to see various international and also local African associations cooperate in tackling the issue of training.
     The internationals can help in the trainers programs so that local associations can move forward in devising apprenticeship programs.
     Multi-nationals are moving into Africa in a big way.
     They should look at supporting the local associations which exist in virtually every country.
     One thing is for certain: there is no time to repeat the mistake in Africa by approaching the market with high expectations and no patience.
     For example, IATA World Cargo Symposium meets in three weeks.
     As an international association it is time for IATA to play a role of inclusiveness by walking the talk.
No part of the industry should be left out while working toward accomplishing projects from start to completion.
     In a real sense, e-freight should now be entering the execution mode.

Editors Note: Issa Baluch may know as much about logistics as anybody you ever met.
     He has the chops and know-how gained over a career that spans 37+ years, so when he puts his thoughts down in black in white for the rest of us, it’s our duty to study and ponder what he has to say.
     The Baluch book, Transport Logistics - Past, Present and Predictions, (available on Amazon for $65.US ) is a 300-plus-page barnburner that Prof. Issa created in 2005, and it still fascinates.
     Who else sets the table for modern logistics study with detailed examples of historic projects that demanded careful transport logistics management? Examples include what it took to build the Great Pyramid in Egypt, and transport logistics practiced in the Berlin Airlift and at the Battle of Stalingrad.
     A second volume, The Wheels of Commerce (Amazon $36.50) was created last October (with Charles Edwards) and follows the thread in an additional 340 pages.
     Best known as the founder of Dubai-based Swift Freight, a medium-sized multi-national that was eventually sold to Barloworld, Issa has made several lasting contributions to the world of logistics, including his position as the guy who launched sea-air in Dubai.
     These days in some kind of “retirement”(as if he ever could be), Issa is now teaching at Harvard and involved in projects at MIT, where he is undoubtedly thinking big thoughts about logistics whilst occasionally appearing at conferences to lend his expertise and passion.
     Issa is also involved in a major farming initiative in Ghana, which is a whole “nother story” as it is said, so stay tuned.
     It is incredibly important and invaluable for every stakeholder in air cargo to have Issa’s take on Africa.
     He is timely and ahead of his time, and always, as his friend Ram Menen describes, “a nice guy.”
     We heartily second that notion.


     Saudia Cargo said it moved 516,000 tons in 2012, scoring a 21 percent increase in revenue versus 2011.
     Fahad Hammad, CEO of Saudia Cargo, is jubilant:
     “Actually, 2012 was our best cargo year in history, largely due to a very strong Q4 that saw revenues increase 21 percent versus 2011.
     “We have achieved growth across the board in all of the regions,” Mr. Fahad said.


     As Chinese Lunar New Year celebrations continue this week in semi-full swing, we wish prosperity and good luck to all as we track air and sea activity to this point in 2013. China’s official holidays started 10 February this year.
     This prompted a January rush of exports first by sea and, as the days to the cut-off were counted down, then by air, as shippers looked to guarantee ample stocks and parts over the holiday shutdown of factories.
     This saw a build up of capacity ex-China and Hong Kong to cope with the pre-Lunar New Year Rush in late January and early February and helped HKIA, for example, book a 20 percent increase in cargo in January compared to a year earlier.
     China’s trading economy then, as usual, came to a virtual standstill as workers trekked home to visit families. Indeed, many factories are expected to remain closed until the final week of February this year.

Hong Kong Chinese New Year night parade marks the Year of the Snake as celebrations wind down. Holiday ends this week amidst reports of a major bump in both air and sea shipping action.

     A number of airlines including Saudia Cargo took the opportunity to shift capacity out of China once the Lunar New Year celebrations began, just in time to hit the peak flower season ex-South America and Africa into Europe for St Valentine’s Day. But once output from China’s factories fully resumes in late February inventory restocking could prompt another mini-boom in air freight demand ex-China.

     On the shipping side of the transport equation, lines have taken rather hearty measures to keep freight rates stable.
     To cope with the deathly quiet loading season in China carriers announced a series of capacity cuts and blank sailings. Maersk, for example, suspended one of its Asia-Europe loops until April due to “declining demand”.
     Other leading liner executives have spoken about the need to maintain disciple to sustain freight rates at profitable levels.
     Many are pinning hopes on a series of major General Rate Increases announced on the Asia-Europe trade starting early to mid-March and ranging from $600-800 per TEU. Whether they can force through the hikes remains to be seen.
     Analysis from ACM/GFI shows that rates are already far higher than a year earlier despite vessel slot capacity availability being more plentiful.

