Add Malaysia Airlines (in both passenger and cargo) as succumbing to business pressure and competition by withdrawing line service from North America later this month.
     Although this move was announced in February, long before the hellish, long, and agonizing nightmare of Flight MH 370, the move seems all the sadder now.
     Here is the goodbye letter from long time cargo pro and Los Angeles-based Julie Johannson:

Dear Air Transportation Partner:

      We regret to inform you that Malaysia Airlines and its cargo arm, MASKargo, will close its four times weekly service from Los Angeles effective April 30, 2014.
     Whilst Malaysia Airlines has a long history in Los Angeles, this route is no longer economically viable.
     The factors contributing to this negative situation today include over capacity and competition resulting in lower yields, high cost of operating the B777 aircraft and pressure from continued increases in fuel costs.
     These are adding further pressure to the expenses of Malaysia Airlines group, which we are continuously evaluating.
     Malaysia Airlines will continue to monitor the market conditions and consider again offering service when circumstances seem more favorable.
     On behalf of Malaysia Airlines and my staff I want to express our Appreciation for your Support over the years!
     Should you have any questions, please feel free to contact me.

Sincerely
Julie Johansson
Cargo Manager North America
Cell: 310 435-5679

FlyingTypers extends best wishes to our friends at MASKargo in Los Angeles.
(Geoffrey)

Exclusive—FlyingTypers provides unique insight into the WCS Sessions. Did IATA WCS Sessions deliver?

     “It would have been good to have seen Tony Tyler (left) as a keynote speaker at World Cargo Symposium,” said Patrick Murray, Head of Calogi and IT Guru, as he recalled IATA Cargo Week in Los Angeles in March.
     “As ever, the presence of the IATA top executives no doubt clearly underlines IATA’s commitment to the cargo business.
     “I think it’s fair to say that we missed him.”
     We asked Patrick to describe his take on the other WCS opening presentations.
     “It’s great to see AA’s commitment to e-AWB.
     “With a force like AA behind the e-AWB, the chances of success are substantially increased,” Patrick Murray said, adding, “Education sessions and workshops can only help the cause.”

Smith’s Message

     “Fred Smith’s message is much more sobering,” Patrick (right) said.
     “Added to the existing threats of decreasing yields, unprofitable freighters, jet fuel prices and market share erosion, our industry is now faced with an additional challenge of protectionism.
     “Given the decline of airfreight in terms of the revenue mix, it is also worrying that if we continue to see the same percentage declines that we are currently experiencing, by 2030 we will see the integrators at 18 percent, air cargo at 12 percent, and ocean at 70 percent.
     “The alarm bells should be going off right now.”

Des All Folks!

     IATA Head of Cargo Des Vertannes offered a rundown of the achievements to date—a shot list that skimmed the past twelve months since World Cargo Symposium last was mounted.
     “Bear in mind,” Patrick observes, “that these are industry achievements and we are all responsible for making these happen.”
     But we point out that several people we spoke to indicated that they were disappointed with the 22 percent e-AWB target for this year.
     “I guess,” Patrick Murray said, “that this is based on the lower-than-expected penetration achieved for 2013.
     Des Vertannes declared, “It’s once again worth noting that these targets are set by the IATA Board of Governors, the airlines, and therefore if we fail, it’s down to us, the industry, to move the ball.
     “In 2011 we set a goal for 15 percent e-AWB usage by the end of 2012, 70 percent by the end of 2013, and 100 percent usage the year after, We need to do much, much more..

Tracking The Sessions

     Andreas Raptopoulos, the CEO of Matternet, described the problem his company is trying to solve: one billion people have no access to all-season roads, making transportation of goods extremely difficult.
     For example, there are many remote places in Canada where it’s challenging to transport anything in the winter. Matternet wants to connect unmanned aerial vehicles (UAVs), which travel short distances, into a bigger network called Matternet in order to meet the world’s transportation needs.
     Every UAV would be able to land at a station and swap a load and battery without human intervention.
     Even where there is reliable infrastructure roads can be highly congested and the solution offers a viable alternative.
     Andreas proceeded with a demo where he actually flew a drone in front of the audience carrying a two-kilo parcel.
     There are a few challenges to making a drone network a reality, including reliability, safety, and airspace management concerns.
     The costs savings, however, can be fantastic. Flying a 2kg parcel 20kms costs around 24 cents.

