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   Vol. 22 No. 26
Wednesday August 9, 2023

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Dan Muscatello and RACOS

      For the past two years, Brandon Fried and I have been looking at how best we can improve the efficiency of air cargo and at the same time lower the costs for all stakeholders and get them passed on to consumers. This effort is supported in Washington, D.C. as a bipartisan movement and we will be having tours and presentations to further familiarize the hill with the issues in the next several months. This has pretty much consumed my time, and as you can see from the article, there are a lot of challenges that we as an industry need to address. But for the first time, we are looking at a way forward. The RACOS (Regional Air Cargo Operating System) concept is important for people to understand, that this is not an airport problem, it is a series of system challenges, that can be addressed. I know that our lives are full of acronyms, but this is one we need.
      We are beginning to see signs that air cargo volumes, although still normalizing, are not yet at pre-COVID levels.
      This makes it an ideal time for the industry and the broad spectrum of private and public stakeholders to take a hard look at how to prepare for the future. “
History teaches us that growth, if not steady, is eventually, inevitable. The FAA, Boeing, and other forecasting entities are calling for roughly four percent annual growth over the next 20 years. In virtually every region where cargo is a meaningful element of the economy and airport revenue, this growth cannot be sustained without a substantial upgrade of the supporting operating and physical infrastructure, facilities, and technology. The result will be a loss in cargo throughput efficiency and increased delays in the processing of extremely high value, time sensitive goods, and higher operating costs for all stakeholders, that to be recovered will eventually be passed on to shippers and consumers.
Recognizing the need for identifying the key issues and potential solutions the Airforwarders Association (AFA) and the National Customs Brokers and Forwarders Association of America (NCBFAA) assembled a Committee to create a way forward. This Committee of industry stakeholders and experts identified five major areas of concern – Technology and Communications, Infrastructure and Facilities, Service, Staffing, and Government Regulations. A nationwide survey was developed and distributed to the full spectrum of industry stakeholders, and nearly 400 responses were received, identifying regions where there are the greatest challenges and ranking the five areas of concern and details related to each. This provided a basic blueprint for resolution, what is perhaps most significant, is that throughput issues are NOT the sole responsibility of the airport, but are a combination of all the entities involved and the most effective solutions will depend on a universal approach meeting all stakeholder needs that is best met through a dedicated federal funding program.
      The data demonstrate that:
            1. Substantial air cargo facility and infrastructure improvements are needed, but that the enabling costs (those that are needed to enable the facility to be built and operated efficiently) produce limited or no return on airport or private investment, and hence no significant incentive to these stakeholders, which often represents a barrier to development. These can include demolition of existing facilities, mitigation of certain environmental costs, land side and aeronautical infrastructure (roadway additions and/or modifications, and accessing taxi lanes and aircraft parking), and expansion of an airport’s electrical grid.
            2. Efficiency of all stakeholders (public and private) will be enhanced and their operating costs (with flow through to consumer pricing) will be reduced. The inhibiting factor is that participation must be universal, and the initial cost of new technology is a challenge for smaller stakeholders. Pilot programs indicate that after three years the initial investment will be covered. State-of-the-art electronic communications will have an immediate impact on efficiency. Truckers, freight forwarders, handlers, the airlines, and federal agencies will be better able to stage pickups and deliveries for both inbound and outbound cargo. Freight forwarders in particular, will be able to time pickups of inbound and outbound cargo, reducing the need to let the freight remain over a weekend and eat up capacity while potentially constraining handler operations. This will enable government agencies, with dual responsibilities for interdiction and facilitation, to better assign staff and adjust schedules.
            3. Service levels are down throughout the industry due to changing perspectives on work that evolved from COVID— lower levels of training, and higher turnover rates. Training and job development, while at the lower end of the financial scale, it is essential that every stakeholder understand their role and how it relates to throughput enhancement.
            4. For staffing, one of the biggest problems is lack of public access to the cargo areas. At many airports, this represents a barrier to employment for a substantial number of job applicants. A second major issue is security. To secure the appropriate access badging can take up to six weeks after a potential new “employee” is hired. In the interim, job applicants are lost because of the delays. This is both a staffing and regulatory issue and a very real problem for cargo handlers and airlines where a trained and available staff is essential. TSA and CBP staffing is also a concern particularly where operations are not 24/7. While the agencies make every effort to be responsive to sensitive shipments, the human resources are frequently unavailable on a timely basis.
            5. Federal regulations, based on local operating requirements, and/or physical constraints, are often subject to field interpretations designed to assist in the processes. Nevertheless, these changes, if not familiar to a stakeholder, can cause delays, that could not otherwise be anticipated. An additional delay factor is the lack of universal federal participation in the electronic communications element of the clearance process.
      What is clear here is that the air logistics chain within a region, is a tightly integrated system of stakeholders, whose effectiveness depends on each other.
        Regardless of the condition of the facility and infrastructure, handlers cannot operate without staff.
        Staff without training, a service ethic, and an understanding of their role are ineffective.
        Good service does not have a significant impact if there are physical, operating, and/or technology constraints.
        Policy and regulations can be a limiting factor if applied inconsistently.
        All the other factors, impacting every stakeholder in the regional chain, need to be connected through sophisticated technology and communications systems.
      These elements, and their clear interconnectivity, support the need for a holistic approach to resolution, which is the core thinking behind the RACOS. Because we are looking at a regional system, the federal allocation of funds would have an immediate benefit for all stakeholders, and in the long term, for shippers and consumers. It will encourage private investment, and give airports greater flexibility in how to allocate funding for environmental mitigation, sustainability initiatives, safety, and security. Legislation for funding the Regional Air Cargo Operating System initiative is moving ahead in Washington, without pushback and with bipartisan support in both the House and Senate. It is extremely important that the industry understand and support the concept, and help to advance it as appropriate.
Dan Muscatello

