124352-Payload May 20

MICA(P) 261/07/2012 PPS1220/07/2013(022977)

The Trade Magazine for the Asia-Pacific & Middle East Regions Vol. 29, No. 5, May 2013

Change when change is needed

Swissport keen on Asian expansion Seeds of economic recovery being sown

www.payloadasia.com

Freighter Supplement

“Our cargo goes where no car goes.” The incredibly rugged terrain of Papua New Guinea makes it almost impossible to move cargo by road. They say that over the last 40 years, this amazing country has been built using our cargo aircraft and I’d say that’s about right. James Tira – Executive Manager, Cargo.

Flying the flag for Papua New Guinea.

www.airniugini.com.pg/cargo

F R O M T HE ED IT OR The Air Cargo Magazine for the Asia-Pacific Region

ISSN 2010-4227

Vol. 29, No. 5, May 2013

Group Publisher Wai-Chun Chen Email: [email protected] EDITORIAL Editor-in-Chief Bob Gill Tel: +65 6521 9763 Email: [email protected] Editor Donald Urquhart Tel: +65 6521 9760 Email: [email protected] Online Editor Syed Shah Tel: +65 6521 9750 Email: [email protected] Contributors Wong Joon San in Hong Kong, Manfred Singh in India, Michael Mackey in Bangkok and Heiner Siegmund in Germany. Sales & AD ADMIN Account Manager Yullie Tan Tel: +65 6521 9749 Email: [email protected] Marketing Executive Avery Li Email: [email protected] Admin Executive Lim Yann Ming Email: [email protected] Publishing Support Production Manager Pauline Goh Email: [email protected] Design Manager Honess Ho Email: [email protected] Database & Web Manager Lim Keng Boon Email: [email protected] Circulation Executive Levi Cheng Email: [email protected] Web Operations Executive Franco Nelo M. Sevilleja Email: [email protected] Web Developer Roger Tan Email: [email protected] FINANCE Finance Manager Lim Ai Ling Email: [email protected] CEO Raymond Wong Email: [email protected]

Contineo Media Pte Ltd 67 Ubi Avenue 1, #06-06 StarHub Green, North Wing, Singapore 408942 Tel: +65 6521 9777 Fax: +65 6521 9788

Reality check

A

fter putting this issue together I’ve come to the realisation that it’s actually a bit of downer issue. It wasn’t really intended to paint a downbeat mood, but really that seems to be the underlying current in some of the pieces from the cover story to the economics pages to the supplement. The issue kicks off with a cover story focusing on the thoughts of FedEx Express’ Asia boss, David Cunningham, who delivered an entertaining and indeed thought provoking talk on how the air express and general cargo industry has changed over the past three decades that he has been in the industry. Peppered with interesting factoids, humorous anecdotes and delivered with a Southern charm that 20 years in Hong Kong has obliviously failed to dent, he raised some very pertinent issues that the general air cargo sector would do well to heed. The supplement in this issue focuses on freighter aircraft with a focus on discussions that came largely out of a recent conference in Hong Kong. While the market downturn is hardly news to anyone, its’ prolonged nature makes some topics inherently more interesting than others. Take for example the topic of freighters. Whether newbuilds or conversions it’s almost a subject better left for another – hopefully better day. As Cathay’s Nick Rhodes pointed out during the conference, the very idea of preparing a case for the acquisition of new or even converted freighter capacity to take to an airline board, is inconceivable at this point in time. Getting a return on assets in this environment is one tough, if not impossible task. Of particular focus at the Hong Kong event was the issue of the rising belly capacity in the market thanks to the massive influx of modern widebody aircraft that are in and of themselves, mini, or in the words of Ram Menen, ‘invisible’ freighters. Is there a future for big freighters, let alone all maindeck players and is the current combination carrier cargo model still valid? These were some of the questions thrown at the industry panel and highlighted in the supplement. And one interesting aspect, the issue of B747-400 P2F conversions was studiously avoided during the two-day event. But having spoken to various delegates on the sidelines of the event, including one who is involved in a 747 conversion operation, the programme is is pretty much dead as a dodo after the floor pretty much dropped out from under it. On the economic front, two pages of articles discussing the global economic situation and confidence of freight forwarders provide a somewhat contradictory picture of where we are headed. But then again, did anybody really expect anything else, other than contradictory? We hope you enjoy the read and don’t worry, it can (probably) only get better.

