ACW 14 December 2015

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THE International Air Cargo Association (TIACA) says the industry is in discussions with US Customs and Border Protection (CBP) on what advance information will be needed for its Air Export Manifest Pilot.

TIACA notes outcome of exchanges could “significantly affect the process of exporting air shipments from the US and it will be considering how best to represent members’ issues with CBP”.

TIACA also says new Middle East security measures introduced by the US Transport Security Administration (TSA) for carri-ers carrying cargo from three countries could delay shipments. TIACA explains it is likely the measures will cause delays, and recommends “forwarders and regulat-ed agents who regularly have shipments originating or transiting the region contact their carriers for further information”.

TIACA also says European Union member states will “not be ready” to im-plement new EU Union Customs Code (UCC) in its entirety and transitional reg-ulations will apply. UCC will launch in May 2016. Secretary general, Doug Brittin says: “It appears the appropriate systems will not be in place to provide, handle, and maintain those authorisations,” and “it looks as if it will be virtually impossible to apply for a new guarantee or a waiver in time”.

Voting will start on 4 January for the Air Cargo Week World Air Cargo Awards 2016 - acclaimed in the air cargo community as the ‘Oscars’ of the industry.

Awards are presented in nine categories ranging from Airfreight Forwarder of the Year to Cargo Airline of the Year and voted by mem-bers of the air cargo community. Voting will take place from 4 January to 29 April.

Presentation of the awards will take place on Wednesday 15 June 2016 at a Gala Dinner held at a prestigious five-star hotel, close to the exhi-bition centre in the heart of Shanghai.

The evening commences with a champagne reception and is followed by an opulent Chinese banquet with fine wines, live music and enter-tainment acts.

The Air Cargo Week World Air Cargo Awards

are a celebration of industry excellence and recognised in the international air cargo com-munity as the standard performance bearer and “the ones to win”.

Exclusive sponsorship opportunities are available for the nine award categories, providing a powerful opportunity to pro-mote your organisation through association with a specific category at this high-profile event.

We are delighted to announce Brussels Air-port, Etihad Cargo and Air Asia have already signed up as category sponsors for the event.

Air Cargo China 2016 (part of transport logis-tic China) is being held on 14-16 June at the Shanghai New International Expo Centre.

Exhibition stands are being taken fast and over 85 per cent have been snapped up. Stands can be reserved through AZura International (exclusive partner of Messe Muenchen) by contacting [email protected] for details.

Backlash over government dithering of Heathrow decision

Representatives from UK businesses have condemned the govern-ment over concerns it will delay the decision

to expand airport capacity for at least another six months due to environmental concerns.

The government had been expected to formally respond to the Airports Commission, which it set up in 2012 to investigate increas-ing London’s runway capacity, by the end of this year. The Commis-sion released its report in July this year, recommending Heathrow Airport builds a third runway (artist impression of expansion pic-tured). The government is now set to put the decision back until the middle of next year. The UK prime minister, David Cameron met with cabinet ministers on Thursday 10 December to discuss expansion, but nothing had been announced by the time Air Cargo Week (ACW) had gone to press.

Campaign group Let Britain Fly campaign director, Gavin Hayes tells ACW: “The government’s plan for yet a further period of delay on a decision to build a new runway

sends an anti-business message. The fact is that Heathrow is full: further fudging will only damage our manufacturers, our tourism industry and the ability of our capi-tal to attract global companies.”

He also says the UK business community is: “exasperated with the lack of leadership on this issue”.

British International Freight Association director general, Robert Keen says: “We need the government to get on with an increase in UK aviation hub capac-ity by announcing expansion and improvement of airport infrastruc-ture at Heathrow to maintain the UK’s position as Europe’s most important aviation hub.”

The Confederation of British Industry director general, Carolyn Fairbairn is calling for leadership as says the UK is losing trade to the emerging economies. “After three years of evidence gathering and a decisive report from the Airports Commission, businesses want to see the government maintain the positive momentum this has deliv-ered, by making a clear decision with a timetable for action.”

In response to media reports

about the delay, Heathrow Airport says expanding Heathrow would have the biggest economic benefits for the UK and can be done while reducing noise for local commu-nities and within EU [European Union] air quality limits.”

If the government gives Heath-row the go ahead, bellyhold freight services will benefit. The Airports Commission said in its report Heathrow accounts for 64 per cent of total UK airfreight by volume and belly cargo will rise from more routes being added.

Heathrow estimates the pro-posed North West runway could be operational by 2026 and cost

£18.6 billion ($30 billion). The airport plans to develop cargo infrastructure regardless of the government’s decision.

Heathrow chief executive officer, John Holland-Kaye says expan-sion will unlock growth across the country, Businesses and unions, regions and local communities, and adds: “We’re ready to deliver the hub capacity this country needs – we will work with the gov-ernment to make it happen.”

Gatwick Airport awaits the decision and is ready to build a second runway at a cost of £9.3 billion, which it says can be deliv-ered faster.

Air Cargo week world Air Cargo Awards 2016 voting starts 4 January

Volume: 18 Issue: 49 14 December 2015

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NEWSWEEK

H ong Kong Air Cargo Industry Services (Hacis) has opened its seventh Chinese depot, located in Nansha, Guangdong prov-

ince, to cater for ever rising demand for e-commerce.

