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   Vol. 18 No. 50
Tuesday July 30, 2019

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Slowdown Hoedown

News that the Cass Freight Index of North American Freight Volumes moved downward another -5.3% in June adds up in USA to a slow dance of negative cargo volumes seven months in a row 2018/2019.
     The Cass Freight Index covers shipments of merchandise for the consumer and industrial economy via all modes of transportation, but it does not include bulk commodities, such as grains or chemicals.

Cargo Volume Means

     Here is what CASS said this week:
     “When the December 2018 Cass Shipments Index was negative for the first time in 24 months, we dismissed the decline as reflective of a tough comparison.
     “When January 2019 was also negative, we again made rationalizations.
     “When February was -2.1%, we said, “While we are still not ready to turn completely negative in our outlook, we do think it is prudent to become more alert to each additional incoming data point on freight flow volumes.”

March Continued Trend Downward

     When March was -1.0%, Cass warned, “that we are preparing to change tack in our outlook.
     Then the April 2019 numbers came in at -3.2%.
     “We see material and growing downside risk to the economic outlook,” CASS said cautiously.
     Now with the June 2019 -5.3% drop, hard on the heels of a -6.0% drop in May, CASS signaled:
     “The shipments index has gone from warning of a potential slowdown to signaling an economic contraction.”

Negatives Don’t Always Impact GDP

     “We acknowledge that all of these negative percentages are against extremely tough comparisons,” CASS said, “and historically the index has gone negative without being followed by a negative GDP.”

Entering Negative GDP

     The Bureau of Economic Analysis (BEA) reported second quarter numbers for USA gross domestic product (GDP) actually saw overall growth in the USA economy slowing 2.1 percent, down from a 3.1 percent uptick during in the first quarter of 2019.
     As compared to the same time last year, GDP growth for the second quarter moved down to 2.3 percent, from 2.7 percent in quarter one of 2019.
     BEA said that GDP figures for 2018, year-over-year ended last year more than half a percentage point lower than previously thought, while 2017 growth was revised (via tax cuts that year) upward.

On The Spot

     “Weakness in spot market pricing for many transportation services, especially trucking, is consistent with the negative numbers and, along with airfreight and railroad volume data, strengthens our concerns about the economy and the risk of ongoing trade policy disputes,” CASS said.

Cargo According To IATA

     The quarterly IATA Cargo Chartbook notes traffic is advancing globally on fumes right now.
     Asia lanes are down 12.6%, with North America to Asia down 5.3%, Asia-Europe off 3.4% and Europe-North America falling 2.5%.
     So while airlines cut capacity, IATA said that new export orders suggest slightly positive growth in third quarter industry traffic.
     IATA also notes its April Business Confidence Survey of Airline Heads of Cargo indicated an uptick in optimism for improved volumes and yields before yearend.
     However for 2019, IATA FTK forecast is flat.

World According to AAPA

     Meantime Association of Asia Pacific Airlines (AAPA) said, that while air passenger demand continued to grow air cargo markets weakened further with the fall in global new export orders.
     AAPA airlines registered a 4.0% year-on-year increase in the number of international passengers carried to an aggregate total of 31.0 million for the month of June whilst revenue passenger kilos (RPK), demand grew by 3.4% year-on-year.

Cargo A Downer

     But the Malaysia-based organization reports Asia Pacific air cargo markets continued to deteriorate, with lackluster business sentiment feeding into lower demand for air shipments.

Pacific Cargo Tanks 7.2%

     As a result, the region’s airlines recorded a 7.2% year-on-year plunge in air cargo demand as measured in freight ton kilos (FTK) in June, marking (where have we heard this before) the eighth consecutive month of declining volumes.
     “The average international freight load factor fell significantly, by 5.1 percentage points to 58.8% for the month, after accounting for a 1.0% increase in offered freight capacity,” AAPA said.

Herdman Weighs In

     “Let me say this about that,” . . . Andrew Herdman, AAPA Director General declared:
     “The first half of the year saw the number of international passengers carried by Asian airlines grow by an encouraging 4.7%, “However, during the same period, Asian airlines recorded a 6.2% decline in air cargo demand, reflecting prevailing weakness in international trade flows across regions, as widening trade disputes and higher tariffs continued to disrupt global supply chains.” Looking ahead, Mr. Herdman said, more of the same with “air cargo demand expected to remain weak.”

Hoedown By Aaron Copland

American Gothic
  “Hoedown” is a uniquely American word that describes a social gathering at which lively folk let the good times roll with dancing.
  Hoedown comes from the farmers of another century, back during a time when the U.S. was mostly dotted with thousands of small farms in between some big cities.
  Work was long and hard, but every Saturday night you could put the “Hoe,” an agricultural tool for turning the soil Down, and put on your dancing boots.
  So here is some summer dance music.
Frank Sinatra Come Dance With Me

  If that doesn’t work for you, how about a 1000-piece jigsaw puzzle of American Painter Grant Woods’ iconic 20th century painting “American Gothic” (Amazon $16.30), to ease the way during the lazy, hazy, crazy days of August?
  Let’s have a Hoedown, air cargo.
  Beats a punch in the nose we say!