Printer: KHL Printing Co Pte Ltd

Payload Asia has been appointed by the 18 member Federation of Asia Pacific Aircargo Associations as official publication for FAPAA news. Payload Asia is a controlled circulation publication available free-of-charge on request to qualified subscribers. Qualified subscribers are buyers and sellers of air cargo/courier/express products and services plus government and trade officials dealing with airfreight who are based in the Asia-Pacific and Middle East regions. Non-qualified readers can receive Payload Asia on payment of a US$225 annual fee. Payload Asia is published monthly by Contineo Media Pte Ltd, 67 Ubi Avenue 1, #06-06 StarHub Green, North Wing, Singapore 408942. Material in Payload Asia is copyright and may not be reproduced in any form without the written permission of the editor.

C O V ER MICA(P) 261/07/2012 PPS1220/07/2013(022977)

The Trade Magazine for the Asia-Pacific & Middle East Regions Vol. 29, No. 5, May 2013

Change when change is needed

Swissport keen on Asian expansion Seeds of economic recovery being sown

www.payloadasia.com

www.payloadasia.com | May 2013

Freighter Supplement

Facing a serious set of challenges, the general air cargo sector needs to take a leaf out of FedEx’s playbook and change – and that change includes a rebalancing of capacity with less dedicated freighter capacity says David Cunningham, FedEx Express president for Asia Pacific. For this and more, please turn to page 26. 1

GATEW AYS

Consultancy firm Frost & Sullivan predict Indonesia’s transportation and logistics market will grow at a compound annual growth rate (CAGR) of 14.8 per cent for the forecast period 2013 to 2017, on the back of surging economic growth.

indonesia Frost & Sullivan predict Indon logistics growth

Frost & Sullivan is forecasting the Indonesian logistics industry to grow 14.5 per cent to IDR 1,634 trillion (US$170 billion) in 2013 as compared to an estimated IDR 1,427 trillion a year ago, fuelled by the Government initiatives and development of the logistics industry fueled by strong economic growth. Frost & Sullivan’s global VP, Transportation & Logistics Practice, Gopal R, said that the relocation and strong flows of capital are also expected to drive manufacturing activities in Indonesia and boost logistics demand. He added that external trade for Indonesia is expected to see a moderate growth of 16.7 per cent to reach $446 billion in 2013. “Import/export forwarding, shipping and airfreight related businesses will benefit from sustainable growth of external trade activities,” he said. Gopal said that the growth of foreign direct investment (FDI) is expected to continue in 2013, with an estimated value of $42.7 billion. He added that FDI realisation in transport & storage sector reached $ 2.8 billion in 2012, which was the second largest share out of overall FDI, after the 2

mining sector at around $4.3 billion. He also said that the strong FDI flow into the mining industry will continue to boost the industrial growth and offer business potential to transportation and logistics industries. Growth constrained Gopal predicts the transportation and logistics market in Indonesia to grow at a compound annual growth rate (CAGR) of 14.8 per cent for the forecast period 2013 to 2017. “However, underdeveloped infrastructure will slow down the growth if the bottleneck persists in the coming years,” he said. The problems of poor connectivity, processes and weak infrastructure is evident in many price differentials and transport problems in Indonesia, Gopal said. He added that trade facilitation is still mainly ‘paper-based systems’, which increases the cost of logistics in addition to reduced efficiency. ‘The Indonesian logistics market is highly fragmented with abundance of small- to mid-sized companies in the market, even the big players are facing stiff competition from these companies,” Gopal said. He added that the fragmented market pushes smaller logistics service providers to go for economic pricing strategy rather than focusing on service quality and breadth of services offered.

He expects airfreight volume to rise 19.6 per cent to reach 1.16 million tonnes from 970,000 tonnes in 2012. “There’s significant potential for air cargo from seasonal perishables, as well as time sensitive and high value components and equipment,” he added. Gopal also said that Soekarno Hatta Airport contributed approximately 36.7 per cent of the total air cargo volume in the country. Outsourcing trends Gopal said that there is a higher inclination towards outsourcing a variety of value added services in the Indonesian market. He added that logistics service providers need to work toward more value-added services while strengthening the intermediate services. He said that logistics end users are also moving towards integrated supply chains with professional service providers. He added that Indonesia is determined to become an important player in international trade and markets with the government focusing particularly on six key areas with the objectives of ensuring the availability of strategic commodities, promoting low cost economic activities and strengthening national competitiveness. The ASEAN Economic Community (AEC) in 2015 will amplify the export value to ASEAN countries, but in the PAYLOAD ASIA | May 2013

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GATEW AYS meantime, logistics service providers in Indonesia should move towards offering specialised logistics solutions for specific industries such as FMCG, construction, service parts and mining as compared to the current basic logistics services with common value-added services. The Indonesia Government should also integrate transportation hubs – seaports, airports, terminals and distribution centers – with the transport network and develop state-of-the art logistics infrastructure for efficient distribution. “Companies should also strengthen its human resources capabilities with professional and experienced logistics personnel along with market expansion,” Gopal said.