The depot is based in the Guangdong Free Trade Zone, and Hacis says it has been designed to support the region’s e-commerce logistics. Hacis says to ensure optimum efficiency, the cargo manage-ment systems and customs clearance system have been integrated to enable real time information exchange. Hacis also says the road feeder service will help business to business and business to consumer customers with simplified customs decla-ration and clearance.

Hacis managing director, Vivien Lau says: “Chinese consumers are increasingly seeking overseas commodities such as

healthcare products and foodstuffs, and ordering these online.”

“As the e-commerce market matures and becomes more price driven, fulfilment is moving closer to the market to achieve economies of scale and cost reductions in logistics. Hong Kong has the global air services needed by this growing business, and Hacis’ opportunities is to provide reli-ability and highly cost efficient onwards connections to the new generation of e-commerce fulfilment centres in China.”

Hacis says customs procedures in Nan-

sha have been simplified to enhance cargo handling efficiency and flexibility, and customs clearance available 24/7. It says cargo can be handled at piece level, with imports temporarily stored in the bonded warehouse then delivered to individual customers. Imported e-commerce cargo is required to pay luggage and postal item tax instead of cargo levies including value added tax and consumption tax.

Lau says: “Nansha’s proximity to Hong Kong creates huge business potential and an ideal partnership; Nansha has the addi-tional land that the Hong Kong logistics industry needs, and Hong Kong provides expertise in modern logistics.”

Nansha is a State-level New Area, ben-efitting from preferential government policies and reforms including tax policy, land management, financial innovation and industrial development.

2 ACW 14 decemBeR 2015

Hacis opens depot to cash in on e-commerce

AIRPORTS across Europe have seen cargo volumes rise 1.2 per cent in October though the top hubs are still posting mixed results, according to the Airports Council Internation-al Europe’s Airport Traffic Report.

Europe’s largest freight airport, Frankfurt Airport (pictured) saw volumes fall by two per cent in October to 174,435 tonnes, while the second biggest, Paris Charles de Gaulle Airport increased by 3.9 per cent to 171,000 tonnes. Am-sterdam Airport Schiphol saw an increase of 1.3 per cent 147,246 tonnes while Heathrow Airport dipped by 1.4 per cent 132,575 tonnes.

Between January and October, cargo has increased slightly by 0.6 per cent. So far this year, among Europe’s top airports, Heathrow is the only one to be above where it was last year, with a 0.1 per cent increase to 1.2 million tonnes. Frankfurt has fallen by 2.8 per cent to 1.6 million tonnes, Charles de Gaulle is down by 2.1 per cent to 1.5 million tonnes while Schiphol has dipped by 1.1 per cent to 1.3 million tonnes.

Volumes up at European hubs

The cargo community at Brussels Airport (pictured) has formed Air Cargo Belgium, a new independent organisation to represent the airfreight industry and stakeholders at the Belgian gateway.

Brussels Airport’s head of cargo, Steven Polmans will lead new group and says that Air Cargo Belgium will be launched in February 2016.

The group will work on e-cargo, formation of a new cargo community platform and create different logistical applica-tions and focus on educational initiatives in schools.

Polmans says the airport has already created a BRUcargo Strategic Committee, where representatives from different organisations meet up to discuss long-term strategic devel-opment of the airport.

Air Cargo Belgium, Polmans says will allow the committee to move forward faster and in a more structured way.

Brussels Airport has seen tremendous growth this year and in the first 10 months of this year saw a tonnage increase by 9.3 per cent to 409,164 tonnes, with freighter traffic driving the increase, up 23.9 per cent to 122,788 tonnes.

Air Cargo Belgium to be launched

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NEWSWEEK

3ACW 14 DECEMBER 2015

Cargo tonnage growth might be tough for some, but not for Munich Airport which continues to go from strength to strength and is the strongest growing hub in

Germany.In the first 10 months of the year, the gateway

saw a 9.4 per cent uplift compared to the same period in 2014 and handled 279,600 tonnes.

The airport says it has faced operational chal-lenges such as the Lufthansa strikes, which brought monthly tonnage down in November, while the biggest challenge of the cargo business moving forward in Germany is the bilateral air transportation treaties.

The main factors behind surging numbers is its steadily increasing role as a cargo hub, its large number of direct daily connections to 45 inter-continental destinations worldwide and rising number of long-haul routes.

“The resulting gains in cargo capacity – spe-cifically belly capacity – have been effectively marketed in Munich and were enthusiastically

embraced by customers. This has given Munich Airport a big boost. However, the segment posting the most robust gains in Munich – contrary to all prevailing trends – is the freighter traffic sub-seg-ment of general cargo,” Munich Airport says.

Cargo types driving volumes in Southern Germany are high-tech IT, and the automotive industry, as the likes of Siemens, BMW, AUDI, Porsche, Daimler, Bosch are headquartered there and production plants nearby. Further and additional investments from these and other Southern German corporations are planned in those markets.

As for 2016, Munich expects growth will come from implementation of major infrastructure projects, such as a third runway which is waiting

for approval by airport shareholders.“We are screening opportunities to expand

our cargo areas due to 20,000 square metres of additional space requirements by clients. The outlooks for 2016 are very positive, we are expecting further growth for the cargo segment due to new clients, routes and increasing frequen-cies on existing routes. Various forwarders are planning to set up their hubs at Munich Airport, which will give us further boost next year,” the airport explains.

A third runway will help growth as will pro-vide carriers with more attractive slots: “A third runway would offer carriers a wider range of operational choices and boost non-stop routes as well as more frequencies on existing routes.”

