United Cargo Ad

EMO 50th Anniversary Ad
FlyingTypers Logo
Geoffrey FIATA Fellow
   Vol. 15  No. 43
Monday June 6, 2016

FlyingTypers Ad


See What The Bears In The Back Room Will Have?

     Recently, over a beer in a Bangkok bar, one leading air freight forwarder explained to your correspondent that air freight as an industry was now a completely different beast to the one he had originally started working in some 20+ years ago. “It’s not just the miniaturization of products and things like 3D printing, the whole idea of charging on a volumetric basis has been debunked,” he said. “In the future I can see multiple verticals finding new ways or producing goods which will erode demand for premium airport-to-airport services.”
     With more and more passenger flights adding to the large cache of structural freight uplift capacity in the market, he said that he had no idea how airlines operating large freighter fleets could be making profits on their operations at present, while for forwarders, margins were no longer available on point-to-point services. “It’s all about adding value either end, there’s no money in it otherwise,” he added.
     Driving margins by adding value in a commoditized air freight sector tends to favor the largest forwarders and 3PLs with global networks, experienced staff, and the ability to differentiate on service and product. This way they can turn handy profit on a low yield business by meeting the specific needs of shippers—a point reinforced by the tranche of recent financial results released by the leading players, which are, for the most part, still recording decent returns on their air forwarding businesses, even as many smaller agents and national or regional players are making cutbacks just to stay in business.
     Certainly, the ‘new normal’ of excess capacity and sluggish demand seems certain to continue putting the squeeze on many in the industry, although the latest volume and yield figures did point towards a slight upturn.
     IATA said that global air freight markets in April had seen a 3.2 percent increase in demand measured in freight ton kilometers (FTKs) compared to the same period last year, although yields had remained pressured as capacity increased 6.6 percent.
     “The increase in demand was broad-based across all regions, with the exception of Latin America,” said IATA. “The strongest growth occurred in the Middle East and Europe, with April demand up by 7.7 percent and 6.8 percent, respectively, compared to the same period last year.”
     However, IATA also pointed out that while growth appeared to be stronger than in the preceding months of 2016, this was largely due to the disappearance of distorting factors associated with the 2015 U.S. West Coast seaport strikes from the comparison data.
     “Overall, the demand for air cargo remains soft and lags behind the relatively robust growth on the passenger side of the business,” said IATA. “This is largely driven by weak world trade. The first quarter of 2016 saw the first annual decline in trade volumes since the global financial crisis in 2009, and the World Trade Organization (WTO) predicts only sluggish growth for the remainder of 2016.”
     Stifel and Drewry’s latest analysis of the air freight sector also concluded that oversupply had dramatically increased in the past year, as passenger traffic had continued to grow at a much faster rate than freight traffic, while demand remained relatively weak. “Since air cargo demand is not the main driver of most airline belly capacity decisions, we would think airfreight would tend toward overcapacity,” said Stifel.
Andrew Herdman     Drewry’s East-West Airfreight Price Index moved up 0.9 points in April to a reading of 80.4, after March’s 0.3 point gain. This followed a period of four consecutive months during which the index declined over 20 points after peaking in October.
     “Drewry expects airfreight pricing to remain under pressure, with further deterioration anticipated into the Northern Hemisphere’s summer months as more passenger aircraft are brought in to service to support the peak tourist season,” said the analyst.
Tony Tyler     The Association of Asia Pacific Airlines (AAPA) also said its April figures showed a continuation of established trends—steady growth in international air passenger demand and weak air cargo demand. Indeed, April saw the region’s airlines carry 24.2 million international passengers, a 4.8 percent increase compared to the same month last year on the back of continued strong regional demand. By contrast, air cargo demand was flat, with volumes in freight ton kilometer terms similar to those registered in the same month last year.
     The ‘between the devil and the deep blue sea’ scenario of ever expanding bellyhold capacity alongside slow macroeconomic growth and freight demand saw the average freight load factor for AAPA carriers fall by 1.7 percentage points to 61.7 percent year-on-year in April, after accounting for a 2.8 percent expansion in offered freight capacity.
     AAPA Director General Andrew Herdman described international air cargo markets as “weak” reflecting “lackluster global trade conditions.”
     IATA’s Director General and CEO Tony Tyler said that while the April uptick in demand growth for air cargo was encouraging, the overall economic environment was not. “The decline in global trade does not bode well for air cargo markets in the months ahead,” he added.
     Unless, that is, you are a forwarder with a clear strategy and a significant global footprint!
Sky King