2012 was a good year for Garuda Indonesia

Garuda Indonesia has reported exceptional growth, doubling its comprehensive income in 2012 compared with 2011, from US$72.7 million to $145.4 million. The Indonesian carrier showed consistent progress across the board, with an increase of 72.6 per cent in net profit from $64.2 million in 2011 to $110.8 in 2012, while passengers increased by 19.6 per cent with 20.4 million carried. The carrier also saw an increase in the amount of cargo carried, up 22.2 per cent to 280,285 tonnes from last year’s 229,378 tonnes. In Australia and the South West Pacific (SWP) region, Garuda Indonesia’s operations also continued to grow rapidly with a passenger increase of 20 per cent, while flight frequencies increased by 22 per cent from 1,537 to 1,877. Commenting on the significant growth in 2012, Bagus Y. Siregar, VP for Garuda Indonesia, Australia and SWP said: “We foresee these strong figures continuing in 2013, especially with the launch of new services for the whole region such as our daily service from Melbourne to Denpasar which started this month. We are also proud to launch a new direct Perth-Jakarta service for the first time on 28th June, as well as the momentous re-introduction of Brisbane – Denpasar services in August. It’s going to be a very exciting year for us and these figures show we are making great progress towards becoming a five star carrier.” Garuda Indonesia president & CEO, Emirsyah Satar explained that improvement in the company financial performance is the result of expansion 4

Batik Air plans to go head-to-head with Indonesian national carrier, Garuda Indonesia on international long-haul routes by tapping some of the five B787-8s on order through parent Lion Air.

of the company’s operations through the 2011–2015 Quantum Leap Program, a programme of commitment to becoming a world class airline by 2015. In 2012 Garuda Indonesia welcomed 22 new aircraft, consisting of two A330200, four B737-800 Next Generation, five Bombardier CRJ-1000 NextGen and eleven A320 for Citilink, raising the total number of aircraft in operation to 106 aircraft, with an average age of 5.8 years.

Garuda targets LondonJakarta ‘kangaroo’ route

Garuda Indonesia aims to challenge alternative routes operated by Singapore Airlines, Qantas and Emirates with a new London–Jakarta service from 2 November. The so-called ‘kangaroo route’ from London Gatwick’s redeveloped South Terminal, will fly five times a week with the carrier’s new B777300ERs, which will fly on to Sydney, while streamlined connections from Perth and Melbourne will also feed the Jakarta-London leg. The service from Sydney will be five times a week, while connecting flights from Melbourne will leave four times a week and from Perth five times weekly. While Singapore Airlines flies from Australia to London via Singapore, Qantas has tied up with Emirates to funnel kangaroo route traffic through Dubai. China Southern also aims to connect Europe and Australia via Guanghzou.

Batik Air set to start ops Jakarta-Pekanbaru

Indonesia’s Batik Air is to tentatively set to make its maiden flight on 26 April

using a planned fleet of B737-900(ER)s sourced from its parent, Lion Airlines. The full-service airline intends to start operations from Jakarta Soekarno-Hatta International (CGK) to Pekanbaru Sultan Syarif Kasim II (PKU), to be followed by Batam Hang Nadim (BTH) and Manado Sam Ratulangi (MDC). Batik Air also plans to go head-to-head with Indonesian national carrier, Garuda Indonesia on international long-haul routes by tapping some of the five B7878s on order through parent Lion.

Investigations ongoing into Lion Air crash

The Lion Air pilot whose aircraft crashed into the sea while trying to land in Bali has reportedly described how he felt it was “dragged” out of its trajectory and into the water. Investigators are considering whether a powerful downdraft of wind caused the crash in which all 108 passengers and crew survived despite the B737-800 cracking in half on impact. The aircraft, newly delivered in February, undershot the tourist island’s main airport runway in Denpasar and belly-flopped in water in mid-April. Authorities from Indonesia, the US and Boeing are investigating. Initial debriefings, witness comments and weather reports have focused attention on the possibility of ‘wind shear’ or a downdraft from storm clouds known as a ‘microburst’. Experts say such violent and unpredictable gusts are rare but can leave even the most modern jet helpless if they are stronger than the plane’s ability to fly out of trouble – with the critical moments before landing among the most vulnerable. PAYLOAD ASIA | May 2013

GATEW AYS

JAPAN ANA planning to resume cargo-only 787 ops in June

All Nippon Airways is preparing to resume B787-8 operations in June, albeit, only for cargo operations. According to Reuters, ANA will resume cargo-only B787 flights to Germany in a bid to restore public confidence in the aircraft, which has been globally grounded after onboard lithium-ion batteries overheated in two Dreamliners in January. All Nippon currently has seventeen B7878s in its fleet.