Chuckles For August 9, 2023

Air IndiaRajiv Bansal

     The Indian government has crafted a host of strategies to bring about widespread changes in the country’s cargo sector. Two dedicated railway trade corridors have been commissioned while trucking speeds have been enhanced and port turnaround times whittled down. These moves should bring down India’s high logistics costs from 14% down to the global benchmark of 8%.
     As for air cargo, Rajiv Bansal, Secretary of the Ministry of Civil Aviation (the highest-ranking bureaucrat in the ministry), pointed out: “India at this point of time cannot afford to have widebody 777 freighter aircraft.” Speaking recently, he reasoned that widebody freighters are “a costly business.”
     Well good for him.
     Also, he emphasized that India did not have the volumes to use widebody freighters to move cargo from one destination to another.
     “In India, only narrow body freighters can be used effectively. India needs to have great financial muscle to pull this off the ground,” Bansal said. “A lot of developments are happening in terms of developing dedicated freight corridors, trucking speed has gone up from Delhi to Mumbai, Delhi to Lucknow, Delhi to Kolkata; therefore, turnaround time has reduced.”
     These moves, hopefully, will start yielding results. However, as of today, India’s air cargo traffic volume did not grow in Financial Year 2022-23: it remained at 3.14 million tons, much below 3.5 million tonnes recorded in FY19: of this, 1.84 million tons was international cargo (both exports and imports) and 1.30 million tons was domestic.
     In fact, foreign air operators captured a major share of the air cargo – both exports and imports, around 95 percent of the market while Indian carriers attained only 5 percent. Most of this 5 percent is ferried by Air India and Vistara on widebody planes. Incidentally, India presently has only 14 dedicated freighters with all of them being narrowbody planes that cannot fly to long-haul destinations in the U.S. or Europe.
     Secretary Bansal also made it a point to highlight the fact that a lot more proactive industry involvement and robust dialogue was needed to usher in further growth in the air cargo sector. In line with Bansal’s advice for a proactive approach, Air India, the country’s national carrier gets high praise once again, having taken initiatives that will put it back in the ranks of major cargo carriers in the world and boost the development of an air cargo supply chain that will speed up exports. In fact, Air India is planning big: its order of 10 Boeing 777Xs, 34 A350-1000s, 20 787 Dreamliners, six A350-900s – all widebodies – will, significantly, raise the carrier’s annual cargo capacity to 2 million tons or a whopping 300% over the next five years.      All these planes will provide belly capacity for non-stop connections to key export markets around the world. Most of these planes will start joining the fleet in 2025.
     Campbell Wilson, Air India CEO and MD, remarked recently that Air India saw “a huge potential in the air cargo industry, which the Indian Government plans to grow to 10 million tons by 2030”. He mentioned that Air India’s cargo division was in the process of implementing a series of strategic measures that would foster growth and strengthen our market presence.”
     Even as Air India readies itself for its air cargo business, Indian air cargo stakeholders have been demanding policy support from the government not only to enable new air cargo players to start operations but provide muscle to existing players to expand.
     That policy and support in reality, according to air cargo stakeholders, will help achieve the 2030 air cargo target of 10 million tons.
     Stay tuned . . .

FlyingTalkers podcast



First Half Post Covid Challenging

Letter From Hong Kong
Chang'e 5

     Chang'e 5 the fifth lunar exploration mission in the Chinese Lunar Exploration Program of CNSA, just became China's first lunar sample-return mission.
     Like its predecessors, the spacecraft is named after the Chinese moon goddess, Chang'e.
     From Hong Kong, “the dark days of Covid are rapidly fading into the background," reports Bob Rogers, majordomo of ULD CARE and part of the force that makes that place great.
     “Its actually just 6 months since our borders fully reopened, behind so many of our peers and attracting a great deal of commentary from the nay sayers ready to count HK and indeed all of China out for the count," Bob declared.
     “To them I say . . . never bet against Hong Kong, that just has never worked, period!
     “The past 6 months have demonstrated how, when the going gets tough, Hong Kong gets going!
     “At the airport the signs are particularly encouraging, it seems Mr. Walsh’s predictions last September that HK’s days as an aviation hub were over were a little premature.
     “Walsh actually came off his dire earlier prediction, describing the situation in Hong Kong as “looking bright”.
     “And indeed things are looking particularly bright on the passenger side with a steady ramping up of both HK-based carriers and overseas carriers.
     “Cargo is a little less rosy," Bob said, "but after the last couple of bumper years this is not surprising.
     “And, while Hong Kong, like so many airports is suffering a problem with labor supply, the government has stepped in and revised the decades-long policy of not allowing the use of mainland labor in the SAR and an initial 6000+ workers from Zhuhai, connected by the HK-Macau-Zhuhai bridge across the Pearl river will shortly commence a daily commute from Zhuhai to work at the HK Airport.”
     For those wishing to venture into the bright lights of downtown HK, the traditional HK welcome awaits them, the stunning harbor scenery, the shops and of course an over-abundance of places to eat and drink to your hearts content . . .
     “Hong Kong," Bob Roger explains, “is back big time.”

Tony Bennett-Fly Me To The Moon

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