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   Vol. 18 No. 2
Monday January 7, 2019

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Ready Set Go 2019

The festive vox pop by FlyingTypers found air freight stalwarts in good form and, reasonably positive
about the industry in 2019. But obstacles to growth are also on the horizon.
Sebastiaan Scholte     Sebastiaan Scholte, CEO of Jan de Rijk Logistic and chairman of The International Air Cargo Association (TIACA), has been outspoken about the lack of hub capacity for all-cargo operations at European airports during 2018, but he believes the challenges of 2019 will lie elsewhere.
     “I am cautiously optimistic about 2019,” he told FlyingTypers. “Growth will be less than 2018, but there still will be growth, especially driven by e-commerce growth.
     “The impact of eventual trade war/barriers is still hard to determine, just like we still do not know what the effects of Brexit will be.
     “Labor shortages, mainly in U.S. and Europe will persist, which could have an effect on capacity - especially on ground, in terms of handling and trucking.”
Brandon Fried     Brandon Fried, Executive Director at The Airforwarders Association, is hoping that market demand next year will surpass both 2018 and 2017. But he admits that the headwinds in macro-economic terms could be strong.
     “While we are hoping for robust air cargo growth in 2019, the current economic and supply demand environment may cause the beginning of a modest slowdown,” he said. “Inflation could rise, the dollar is getting stronger, the Euro is weaker, Brexit uncertainty looms and, of course, the tenuous oil situation created by the Iran sanctions and the U.S. tariff situation could play significant roles in reducing air cargo demand.
     “Also, volumes driven by e-commerce - Amazon, Alibaba etc. - could create capacity constraints and raise costs.”
     The macro-economic forecasts for Eurozone growth have also been slowing in recent months and this could weigh heavily on consumer demand next year. Freight Investor Services’ China-Europe Forward Curve predicts a long descent in air freight pricing on the lane through the first quarter of 2019 after a reasonable peak season at the end of 2018.
Harriet Heathcote     Harriet Heathcote, Airfreight Business Development Manager at FIS, told FlyingTypers from her London office that the industry in general was struggling with “huge overcapacity” at the moment and “it looks like forwarders are going to be left with an excess of block space agreement space”.
     She added: “We’re thinking next year, it’s probably going to take everybody a while to find their feet and actually work out where the market will be. We think it will be quite volatile and it might not do what it’s supposed to, year-on-year.”
     Freight marketplace Freightos reported in mid-December that, excluding China-Europe, there wasn’t a peak season for air freight rates in 2018. “In fact, Europe-U.S. rates are currently only 3% - with some carriers still posting promotion rates - up on November 5. Over the same period, China-U.S. rates actually fell by 4%.
     This was in stark contrast with mid-December 2017, when many routes hit capacity, leaving many shippers facing sky-high rates to get their shipment loaded. Freightos noted that airlines have increased capacity since last year, but also that demand has not increased as much as anticipated during 2018.
Manel Galindo     As for next year, Manel Galindo, CEO of Freightos WebCargo, told FlyingTypers that current indicators suggested that air cargo demand would increase next year.
     “For instance, the latest WTO outlook for global trade predicts modest growth, which should also play out as a modest growth in demand for air freight,” he said. “And, having been caught last year, air cargo carriers have been increasing capacity. However, forecasts can be blown apart by unexpected factors, such as this year’s sudden escalation of the U.S.-China trade war.”
     Overcoming the headwinds facing the industry next year will be aided by the new tools becoming available for air freight stakeholders. “Fortunately, technology can help us work more efficiently, especially through big data, digitization/robotization and AI,” said Scholte.

Abba New Year Song

chuckles for January 7, 2019


President Trump’s efforts on revamping the U.S. trade agreements to make them more fairly balanced came under much criticism but they are starting to bear fruit and trade flows are increasing.
     The U.S.-Mexico-Canada Agreement was signed with two of the U.S.’s top three trading partners, Mexico and Canada. China, the third partner is still engaged in trade talks that are close to being concluded, although there are other considerations (political) involved.
     Below is an outline of the new USMCA agreement, which keeps most of the original NAFTA agreement. The name change (to U.S.-Mexico-Canada Agreement) was at the insistence of President Trump.

     • Canada can continue to refuse to export environmentally sensitive natural resources (pipeline water).
     • Canada can continue to protect its culture sector.
     • It increases access to Canadian agricultural market for American producers (from 3% to 3.59% of total dairy market tariff-free).
     • It increases percentage of North American sourced parts for cars to qualify for tariff-free status (from 62% to 75%).
     • All tariff-free autos must have 40-45% of components produced by workers making USD$16/hour or more.


     The agreement is mostly the same as the old NAFTA agreement.
     • Mexico will double its consumer duty-free limits from $50 to $100. That means that any shipment valued less than $100 is duty-free, making the shipping process cheaper and easier for small packages.      This might increase small package movements from the U.S. to Mexico.
     • 40-45% of auto components need to be built by workers earning USD$16/hour or more, which makes Mexico less competitive, since currently its auto workers earn about half of that. That wage may lead to more manufacturing in the U.S.
     • The agreement has stronger provisions for intellectual property protection, which protects American businesses in a number of sectors - pharma, entertainment, fashion, big agro, biotech. It will make it harder for Mexican firms or individuals to manufacture generic medicines; use unlicensed seeds, chemicals or pesticides; pirate movies, tv shows or music; and use brand names, trademarks, logos or designs without paying licensing fees.
     • The agreement will also increase the requirements for Mexican truck drivers and vehicles to operate in the U.S. beyond the border zone. Right now there are a limited amount of permits that exempt Mexican trucks from U.S. safety and emissions standards. These permits will be eliminated, preventing the operation of trucks that don't meet those standards.
Bill Boesch