SINGAPORE Singapore Airlines March load factor up

Singapore Airlines Cargo saw its load factor rise 2.2 percentage points to 67.2 per cent in March compared to a year ago with SIA saying the cargo load factor was higher for all route regions through capacity management, except for East Asia where demand did not keep pace with capacity reductions. By region: East Asia 55.5 per cent; Americas 67.2 per cent; Europe 84.2 per cent; South West Pacific 62.9 per cent; and West Asia & Africa 67.2 per cent. Overall capacity was down five per cent in March to 908 MTK from a year earlier, while total freight carried was off slightly from last year at 103.7 (million Kg), but up 76

per cent over February figures. Freight carried in terms of tonne kilometers was 610.1 MTK.

ST Aero seals new contracts in 1Q

Singapore Technologies Engineering Ltd (ST Engineering) has announced that its aerospace arm, Singapore Technologies Aerospace Ltd (ST Aerospace) has sealed new contracts worth nearly SGP$480 million (US$388 million) in the first quarter of 2013. The contracts are for airframe, component and engine maintenance, as well as engineering and development, which will be carried out through its global maintenance, repair and overhaul (MRO) network. A tot al of 180 airc raf t were redelivered for airframe maintenance and modification work in the first quarter of 2013. This is in addition to the five B757-200 freighters converted through its MRO network. Besides airframe redeliveries, ST Aerospace processed 15,161 components, 72 landing gears and 60 engines for both commercial and military customers. ST Aerospace is stepping up its participation in the engine leasing business. Its wholly owned subsidiary, ST Aerospace Engines, has injected additional capital into its 50 per cent-owned associate company, Total Engines Asset Management, bringing its total share capital contribution to US$8.21 million. It has also expanded its

In the mood for innovation? Fly into the future with Lufthansa Cargo.

customer base by securing new engine leasing contracts during the quarter. On capability development, following the completion of ST Aerospace’s investment of 35 per cent equity interest in Elbe Flugzeugwerke (EADS EFW), ST Aerospace has commenced the A330P2F engineering development phase for the freighter conversion programme. Additionally, EADS EFW will serve as ST Aerospace’s European MRO centre, bringing convenience and value-added solutions to customers in the region, it said.

Malaysia Malaysian forwarders appeal bumiputera rule

T h e A i r f r e i g h t Fo r w a r d e r s ’ Association of Malaysia (AFAM) has written a letter to Prime Minister Datuk Seri Najib Abdul Razak to ask for a timeframe in which a rule which necessitates forwarding companies to have a 51 per cent bumiputra equity participation, can be reviewed. ‘Bumiputra’, which means ‘son of the soil’ is the country’s controversial racebased affirmative action programme for its majority Malay population which has been in place since the 1970s. “We once again request that the Prime Minister kindly assist us in obtaining the necessary information with regards to the time frame needed to review the existing policy requirement for a 51 per cent bumiputra equity requirement for

June 4-7, 2013 Hall A4, Booth 101/302

Stop in and see us at transport logistic in Munich.

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www.payloadasia.com | May 2013

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GATEW AYS the forwarding industry as we feel that it is only an administrative matter and it should not take that long to resolve,” AFAM chairman Walter Culas said in the letter dated 8 April 2013. In August 1990, the Royal Malaysian Customs Department had issued a directive under the National Economic Policy (NEP) imposing a requirement of 51 per cent bumiputra equity share for all new and renewed forwarding agent licences. AFAM has been asking for a review of the law since 2007. About 3,471 forwarding agents are affected by the rule. “We had pointed out in our previous letters that the forwarding industry is the only business segment that is required to meet the 51 per cent bumiputra equity requirement while all other business segments need only comply with a 30 per cent bumiputra equity requirement as stipulated in the NEP,” the letter said. “In fact, some of these requirements have further been removed with the recent liberalisation of the service sector,” said Culas highlighted in the letter. In 2009, the government lifted the 30 per cent bumiputra equity rule in 27 services subsectors, including health and social services, tourism, transport services, business services, and computer and related services.

Malindo Air to begin int’l flights to India

Malaysia-based Malindo Air is planning to serve Delhi Indira Gandhi International (DEL) and Tiruchirapally (TRZ) as its first international routes with daily B737-900 flights set to begin on 1 June from Kuala Lumpur. In addition, the airline plans to bolster its domestic network through the addition of Bintulu (BTU), Johor Bahru Senai International (JHB), Mekoryuk (MYU), Penang Bayan

Lepas International (PEN) and Sibu (SBW) flights also scheduled for 1 June. At present, the Lion Airlines subsidiary serves Kota Kinabalu International (BKI), Kuching (KCH) using a fleet of two B737-900ERs.

