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   Vol. 18 No. 47
Wednesday July 10, 2019

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Air cargo rates continue to see weekly volatility, but with the demand outlook tepid and ample capacity available on most lanes, pricing continues to fluctuate, albeit within boundaries far below those enjoyed in 2018.

Flex Sees Stable

     Capacity out of most Asian origins was reported by Flexport to be “stable” at the end of June with capacity available. The exception was Central China where demand was strong and rates going up as Apple, HP and other electronics shippers exported to the U.S. ahead of anticipated tariffs.

Rating The Traffic

     Hong Kong–U.S. rates reached $3.39 per kg at the start of July after hovering in the $3.27-3.55 per kg range through June, according to TAC Index.
     By comparison, rates on the same lane were $3.66 per kg on July 2, 2018 and were just about to embark on a Himalayan traverse to the heights of $5.73 per kg in November.
     Hong Kong–Europe rates are also volatile, climbing slightly over the previous week to reach $2.74 per kg at the start of July, still a long way short of the $3.77 per kg recorded in December last year, although level compared to a year ago.

Demand Driven Summer Lull?

     As guides go, year-on-year pricing comparisons are tough on an air freight market that saw such an elongated demand spike last year thanks, mostly, to the U.S.-China trade war.
     Desperate frontloading on the Asia to North America trade lane ahead of various tariff deadlines in the second half of the year saw ocean supply chains suffer congestion and delays at ports, adding to modal shift and sucking capacity out of global air freight markets.

Forward Comparison Looks At 2017

     By contrast, some analysts believe that comparisons to 2017 – a more traditional year for air freight demand - illustrate that the Transpacific market now is less bearish than year-on-year comparisons suggest, while Europe, subject of continuously poor economic projections, is in fact currently performing satisfactorily.
     And there is some truth in this: rates at the start of July 2017 on the Hong Kong–U.S. and Hong Kong–Europe lanes $3.36 per kg and $2.27 per kg, respectively.

Eliminate Extremes

     WorldACD made much the same point in its latest report, which takes in the first five months of 2019. “Let’s join the people who find that a comparison with 2017 is more ‘realistic’ than a comparison with 2018, given last year’s ‘extreme’ growth figures,” huffed its latest report.
     “Compared with Jan-May 2017, the year 2019 so far shows worldwide growth of +1%. Moreover, 22 of the 40 largest air cargo countries in the world show positive growth for the same period.
     The growth percentages between 2017 and 2019 range from 32.6% for Chile to 0.1% for India.”
     However, although comparisons versus 2017 add context, there is no disguising the slowdown the market has suffered so far this year.
     In the month of May, WorldACD found that total chargeable weight again fell compared to the same period of 2018, this time by 5%. Yields in USD fell by 5.6%, resulting in revenue loss for airlines of more than 10% year-on-year.

Nowhere To Run Nowhere To Hide

     “Not a single region escaped the trend: the origins Africa and Europe suffered least, with year-on-year volume drops of 2.2% and 2.4% respectively, but the origins Asia Pacific and North America chalked up year-on-year losses of -7.0 % and -7.2 % respectively,” it said.
     “Latin America and the Middle East & South Asia (MESA) could not buck the trend either (-4% and -3.4%).”

Word From Mount IATA

     IATA reported a 3.4% year-on-year in global demand in May, a slight improvement on the 5.6% contraction in April.
     However, capacity growth outstripped demand growth for the 13th consecutive month, up 1.3% year-on-year in May.
     IATA said air cargo demand had suffered from very weak global trade volumes and trade tensions between the U.S. and China. “This has contributed to declining new export orders,” it noted. “The indicator for new manufacturing export orders, part of the global Purchasing Managers Index (PMI), has indicated falling orders since September 2018.”
     Alexandre de Juniac, IATA's Director General and CEO, said the impact of the U.S.-China trade war on air freight volumes in May was clear. “Year-on-year demand fell by 3.4%,” he said.      “It’s evidence of the economic damage that is done when barriers to trade are erected. Renewed efforts to ease the trade tensions coming on the sidelines of the G20 meeting are welcome. But even if those efforts are successful in the short-term, restoring business confidence and growing trade will take time. And we can expect the tough business environment for air cargo to continue.”

Looking For The Light

     Optimism elsewhere is difficult to find. “[The] market price recovery continues, however changes aren't significant enough to indicate an airfreight recovery,” commented Peter Stallion, an air cargo derivatives broker at Freight Investor Services.
     WorldACD added: “Writing this message at the half-way point for the year 2019, it is difficult to believe that the year will recover from its dismal start.”