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Betty Hutton

Not since 1914, and the silent movie serial “The Perils of Pauline,” which was in 1947 brought back as a talkie starring Betty Hutton (pictured), has transportation had a cliff-hangar to top the on-again, off-again saga of now bankrupt Jet Airways.
     Just like Pauline, every time you think she is finished, even as a high-speed train bears down on her helpless figure tied to the track, somebody jumps out and saves the day.
     India’s Jet Airways enters the conversation these days in India every now and then raising the question, will it ever be revived?

Naresh GoyalNaresh In The Picture

     Naresh Goyal. Jet’s founder and CEO, until he exited the scene some time ago, had pleaded for government help to resurrect the carrier but it had not yielded results.

India Washed Its Hands Off Jet

     India’s Civil Aviation Minister Hardeep Singh Puri recently said in the Upper House of Parliament, that while the government was in touch with domestic airlines to accommodate the Jet Airways staff, the revival of the airline was only possible under the Insolvency and Bankruptcy Code (IBC).
     The government, said Puri, could not be held responsible for the business failure of a private entity.
     He said that the government had no role in raising funds for Jet Airways, as it was Jet’s internal matter.
     “Each airline prepares its business plan on the basis of its own market assessment and liabilities. Based on their business plan, the efficient operations and financial resources are the responsibility of the airline,” said the minister.

Jet Rose To Number Two

     First, a few facts. Naresh Goyal-led Jet Airways, the country’s second-largest airline shut down its operation on April 17, 2019 after the State Bank of India-led consortium of lenders who control 50 percent ownership of the airline, refused to provide it the much-needed emergency funding of $60 mn.

Attempts At Resurrection

     Between then and now, there have been attempts by quite a few entities to start the carrier again.
     But hopes were set way back when Jet’s creditors—the 26 banks led by State Bank of India (SBI)—failed to convince anyone that the carrier was a ‘going concern’ and were forced to approach the National Company Law Tribunal (NCLT) in Mumbai on June 20 to start bankruptcy proceedings.

Time Is Short

     The court directed the bankruptcy resolution firm Grant Thornton, which has been working with creditors on behalf of the Jet Airways, to complete the recovery process within 90 days, instead of the 180 days that is typically the norm.
     The bankers have also been considering a request to provide interim funding of $10 million to pay salaries to employee, legal dues, compliances, operational and maintenance costs, among other things.

Offers In August

     The Expression of Interest (EOI) window to gauge buyer interest in the airline will be opened in early August and candidates will be shortlisted soon afterwards.
     Whatever the outcome of the EOI, it will take quite a while for the Jet Airways issue to be sorted out.
     Let’s take a look at some of the challenges.

Lawsuits Of Plenty

     To begin with, according to reports, the NCLT has received claims worth $3740+ mn through 16,643 claims.
     The financial creditors (14 domestic banks, 12 foreign banks and eight lessors) made 37 claims totalling $1537 mn.
     The hefty claim numbers hide a bitter truth that Jet Airways and its bankers are keen to hide.
     The truth will be out when the forensic audit report (done by Ernst & Young appointed by the banks in December last year for the period between April 2014 and March 2018) is made public.
     According to Jet’s latest audited balance sheet, its total liabilities amount to $2968 mn. But the NCLT received claims amounting to more than $3740+ mn. Why is there a difference of $1772 mn?

Is Anybody Happy?

     The question that keeps popping up is: Why have the liabilities—assuming they are genuine—remain unpaid?
     In the last 12 years, Jet has had continual losses except on two occasions.
     Why then were the liabilities not paid up?
     And, why did they remain undetected for years?

The Contingent Liability Two-Step

     The answer lies in Jet’s contingent liabilities and how the airline neatly danced around the numbers.
     In the audited Jet Airways balance sheet, contingent liabilities were listed amounting to $9018 mn.
     Contingent liability is a potential liability that may occur, depending on the outcome of an uncertain future event.
     So contingent liability is recorded in the accounting records if the contingency is likely and the amount of the liability can be reasonably estimated.
     The auditors got away by hiding this whopping sum in the garb of contingent liabilities.

HQ Building Repossessed

      The claims notwithstanding, the owner of Jet’s office spaces in Mumbai have sent a notice through its law firm to the NCLT, to repossess the building.
     The lease agreement was terminated on June 7, but goods, including computers and files are still in the office premises.

Fliers & Partners Are Frankly Screwed

     Even as the banks, financial institutions and creditors wait for a resolution, fliers with the carrier’s advance tickets are the most worried.
     Jet Airways had codeshare partnerships with airlines spanning across the globe from Aeromexico and Air Seychelles to Fiji Airways and Flynas and well-known names like Air Canada, Air France, Delta, Korean Airlines, Malaysia Airlines, Qantas and Virgin Atlantic. There are many ticket holders who have queued up to return their tickets and get their money back.
     Jet Airways website points out it will take 7-10 working days for the credit to reflect in ticket-holder’s account (for cancelled tickets).