NEW ZEALAND Air NZ, Virgin Australia to fly Perth–Christchurch

A twice-weekly flight between Christchurch and Perth will revive an abandoned trans-Tasman route from December 2013 until late April 2014. An Air New Zealand B767 will fly the route, under a codeshare with Virgin Australia, twice a week. Air New Zealand CEO Christopher Luxon described Perth and Christchurch as the two largest trans-Tasman destinations without a direct alliance service, although the route was last flown more than 20 years ago. “This is a great time to be linking these two destinations. The West Australian economy continues to grow at a faster rate than the rest of Australia and rebuilding activity is poised to stimulate travel demand within Christchurch and Canterbury.” Air New Zealand and Virgin Australia are currently seeking reauthorisation for their codeshare, which started in February 2011. In separate news, Air New Zealand is reportedly seeking clearance for a codeshare with Turkish Airlines.

CHINA Uni-Top eyes grounded Grand Star assets

Tianjin Binhai International-based GrandStar Cargo International Airlines is set to take on a new majority shareholder in the form of China-based logistics firm, Uni-Top Group. Uni-Top has signed a

Lion Air subsidiary, Malindo Air is set to begin international services to India’s New Delhi and Tiruchirapally.

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Letter of Intent with current Grand Star majority shareholder, Sinotrans Air Transportation Development Co (Sinotrans Air) for the transfer of their 51 per cent stake. Wuhan-based Uni-Top, owner of Uni-Top Airlines, is likely interested in securing Grand Star’s Tianjin traffic rights, as well as adding its parked B747400F to its current fleet of three older B747-200Fs. Sinotrans had originally planned to liquidate Grand Star’s assets in 2012, but then decided otherwise.

China Southern launches 2nd Zhengzhou-US service

China Southern Airlines’ new Zhengzhou-Chicago service commenced from 10 April. The service, utilising a B747-400F, is the second all-cargo route China Southern has launched from Zhengzhou Xinzheng International Airport, coming only shortly after the debut of Los AngelesZhengzhou-Guangzhou freighter route on 5 March. The introduction of two international all-cargo routes within two consecutive months indicates the improving logistics environment of Zhengzhou airport and China Southern’s investment in the Zhengzhou Airport Economic Experimental Zone. The inaugural flight was mainly loaded with Apple products, according to China Southern Cargo. The two times weekly service is routed PudongZhengzhou-Chicago and provides a weekly capacity of over 200 tonnes. Additionally, connected by China Southern’s trucking and air-to-air network, shipments can be rapidly distributed to over 10 cities in America such as New York, Atlanta, Boston and 19 South American cities located in Chile, Paraguay, and Brazil, the carrier said. “In recent years, with the relocation of industries and labor force, more and more large enterprises like Foxconn, Zhengzhou Yutong Bus Co., Ltd, Zhengzhou Nissan, Aluminum Corporation of China (CHINALCO) settled in Zhengzhou, substantially stimulating air cargo demand in Zhengzhou,” China Southern Cargo said. The carrier added that it attaches great importance to the air cargo market in Zhengzhou and has been striving to bridge Zhengzhou with overseas markets via Guangzhou. “China Southern has successfully developed a seamless freighter-belly and PAYLOAD ASIA | May 2013

GATEW AYS

China Southern Cargo has added a second Zhengzhou-US service as cargo demand grows in the western Chinese city.

freight-freighter cargo transfer network. In order to provide quality service to Zhengzhou’s electronics enterprises, China Southern has developed tailor made transfer process in Guangzhou. The new all-cargo route of China Southern Airlines will undoubtedly deliver a more convenient transport channel for Zhengzhou shipments and bring more choices for the Zhengzhou enterprises,” it said.

TAIWAN EVA Air considering B787-10 and B777X

Taipei-based EVA Air is reportedly considering buying the B787-10 and the B777X with its management waiting for Boeing to reveal more information with respect to the 787-10 and 777X before making a decision. It has also said that it is keen on the B777-F as a replacement for its ageing cargo fleet of six MD11Fs and nine B747-400Fs, but that the current soft global air cargo market does not make that a viable proposition currently. In line with its plan to cut costs – fuel costs in particular – EVA will gradually phase out its fleet of seven MD-90s and three B747-400s between 2014 and 2016 while simultaneously phasing in a fleet of seven brand new B777-300ERs and ten more A321-200s.