Munich set to expand as cargo tonnage surges

QATAR AIRWAYS has increased its bellyhold cargo route frequencies to its gateways in the Kingdom of Saudi Arabia starting this month.

The carrier says it is to operate 39 additional flights to Abha, Gassim, Ta’if, Jeddah, Riyadh and Madinah beginning 11 December 2015 through to 1 March 2016.

This will bring the total number of services to Saudi Arabia to 130 flights each week allowing easy access to a network of 153 destinations worldwide via Doha International Airport.

Jeddah and Riyadh, which are now served with a double daily service, will both increase to 21 flights per week adding a third daily flight operated by the Airbus A319 starting 16 and 18 December, respectively.

Qatar Airways Group chief executive, Akbar Al Baker says: “The commercial growth and investment seen there over the past few years will undoubtedly precede an increase in de-mand for travel to and from these cities.

“It is always our prerogative at Qatar Airways to be ahead of the curve and to go beyond the expected.”

On 1 December, Qatar Airways started a new service to Nagpur (India) from Doha.

WorldNewsCHEP AEROSPACE SOLUTIONS and Air Transat have extended their unit load device (ULD) management partnership for a further five years. Since 2003, CHEP has managed ULDs including the supply of lightweight ULDs.

FLYBE CARGO has started a coopera-tion with door-to-door delivery firm the Jetpak Group. Jetpak can now pro-vide services between the UK and the greater Benelux area from 7 December by using Flybe’s extensive network in Europe. Flybe will add Ireland in the first quarter of 2016. The general sales and service agent is the Air Logistics Group.

CHAPMAN FREEBORN AIRCHARTER-ING has upped its presence in Poland with a new office in Katowice to meet demand for its specialist aviation services.

record breaking year for PACTlSHANGHAI PUDONG INTERNATIONAL AIRPORT CARGO TERMINAL (PACTL) says it is on for a record breaking year having handled over 1.4 million tonnes in the first 11 months of 2015.

The company broke the 1.5 million tonne barrier in 2014 and it is expecting to exceed that this year. PACTL has seen volumes rise by 6.8 per cent in the first 11 months of 2015. International cargo rose by 6.7 per cent to 1.3 mil-lion tonnes. Imports increased by nine per cent to 590,669 tonnes and exports rose by 5.3 per cent to 867,594 tonnes.

PACTL vice president, Lutz Grzegorz says: “Even though growth rates have been stronger in the past, I can still see a positive trend in our business and this will almost cer-tainly enable us to set another record for freight volumes in 2015.”

The growth came despite November seeing the only monthly year-on-year fall, dropping by 0.7 per cent to 146,223 tonnes. Domestic cargo fell by 2.4 per cent to 9,513 tonnes while international volumes dipped by 0.6 per cent to 136,710 tonnes.

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Saudi flight rise for Qatar

ACW 14 DECEMBER 2015 4

C argo volumes at Miami Interna-tional Airport (pictured) (MIA) have stagnated, because of weakness in Latin America with the continued strength of the US dollar not helping

matters.Miami Dade Aviation Department, the air-

port operator, marketing manager, Chris Mangos tells Air Cargo Week (ACW): “MIA has handled 1,773,693 tonnes of freight through October 2015, which is almost exactly the same tonnage as the same time last year. Continued decline and slowing of Latin American economies, par-ticularly in Brazil, as well as the fate of the US dollar’s value, have affected our activity.”

He says the signs of problems in Latin Amer-ica had been apparent from the beginning of the year though MIA should see growth in December.

“All things being equal and with fuel costs maintaining their present levels, MIA should

experience an upward trend in cargo through December due to end of year tonnage typically being the highest of the year.”

Mangos says September and October were

the first months of the year since May to see increases in freight. He thinks the challenges of 2015 will continue into 2016, telling ACW: “Challenges on the horizon in 2016 will be to find growth opportunities around the globe at a time when the economies in China and several Latin American countries have slowed down, combined with US exports slowing down due to a strong US currency.”

Computers and peripherals continue to be the largest export from MIA, at 41,518 tonnes, fol-lowed by industrial machinery at 33,746 tonnes and telecommunications equipment at 27,801 tonnes in 2014. Among imports, the highest vol-

ume was among perishables, handling 206,866 tonnes of flowers, 165,888 tonnes of fish and crustaceans, and 119,132 tonnes of vegetables and roots in 2014.

One area, which is booming for MIA is phar-maceuticals, with the value handled increasing by 79 per cent between 2010 and 2014 to $3.2 billion, not including transit cargo. In November, MIA became the first US airport to be designated a pharma freight hub by the International Air Transport Association (IATA).

Mangos tells ACW: “We expect that the IATA designation will help to generate even more growth for MIA’s booming pharma business.”

He says the certification gives MIA a clear advantage over its rivals.

“The designation brands the airport among pharmaceutical manufacturers as an industry leader that transports pharma products in accor-dance with best practices. This designation will also highlight MIA’s dominance of the pharma-ceutical trade in the Americas and its leadership as a safe destination for pharma transport.”

“With MIA already being the largest interna-tional freight airport in the country, along with our extensive global route network, we expect the designation to significantly increase the pharma business that MIA currently does and enable Miami to more directly challenge the other pharma markets in the US.”