Boys In The Back

chuckles for June 6, 2016

DIAL Up Ten Years
(L-R) Sanjiv Edward, Head of Cargo Business, DIAL, Indana Prabhakara Rao, CEO, DIAL (in blue shirt), and Srinivas Bommidala, Chairman Airport, GMR Group (with black jacket) with the huge cake celebrating DIAL’s tenth birthday post-privatization.

     May was a merry month for Delhi International Airport Limited (DIAL). It celebrated its tenth birthday as a private entity and, more importantly, it did so with a bang: it became the World No. 1 Airport (25-40 MPPA category) in the ACI ASQ (Airports Council International’s Airport Service Quality) for 2015 (it was its second consecutive award).
Indana Prabhakara Rao      For DIAL’s Chief Executive Officer Indana Prabhakara Rao, (left) the award emphasized the importance of service quality offered at the airport. When the award was announced last year, the CEO commented, “the journey was never easy, especially after holding the No. 2 mark for the last three years. We can now justifiably claim to be world’s best. Our hard work and dedication has taken us from being one of the worst airports to the very best airport in the world.”
      Along with passengers, cargo has also taken a leap in the Delhi airport: from 383,000 tonnes in 2005-6 (when the airport was handed over to the GMR-led Consortium) to 726,000 tonnes in 2015-16. Said I. Prabhakara Rao, “Cargo tonnage has almost doubled (since we took over). And today with two operators (the Celebi-operated Celebi Delhi Cargo Terminal Management India and the Cargo Service Center India), capacity is huge: almost 1.2 million tons.”
      Over the years, along with the enhancements to facilitate passengers, initiatives have been taken to boost service quality in cargo. The CEO mentioned the launch of the mobile app for cargo. The application has helped reduce paperwork and tracks movement of shipments on a real time basis. In line with the Prime Minister’s Digital India vision, the CEO said that the “DIAL cargo app benefits the entire air trade system where you can transact complete business functionalities such as tracking consignment, paying terminal charges, and issuing delivery and carting orders, all in a paperless manner.”
      Having achieved the top rank, Delhi airport’s ambition to transform itself into a hub remains. Of course, the first priority for the CEO is to make the Indira Gandhi International Airport, as it is known, a top passenger hub. Speaking about Delhi becoming a hub, the CEO said that in 2006, the traffic was 16.23 million while today it is 14.15 million. To create a hub, he emphasized, “You need two things. One is connectivity, the second is infrastructure facility to transfer smoothly.” The infrastructure was in place. Now, what was needed was connectivity. Why should fliers pass through Delhi, he asked. “If you look at the last three-four years, we are working on connectivity. Today, long-haul flights are coming. There are flights (from Delhi) to San Francisco... London has six flights now. There are Sydney flights… And the important thing is, you need a strong carrier. Today, Air India is the only carrier, and to some extent Jet; they are the only two carriers doing long-haul. In addition, a hub requires Fifth and Seventh Freedom rights. Then, people can come here, for example, from Singapore and fly to London. We can work as a hub. We need that as well as liberalization of routes,” he said.  
      As with fliers, cargo too has seen transshipment. “Now almost about 70,000 tonnes per year of transshipment is being done in Delhi,” said Prabhakara Rao. “It is quite good. And in such a location (as Delhi), which is completely landlocked, doing transshipment is not easy,” he said. The tonnages would have been higher had there been easy accessibility to a port.
      The CEO also mentioned that the airport had enough cargo capacity—in addition, the facilities too had multiplied. The perishables unit, for example, with its arrangements for handling pharma products and meat, was doing very well.
      A cargo village has also been planned. A release mentioned that in “its efforts to establish Delhi Airport as the ‘The Cargo Gateway of India,’ the operator has identified areas for world class cargo infrastructure for both first and second tier layers of overall air cargo supply chain.” While the cargo terminal operators and airlines form the first tier of stakeholders, freight forwarders and 3PL players formed the second tier in the overall air cargo supply chain, the release said.
      DIAL has planned to set up the cargo village forming the second tier layer in line with international practices. The village would facilitate air cargo trade and offer freight forwarders with on-airport warehousing and office facilities. It would also bring about an efficient transfer to and from the cargo terminals with faster processing efficiency. For the time being, however, with capacity lying unutilized at the terminals, the air cargo village plan has been held back.
 Pradeep Panicker     A move, however, that has gained huge popularity among cargo circles is the outcome of the partnership forged between GMR and Concor quite some time ago. This has seen the beginning of bonded trucking services from the Inland Container Depot at the industrial city of Kanpur to Delhi Airport. The transit time between Kanpur and Delhi is around 12 hours. Pradeep Panicker, (right) Chief Commercial Officer-Aero, DIAL, said that the launch of such a facility was another move to meet the growing demand of the cargo industry emerging out of the Tier-II cities. It would not just cut down on the cost and time involved in shipping, but would also reduce the multiple handling of the air cargo.  
      Yet another success that DIAL officials mentioned—in this time of celebrations—was the agreement between Delhi Airport and Amsterdam Airport Schiphol to collaborate and promote an air cargo trade lane between the two airports. The Memorandum of Understanding (MoU) that was signed seeks to promote business, product development, knowledge sharing, training, performance benchmarking, and regulatory agency cooperation. Also, the agreement would enhance Delhi and India’s logistic capabilities at the global level.
Tirthankar Ghosh