SOUTH KOREA

safety, inflight services, flight operations and maintenance. Under the agreement, MAI will place its ‘8M’ code on Korean Air’s daily flight between Seoul and Yangon. Korean Air plans to expand the codeshare agreement on flights operated by MAI.

Korean Air seals deal on 44% stake in CSA

Korean Air has completed its acquisition of a 44 per cent stake in fellow SkyTeam alliance member CSA Czech Airlines, with an option to buy the remainder. Speaking on the occasion, Cho Yangho, chairman of the Board of Directors and CEO of Korean Air, said he considered CSA, “a trustworthy partner with whom we wish to expand into Central and Eastern Europe”. The first moves within the tie-up include the lease of a Korean Air A330-200 to CSA, which will be deployed on its new two-times a week Prague Vaclav Havel Ruzyne (PRG)-Seoul Incheon International (ICN) route in cooperation with Korean Air from this summer. The Czech government decided to initiate the selection of a strategic partner for the country’s flag carrier in November 2012. Subsequently, 52 of the world’s biggest international carriers were invited to take part in the tender procedure with only a single offer submitted by the 1 March deadline, by

Korean Air, Myanmar Airways sign codeshare

Korean Air has signed a partnership and co deshare memorandum of understanding with Myanmar Airways International (MAI). Established in 1992, Myanmar Airways International operates seven international routes with a fleet of one A319-100 and seven A320-200s. The MOU will enable both airlines to promote bilateral cooperation in all areas including passenger traffic, 8

(l-r) Yang Ho Cho, Chairman and CEO of the Hanjin Group and Korean Air and Petr Necas, Prime Minister of the Czech Republic.

Korean Air. On 13 March the Czech government approved the sale of the 44 per cent stake. “The new stake bought by Korean Air in Czech Airlines will significantly impact the entire Czech Republic, thanks to tighter ties with the rapidly growing Asian region, increasing awareness from potential Korean and Asian investors, increasing commercial collaboration and reinforced tourism between the Czech Republic and Asian countries,” Prime Minister Petr Nečas said. Korean Air said it plans to expand its network through Prague airport by increasing its code share flights and improving its connection schedules with Czech Airlines.

India

AirAsia India on track for a September launch

AirAsia India is on track for a September launch date provided it completes and obtains all necessary government checks and approvals, Bo Lingam, AirAsia’s COO, has said. A 49:30:21 joint venture between Malaysia’s AirAsia and Indian companies Tata Sons and Telstra Tradeplace, AirAsia India plans to initially base two A320-200 aircraft in Chennai and will cater primarily to India’s Tier-2 and Tier-3 cities. The deal makes AirAsia the first foreign carrier to enter into a joint venture with a local Indian company after the civil aviation sector was thrown open to overseas investors with a 49 per cent shareholding cap, by the Indian government in 2012. Meanwhile, AirAsia Group CEO Tony Fernandes has said AirAsiaX will likely re-enter the Kuala Lumpur-Mumbai, Delhi markets soon with a possible feeder service to the new AirAsia India joint venture.

India venture would tap existing Virgin model

Virgin Atlantic president, Richard Branson, has revealed that his group is now actively considering launching an Indian subsidiary using the carrier’s Virgin Australia and Virgin America operations as a model. The move comes after the Indian government revised legislation permitting foreign airlines to hold up to 49 per cent equity in Indian carriers except for Air India. Speaking to Livemint, Branson said that in light of the recent launch of Virgin Atlantic flights from London Heathrow (LHR) PAYLOAD ASIA | May 2013

GATEW AYS to Delhi Indira Gandhi International (DEL) and Mumbai Chhatrapati Shivaji International (BOM), Virgin viewed the Indian market as having great potential, but would not go the classic LCC route, rather offering “a low-cost airline albeit with a good quality business class” product.

Kingfisher takes another stab at getting airborne  

India’s Kingfisher Airlines, grounded for more than six months, has begun the process of seeking regulatory approvals to re-launch its operations and has submitted plans to the Directorate General of Civil Aviation (DGCA) for an infusion of funds and revival of its flights. “We have shared the funding and traffic plans. The initial funding to restart the airline will come from the (core) Group. We have also requested that our licence be renewed,” said CEO Sanjay Aggarwal. Kingfisher’s flying licence was suspended in October and lapsed in December after the airline was grounded following a strike by its employees over non-payment of wages. According to the new plan, Kingfisher would resume limited operations with five A320 and two turboprop ATR aircraft and gradually increase operations until the number of aircraft reached 20.