USA

With the continuing strength of the US dollar making business a challenge for all players, IAG Cargo is focusing on its premi-um products to increase business.

iAG Cargo regional commercial manager for North America, Joe LeBeau (pictured) tells Air Cargo Week (ACW): “it has been a tough year, i think for the whole market … a lot of that is due to the strength of the dollar. On the flip side imports have been strong.”

he says that: “Shipments were well above where we were a year ago but weight and volume are down.”

the year has been inter-esting for iAG, like other companies doing business in the US, it received a boost at the beginning of the year thanks to the West coast seaport strike before slowing down when it cleared. LeBeau says: “We are seeing a good peak season, we have only two to three weeks left. Quarter one had the West coast port strike but Q2 on it has been a struggle.

“the peak, relative to the market has moved to its busy mode, it is not the typical

peak as seen before.”LeBeau says iAG is cautiously optimis-

tic about the future, as it focuses on its premium products such as Prioritise and Constant Climate, while e-commerce vol-umes continue to increase as well. “We have done a great job, starting to move to more premium products.

“We have had growth in Prioritise and Constant Climate, we are looking

in 2016 to maintain that mo-mentum. i am very optimistic about the beginning of next year.”

iAG Cargo is increasing its UK – US services with Boeing 787-9 flights from London’s Heathrow Airport

to San Jose International Airport from 4 May 2016. LeB-

eau says he is very excited about the prospects of this service, telling

ACW: “it is going to be a game changer on the West coast … A lot of express and perishables go into that market right now.”

he says this new service will provide ca-pacity for perishables that cannot be served with the Airbus A380 services from Los Angeles.

Players challenged by dollar

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Miami stagnating due to Latin American weakness

Justin Burns, ACW: How has cargo been performing within the Manchester Airport Group (MAG)?Busby: 2015 has been an incredibly strong year across all of MAG’s airports. Our 12 month volumes have increased from around 640,000 tonnes to nearly 670,000 since the start of the year. East Midlands has provided the significant volume growth while Manchester has delivered double digit growth in several months throughout the year. London Stansted has grown steadily, and its airline portfolio has been boosted significantly through recent launches by China Southern, Turkish Airlines Cargo and we’re in the process of welcoming CargologicAir to the industry right now.

Justin Burns, ACW: How important does MAG view the cargo side of the business?Busby: MAG has always valued the cargo business as both a direct contributor to our business, but also as an essential ancillary revenue stream to passenger services; particularly full service, long haul carriers. This has been demonstrated through EMA’s commitment to the express carriers, through Manchester’s initial phase of Airport City - World Logistics Hub, and through the dedicated cargo management team that has brought this appreciation and commitment to London Stansted Airport as well.

Justin Burns, ACW: Do you think the UK government should pay more attention to Stansted and Manchester for expansion and development?Busby: The UK needs to develop a strong network of competing airports and we call for the government to respond to the Airports Commission with a policy that delivers that. The UK needs a strong network of airports because it will need all the capacity it can get over the next 10-15 years, before any new runway is delivered. As part of this, it is imperative, best use is made of the capacity available at Stansted and Manchester.

Justin Burns, ACW: Do you expect more freighters into Stansted, Manchester and East Midlands Airport?Busby: Absolutely. We’ve had a strong year with new airlines and growth from our existing customers. The momentum we have currently is good and we’ll do everything within our power to continue this trend into 2016 and beyond. The congestion at Heathrow is allowing MAG to demonstrate how well our airports can work for freighter and passenger airlines.

Justin Burns, ACW: What plans does MAG have to develop airport cargo infrastructure and routes?Busby: There are a number of opportunities being explored which could add bespoke capability towards niche markets. We are already seeing DHL invest significantly in its East Midlands facility and with a new 27ft hi-loader at EMA we have seen immediate benefits particularly towards the outsized cargo

market, supporting the incredibly diverse consignments the charter brokers like to challenge us and our service partners with. There are plenty of areas to consider, but we will work with our customers to ensure that what we commit to is actually what the market wants, or needs.

Justin Burns, ACW: What are the principle cargo operating challenges at the moment?Busby: We’re in peak season, and to date we have seen a strong surge in volumes and subsequent traffic largely driven by e-commerce. The key challenge for MAG and our service partners is to deliver on the high levels of quality and service we have promised.

Justin Burns, ACW: In what ways do you think the air cargo industry can grow?Busby: One of the key opportunities to enhance the air cargo offering is to protect the integrity of the cool chain. With this in mind we are exploring options to ensure if a consignment needs a certain temperature window, this can be guaranteed during the (ideally) brief duration the goods are at our sites. Perishable and temperature sensitive goods are key verticals, and we’ll do everything to support our customers and our industry’s reputation to retain these commodities as airfreight goods.

5ACW 14 deceMber 2015

A decision on expanding airport capacity in the UK is set to be made soon, but everyone is forgetting about the country’s other airports. Air Cargo Week spoke to the Manchester Airport Group’s business development manager for cargo, Conan Busby about how his group is performing, its plans and the runway debate..

60 withCONAN BUSBY

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ACW 14 decemBeR 2015 6

T he air cargo market has had a roll-ercoaster 12 months and this unpredictability and volatility is set to continue into 2016.

Boeing’s regional director for air-line market analysis, Tom Crabtree (pictured) says the US aircraft manufacturer is forecasting a similar year to the one soon to draw to a close.

Speaking to Air Cargo Week from Seattle (US), Crabtree explains: “We had high hopes for

2015 and they did not materialise due to the under-performing world economy and world trade in general and also due to lower industrial production.

“That being said, growth in freight tonne kilo-metres (FTK) this year has been 2.7 per cent year-on-year (YOY) up to September and for October a small number of carriers have shared with us that growth is around 2.5-3 per cent.”