  Ram Menen is one of the original founding team of Emirates Airline, that headed SkyCargo from inception in October 1985.
  Ram, it can be said, built SkyCargo from the ground up to its place near or at the top of the world, as top executive and guiding spirit for 27 years.
  In fact when he retired in 2013, he departed Emirates with SkyCargo as the largest international cargo airline in the world.
  Ram is a FCILT (Fellow of the Chartered Institute of Logistics & Transportation), as well as a FRAeS (Fellow of the Royal Aeronautical Society).
  He is one of the founding members of The International Air Cargo Association (TIACA), serving as Vice President in 1993 and 1994, and as President, CEO and Chairman of the Board in 1995 and 1996.
  Ram Menen has won every major award given by industry publications.
  Today, with his wife Malou, he splits his time between homes in Luxembourg and Kuala Lumpur.
  Their son Ram Menen Jr. continues in the family transportation tradition. Ram Jr. is currently employed by Amazon Logistics.

What Happens Next?

     “When we used to say that we were living in an interesting time at the turn of the century,” Ram Menen said, “we hadn’t even imagined what interesting times would really look like!
     “I don’t think what we have seen during the last couple of years is a normal economic cycle.
     “Normal cycle would have put the world into a recessionary period toward the 3rd/4th Quarter of last year.

What Has Changed?

     “The socio-political environment has completely been disrupted, not sure for the better, because of the protectionist policies creeping back and the resultant looming trade wars between major economies.
     “It has become extremely difficult to make any kind of forecast with confidence.
     “Call it the Trump Effect!
     “On top of that, the Brexit chaos has not helped.
     “Basically we have seen the can being kicked down the road, and now it is almost certain that it is going to be a 'no-deal Brexit'.
     “The highs that we saw during the last year have been a result of the inventory build up to avoid paying tariff in the U.S. and China, as well as hunkering down for a ‘no-deal Brexit’ scenario.

Looking At Timelines

     “In the case of the U.S., the efforts in firing up the domestic production and manufacturing activities is likely to take time, which means that the U.S. will still have to rely on imports.
     “Ramp up in non-tariff affected countries like Vietnam can also take time.
     “It is good that the second wave of tariff regulations on Chinese goods has been postponed.

Nothing Written In Stone

     “The lows that we are experiencing could be temporary and as the stockpiled inventories get depleted, looking forward, we should see the demand for cargo coming back and can expect a better second half of the year.

Cargo Will Come BACK

     “We should also see a spike in demand into UK during September and October . . . just before the no-deal Brexit.
     “There probably will be a lull in traffic to UK during the last quarter of this year.
     “The demand for rest of Europe is likely to be steady.
     “LATAM and Africa market demand is likely to be moderate. Intra-Asia Pacific demand is likely to remain strong and on a growth footing in the movement of components traffic as manufacturing activities try to find ways of tariff avoidance in the U.S.

Watch On The Gulf

     “The Gulf region is likely to see demand for air capacity as the shipping lanes are affected by the current spat between the U.S. and Iran. It is a hotspot and something that needs to be watched closely.
     “It is potentially a dangerous and volatile situation and a war could change the market dynamic, not only in the region but in other parts of the world.

Capacity Rationalization Is Key

     “Key to managing the next 12 months will be capacity rationalization. I see the ocean folks have already embarked on this by blanking out sailings over the next couple of months.
     “The pressure on yields will be acute because of the pressure from procurement folks to reduce costs to absorb the increase in costs because of increase in tariff in the U.S. and China.

E-Commerce No Limits

     “E-commerce will continue to power the air cargo industry. Giants like Alibaba and Amazon will continue to change the dynamics of the air cargo industry. So will the likes of Flexport, making digital logistics a reality.

Keep A Weather Eye Out

     “As mentioned earlier, the current trend is an anomaly and markets can go either way because of the uncertainties. However, my gut feeling is that the second half is likely to be better than the first.
     “Only time will tell,” Ram Menen said.

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Season Of The Witch
Nadezhda PopovaIt’s been just six years since the world lost an important, if not one of the most important heroes of WWII. Having passed on July 8, 2013, at the age of 91, Russian pilot Nadezhda Popova, along with about 40 other women—“Night Witches”—were war heroes instrumental in driving the German army out of Russia all the way back to Germany.

