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   Vol. 18 No. 4
Monday January 14, 2019

How U.S. Government Closure Impacts Air Cargo
Brandon Fried     FlyingTypers asked Brandon Fried, Executive Director of U.S.- based Airforwarders Association if and how the current U.S. Government shut down is impacting his members and received this replay Monday afternoon.
     “The air cargo industry’s successful efforts to work with Congress and the TSA,” Brandon said, “to provide its own security measures, are producing dividends during the current partial government shutdown.
     “While these initiatives have enabled the flow of air freight to generally continue unimpeded, we are seeing brewing challenges behind-the-scenes that could have a substantial impact on the industry.

Some Delay Noted
     “Since TSA upper-level management is not currently working, the processing and renewals of Security Threat Assessment applications are encountering delays.
     “Also, questions regarding web platform issues which require help desk assistance are going unanswered.”
     “There has been virtually no significant managerial support from CBP and the Census Department to facilitate Automated Export System fatal error corrections.
     “Similarly, staffing at the Directorate for Defense Trade Controls which are required for export licensure is limited or absent.”

Closure Air Cargo ViewpointProblems Will Mount
     “This lack of personnel will become problematic quickly, as shippers requiring export licensing may not have the ability to obtain the necessary export permits.
     “While some Customs Border Patrol CBP staffers are working, present personnel alone will not be able to manage the increasing number of incoming requests for support.”

Routine Interrupted
     “Airforwarders Association members report that routine assistance is currently limited and difficult to obtain for Automated Commercial Environment support.
     “For example, one member said that her long-awaited approval for a Container Freight Station has encountered a further delay.
     “As the backlog of unresolved problems like this one increases, the volume will build exponentially for even more substantial possible delays when government workers return.”

AfA Action Plan
     “Our members are working with their shippers to keep them informed of the situation, and to provide continuous shipment updates,” Brandon Fried said.

Editors Note:  On January 31, 2019 from 12:00 to 2:00 pm Brandon appears as guest speaker at the JFK Air Cargo Association monthly luncheon.
“Air Cargo Outlook” is the topic, with Brandon telling it like it is, as he confronts challenges and opportunities facing the air cargo industry in 2019.
Great networking with a drink, at a supple venue that includes a substantial luncheon, and an hour with a dreamer and doer in air cargo.
Members: $55.00, Non-members: $70.00. To register, click here.

chuckles for January 14, 2019

Focus vs Confrontation Challenges Trade

Air freight markets have rapidly deflated in the early days of January
with a hoped-for pre-Chinese New Year bump failing to materialize, at least so far.
     According to the TAC Index, average gateway prices on routes from Shanghai to Europe fell from $3.17 per kg on November 5 to $2.98 per kg on January 7. The decline on the Transpacific Hong Kong-North America lane was far more severe, however, slumping from a year-high of $5.69 on November 19 to just $3.79 on January 7.

Spring Celebration In China

     The advent of CNY Factory shutdowns for Chinese New Year scheduled from early February as Lunar New Year (Year of the Pig) celebrations commence February 5 are already causing a slowdown in exports out of Asia.
     According to Flexport, there is currently ample cargo space available on flights out of China, Hong Kong and Vietnam, with market demand “significantly decreased” out of all three key origins in recent weeks, and a decline in spot rates ex-Vietnam.
     “The last possible Cargo Ready Date to still move goods out of China before Chinese New Year is February 2nd,” said the digital forwarder.

On the money talks between USA and China are reportedly “going well,” as both sides attempt to reach consensus on how to handle issues of trade, intellectual property and market access for U.S. companies in China.
   Meetings of U.S. and Chinese delegations at the G20 event in Buenos Aires in early December produced a delay until March 1, in commodities that were scheduled to jump from 10% additional duties to 25%.
   The upshot is that China has begun purchasing American soybeans again and maybe G20 helped burnish up globalization’s waning reputation a bit.
Stay tuned . . .

Buchman Disappointed

Eytan Buchman     Eytan Buchman, VP of Marketing at Freightos, told FlyingTypers that the early January slowdown follows a disappointing 2018 peak season.
     “In stark contrast to 2017, when air freight hit capacity, and peak pricing were unusually high, the 2018 peak season was far more understated,” he said. “Airlines increased capacity, but demand did not increase as much as anticipated.”
     Buchman said that in early November, only the China-U.S. lane showed any sign of peak pricing, with the normal pre-Thanksgiving rush boosted by trade tariff advance shipping.
     “As peak season continued, China-U.S. prices reached their highest level on November 26, subsequently dropping 55%,” he said.
     “China-Europe prices increased 30% and have now returned to pre-peak levels.
     “There was no peak pricing on the Europe-U.S. lane. The current price is just 1% off peak. In fact, carriers even continued offering promotions on some lanes right through December.”
     Buchman’s peak season analysis was reflected in newly-released volume figures for November, the latest month for which after-the-fact numbers are available.

