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   Vol. 18 No. 43
Monday June 17, 2019

Virgin Cargo Ad

800 lb Amazon Of Air Cargo

(Forget about the fabled gorilla in the room, here SkyKing confronts the reality of an 800-pound Amazon).

Recently Bill Boesch, the distinguished and eloquent former President of American Airlines Cargo, explained in a FlyingTypers column how Amazon has the capability to transform the air cargo landscape.

Follow The Fleet

     For example, the e-tailer is already “its own air cargo customer,” thanks to its ACMI contracts with ATSG and Atlas for Boeing aircraft, which will give it a fleet of more than 50 freighters by next year. This leaves integrators such as UPS and FedEx in the position of both providing services to Amazon – one recent report claimed Amazon accounts for 6.5% of total UPS revenue and 4.7% of FedEx revenue - as well as competing with it for customers and their cargoes.
     What’s more, Amazon can easily upgrade its air freight operations, either by buying out one of its air charter partners or by acquiring or partnering with an integrator. “Either move by Amazon would change the face of America’s air cargo industry and cause withdrawal or consolidation of the present U.S. cargo charter carriers, and maybe even one of the integrators,” argued Boesch.
     He is not alone in his views. Multiple commentators have contended that taking on the world’s leading integrators and 3PLs is a logical next step for Jeff Bezos’s brainchild.
     Amazon itself claims its only aim is to move its goods more quickly to customers and avoid delays and/or paying premiums during peak season. However, when it filed its annual report it listed "transportation and logistics services", previously not identified as a rival vertical, among its list of competitors.

Shake Rattle & Roll

     “Amazon is clearly shaking things up in North America and they have built an unbelievable network and are actually threatening FedEx’s and UPS’s core business,” said Neel Jones Shah, SVP and Global Head of Air Freight at Flexport.
     “I don’t know if that was their intent from Day 1, but once they have built this amazing network, they certainly don’t have to use it only for Amazon, they can use it for third parties.”

The Price Squeeze

     Already Amazon’s growing presence in the market is putting downward pressure on prices.
     “By being both vendor and carrier, and through unprecedented data mining into customer preferences and habits, Amazon can control its market and flatten out seasonality peaks and valleys by adjusting prices and offering free express delivery, forcing many FedEx and UPS customers to demand lower rates from the integrators so they can be competitive,” added Boesch.

Amazon The Report

     One recent report by Armstrong & Armstrong - Amazon Logistics – Market Estimates, Benchmarking and Predictions - illustrated just how significant Amazon’s logistics footprint already is and why the demands of e-commerce are opening up opportunities for it to emerge as an even bigger player in the logistics field.

Amazon warehouse

Sorting It All Out

     In the U.S., Amazon’s 38 sorting centers comprise 11.3m square feet while its 124 logistics facilities comprise 124.7 million square feet, with another 41.1 million planned or in progress. Amazon also has an estimated fleet of 4,000-7,500 trailers used for transport between warehouses and fulfillment centers and is investing $1.5 billion in its Cincinnati/Northern Kentucky Hub.

Head To Head

     By comparison, UPS owns and leases more than 1,000 package operating facilities and A&A estimated its 33 principal facilities comprised about 17.9 million square feet.
     FedEx Ground, meanwhile, has 601 total facilities, 37 of which are hubs. 373 of these facilities are co-located with FedEx Home Delivery (B2C) operations, with an additional 38 FedEx Home Delivery locations. “FedEx Ground hubs account for 17 million square feet. We estimate FedEx Ground’s facilities total 46.8 million square feet,” said the report.

Down To Brass Tacks

     The report noted that Amazon’s third-party ‘marketplace’ sales already exceed Amazon’s own and its logistics business is becoming critical to brand enhancement. “For Amazon, logistics is inseparable from brand,” said A&A, adding that its investments in logistics improve the customer experience, reduce prices and feed back into its branding, therefore offering multiple reasons why executives might see the sense of continued expansion.