     Nadezhda Popova was born on December 27, 1921, in Ukraine. At the fledgling age of fifteen and unbeknownst to her parents, Nadezhda joined a pilot club in the Soviet Union, where females accounted for only a quarter of the population. The Economist called her “a wild spirit, easily bored; she loved to tango, foxtrot, sing along to jazz. It made her feel free, which was also why at 15 she had joined a flying club without telling her parents.”
     It was that “wild spirit” that suited her so well to life as a pilot—especially a pilot in the 588th Night Bomber regiment. Initially, Nadezhda was denied enlistment, as all women were in Moscow. “No one in the armed services wanted to give women the freedom to die,” she told Albert Axell, the author of Russia’s Heroes: 1941-45 (2001). But on Wednesday, October 8, 1941, an order was issued to deploy three regiments of female pilots, and the Nachthexen, the “Night Witches,” were born.
po-2     So called by the Germans because of the whistling, whooshing susurrus sound that ushered from their plywood and canvas, two-seater, open-air Po-2 biplanes—like a witch’s broomstick cleaving the air—the “Night Witches” completed 30,000 missions over a scant 4 years—on Nadezhda’s busiest night, she performed 18 sorties in a single evening.
     At only 19 or 20 years old—a young woman by any definition—Nadezhda’s piloting prowess was a thing to behold. Flipping her wood-and-fabric cropduster over, she would dive at top speed, flying low over German searchlights, dancing her plane (remember, her love of dance!) in a tango tease to attract the lights while a second plane sneaked up quietly behind to drop bombs. The pilots would then trade places and the decoy dance would begin again, this time with Nadezhda dropping her payload.

High & Mighty Moments Of Terror

     Flying a Po-2 was not an effortless task. Made with the same simple stuff one would use to make an easel—so as to be invisible to radars—the Po-2 whistled perhaps a bit too easily through the air; the open cockpits left the women exposed to the elements, the instruments of the plane and their faces either soaked in the rain or freezing in the bitter night air. There were no parachutes, no radio, no radar or guns—no real hope for survival if one were shot. And getting shot was like putting paper through a shredder, the wings reduced to tattered confetti, the whole plane alighting like magician’s flash paper.

Mad Love

     And yet, Nadezhda loved every minute of it. While they weren’t outfitted to be comfortable, Po-2s were incredibly fun to fly—highly maneuverable and stable, easy to pull out of a spin, and with a lower maximum speed than the German Messershmitts’ stall speed, which made them more difficult to shoot down. As The Economist reported, “Walking towards a plane, every time, [Nadezhda] would get a knot in her stomach; every time she took off, she was thrilled all over again.”

Nadezdha Popova and Putin

     We forget, sometimes, the humanity that must perform these inhuman acts; we have the habit of conflating people with their actions. We see the 8-meter-long fuselage, but forget the body that controls it; we remember the whispering wings as they pass overhead, but forget the clenched hands gripping the handles.

Witches Video

    At the end of the day, Nadia (as she was called) was also a young girl. Despite leading 852 sorties during the war; despite sporting hair that had been lopped off (as was standard), and donning hand-me-down men’s flight jackets, boots, and overlarge pants, Nadia “kept a white silk blouse and a long blue silk scarf, in case she had to make a really feminine impression,” reported The Economist. She wore a delicate beetle brooch on her uniform as a good luck charm.
   As lead pilot in a sortie, she lost eight very good friends in a hail of Messerschmitt fire—this, after losing her brother, Leonid, in the first month of the war. She herself was shot out of the sky a number of times. She endured the male military that mocked the “skirt regiment”—she even fell in love, despite the horror of it all, with a male fighter pilot. She read him poetry and after the war, they married. All of this, while also dropping 23,000 tons of bombs on the German army.
Women In ChargeFlossie Arend Byline     Late in 1942, flying so low she could hear the cheers of the Russian marines and see the faces of the German soldiers lit up by the fire of their weapons, Nadia dropped medicine, water, and food for the men trapped at Malaya Zemlya. When she returned home, she found her plane riddled with 42 bullets—bullets that also, frighteningly, pierced her map and helmet.
     After the war, Nadezhda Popova was awarded the nation’s highest honor: Hero of the Soviet Union; she also received the Order of Lenin, the Order of Friendship, and three Orders of the Patriotic War.
     As Summer 2019 rolls along, we’d like to take a moment to remember Nadezhda (Nadia) Popova: pilot, savior, warrior, and woman.
Flossie Arend

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