Help Is Pledged By MoCA

     The Ministry of Civil Aviation (MoCA), the DGCA (Directorate General of Civil Aviation) and other regulators are aware of the problems being faced by passengers.
     The MoCA has tweeted:
     “Any passenger complaints or issues should be promptly reported to the Ministry of Civial Aviation’s AirSewa portal or on its mobile app.
     “We will follow up immediately.
     “Our overriding priority remains the safety, convenience, and affordability of our Aviation system.
     “We are assisting airlines and airports to bring in capacity rapidly to ensure that fares remain stable and competitive.”
     “As for travellers who were members of Jet Airways’ frequent fliers’ program, Jet Privilege—incidentally, an independent company under the Etihad Group—remains operational even as the airline has stopped operations only “temporarily”.
     Jet Privilege announced that the value of JPMiles (the frequent flier points) would stay secure and intact.
     It said: “Members have the choice to redeem their JPMiles to fly free across more airlines, any destination, any flight, and any seat, in India and globally, starting with the same JPMiles requirement as before which was applicable to Jet Airways and its partner airlines.”

Conversion Rate Cut To Redeem Miles

     However, there was a catch.
     According to reports, though the carrier has send out an e-mail saying that JPMiles could be used to book flights on other airlines through the “select flights” option on Jet Privilege’s website, the conversion rate was lower.
     Many people right now, sources say, are changing the JPMiles for Amazon vouchers, hotel bookings and even books and magazines.
     There is also no clarity on what will happen to the Jet Airways slots.
     At Delhi and Mumbai, domestic carriers have been temporarily awarded the Jet slots.
     If the airline fails to get a new buyer, these slots will remain permanently with them.
     As of April 18, 2019, the carrier had only five airplanes, down from 124 before the grounding.

Jet Airways Cabin Attendants

Hardeep Singh Puri Employees Taking The Big Hit

     The worst affected have been the employees.
     While those involved with operations, pilots and other crew members have to an extent been accommodated in other domestic and international carriers, a large number remain unemployed.
     The government has pitched in to help with the creation of a website for Jet Airways’ staff.
     On July 17, in the upper house of Parliament in India (Rajya Sabha), Civil Aviation Minister Hardeep Singh Puri said:
     “We are also producing a website which is ready. I wish I had the capacity of telling you that the website is up.
     “Every employee would be listed there and the prospects for their re-employment or employment will be facilitated by the government.”
Tirthankar Ghosh

Chuckles For July 28, 2014

Luis Vidal and Christina Cassotis

  In Pennsylvania, USA—Allegheny County Airport Authority CEO Christina Cassotis, (right) and architect Luis Vidal (left) sit in front of a rendering of the proposed terminal modernization at Pittsburgh International Airport during a meeting to unveil the more than one billion dollar project that is scheduled to open in 2023.
  On the cargo side, “land a customer, get an airline,” matches up Qatar Cargo with Sri Lanka-based 3PL Expo Freight (EFL) with a weekly B-777 freighter.
  Actually, QR has served PIT for just under two years.
  The partners claim, the Doha to Pittsburgh service offers an unbeatable solution for 72-hour transit time from the Asia-Pacific region to regional distribution centers and retail stores in the United States.
  “Pittsburgh’s location midway between Chicago and New York offers convenient access to two of the largest air cargo markets in the U.S. and many markets in between,” Christina Cassotis advises.
  And no pig-iron (crude iron produced in the former “iron city”) in sight!

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Super Mariano Rivera And Delta

  Delta Airlines came up big for baseball and “The Boys of Summer” July 16, naming an airplane and numbering an airport gate at John F Kennedy Airport in New York, honoring New York Yankees pitcher Mariano Rivera, a five-time World Series Champion.
  Mariano was on his way to Cooperstown, New York to be inducted into the Baseball Hall of Fame, when these pictures were snapped July 16.
Summer Fun  Simply put, in the 100-plus year history of baseball, Mariano Rivera is the greatest closer.
  The closer, to explain the player, is a pitcher that usually throws the last inning against the opposition when his team is ahead in the score.
  Here is Super Mariano, in the left seat, at Gate 42 (his Jersey number) at DL JFK with his name and number and signature on the Gate, and also affixed to the tube of the most beautiful and elegant big jet plane ever built.
  Magic moments filled with love.

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. 18 No. 47
Down In The Depths At 35,000 Feet
Things To Come In 2019
Season 0f The Witch

Vol. 18. No. 48
Amazon & Air Cargo In Focus
How Big Is A Really Big Change
Chuckles for July 17, 2019
When Man Jumped Over The Moon

Vol 18. No. 49
Unilode A Kick In The Can
Dial Designated Excellent
Chuckles for July 23, 2019
September Montreal ULD Confab
VS Cargo iQ On The Smart Track
Qatar Cargo To The Top

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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