The Road Ahead

     Based on Amazon’s several-year $1.5 billion investment commitment at the Cincinnati/Northern Kentucky International Airport, A&A expects Amazon to ramp up this facility and continue to work with lessors/operators like Atlas Air to grow its fleet size for full utilization of the hub.
     “As the hub won’t be operational until 2020 and complete until 2025–2027, we would expect any additional build out of regional hubs to come at the tail end or after the CVG hub completion,” added the report.
     “The strategy for Amazon Air will depend on Amazon’s international expansion. Amazon has fulfillment centers across North America, Europe, Asia, and Australia. Third-party sellers can ship products to either domestic or international fulfillment centers, and Amazon will provide value-added warehousing, transportation, and handle customs. “International sales are growing rapidly, with 80% year-over-year growth in 2016.
     “Global sellers now represent a quarter of third-party seller sales. We know international is increasing in importance for Amazon, and the company has interest in developing e-commerce markets, such as India.”
     A&A said, in future, Amazon could establish more regional air hubs after completion of CVG, but a more aggressive scenario would see a strategic partnership to attack U.S. rivals.

DHL/Amazon Hook Up?

     “Amazon could embark on a strategic partnership to jointly chip away at the UPS/FedEx/USPS oligopoly,” said the report, which suggested DHL would be a suitable partner in such an endeavor, given that the German integrator has a hub at CVG on 181 acres, with sorting capacity of 108,000 packages per hour and 80 flights per day. DHL also already partners with Amazon at CVG since Amazon’s hub won’t be operational until 2020 and complete until 2027.

The Amazon Space Ship

     Cathy Morrow Roberson, founder and head analyst at Logistics Trends & Insights, told FlyingTypers that logistics has rapidly become a competency of Amazon. “I still believe they will take care of their customers first and if there is space on a ship, plane, truck or van they will sell it out just like any forwarder or 3PL would do,” she said.
     What is certain is that Amazon’s next logistics investments will have huge repercussions across the industry.

Juneyao launch with Ospentos

The great northern Europe air cargo pioneer Erik Byman informs us that his Tallinn-based handling company Ospentos signed an agreement with Juneyao Air for trucking and handling service in the Baltics, Ukraine & Belarus.
Haiti Arendi and Erik Byman    “On June 28, 2019 when Chinese Juneyao Airlines (HO) launches its maiden flight to Europe by opening a direct daily connection from Shanghai Pudong International Airport to Helsinki-Vantaa Airport, we will be ready with top handling and connection services,” Erik Byman said.
   “Juneyao’s cargo capacity offering will not be limited to Finland alone.
   “Our agreement connects this exciting new airline enterprise with our services. We are the regional market leader in handling and distribution to the Baltic states and further to Belarus and Ukraine.
   “As a service-focused airline, we need an excellent partner on the road feeder service. Ospentos has dominated the market for years because they always focus on efficiency and service, and we believe Juneyao Air will always maintain a good cooperation with Ospentos in the future,” said Yingzhan Zhu, Juneyao´s cargo marketing manager.
   Helsinki will be the first long-haul route for the Chinese carrier, which will operate daily service with a medium wide-body Boeing 787-9. Although operated as a passenger service, the cargo capacity of the 787 will allow it to carry 20 tons of air cargo.
   “We are well-positioned to be a one-stop shop for Juneyao Air in the region, including all the Baltic states, Belarus and Ukraine. Moreover, thanks to our Qstep air cargo ground handling platform, it is possible to also provide status updates in Minsk and Kyiv, where local handling capabilities are currently limited,” adds Mr. Haiti Arendi, Ospentos International board member.

Chuckles for June 12, 2014

     We posed the same questions to a pair of top managers in our business today—an air cargo industry stalwart and an airport visionary.