Show Me The Money

     Following Andreas’s presentation, Brian Pearce, the IATA money guy and chief economist, offered a presentation called “Weak World Trade and On-shoring: permanent or temporary?”
     It was Pearce-ing news from the IATA chief economist as he talked about statistics in the airfreight industry.
     Up until recently, he noted, cargo revenues have moved in line with passenger revenues; however, the last three years have shown a different trend with the gap widening in favor of the passenger business.
     Revenues, which were expected to reach US$20 billion more than they did today, did not materialize.
     Brian observed that e-commerce, which is transforming the retail business (e-tailing), is also critical for airfreight.
     A new challenge for the air cargo industry is also weaker world trade, partly due to protectionism and partly because of policies focused on buying locally to protect jobs at home.
     A new threat to the air cargo industry, known as ‘on-shoring,’ has been born.
     Fuel efficiency, Pearce pointed out, and carbon-neutral growth are key issues over the next few years, with the risks being imposed costs on our industry from governments and regulators.
     Well, if at every conference you can learn something, then IATA WCS fit the bill.
     According to Brian Pearce, it appears we now have another threat to the industry, onshoring, which can now be added to the existing threats of decreasing yields, unprofitable freighters, jet fuel prices, market share erosion, and protectionism.
     One truly wonders what else lies around the corner and how the industry can respond to so many pressures?
     In any case, our ever-confident Patrick Murray sees some light.
     “It’s good that the IATA chief economist recognizes the importance of e-commerce to our industry,” Patrick Murray said.

Word Up

     Finishing on an upbeat note, Brian said there are encouraging signs, such as improved business confidence and the demand cycle turning up.

Seabury Shifts

     Gert-Jan Jansen, Executive Director, Seabury Group, presented the details of a comprehensive mode shift study analyzing shipper trends in transportation decisions.
     Modal shift has cost the air cargo sector around five million tons of cargo per year—around 10 percent of total global volumes—and looks set to continue.

     Modal shift, we learned, had been taking place since 2000, had slowed down during the crisis years of 2008 to 2010, and accelerated from 2011 to 2013.
     The survey indicated that most forwarders and shippers surveyed expected modal shift to continue, but at a slower rate.
     Seabury said shippers and forwarders believed the modal shift could be reversed by offering cheaper rates and more products, and by developing closer relationships with shippers, multimodal solutions, and improved reliability.
     The truth is that Gert-Jan Jansen’s presentation merely underlined what we already know: we are currently losing market share to other forms of transport.
     FlyingTypers thinks recovery has to be led by listening to our customers.
     This in itself could be a good track for the next WCS.
     Here are some ideas:
     How does air cargo, as an industry:
          1. Offer cheaper rates?
          2. Develop more products?
          3. Develop closer relationships with shippers?
          4. Offer multimodal solutions?
          5. Improve our reliability?
     We asked Patrick Murray.
     “Lots of answers spring to mind, and once again we have many existing solutions to the above. Our immediate thoughts are to reduce costs by implementing e-cargo solutions and pass the savings to customers.
     “The industry needs to look at what the integrators are doing: door-to-door, guaranteed delivery.
     “Imitation is the sincerest form of flattery.”

Tracking Trends at WCS

     Gert-Jan Jansen, Executive Director, Head of Cargo Advisory Practice, Seabury, also presented the industry outlook for 2014.
     Fashion and raw materials achieved the highest growth rate in 2013 (11 percent).
     High-tech cargo lost ground over the same period, mainly computers and semiconductors, with China contributing to more than a third of the world’s losses in high-tech exports.
     It’s no secret that the growth of cargo capacity would be driven by the continuing arrival and deployment of passenger aircraft, with the Asia-Pacific carriers having the majority of capacity on order.
     When the discussion turned to freighters, the consensus was that despite the growth of belly capacity, the main-deck aircraft would continue to play a major role for the foreseeable future.
     Emerging markets felt the slowdown in global economic growth in 2012 but generally continued to grow at a faster pace than traditional developed markets. However, the growth in trade came from emerging market to emerging market. Developed countries saw a slow down in trade both from other developed countries and from emerging countries.
     Vietnam and Bangladesh stand out as two of the fastest-growing trading economies.
     Meanwhile FedEx placed the most freighter orders over the past five years with 51, many of them replacements.
     Large and medium freighters are increasingly flying shorter sectors as they “vacuum clean” for cargo.
     The full-range capabilities of these aircraft are not being exploited, Seabury noted.
     The conventional belief that the cargo industry will grow at an annual rate of 5-6 percent per year in a strong economy appears to be unfounded.
     Furthermore, instead of growing at twice the GDP, since 2010 it has only been growing at one time the GDP.
     At the same time passenger traffic has enjoyed a consistent recovery since mid-2009, while cargo recovered quickly in 2010 before falling back and stagnating.
     In terms of industry measurements, RPKs (Revenue Passenger Kilometers) continue to rise much faster than FTKs (Freight Ton Kilometers). AFTKS, Available Freight Ton Kilometers, are also outstripping FTKS.