IATA Has Some Ideas

     The International Air Transport Association (IATA) said demand, measured in freight ton kilometers (FTKs), was flat (0%) in November 2018 when compared to a year earlier. “This was the slowest rate of growth recorded since March 2016, following 31 consecutive months of year-on-year increases,” it reported.
Alexandre de Juniac     IATA attributed the stagnation to signs of “weakness in global economic activity,” declining consumer confidence and “a contraction in export order books in all major exporting nations,” with the exception of the U.S.
     “Normally the fourth quarter is a peak season for air cargo,” said Alexandre de Juniac, IATA’s Director General and CEO. “So essentially flat growth in November is a big disappointment.”
     WorldACD found that not only did November 2018 disappoint compared to a year before, but it did not even retain its traditional position as the busiest month of the year. “Volume in November 2018 was not only 1.4% lower year-on-year, it was also lower than the month before: with a peak that was less pronounced than in previous years, November saw a drop vs October of 2%,” said the analyst.

AAPA Sees Edge

Andrew Herdman     The Association of Asia Pacific Airlines (AAPA) said the region’s airlines saw international air cargo demand measured in FTKs edge 0.1% higher year-on-year in November, but this increase was swamped by a 5.9% jump in offered capacity, leading to a 3.8 percentage point decline in the average international freight load factor to 65.2%.
     "The moderation in export activity with slowing business orders, contributed to the slowdown in air cargo growth for the month, although this was mitigated by higher volumes of e-commerce shipments going into the year-end festive season,” said Andrew Herdman, AAPA Director General.
     “Overall, the region's airlines recorded a cumulative 4.3% increase in air cargo demand during the first eleven months of the year, a reasonably solid growth rate following the exceptionally strong 9.6% annual increase recorded in 2017."
     Looking ahead, Herdman said the overall prospects for Asian carriers remained relatively positive. “Continued moderate growth in the global economy and lowered oil prices should support further expansion in air travel demand and air cargo markets in the coming year, although the recent deterioration in trade sentiment and uncertainties over the potential impact on consumer confidence levels present some downside risks,” he said.

Focus Versus Confrontation

     De Juniac was also upbeat, but predicted air cargo stakeholders would face a number of headwinds as 2019 progressed. “While our outlook is for 3.7% demand growth in 2019, downside risks are mounting,” he added. “Trade tensions are cause for great concern. “We need governments to focus on enabling growth through trade, not barricading their borders through punitive tariffs.”
     WorldACD concluded: “The mixed picture we have seen in 2018 may well carry over into the new year, which seems to announce itself with much more uncertainty than a year ago, when the air cargo world looked quite stable.”

Turkish o Horsing Around
  Turkish Cargo’s membership in the Animal Transportation Association (ATA) delivers assurances for shippers that a close working relationship with a “great international organization that aims to transport live animals at secure and ideal conditions is in place,” the carrier said.
  “Turkish Cargo adheres to the IATA LAR (IATA Live Animals Regulations) in all its acceptance, storage and transportation processes for the live animal transportation service.”

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Fool Post Brexit

     The aerial highway between the UK & EU could get messy as post-Brexit negotiations take place, said Investopedia, a website based in New York City that focuses on investing, finance education and analysis.
     The creation of the EU saw tourism in Europe grow as low-cost airlines flourished. However, following the triggering of Article 50, the European Commission has said U.K. carriers will be forbidden to travel between European cities and will be left to direct flights in and out of the U.K.
     Airlines have continually called for U.K. officials to sign a bilateral agreement with EU officials to allow the continuation of intra-Europe flights.
     Under potentially tight restrictions, European airlines would be forbidden to operate flights between U.K. cities.
     As Article 50 was triggered, Ryanair officials declared seeing a "distinct possibility of no flights between Europe and the U.K." for a period of time after March 2019.
     Airlines have been some of the most outspoken critics throughout the Brexit campaign.
     Virgin founder Sir Richard Branson accused the pro-Brexit campaign of misleading voters and said the result would be so detrimental to the British economy that a second referendum should be called. "Thousands and thousands of jobs will be lost as a result of this.
     “Thousands of jobs that would have been created will be lost, and the knock-on effect will be so dire," Branson said after the vote.

Airlines Do The Two Step

     Recently Ryanair created a new airline branded Ryanair UK and landed an AOC from UK CAA as insurance to be able to operate flights within the United Kingdom and to gateways in the EU, post-Brexit.
     Wizz Air has also secured an AOC from the UK CAA.
     Elsewhere EasyJet reportedly set up a new company based in Vienna to enable the airline to operate flights within the EU.
     Some other carriers are looking back in time to keep flights going.
     KLM said that, post Brexit, it expects to continue operating to the UK by invoking the 1960s bilateral agreement between the Netherlands and the UK that established mutual flying rights between the two countries.
     So the dance continues, as the word up that there shouldn’t be any disruption to flights after the UK exits the EU, sounds increasingly hollow with no specific deals in place.
     The airlines and others make it clear that no one wants to be the fool on April 1, left at the gate without a deal.

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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
FT010419Vol. 18 No. 1
Air Cargo 2018 In Pictures
Vol. 18 No. 2
Ready Set Go
Chuckles for January 7, 2019
Celebrating Herb Kelleher

Vol. 18 No. 3
Air Cargo 2018 In Pictures Part 2

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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