But Crabtree notes the tough times seen by the industry in 2015 is not a sudden trend: “This weak growth is indicative of the trade we have seen for the last six to seven years.”

As for 2016: “Next year, world economists are forecasting a downward of 2.5-3 per cent growth. The truth is we have not seen that growth since the 2009 down trend and the world economy has sub-performed.”

2015 has been an unstable year with airfreight getting a significant boost in the first quarter

(Q1) due to the US West coast port slowdown, as the likes of car manufacturers like Toyota called on air cargo operators to move needed parts and other firms turned to air operators.

Air cargo markets are certainly forecast to achieve lower figures at the start of 2016, as this year’s Q1 was inflated and cannot be an accurate judge of how the market was performing.

Industry numbers are likely to be signifi-cantly down in Q1 of 2016 due to this, Crabtree explains: “Performance in Q1 will be particu-larly tough as we saw extraordinary growth and posted outrageous numbers in Q1 this year. We need to get through Q1 first and then there will be growth.”

As for how 2016 as a whole is likely to pan out, Crabtree says it is very difficult to forecast: “We could see negative numbers or we would get lucky and break-even or get some positive growth. It is a niche business and a lot of people forget that.

“In the first quarter of the year we will prob-ably struggle, but there will be strong growth in North America and Europe. The continued strong dollar will help Europe and the US econ-omy will improve.

“The developing world was going to carry us for economic growth such as China, Brazil and Russia, but due to various reasons in Russia and Brazil, they will continue to struggle.”

In looking ahead, Boeing garners the fore-casts of various economists across the globe and Crabtree says they predict in 2016 the air cargo market will be a bit stronger than this year.

“We do think growth could be around three to four per cent, but that is going be in air cargo FTK’s,” an optimistic Crabtree explains. “We recently did a poll with air cargo industry lead-ers who all agree that quarters three and four next year will be strong in 2016 and we (Boeing) agree with them,” he says.

Crabtree explains the North America and European economies are recovering and show-ing positive signs of growth. Capacity providers in both regions have reported rising demand in Q4 of 2015, he says.

Emerging markets across Asia, and Africa are

still seeing strong growth and airfreight is set to continue to benefit from them next year.

Crabtree expects the likes of India, Vietnam, Myanmar and South Africa to perform strongly in 2016, while the sub-Saharan Africa region he expects will post improving numbers, which is fuelled by a growing middle-class and rising intra-African trade.

“India has turned out to be a very strong mar-ket and will continue to be a growing economy and market,” Crabtree explains.

As for China, its slowdown from the middle of 2015 caused shockwaves across the industry and global economies, and Crabtree says it gave the market a “really big scare” in Q3 of this year, but notes there has been a recovery in Q4 and he expects China to “stabilise” next year.

“All in all, things are going to be better taking in the half-glass full approach, rather than the half-glass empty approach,” Crabtree enthuses.

As for the freighter market, Crabtree says the need and use of all-cargo aircraft will continue and there decline is over-stated: “Air cargo is just a by-product in bellies and as a conse-quence freighter traffic has been in excess of 50 per cent for the last four years. There is a funda-mental demand for them (freighters) and it is a different demand base for freighters.”

He notes freighters will always be in demand, giving an example of the Trans-Pacific trade lane, where 80 per cent of cargo is flown on freighters, but says there continues to be rising available belly capacity.

Crabtree feels cargo capacity reported in the bellies of aircraft is not as accurate as it should be: “Air cargo capacity in bellies is often over-quoted in press releases by operators and they are usually the exception rather than norm.

“We have seen the mar-ket picking up, but the vast majority of carriers we have been talking to are taking the ‘wait and see approach’ (to freighter orders) which we will continue to see into 2016,” Crabtree says.

Next year set to be similar to 2015, Boeing expectsMARKET FORECAST 2016

Weak Q1 next yearFreighter demand still there

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Forecasting the performance of air cargo carriers next year is something most analysts are finding hard to pre-dict after a turbulent last 12 months.

The airfreight industry was hit in 2015 by poor per-forming world trade, as growth in emerging markets

such as Brazil, and Russia fell off, China’s economy slowed, which coupled with weak demand put pressure on airfreight operators.

The International Air Transport Association (IATA) global head of cargo, Glyn Hughes (pictured below) says 2015 has been “disappointing” after 2014 was a good year, although this was driven in part by the US West coast port strike and some excep-tional automotive recalls from the likes of Toyota.

He says the momentum was achieved in the fourth quarter (Q4) of 2014 and the first quarter (Q1) this year have “tapered off pro-gressively during the year”, but how about the next 12 months?

Many commentators expect the start of 2016 to be tough after the uplift in Q1 in 2015 and are expecting another unpredict-able year, but Hughes sees reasons for optimism and says IATA is expecting solid growth.

“The forecast for 2016 is for freight tonne kilometre growth of three per cent. The steadily improving European economy, cou-pled with continued positive growth in US jobs means those two significant consumer markets should reflect an increase in air-freight demand.

“Chinese market uncertainty, despite government stimu-lus remains an area of concern considering

the impact on the global economy. OECD (Organisation for Economic Co-op-

eration and Development) and IMF (International Monetary Fund) global gross domestic product fore-casts reflect an improved position

versus 2015, which should positively impact air cargo demand.“On balance we would anticipate another

challenging year, but with signs of positive improvements versus this year.”