Boeing Info Blizzard

     Russell Tom, Regional Director of Marketing, Boeing, spoke of the increase in ocean traffic affecting all-cargo operations and where Boeing sees growth and opportunities for its freighter productions.
     He said that main deck’s share of cargo continues to remain steady at about 60 percent.
     Boeing figures that the world’s freighter fleet would increase from 1,730 to 2,300 by 2032.
     The lower holds of passenger aircraft cannot accommodate the demand.
     No surprise that Boeing believes that freighter airplanes are crucial to the overall health of the air cargo industry.
     Dedicated freighters provide reliable capacity to shippers of general cargo, mail, and express packages, and cargo that cannot be accommodated in passenger airplane lower holds.
     The significant efficiency and capability advantages of large freighters will enable carriers to manage projected traffic growth without increasing the number of airplanes proportionately.
     The world’s 30 largest carriers that use both passenger and freighter aircraft carry 46 percent of their cargo on freighters. Production freighters will continue to play an important role because their superior reliability, operating cost, and capability can outweigh the significant on-ramp acquisition cost advantages enjoyed by conversions.
     Continuing a trend of many years in the Asia Pacific region, all-cargo and combination carriers will take the greatest number of large freighters, which are uniquely suited to long-haul, intercontinental markets.
     Express carrier networks will take the majority of medium wide body freighters, ideally sized to support high-yield, time-critical operations.
     Standard-body freighters will serve emerging regional and niche markets, as well as express markets, Boeing reports.

All This Is That

     We thank Boeing for the information.
     The growth of emerging markets is interesting.
     FYI, many people are aware of the great potential in both Bangladesh and Vietnam, and speaking to Patrick Murray elicits the remark that “we are already working with the industry in both countries to automate their processes.
     “Bangladesh remains an issue for us as many airlines still continue to issue pre-printed stock, whereas moving to neutral air waybills will really help the e-cargo cause,” Patrick Murray said.
     “If we can eradicate this practice, not just in Bangladesh, but in other markets where this practice continues, we can put in place one of the building blocks for e-cargo,” he added.

Explain The Numbers

     A thought that occurred to us after the Boeing presentation was whether the AFTKs mentioned included the aircraft being purchased by non-cargo carrying low cost carriers.
     It would be good to know if these airlines were excluded from the count.

Freighters On The Half Shell

     The never-ending conundrum of freighter viability continues.
     The daily utilization rate (hours flown per day) of freighter aircraft was between 9.5 hours and 10 hours before the global financial crisis, which then plummeted to around 8 hours in 2009.
     After recovering sharply to a new peak of more than 10 hours in mid-2010, it fell dramatically to well below nine hours at the end of 2012.
     These statistics support the ‘vacuum cleaner’ approach adopted by some airlines, but reduces the productivity of the aircraft.

Land of Opportunity

     The Land of Opportunity session offered valuable guidance on building business in emerging new markets in Asia, Africa, Latin America, and elsewhere.
     Marco Bloemen said that China and Brazil would continue to offer opportunities, while Bangladesh and Vietnam are also growth markets.
     He noted that air cargo markets can change quickly due to production shifts and newly created airfreight flows.
     China is responsible for the highest absolute freight growth, but with it comes certain risks.
     Changes in China’s trading patterns affect the entire world.

BRIC & MINT

     We spoke to conferees about Brazil and Mexico.
     Brazil is part of the well-known BRIC acronym, which includes Russia, India, and China, but a lesser-known fact is that Mexico is part of MINT—Mexico, Indonesia, Nigeria, and Turkey.
     We learned that both Brazil and Mexico face similar challenges such as infrastructure, but investment projects are in the pipeline.
     Brazil will spend nearly $15 billion over the next 20 years upgrading its airports.
     While trade liberalization, prudent fiscal policy, and innovative social programs have helped reduce poverty and income inequality in Brazil, there is still some way to go.

