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   Vol. 16 No. 48
Tuesday May 23, 2017


LHCargo Climate Care

airplane bullet All In The Family . . . Lufthansa Cargo won The Ops Monitor and Efficiency Gap Analyzer (OMEGA) Award for Excellence in the Environmental Responsibility category at the Deutsche Gesellschaft zur Zertifizierung von Managementsystemen (DQS) Sustainability Conference May 17 in Duesseldorf. DQS Group was founded in 1985 mainly to promote the German economy. Merged with US based Underwriters Laboratories in 2008 DQS today is one of the world’s largest certification bodies.

airplane bulletJames Ginns  New Faces . . . Cathay Pacific named James Ginns, as its top cargo executive. Simon Large, the current cargo boss moves elsewhere at the airline.

airplane bullet  Thanks A Ton . . . Chinese online shopping giant Jingdong launched JD Logistics, that is testing out the world’s largest-scale drone delivery network able to lift 2,200 pounds. The company will target deliveries to more rural areas of the country’s northern Shaanxi Province.

airplane bullet Bruce Tonn  Speaking of 'Tons.' Once upon a time Bruce Tonn (right) worked for Ed George and both became west coast USA air cargo legends at Western Airlines. Then Western went to Delta and Bruce Tonn, the guy with the best last name in air cargo ever, assumed command of Delta Cargo in Atlanta. Have not heard from Bruce since he retired from DL some years back. Anybody?


airplane bullet  Talk about a road hazard. Where the rubber meets the road this guy got an unwanted lift as a manhole cover exploded underneath his car.

airplane bulletJoe Badamo  Dynamic Duo . . . The great Joe Badamo, ( right) Silkway Air and President of the JFK Air Cargo Association (pictured at CNS Partnership 2017) reports that ACA hosts CNS President Lionel Van Der Walt and VP Mike White this week Thursday May 24 at JFK Hilton ACA Monthly Luncheon. Good deal for USD$50 (with membership), nice lunch and an adult beverage during the meet & greet which begins at 11:45. For more click here
“Next ACA not to be missed is our 4th Annual Charity Golf Outing on June 27th that goes all day long 10:30 AM until 10:30PM,” declares Joe.

The President Show-Old Hickory

Watch our very own Anthony Atamanuik as he interviews former President Andrew Jackson about the Civil War (above left)) and tune into The President Show on Thursday nights at 11:30pm on Comedy Central.

Ocean Mess Boosts Air Cargo

      The global air cargo market has made a rather positive start to 2017.
      As reported in FlyingTypers, the macro economic environment has been upbeat, with most key markets showing growth and demand on air via East-West freight lanes encouraging in both directions.

Disruptive Ocean

      But what has really stood out this year is how supply chain disruption in ocean shipping services can quickly change the dynamics of air cargo demand.

Container Shortages

      So far this year, forwarders and airlines have reported spikes in demand in Europe and Asia related to the shortcomings of container services by sea. Similar disruption is also expected in the U.S. in the coming weeks, which could also boost air cargo.

Shipping Alliance Focus

      The key to all this has been changes in the liner shipping alliance system this year.
      In simple terms, four alliances became three with new schedules introduced in late March and early April.
      But the reality of the realignment was far more complex.
      Hundreds of ships had to be repositioned ahead of the new alliance schedules and many lines also had to prepare plans for vessel calls at different terminals within individual ports. Given the long transit times of vessels—the operational transition started far before the launch of new schedules last month and is still being bedded in now—some disruption was inevitable.
      And where this disruption has occurred, it has been the equivalent of a seasonal cargo boost for the air freight business, which has benefitted from modal shift.

Stephane LemaireSkyTeam Sails

      Stéphane Lemaire, (right) VP Asia at Air France KLM Martinair Cargo, said ocean capacity constraints in key markets—as well as shippers diversifying risk by using both sea and air in their logistics plans, not least due to the alliance reshuffle and the bankruptcy of Hanjin last year—had given demand a critical extra boost this year.

First Indicators

      This first ocean crunch was apparent in northern Europe during March, when export demand was also higher than expected.
      Blank sailings from Asia during Chinese New Year enabled lines to reposition vessels ahead of the transition.
      But this led to a shortage of capacity in Europe for forwarders loading cargo for Asia through most of March and April.

Lufthansa Chimes In

Jacqueline Casini      A spokesperson for Lufthansa said demand from Europe to Asia had been strong this year, especially to China, boosted by the lack of ocean slots available.
      “The shift from ocean to air is clearly one driver of the situation,” said Jacqueline Casini, (left) Director Communications & Environmental Management. “It started right from the beginning in 2017 with a peak in March.
      “Capacity became very tight, with the effect that our express numbers went up significantly.
      “It remains to be seen how long this situation will continue.”