Air Cargo News 40th Anniversary Issue

Memorial Day 2016Memorial Day 2016

Subscription Ad

Porta Estellar

   Porta Estellar ("Star Gate" in Catalan) was an immersive art installation featured at last year's La Mercé festival in Barcelona.
   Produced by PlayMID, a collaboration between studios Playmodes (Santi Vilanova and Eloi Maduell) and MID (Alex Posada), Porta Estellar featured innovative light and sound effects to take visitors on a galactic adventure. A statement from PlayMID said, "Through the creation of visual and sound sequences that suggest the idea of interstellar travel, [the] audience flies to outer space in an intense trip, from departure and takeoff to the sighting of comets, planets, galaxies and alien worlds, until finally returning safely to earth."
   Porta Estellar took place inside the salvaged fuselage of a DC-9 that crashed at Grenada Airport in 1992. It was rescued by artist Eduardo Cajal—he has collaborated with several artists over the years who have used the plane as a setting for art installations.

If You Missed Any Of The Previous 3 Issues Of FlyingTypers
Access complete issue by clicking on issue icon or
Access specific articles by clicking on article title
FT051816Vol 15. No. 40
UPS & SAP View Future In 3D
Women in Charge: How Women Power Unisys Cargo
Chuckles For May 23, 2016
Same Day United Matters
Watch The Birdie At A Golf Outing
FT051816Vol 15. No. 41
TNT 70 Years In 70 Seconds
Undeclared DGR Via eBay
Chuckles For May 27, 2016
MIA BRU Put Pharma On Ice
Security & Weekend On Wheels

FT051816Vol 15. No. 42
So Smart It's Stupid
Chuckles for June 1, 2016
Letters to the Editor - June 1, 2016

Publisher-Geoffrey Arend • Managing Editor-Flossie Arend •
Film Editor-Ralph Arend • Special Assignments-Sabiha Arend, Emily Arend • Advertising Sales-Judy Miller

Send comments and news to geoffrey@aircargonews.com
Opinions and comments expressed herein do not necessarily reflect the views of the publisher but remain solely those of the author(s).
Air Cargo News FlyingTypers reserves the right to edit all submissions for length and content. All photos and written material submitted to this publication become the property of All Cargo Media.
All Cargo Media, Publishers of Air Cargo News Digital and FlyingTypers. Copyright ©2016 ACM, Inc. All Rights Reserved.
More@ www.aircargonews.com

100% Green