SRI LANKA Srilankan, Mihin Lanka losses widen

SriLankan Airlines and the state-run budget carrier Mihin Lanka saw their losses widening during the year 2012, the recently released Central Bank annual report showed. SriLankan Airlines reported an operating loss of Rs20.5 billion (US$ 165.3 million) during the year against Rs.19.1 billion operating loss it incurred in 2011. Despite the total revenue of the airline increasing by 36.1 per cent to Rs.107.4 billion, the operating expenditure rose 30.6 per cent to Rs.128 billion during the year. “Emerging competition from other international airlines and the volatility of fuel prices have adversely affected the profitability of SLA (SriLankan Airlines),” the annual report noted. During the year, SriLankan Airlines acquired a new A320 aircraft and an A330 aircraft. Meanwhile, Mihin Lanka’s losses doubled with the budget carrier incurring an operating loss of

www.payloadasia.com | May 2013

Rs.1 billion in 2012, against Rs.455.3 million in 2011. D espite the dismal f inancial performance of the two state-owned carriers, the civil aviation sector recorded a positive growth as Bandaranaike International Airport (BIA) saw total air cargo handling increase by 11 per cent y-o-y with seven million passengers (including transit passengers) during 2012, recording a 15 per cent increase year-on-year. Passenger aircraft movements handled by the BIA increased to 48,416 aircraft, indicating a y-o-y growth of 11 per cent. Sri Lanka recently opened its second international airport in Mattala and expects to serve one million passengers and an annual cargo throughput of 45,000 tonnes.

Middle East Emirates takes lead in e-freight adoption

Emirates SkyCargo is the first carrier to implement Electronic-Air Waybill (e-AWB) shipments under the industry’s recently ratified multilateral e-AWB standard. “SkyCargo has tirelessly worked towards the adoption of e-freight with its customers, while also ensuring that processes are more widely understood and adopted in the industry as a whole,” the carrier said. Since 2011, Emirates SkyCargo has put in place over 120 bilateral e-AWB agreements with its customers to ensure a smooth transition from paper Air Waybills (AWB) to Electronic Air Waybill data (FWB). “Following the recent World Cargo Symposium held in Doha, at which the e-AWB multilateral agreement was ratified, we have received an increased interest in e-AWB adoption from our

customer base globally. In addition, we have observed heightened interest in e-freight implementation industry-wide – we are at an important junction for the cargo industry, with the future looking bright for e-freight adoption,” said Ram Menen, Emirates divisional senior VP Cargo. “With increased flexibility in the e-AWB process as a result of the multilateral e-AWB agreement, industry players are finding it easier to enter into the e-AWB environment and manage processes electronically with their customers. As a result, we will see increased adoption of e-AWB processes for both the Montreal and Warsaw Convention Countries over the coming months and years. Emirates SkyCargo will continue to remain at the forefront of these developments and advise those interested in taking the steps to ‘go green’ and adopt a paperless cargo system,” he added.

Oman Air looks to start new LCC, cargo airline

Oman Air is planning to launch both a low-cost carrier and a cargo airline in the wake of a massive US$253 million loss posted for its 2012 Financial Year. According to Oman Air chairman Darwish bin Ismail Al Balushi, the Omani Government, Oman Air’s sole shareholder, has agreed “in principle” to the proposal, with a feasibility study now underway. Al Balushi is quoted as saying that while passenger numbers and revenue in fact rose 21 per cent on 2011 with cargo performing especially well posting a 29 per cent growth, losses accrued mainly due to the Omani national carrier’s acquisition of new aircraft with the carrier expecting to take delivery of six B787s, 11 B737s and three A330s over next five years. In March Oman Air launched a Block Space Agreement with DHL Express enabling it to utilise DHL’s capacity in  both  directions of its  operation  between Muscat and Dubai, giving it crucial maindeck lift it is otherwise lacking.

Etihad Cargo expands network, boosts capacity

Emirates SkyCargo is the first carrier to implement Electronic-Air Waybill (e-AWB) shipments under the industry’s recently ratified multilateral e-AWB standard.

Etihad Cargo, the fast growing cargo division of UAE flag carrier Etihad Airways, has added Washington D.C. to its global cargo network, in addition to boosting frequency to Hong Kong courtesy of strategic partner Air Seychelles. The US capital is Etihad Cargo’s fifth destination

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GATEW AYS in North America, while Hong Kong is already part of the carrier’s fivedestination Greater China cargo network. The news follows the launch of passenger services from Abu Dhabi to both cities in recent weeks. Etihad Airways started direct daily services to Washington D.C. with A340-500 aircraft on 31 March and Air Seychelles, in which Etihad Airways owns a 40 per cent stake, initiated services to Hong Kong via Abu Dhabi three times a week with A330-200 aircraft on 24 March. “Our cargo network continues to expand and with the addition of bellyhold capacity to Washington D.C. and an overall increase in cargo capacity to Hong Kong, we believe these new operations will strengthen cargo services both east and west for our customers,” said Kevin Knight, chief strategy and planning officer at Etihad Airways. Etihad Cargo already offers daily bellyhold cargo capacity from Chicago and New York to Abu Dhabi, and three times a week from Toronto to Abu Dhabi. In addition, Etihad Cargo offers a twiceweekly freighter service from Houston to the UAE capital. The additional bellyhold