Next year, IATA predicts air cargo demand is likely to continue to come under strain again, like this year and operators are get-ting used to the tough operating environment.

Hughes says: “Tough times and a challenging environment appear to be the new norm so focus should be made on increasing efficiency, enhancing the value proposition, embracing technol-ogy and investing in quality. Although in an environment where there is increasing pressure on yields and margins it is often dif-ficult to secure the required investment.”

The last 12 months has seen significant growth from carriers in the Middle East, while North America and European airlines have steadied and picked up especially in the Eurozone in Q4. Carriers in Latin America have struggled due to weak currencies and poor performance from Brazil, the region’s powerhouse economy. Afri-can carriers have risen albeit by not as much as what was hoped, as conflicts, political uncertainty, humanitarian crises and a lack of intra-Africa trade hold the region back. The Asia Pacific region has had a difficult year with China’s slowdown having an impact and lower growth rates in other Asian countries.

As for what regions will be buoyant in 2016, the mature mar-kets of North America and Europe are set to perform better, but Hughes says it could be much of the same again for most, but the beacon air cargo growth region may fall a bit: “Carriers based in the Middle East are expected to continue the recent trend of sig-nificant growth in volumes, although with fewer new freighter deliveries planned to commence operation the significant growth of recent years may reduce a little.”

The air cargo industry has to a certain extent repositioned itself, which many argue is vital to achieve future growth and compete with other transport modes.

One area set to see a boom in 2016 and see significant growth is e-commerce, which Hughes sees as the big opportunity for carriers in all regions of the globe: “The continuing growth in

e-commerce presents an opportunity for all air cargo operators, from express integrator solutions to main deck operators to tra-ditional belly based carriers all will be needed to satisfy demand, which is impacting all regions as cross border expansion occurs.”

But airlines are also set to gain growth and target other sec-tors of the marketplace, and investments are set to continue in specialist cargo types to cater to the needs of shippers moving temperature sensitive pharmaceutical products and perishables, dangerous goods, outsized cargo and in other segments.

Hughes expects this focus to continue as there are growth opportunities: “Time and temperature sensitive commodities, whether that is fresh foods and flowers or high end pharmaceu-ticals are areas where we expect solid air cargo performance to continue. It is also great to see the amount of investment carriers, forwarders and ground handlers are making into cool chain solu-tions. This is a great response to the call for increased quality in air cargo supply chains.”

Improving position

MARKET FORECAST 2016IATA: freight tonne kilometres will grow three per cent in 2016

7ACW 14 DECEMbEr 2015

Middle East fall

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ACW 14 december 2015 8

T he International Air Transport Association (IATA) announced a strong overall financial forecast in 2016 for airlines in its industry outlook on Thursday (Decem-ber 10) but cargo revenues and yields are set to tumble.

IATA forecasts, next year, the average carrier net profit margin will be 5.1 per cent being generated through total net profits of $36.3 billion.

Strengthening industry performance it explains, is being driven by lower oil prices, which was $55 a barrel in 2015, but likely to average $51 a barrel in 2016, giving profits a boost and stron-ger economic numbers in key economies, such as the Eurozone, while global gross domestic product (GDP) growth is set to be 2.7 per cent, up from 2.5 per cent in 2015.

IATA’s director general and chief executive officer, Tony Tyler (pictured) says: “This is a good news story. The airline industry is delivering solid financial and operational performance.”

As for carrier revenues in 2016, IATA says they are expected to rise by 0.9 per cent to $717 billion, still below the industry peak in 2014 at $758 billion, but above the $710 billion in 2015. Again the passenger side of the business will drive this, contributing $533 billion in 2016 with cargo revenues set to decline $1.4 bil-lion to $50.8 billion, from the $52.2 billion in 2015.

The association says demand for air cargo is “disappointing”

but still expected to accelerate in 2016 to three per cent ahead of the 1.9 per cent growth in 2015 and the weak performance “reflects sluggish growth in world trade”.

Cargo demand growth is more than a half lower than the pas-senger side of the airline business, which is expected to surge 6.9 per cent in 2016.

IATA says the three per cent is slightly ahead of GDP growth, which is expected to average 2.7 per cent in 2016, but prior to the Global Financial Crisis this pace of economic growth would have generated much faster international trade and air cargo growth.

The association says: “The pattern of growth appears to have stopped as companies bring supply chains closer to home.” In total, the industry is expected to uplift 52.7 million tonnes of cargo in 2016, up from 51.3 million in 2015.

Yields have also come under pressure this year and IATA says this trend will continue and forecasts cargo yields will fall by a further 5.5 per cent next year.

On a brighter note, the pace of decline is a deceleration from 2015 when cargo yields fell by 18 per cent. IATA says six per cent of this can be “attributed to the appreciation of the US dollar and the impact this has when accounting for non-US dollar revenues”.

In 2016, IATA also forecasts the financial performance of the airline industry in 2016 will vary “dramatically by region”.

North American carriers are leading the industry’s perfor-mance and are expected to generate considerably more than half the industry’s total profits in 2016 of $19.2 billion, slightly down on the $19.4 billion in 2015. This is due to a strong US economy, the appreciating US dollar, lower oil prices and restructuring.

European airlines are expected to see net profits increase to $8.5 billion in 2016 from $6.9 billion. IATA says lower fuel costs, a faster than expected recovery of the European economy and strong performance on business travel on North Atlantic route will benefit the region.