Modal Shift Beat Goes On

      “Modal shift is part of the overall driver for increased demand, but not the only reason.
      “Generally,” Casini said, “demand for air cargo capacity has improved over all markets driven by the high tech, automotive, and ecommerce sectors.”
      In late April and early May, changes to port calls by lines allied with bad weather also caused lengthy congestion and delays at the port of Shanghai, the world’s largest container hub.
      Casini confirmed ex-Asia lanes had been vibrant all year and the carrier saw a further uptick in demand from China as ocean delays worsened.
      “There are several possible explanations, for example, the ocean delays, but also the limited capacity on offer, since authorities limit extra capacity or charters,” she added.

Yang Ming Thing

      Another factor in the shipping conundrum has been the financial position of Yang Ming. Many forwarders are wary that its well-documented troubles could presage another Hanjin—a bankruptcy that left supply chains in disarray—so avoidance of the line has, to all effects, taken vessels out of the market as shippers and forwarders steer clear, exacerbating any short-term local shortages in container slots, particularly in Asia where Yang Ming has traditionally been a major player.
      Lufthansa said that it has now added more capacity on routes to and from Asia. 
      “We have been able to flexibly increase freighter capacity to meet the additional demand with the focus on China (SHA/CAN) and Japan (TYO),” said Casini.

To Be Continued

      As FlyingTypers went to press, reports of additional ocean supply chain disruption linked to the alliance reshuffle were emerging at U.S. West Coast ports.
      This is forecast to spread to the east coast later in the month.
      From our vantage point, the air cargo industry looks to be the beneficiary.


Chuckles for May 23, 2017

Lufthansa Eyes On Asia

     If you found the recent Air Cargo Europe a bit tight on breathing room, you will get no argument from us.
      Just like many others, we spent time earlier this month walking the very narrow trade show aisles at Messe Munich.
      Last year, the aisles at TIACA Paris (which probably could have used more business) felt as wide as runways.
      It was just the opposite at ACE. A complete sellout of booth space delivered an aisle experience that felt like navigating the inside of a sardine can.
      Air cargo went cheek to jowl in Munich, Germany, inside an exhibition hall with only two bathrooms (that we could find) located near the entrance.
Franz Joseph Miller      However, close quarters amongst colleagues provided the opportunity for plenty of face-to-face business. On the bottom line, that is what matters.
      It just might be nice if trade show organizers might work a bit harder to deliver more space and bathrooms.
      Lufthansa Group’s large exhibit extravaganza at the immediate entrance was set up to include all the German carrier's partners and acquisitions.
      The Lufthansa Group booth was notable in its spread, which seemed to stretch on into forever and included scores of attendees eating pretzels and soup throughout the three-day event. It also boasted the presence of Franz-Joseph Miller, (left) the founder of time:matters, the high-powered, high value shipping service partnered with Lufthansa Cargo.
      FJ is packing it in after he sold his stake to Lufthansa earlier this year.
      As FJ describes it, it’s all nice-nice, but we wouldn’t count this rather brilliant logistics professional out of the industry just yet as he retreats to his thinking place.
      Whilst passing on Lufthansa’s canned press dinner in a Munich basement, our ace reporter SkyKing spoke to LCAG’s Director South China, Hong Kong, and Taiwan Konstantin Stathopoulos.

Loss & The Light

      By now, Lufthansa’s net loss of €68m Q1 2017 compared to an $8m loss a year earlier is old news, but the performance of the carrier’s logistics division, which includes Lufthansa Cargo, proved a shining light. Europe’s leading cargo airline earned €33m before interest and tax, a turnaround performance from the €19 loss booked a year earlier.
      A recovery in demand enabled a year-on-year quarterly revenue increase of 18.5 percent while traffic, measured in revenue cargo ton kilometers, expanded 6.3 percent led by the Asia-Pacific region, where net traffic revenue grew 19.8 percent year-on-year in Q1 to €218 million euros.

Hope Springs Eternal

      The positive results have encouraged Lufthansa Cargo, which currently services 300 destinations in 100 countries, to expand its freighter flights to Shanghai from the current seven per week to nine in September. Guangzhou will also see more capacity, up from the current four freighters per week to five starting in July.

Konstantin Stathopoulos

Asian Demand Up

      Konstantin Stathopoulos told FlyingTypers Asian demand had been positive throughout the first quarter with China (including Taiwan and Hong Kong) a top performer both before and after Chinese New Year and on both inbound and outbound lanes.
      “The peak season at the end of last year was definitely higher than we expected,” he said. “We always experience good demand in the fourth quarter from October, but last year it was bigger than expected and we didn’t really see a cut-off of demand over the Christmas and New Year holidays.
      “That made a very nice ramp going into this year.
      “We saw very good demand before CNY and then March and April were also very good in both directions in and outbound China.”