Migration Well Noted

     “Many manufacturers have moved production from China to India or Vietnam,” Patrick Murray notes.
     “It’s also noticeable that in the past few years, several companies have returned to Mexico.
     “I understand that an airfreight shipment from China to the United States that costs $20,000 will cost in the region of $7,000 from Mexico, making Mexico an attractive proposition.”
     So we wonder where this all goes as labor costs are rising in coastal China, and many manufacturers are shifting production to the country's inland regions, Asian countries west of China, Africa, and South America, particularly Brazil.
     Interest (minus the political upset) is also growing in Russia.

Youri Takes A Stand

     A brief conversation with Youri Busaan, (left) CEO, AERCO Airports of Congo, was revealing
     We had both identified that in many cases traditional cargo is travelling as excess baggage.
     A trader can ship the goods on the same aircraft on which he is travelling, and clear them immediately upon arrival through the passenger customs authorities.
     So in the time it takes to unload and check shipments into the cargo terminal, the goods transported can be customs cleared and on sale.
     As most of us are aware, excess baggage is an expensive means of transporting goods. Obviously traders feel this is a price worth paying.
     The goal of cutting up to 48 hours off the average end-to-end time of a consignment may not be enough.
     Perhaps there is a market for handlers to offer premium unloading, handling, and Customs clearance services.

Final Thoughts On Los Angeles WCS

     The 8th IATA World Cargo Symposium came and went and it drew the very best in the cargo industry.
     Meanwhile, airfreight’s share of the market continues to slide, yields are down, and a host of other factors, some existing, some new, continue to affect our great business. Without a doubt at this time all of us are tasked with bringing new talent into the industry.
     What a challenge.
     No one would argue that success breeds success and new talent would be more likely to join a growing and profitable industry. Given what we heard during the WCS, it’s going to be a tough sell.
     We saw the e-AWB target being revised downwards to 22 percent when we were initially targeting 70 percent this year.
     As reported in this story earlier, this is a great disappointment to everyone who has tried so hard to make this happen.
     “It’s hardly surprising,” said Patrick Murray, “that shippers still see cost as a barrier to air cargo recovery.
     “In one of the sessions, Cristo van der Meer (right) of FloraHolland said a large portion of the cost of flowers comes from air cargo.
     “Without airfreight, the company can cut 30-40 percent of costs.
     “The number one priority to return to the ‘Halcyon Days’ that Fred Smith alluded to in his keynote this year at WCS and to reverse the trend of air freight decline, according to shippers and forwarders, is for airfreight costs to come down.
     “To do this, as an industry we need to reduce our costs.
     “Let’s face it,” Patrick Murray said, “we can no longer afford to carry paper or engage in paper-based processes.”

Thought Finale

     We heard the phrase “game changer” mentioned several times during the week.
     Des Vertannes said:
     “Game-changing innovation is sorely needed in air cargo.
     “Our industry has been mostly stagnant since 2008.
     “We face significant challenges in the areas of efficiency, security, and sustainability and the entire industry needs to commit to new innovative processes if we are to benefit from any economic upturn.”
     We think part of the problem with big conferences could be the reluctance to share ideas in an open forum and join together to really resolve the industry problems that we heard so much about during last week.
     FlyingTypers believes that many shy away from making the investments required to return the industry to its “Halcyon Days” (Integrators excluded, of course).
     We recall that in 1987 nine European carriers joined together to develop the Galileo CRS solution to counter the high market penetration of the Sabre and Apollo systems.

Looking For Mr. & Ms. Goodcargo

     Is there a ‘game-changer’ out there who can rally the industry and enable us to get air cargo growth back on track with an affordable action plan?
     All that being said, with over 1,000 delegates, the IATA WCS was a great place to network overall.
Geoffrey/Sabiha