Profits for the Asia-Pacific region are expected to grow from

$5.8 billion in 2015 to $6.6 billion in 2016, as carriers benefit from lower fuel prices, but the region will take a hit on the freight side of business and IATA notes it is “in the front line for the impact of continued weakness in cargo revenues”.

Middle East carriers are expected to see collective profits of $1.4 billion in 2015, but set to recover most of the lost ground with a $1.7 billion net profit in 2016. IATA says the region is split between strong Gulf airlines, with successful long-haul super-connector operations, and regionally-focused airlines which are suffering from lower oil revenues and political conflict.

The performance of carriers in Latin America is weak on the back of the deepening economic crisis in Brazil, weak commod-ity prices and adverse currency fluctuations. IATA says the region will finish 2015 with a $300 million loss, recovering to a $400 million profit in 2016. Airlines in Africa are expected to be in the red in both 2015 and 2016 with losses of $300 million and $100 million, respectively. IATA notes the continent’s carriers in general suffer from weak economies and stiff competition on international markets.

The overall financial outlook for airlines in 2016 is positive, but the cargo side of the business will continue to face challenges and yields, and revenues are forecast to fall, but the predicted three per cent growth in demand leaves room for optimism.

Cargo revenues and yields set to fall next yearMARKET FORECAST 2016

Yield decline to slow

Weakness in Latin America

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Freight forwarders have been enhancing their business in the thriving pharmaceuticals sector by extending and winning contracts.

Kuehne + Nagel has extended its overland contract with pharma firm Merck Sharp & Dohme (MSD) in

Europe, Middle East, Africa (EMEA) and North America for another two years.

Since 2012 MSD uses KN PharmaChain, which is a specialised supply chain service designed for the needs of the pharma and healthcare industry.

Within the scope of the cooperation Kuehne + Nagel continues to manage GXP certified FTL (full-truck-load) and LTL (less-than-truck-load) temperature-controlled services for pharma products across the EMEA region and within North America.

In addition Kuehne + Nagel organises and executes the trans-portation of palletised pharma from MSD’s manufacturing sites in Europe and North America to their global distribution centres.

Here, MSD products are managed and controlled by a dedicated team of Kuehne + Nagel pharma specialist in an environment spe-cially designed to meet the GXP guidelines.

Kuehne + Nagel International’s executive vice president of

overland, Stefan Paul says: “Our focus is to deliver day-to-day effi-ciency benefits and quality for MSD. We are pleased to prolong this successful partnership.”

Meanwhile, CEVA Logistics has been awarded a major new specialist healthcare logistics contract to provide UK-wide distribution and warehousing to BMI Healthcare.

BMI Healthcare operates more than 60 hospitals and other health-related facilities around the UK and is headquartered in London.

The three-year agreement, effective Novem-ber 2015, was won following a competitive tender against other specialist third-party logistics providers.

CEVA says it was selected as the best business partner for Britain’s biggest private healthcare provider as a result of the “value it will add to the company’s internal supply chain”.

The new contract will involve the warehousing of medical devices and consumables, hi-tech storage of pharma products at two degrees Celsius and minus eight degrees Celsius, and dis-

tribution of those products across the UK to BMI’s estate of private hospitals and reverse logistics as required.

CEVA’s managing director, for UK, Ireland and the Nor-dics, Michael O’Donoghue says: “CEVA’s operational framework for handling the BMI Healthcare business was a key component of our value proposition for this new relationship.””We believe our range of ser-vices will improve supply chain efficiency, provide operational flexibility and enhance IT inte-gration for the organization.”

CEVA Logistics

Pharma business focus for freight forwarders

9ACW 14 DECEMbEr 2015

PHARMA NEWS ROUND-UP

IAG ups London-Tel Aviv for pharmaIAG CARGO is to upgrade its London to Tel Aviv services from Airbus A321s to Boeing 777-200s from March 2016 to take advantage of Israel’s fast growing pharmaceutical sector.

The 777-200s will operate twice a day between Heathrow Airport and Ben Gurion International Airport, replacing the remaining A321. The upgrade will provide a daily capacity of 29 tonnes and over the summer of 2016, IAG Cargo will in-crease by 72 per cent to 2,500 tonnes compared to this year.

IAG Cargo global head of pharmaceuticals and life sciences, Alan Dorling says: “Tel Aviv is a thriving business centre and also one of the most important regions for the manufacture of pharmaceuticals. Through the additional capacity delivered, we can now offer manufacturers in the region greater lift, helping them as they look to grow their businesses.”

The airline says the Israeli pharma sector is set to be worth $2.3 billion by 2020. Israeli drug firms will benefit from ac-cess to 106 Constant Climate approved destinations through IAG Cargo’s Good Distribution Practice approved Heathrow hub, with connections to growing pharma markets in Latin America.

DHL GLOBAL FORWARDING has launched LifeTrack mobile app for iOS and Android operating systems for the life scienc-es and healthcare industry.

DHL says the free application will provides on-the-go access to its online cold chain tracking and management platform, LifeTrack. It says LifeTrack provides life sciences and health-care industry customers with an overview of shipments and alerts to in-transit issues, with access to cold chain advisors 24/7 directly from the app.

Customers using DHL Thermonet and LifeConEx services will have the same access to the app using their web browser version login.

DHL Global Forwarding global head of DHL temperature management solutions, and LifeOnEx chief executive officer, David Bang says: “With the LifeTrack app we meet our cus-tomers’ need for increased visibility and convenient access to the main features of our browser version, while on the go.”