Bill BoeschMr. Boesch started his career in global transportation and logistics in 1965 working for Seaboard World Airlines. He later joined Flying Tiger Airlines and Emery Worldwide. Mr. Boesch then left Emery to become Pan American World Airways’ Senior Vice President where he headed both Passenger and Cargo Sales and Operations. He left Pan Am to lead American Airlines’ Cargo operation and retired from AA in 1998. Under his direction American became a world leader in the air cargo and logistics business.
     Mr. Boesch was involved in projects for the U.S. Government throughout his airline career and became more active after retiring from AA by serving as Director of U.S. Aviation Policy for the White House Commission on Aviation Security. He was part of the extensive on site planning and support of the Iraq drawdown, involvement with the Afghanistan operations, and has worked on all aspects of the Civil Reserve Air Fleet (CRAF) from both an airline and government standpoint.
     Mr. Boesch is the recipient of numerous awards including the Lifetime Air Cargo Achievement Award, the Ellis Island Medal of Honor and various awards from the U.S. Department of Defense.
     Mr. Boesch is presently continuing his work for the U.S. Government and heads up The Council For Logistics Research.

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Herb Kelleher

     “Too bad he is gone.
     “We need more like him in both private and public life.
     “A man of courage, ambition, ability and integrity who made a real contribution to the industry,” said Robert Crandall, legendary former president and chairman of American Airlines.
     Herb Kelleher, founder of Southwest Airlines, died last Thursday January 3 at the age of 87.
     Mr. Kelleher was a "pioneer, a maverick, and an innovator," Southwest Airlines said, adding:
     “His vision revolutionized commercial aviation and democratized the skies.
     “Herb's passion, zest for life, and insatiable investment in relationships made lasting and immeasurable impressions on all who knew him and will forever be the bedrock and esprit de corps of Southwest Airlines."

The Bag Man

Herb Kelleher Bag Ad     “I knew nothing about airlines, which I think made me eminently qualified to start one because what we tried to do at Southwest was get away from the traditional way that airlines had done business.
     “I think that was very helpful." Herb Kelleher said.
     Herb was also often up front promoting the carrier. He was pictured handing out peanuts on board flights as Southwest’s innovative low cost, no frills service gained attention.
     When a rival carrier claimed that people might be embarrassed to be seen flying “no frills,” Herb delivered the Southwest message in a TV commercial with a bag over his head.
     “We will give you this bag for all the money you save!” he laughed.
     Mr. Kelleher served as Southwest's executive chairman from March 1978 until May 2008 and as president and CEO from September 1981 through June 2001.
     He served as chairman emeritus at the time of his death.

Kelly Views

     “His vision for making air travel affordable for all revolutionized the industry," Southwest chairman and CEO Gary Kelly said.
     “But his legacy extends far beyond our industry and far beyond the world of entrepreneurship.
     “He inspired people; he motivated people; he challenged people—and, he kept us laughing all the way."

Parker Rolls

     American Airlines CEO Doug Parker said Kelleher's vision "brought the freedom of travel to hundreds of millions of people, and his appetite for taking on any real or perceived battle was unmatched.
     “His style presents the ultimate case study for airlines or any service company whereby if you take care of your people, they will take care of your customers, which will take care of your shareholders," Mr. Parker said.
     Often clad in jeans and a plaid shirt, Southwest Airlines during the Kelleher era was a place where every day was dress-down day.
     Southwest, it should be remembered, began in 1971 as a tiny commuter serving three Texas cities with four planes and 190 employees.
     Today the carrier moves more passengers annually in the United States, than any other airline.

Cargoman Boesch

     I recall that when Bill Boesch retired as President of American Airlines Cargo, and we all gathered in Dallas to salute the air cargo industry great, Mr. Kelleher entered the ballroom and stood in the back of the gathering talking to Robert Crandall.
     Herb spoke in deep resonate tones, probably driven in no small part by his love for bourbon and cigarettes, so even when he talked in a whisper, you could hear him from a distance.
     In any case, just after Jan Meurer offered some kind words and a giant bouquet of tulips to Bill, Herb also got up and rocked the room.
     We asked Bill to share some thoughts about Herb Kelleher.
     “When a great heads-of-state dies, we have massive state funerals and flags at half mast.
     “But in the airline industry when the great pioneers pass, the ones that have developed our heritage, their passing goes almost unnoticed, except maybe by family members and in this case a few people at Southwest.
     “Herb Kelleher was one of the greatest.
     “He was a man of integrity and strong will who viewed his employees as his most important asset.
     “So it is my hope that those employees will do something special to honor him for years to come.
     “And if they do something I hope they reach out to me to contribute in any way I can. “This industry will miss Herb and his genius. When you were around him you couldn't help but smile and feel good for weeks afterwards.
     “Herb, my friend, may God appreciate you the way our industry did, and if there is a airline in heaven, I hope you are running it!”

American Tantrum

     Give the gift of laughter this New Year's with American Tantrum.
     American Tantrum is a hilarious, cutting satire that imagines the contents of the 45th President's Presidential Archives in interviews, classified documents, illustrations and more.
     Buy the book and audiobook here now.

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Vol. 17 No. 89
A Tree Grows In Hollis
Chuckles for December 24, 2018
Kelly's Christmas Playlist

Vol. 17 No. 90
True Confessions:
Oliver Evans
Jim Butler
Dan Muscatello

FT010419Vol. 18 No. 1
Air Cargo 2018 In Pictures

Publisher-Geoffrey Arend • Managing Editor-Flossie Arend • Editor Emeritus-Richard Malkin
Film Editor-Ralph Arend • Special Assignments-Sabiha Arend, Emily Arend

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