Varying Factors Driving Growth

      Stathopoulos said a number of factors explained the prolonged boost in demand. “On some lanes, not least from Europe to Asia and more recently ex-China,” he said, “port congestion had contributed to modal shift.  
      “The Hanjin bankruptcy last year definitely played into it and the sea carriers overall reduced their capacities,” he explained. “This led to a reduction in stocks in the warehouses in Europe and the U.S. that needed to be refilled quickly. As well as product launches, we had the recall of the Samsung phones and quite firm management by Chinese authorities on extra capacity going out of Chinese airports.
      “Many airports are very, very restricted for chartered flights but as a line operator you have the advantage to add capacity in these markets, whereas the pure charter operators can’t.
      “All of that combined led to the extraordinary peak we saw last year and also then into the first half this year,” he declared.

New Normal At Hand

      Konstantin believes higher demand to and from key Asian markets could represent a ‘new normal,’ at least for 2017 and possibly beyond.
      “This is a trend that has been evident for quite some time now—that the demand ratio in and outbound China is actually quite balanced from an airfreight point of view,” he said.
      “There are definitely more and more imports as the government encourages domestic consumption.
      “And exports are up this year,” he said.

China Never Went Away

      “You can’t say that the Chinese economy is recovering,” Mr. Stathopoulos said, “because it was never really in a bad situation.
      “But certainly this negative trend of decreasing growth rates has changed from our perspective and, given the right environment, this will continue for the remainder of the year, which is why we’ve expanded our freight services into our existing gateways at Shanghai and Guangzhou, hubs where we have seen positive developments.”

Healthy Balances

      “The most important part for us is to have a healthy loads on our aircraft, in and outgoing.
      “There are not many markets in the world which have a healthy balance so this helps us have a good profitable operation and, on the other side, of course as soon as the demand is high enough, it gives us more room to work on the revenues, on profitability and on rates.
      “In China, we have seen rates increase. It’s not huge but it’s certainly a few percentage points.”

Look Up To See Down?

      “I think the interesting phase will now come over the summer months—the traditional low season.
      “The question really is how far down do rates have to go, and can we still keep that gap of positive growth in terms of rates towards last year as well?”

HKIA “Shì de, qing”

      “Yes, please,” HKIA remains a key part of Lufthansa Cargo’s Asia strategy.
       The carrier has now moved its ground handling operation at the world’s largest freight hub to Cathay Pacific Cargo Terminal (CPCT), cementing the joint business agreement signed with Cathay Pacific Cargo last year that sees the two airlines work closely on network planning, sales, IT and service enhancements as well as now sharing a single location for export drop-off and import delivery.
      “HKIA certainly remains one of most important hubs in our network in Asia,” said Stathopoulos.
      “If you look at the development of HKIA overall as an air cargo port, it is still growing.
      “Certainly not with big growth rates as you can see in Mainland China cities, but it’s still growing.
      “In the future we still see HKIA as the main gateway in southern China. Obviously, what we want to reach is the market position and also a position in front of our customers that makes us indispensable for them and gives us more growth opportunities jointly together with Cathay. Cathay as local carrier has different opportunities here than we have. We think, as two big global cargo companies, we can definitely achieve more here than we could achieve individually.”

Look Up To See Down?

      As to the future, it belongs to Asia.
      “We see a positive drive for exports, especially into Europe but also into the U.S. and other markets,” said Stathopoulos.
      “One of our biggest benefits is we’ve established ourselves as the quality carrier in these markets with only very little changes and customers do appreciate and see the value of our very reliable service.
      “A lot of carriers have withdrawn services, or withdrawn completely from the freighter market, so it really shines in the market that we’ve been very reliable and that our services are there to stay in our market.”

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Dnata Enters American Market

  Dnata (Emirates Group) acquired AirLogistix USA, which operates a 30K perishables cargo facility, handling operations at George Bush Intercontinental Airport Houston. This marks the Dubai-based ground handler’s first move into the American market.
  Dnata said it would build a similar facility in Dallas this summer.

Ostssflughafen Barth Airport

  Osteeflughafen Barth Airport is a regional facility serving the city of Strasund and the town of Barth Germany.
  Opened by The Luftwaffe in 1936 and closed after WWII, today the Baltic Sea airport is utilized mainly for private aviation.
  But the airport ground is also home to a giant solar power plant facility built by Baywa r.e. (Munich).
  Here, a worker walks along the third section of the solar farm after its official activation earlier this month.

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
Vol. 16 No. 45
ATC At The Heart of GSSA
Chuckles for May 11, 2017
Emirates Lands Uptick For 2017
Trees Gave It Up For Daily Blah

Vol. 16 No. 46
The Trump Effect Pt. 5: Who Will Pilot The Airline Business
Chuckles for May 17, 2017
Awards Leave Some At A Loss
Emirates Group Posts Profits

Vol. 16 No. 47
The Trump Effect Pt. 5: Who Will Pilot The Airline Business
Chuckles for May 17, 2017
Awards Leave Some At A Loss
Emirates Group Posts Profits

Publisher-Geoffrey Arend •• Managing Editor-Flossie Arend
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