“Our mobile application provides customers with im-mediate overview of the most critical information, such as temperatures, interventions and shipment resolutions, all in an intuitive mobile design.”

DHL launches pharma app

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ACW 14 DECEMBER 2015 10

SOUTH EAST ASIASingapore looks to niche cargo as volumes stagnate

Changi Airport (pictured) has seen volumes stay flat in 2015 up to October and is expecting this trend to con-tinue into the start of next year.

Between January and October this year, Changi han-dled 1.5 million tonnes of cargo, the same as in 2014.

Some months of the year were noticeably above 2014, such as February posting an increase of 7.3 per cent to 136,000 tonnes, while others were down, particularly in July, which declined by 4.8 per cent to 147,500 tonnes.

Airport operator Changi Airport Group senior manager for cargo and logistics development, Phau Hui Hoon tells Air Cargo Week (ACW) despite volumes staying flat, certain areas have seen significant increases. She says: “In terms of niche cargo segments, there was strong double digit growth in the live animals and pharmaceuticals cargo segments, growing 11 per cent and 34 per cent on-year respectively from January to October 2015.”

As for 2016, Hoon it is likely to start slowly though may pick up by the end of the year. She tells ACW: “Going into 2016, air cargo volumes are likely to remain flat, given the slowdown in major economies such as Europe, and the weaker than expected recovery of the US economy. Nevertheless, we remain cautiously

optimistic that air cargo volumes will recover by the end of 2016.”With continuing development in Asia, Changi is expecting

growth in the future, particularly from Association of South East Asian Nations (ASEAN) countries. Hoon says: “Progressive eco-nomic integration within ASEAN would potentially spur airfreight demand in the region. As the cargo hub in the region, Changi Airport is well placed to meet increased demand for intra-Asia airfreight service with its excellent connectivity, service, reliabil-ity and efficiency.”

One area Hoon expects to see continued growth in is pharma-ceuticals, which she says is proving “robust”. “In addition to the healthy growth, pharmaceutical cargo also offers a higher yield due to the special care and precautions required to transport such products.”

Pharmaceuticals only represent a small proportion of cargo at Changi but it is valuable and expected to grow. Hoon says: “Although the share of pharmaceutical as a proportion of air cargo is small at this juncture, increased global spending in healthcare and medicines and strong growth in emerging markets will con-tinue to drive demand for pharmaceutical cargo.”

To handle ever growing pharmaceutical volumes, ground han-dlers have constructed SATS Coolport and dnata Coolchain. Hoon says: “SATS Coolport has also been appointed as the world’s first facility to receive the IATA [International Air Transport Asso-ciation] Centre of Excellence for Independent Validators for pharmaceutical handling.”

“With these enhancements, coupled with Changi Airport’s strong connectivity, we have seen an increase of pharmaceutical cargo handled at the airport,” Hoon adds.

As part of its continued development, Changi will be converting its third runway to civilian use, to be ready in the mid-2020s. As part of the project, known as Changi East, a 1,800 hectare site will be used to build a new mega terminal, extending the third runway, industrial facilities, related infrastructure and transport links.

Hoon says: “To support the long term growth of Singapore’s cargo and logistics sectors, dedicated facilities for airfreight and air express services as well as MRO [maintenance, repair and overhaul] activities, will be developed as part of the Changi East development.

“This development will secure the long-term growth of Sin-gapore’s cargo and logistics sectors, and strengthen Changi Airport’s position as a major air hub.”

SOUTH EAST ASIA is affected by the ups and downs of global trade like all regions, but Lufthansa Cargo tells Air Cargo Week (ACW) it is optimistic about growth in the area.

Its regional director for South East and Australia, Frank Beil-ner (pictured) says 2015 has been a good year in the region and it is well positioned for opportunities presenting them-selves at the end of 2015. He tells ACW: “We are quite pleased with business development in 2015, even though we would of course have liked the very strong trend of the first half of the year to last a bit longer.”

“We are well positioned to make use of any year end op-portunities that arise in 2015. For 2016, Lufthansa Cargo will remain a strong player in the region. Of course, it is impossible to separate the South East Asian business outlook from the global picture, which is currently mixed.”

Beilner says South East Asian economies are integrated with global trade so need carriers with extensive links. He tells ACW: “The South East Asian economy is tightly integrated in to glob-al traffic flows. Therefore, we believe that only carriers with a strong global network are positioned to offer excellent service to customers in South East Asia.”

“Lufthansa Cargo is specialised in carrying goods that require expert treatment and special care, such as animals, pharma-ceuticals, valuable goods or express shipments. But due to our global freighter network, we can of course also carry the bulk commodities of the region, such as textiles, electronics or per-ishables,” he says.

Lufthansa Cargo has upped services to the region with weekly Boeing 777 Freighter services to Ho

Chi Minh City in Vietnam which leaves Frank-furt (Germany) on Thursdays for Ho Chi Minh via Mumbai (India) before heading to Hong Kong. Beilner says: “After a successful start up of our freighter operation in Ho Chi Minh

City this year, we are aiming to expand our freighter service to Vietnam in 2016.”

Lufthansa set to upSE Asia services

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Freight Forwarders

11ACW 14 DECEMBER 2015

TRADEFINDER

Turkey

Airlines

USA

Freight Forwarders

Hong Kong

Lithuania

Perishables

Industry Events

USA

Cargo Handling

United Kingdom

Associations

Worldwide Germany

China

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