Oliver Evans
Honoring Jacques Ancher

     Even the Energizer rabbit will feel the heat if the ICAO panel that met up in Montreal all this week comes down hard (as expected) on the cargo and pax transport of lithium batteries.
     The 14-member ICAO Dangerous Goods Panel (DGP) is mostly government appointed from the leading trading nations – plus some key industry stakeholders such as IATA and PRBA who enjoy observer status.
     However, without being premature one can already say that the cards are getting shuffled:
     The ICAO Break-Out-Session on Compliance and Awareness working paper highlights that “the common view was that an effective means was to push compliance back down the supply chain towards the manufacturer” and that government inspectors and operators alike should have a good hard look at “how well does the forwarder know their shippers, that the shipper has trained employees, access to proper classification and Safety Data Sheets”.
     These dry and chilling words have the potential to impact the air transport industry – and the transport industry as a whole, since DG transport requirements are harmonized throughout the modes of transport by means of the UN Model Regulations.
     The business model of auction platforms could be seriously at stake as well as most of the so-called “reverse logistics” which is more often than not in B2C another term for willful non-compliance.
     Whether or not they reached agreement is waiting in the wings as we go to press.
     So will NEMA and PRBA prevail in their demands to preserve the Status Quo, or will ICAO tackle the longstanding issues with mailing and shipping these omnipresent Lithium – battery related commodities?
     Stay tuned to FT and we’ll keep you updated as soon as there is definite news, about whether or not the ICAO DGP reached agreement.
Jens/Geoffrey

In case you missed it, FlyingTypers has covered this subject in detail.
Here are the links:
Dangers Of Lithium Ion Batteries
Lithium Sparks Dreadful Report
Lithium Dangers To Air Cargo
Testing Lithium Logistics

     In the years since the 2008 Global Financial Crisis it is has been commonly assumed that there has been a drift of cargo from air to ocean solutions and, on the Asia-Europe trade lane, to new and ever improving intermodal solutions via Russia or Central Asia.
     While much of the evidence is circumstantial and exact data is difficult to come by, a cursory examination of growth figures for container shipping demand and air freight volumes – the former has posted regular if slow year-on-year expansion while the latter has seen negligible or bearish growth on most lanes since 2010 - suggests that cargo drift has been no modal illusion.
     Cost cutting was, of course, a key factor: slow consumer demand from a stricken U.S. economy and troubled Eurozone meant it was only natural that supply chain organizers did their utmost to reduce transport outlays.
     But with the global economy looking markedly more perky in the last six months, Flying Typers asked a number of leading executives whether improving consumer confidence in key Western markets would boost air freight volumes as the need to for expedited shipments rose; or whether they thought the lengthy dip suffered by the air cargo industry in both volume and pricing was indicative of a more fundamental, long-term modal shift.

     Martin Dixon, Director Research Products at Drewry, was surprisingly upbeat about what air freight markets may have in store during the coming months.
     He believes that recent years have been marked by a shift from air to ocean, although he said pinpointing the exact size of the shift was difficult because the volumes were too small to appear in container shipping statistics.
     But Dixon takes the view that as the global economy recovers there will be a relative modal reversal, with more companies in a variety of sectors likely to find they need to use air freight more often to manage inventories effectively.
     “We expect some shift back to airfreight as the global economy recovers,” he told Flying Typers.
     “Some of the shift away from air that we have seen over the past few years has been the result of cost cutting. Hence, as cost pressures recede, so we are likely to see greater use of expedited airfreight for traditional high value, time sensitive commodities such as hi-tech, aerospace, pharma, fashion and perishables.”
     However, he said there have also been other factors that have contributed to modal shift away from airfreight apart from simply the desire to squeeze as much cost out of supply chains as possible. For example, product miniaturization has reduced overall volume demand for commodities that have traditionally moved by air such as hi tech consumer goods where high value laptops have been superseded by smart phones.
     “There has also been a longer term trend whereby companies have just become better at managing their supply chains and so reduced dependence on expedited freight spend,” he said. “Meanwhile, traditionally slower modes of transport have become more efficient and reliable. This is particularly true of land-based modes such as road and intermodal which has impacted demand for domestic or intra-regional airfreight.”
     He also believes that container shipping lines have improved performance and made their services more attractive to shippers. “Ocean carrier service reliability has improved over the years, assisted by the one-stop shop services offered by the logistics service providers,” he said. “Developments in reefer technology have also enabled perishable shelf-life to be extended, so encouraging some shift from air to sea freight.”
     And with lower energy prices in the U.S., and rising costs in coastal China, many cargoes that may have previously been flown could instead soon be manufactured closer to consumer markets, further diminishing demand for air freight. “Going forward, near sourcing will challenge wider use of airfreight,” he said.
     How much of the cargo lost by the air cargo sector to ocean and other modes in recent years can be recaptured is, according to Dixon, harder to forecast. Air should do better as overall cargo volumes expand, but he also expects the switch of some automotive, textiles, perishables and pharma commodities that traditionally moved by air to sea to continue.
SkyKing

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