Bill BoeschWilliam Boesch
Cargo Logistics Solutions

The Great Man In Air Cargo

What have you been up to?
     I’m still spending time helping the USG with various projects, as well as exploring ways to improve the situation in Afghanistan. I will have a book out in the next few months about what my team did in Iraq and then follow it up with what we did in Afghanistan.      Hopefully it will get some people to rethink our tactics. I am also trying to spend time with my grandchildren, my 2 daughters - Robin and Heather, my friends and wife, Shari. And when I have a spare moment I try to spend it outdoors hunting and fishing.

What are you most passionate about?
    The things I am passionate about are first, the health and well-being of my family.     The next is doing everything I can to help the U.S. end the current costly conflicts and help stop possible future conflicts, to protect our military as well as our police and fire fighters who have to react to terrorist activity. I also do my best to support groups who help the children who are affected by the misery we have all created for people in this world. Last, but not least, is the health of our airline industry, and the effect the fast-moving changes we are seeing is having on it.

What's on your playlist?
     I try to read and listen to college course tapes on history, current events and all religions and cultures. I have always believed that knowledge is power and do my best to absorb as much as possible.

Name three qualities that got you to where you are today.
     You really don’t need three qualities but only one. I wake up every morning and look in the mirror and say - “I’m going to make this the best day of my life.” Then I ask god to help me do it. Now in order to do this you must know how to handle stress, preplan as much as possible and when things go wrong don’t look to blame others but make it your mission to fix it. One of the best comments I heard years ago was “When hell freezes over, get an ice pick and chop through the ice.” Never give up!

What change would you like to see in air cargo?
     I think I covered a lot of that in my many Trump Effect articles. But put simply I would like the industry to work together in areas they legally can, with the single aim of providing their customers with the best quality of service for the area and price they choose to purchase.
     Even though I disagreed with Bob Crandall on a few issues, what I respected most about him was he took responsibility for his actions. He wasn’t afraid to take an informed risk and he stood up for what he believed was right for his employees and stockholders.

What do you love most about your work?
    The challenges, the excitement and the support I can offer to others.

If you could solve one problem in the world, what would it be?
    Stop killing each other in the name of God.

Warren Kroeppel Warren Kroeppel

Shelter Aviation

A Visionary Airport Man

What have you been up to?
     I am currently the Chief Operating Officer of Sheltair.

What are you most passionate about?
     I am most passionate about “doing the right thing” for our wonderful staff and our customers. I am always trying to improve performance and relationships.

What's on your agenda right now?
     Right now I am working on a number of development projects that are ongoing at many of our airport locations, as well as improving the services that we provide to our customers.

Name three qualities that got you to where you are today.
     Hard work, honesty and perseverance.

What change would you like to see in airports?
     Make them much more user friendly and efficient in security operations and baggage systems.

What do you love most about your work?
     The long-term relationships with people – our staff, our customers and other people I’ve had the pleasure to know within the industry.

If you could solve one problem in the world, what would it be?
    Get rid of the extreme “polarization” between people with different viewpoints – people don’t listen to each other and there are almost no attempts to work together for common goals, as was done in the past.

About Warren
    Warren Kroeppel is a visionary airport man, who once upon a time led New York City’s favorite (despite what you might have read), LaGuardia Airport as that gateway’s General Manager.
    Against what should have been an overwhelmed LaGuardia a decade ago, we recall Warren as always a ‘Cool Hand Luke’ in his determination and effectiveness to keeping operations moving.
    Warren Kroeppel is genuine, caring and a nice guy who was a true inspirational leader of the LaGuardia Airport team at a time the place needed it, following the great tradition of Ed Ingraham and Tim Peirce.
    Interesting to note—Ed, Tim & Warren’s combined service of managing LaGuardia adds up to over 50 of the airport’s 70 years since opening in 1939.
    Thinking about the years since he departed LGA, no doubt anyone would have had a tough time managing that airport.
    But Warren was, and I believe still is, the kind of person you can put into any situation and he will know just what to do.
    For the past decade at Shelter Aviation, Warren now serves as COO of one of the largest most respected privately-owned, aviation companies in the world with airport properties in FL, GA, NY and CO offering FBO, real-estate and construction services.

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