     ACM/GFI says the liner shipping paper market reveals weak forward sentiment towards the March GRIs, but there is more evidence that this year companies are planning for a traditional Q3 peak season in freight rates, something that has largely failed to materialize over the last two years.
     The Transpacific Stabilisation Agreement (TSA) which represents most major carriers on the route has also recommended GRIs starting April of $400/FEU and $600/FEU for shipments from Asia to the US West Coast and East coast, respectively. The ‘G6’ alliance of carriers (Hapag Lloyd, NYK, OOCL, APL, HMM and MOL) which was set up last year to aid co-operation on Asia-Europe lanes has now been extended to the Transpacific, suggesting carriers are extending effort to manage capacity.
     “If nothing else, these latest announcements point to further commoditisation on the Transpacific head haul trade,” said ACM/GFI. “While carriers are still free to co-ordinate rate hikes whenever they choose, albeit via a thinly veiled consortium, they do so despite market fundamentals, and at the same time as aligning their service offerings.”

     On the plus side, it seems the threat of strike action at U.S. ports and congestion surcharges has given greater certainty to U.S. shippers after USMX and ILA reached agreement on a master contract valid for six years.
     Of course, the fate of freight rates also depends on the strength of the global economic recovery. Initial signs in early 2013 suggest financial conditions are improving and policy actions are providing stability.
     “The global economy remains on the expansionary track at the start of 2013,” said Peter Sand, BIMCO Chief Shipping Analyst. “The positive development is underpinned by rising global employment, a faster new order inflow and a higher output of services and manufactured goods.
     “Most major economies contributed to the composite Purchasing Managers Index’s (PMI) growth. As global manufacturing PMI is a leading indicator for global industrial production, which is closely linked to shipping demand, BIMCO see this overall improvement as a support to shipping.” And, he may have added, for air cargo too.
     World output will jump from 3.2% in 2012 to 3.5% this year, according to IMF January projections.
     Sand said that for container shipping the demand situation looked rather solid and “underpins the optimism that also originates from a lower inflow of tonnage as the year progresses”.

     Nevertheless, this year there will be asteady procession of new Ultra Large Containerships joining the fleet which will be the largest on the High Seas once they are launched in late Spring and early summer.
     After some 51 vessels of more than 10,000 TEU capacity were added to the fleet last year, another 42 will be introduced in 2013.
     “The impact from this will be felt in particular on the Far East to Europe trading lane, where these vessels are almost exclusively heading,” said Sand. “This will mean that a bit more than 4 full strings of 10 vessels each will be added.”
     Although demand growth continues to be outstripped by supply expansion, January was the most active month on record for container ship recycling, behind only two months in mid-2009, providing some ballast to market sentiment.
     “At the beginning of 2010 and again in 2012 rates went up from low levels to double up and quadruple up, bringing around a freight rate level that left room for subsequent rate slides throughout the rest of the year within healthy distance of break-even levels,” said Sand. “2011 was very different, but 2013 has started along the positive lines of 2010 and 2012.”
     “If history is anything to judge by, the freight rate lifts that have been experienced on the trans-Pacific and Far East to Europe trades in recent weeks may bring about rather decent average full-year rates.”
Sky King


     When he was 70 years old, the great playwright, author, singer, and film director extraordinaire Noel “Cad” Coward observed:
     “I seem to be eating breakfast all the time.”
     I thought about Cad today after having “Breakfast with Issa,” because delivering air cargo news is my life, and the thoughts and words Issa Baluch brings to the dialogue about Africa, a place on many people’s mind this week, is special, unique and needed.
     I recall breakfast as the best meal of the day when I was serving in Vietnam—one was always glad to make it to another day.
     Now as a septuagenarian myself, I can confirm what Cad said, as indeed it seems that days and weeks, months and alas even years fly too quickly.
     But with an eye on tomorrow, up early and at rest early, or up late and writing later, eggs and grits will be fine, thank you.

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