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capacity offered by Air Seychelles’ new service between Abu Dhabi and Hong Kong will strengthen the already established four-times-a-week Etihad Cargo freighter service between the two cities. At present Etihad Cargo offers both bellyhold and full freighter capacity to Beijing and Shanghai, bellyhold capacity to Chengdu, and a freighter operation to Guangzhou. Etihad Cargo serves 86 destinations internationally and operates a fleet of two B777F, one B747-400ERF, one B747400F, two A330-200F and one A300600F. Etihad Cargo will take delivery of three additional freighters in 2013 and 2014, comprising one B777F and two A330-200F.

Emirates adds daily Stockholm flights

Expanding its presence in Scandinavia, Dubai-based airline Emirates has confirmed it will begin operating a daily B777-300ER flight to Stockholm, Sweden from 4 September 2013. With strong bilateral trade links already in place, trade between the UAE and

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Sweden reached more than US$896 million in 2012, an increase of 4.3 per cent from 2011. A major North European economy with a strong GDP, Sweden is well known for iconic global brands such as IKEA, Volvo, and fashion clothing brand H&M. This new service is expected to further stimulate economic growth with key Swedish trading cities across the Far East and Australasia, the carrier said. In addition to passenger operations Emirates SkyCargo will offer 19 tonnes of cargo capacity between the two cities. Popular commodities are expected to be pharmaceuticals, construction equipment, electronics, perishable food items, textiles, leather goods, plants and flowers. The carrier already operates a three-times weekly service to Gothenburg in Sweden and the addition of Stockholm is expected to further boost the airline’s cargo operations in the region.

V-D’s new Sharjah MRO facility begins operations

Volga-Dnepr Gulf ( VD Gulf ),

with the people, processes and technology… to make it all happen.

PAYLOAD ASIA | May 2013

GATEW AYS aircraft of the B747 or Antonov AN-124 type. The facility is equipped with all necessary tools and equipment, as well as modern air conditioning and fire fighting systems to perform safety maintenance services for the various aircraft types up to C-check.

Emirates wants more B777X specs

The first aircraft for Volga-Dnepr Technics’ new MRO hangar in Sharjah: A Volga-Dnepr AN-124.

representing Volga-Dnepr Technics in the Middle East region, has commenced operations in its new maintenance hangar facility in Sharjah. On 8 April Volga-Dnepr Gulf obtained an official Operations Approval for the hangar facility issued by the Department of Civil Aviation Government of Sharjah, confirming that VD Gulf has successfully completed the required hangar safety procedures and is ready to provide aircraft maintenance, component repair

Exceeding their expectations…

time and time again.

and overhaul services. Following the approval, VD Gulf towed the first aircraft into the new hangar, an Antonov AN-124 ‘Ruslan’ freighter belonging to VolgaDnepr Airlines. The launching of the new 22,000 square meter hangar complex at Sharjah Airport will allow the company to uphold its market position in the UAE, the group said. The hangar will be able to simultaneously accommodate six narrow-body aircraft or two wide-body

Because what’s important to them…

Emirates has asked Boeing for more specifications regarding its proposed B777X variant before placing an order. Currently, Emirates operates 126 B777s (both passenger and cargo), but according to airline president, Tim Clark, should details like “layouts, seating, galleys, aircraft weight and fuel burn” all prove favourable, the Gulf carrier would consider an order for as many as 275 of the advanced type. While currently in talks with Boeing, Emirates doesn’t expect to conclude any deal before June’s Paris Air Show. Other carriers whose interest in the 777X has been piqued include Philippine Airlines, Qatar Airways, EVA Air, British Airways and Lufthansa.

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GATEW AYS

Europe & CIS European carriers are calling for a level playing field for the EU’s emissions trading system (EU ETS tax) after the European Parliament voted on 16 April to support the ‘stop the clock’ proposal for aviation – but only for non intra-EU flights. The European Regions Airline Association (ERA) and the International Air Carrier’s Association (IACA) want the moratorium to be extended to all flights departing and arriving at an EU airport to prevent discrimination against European carriers operating intra-EU flights. The ETS moratorium puts the ETS on temporary hold to enable the International Civil Aviation Organisation (ICAO) time to find a global solution to mitigate emissions.

and safer transportation solutions, the carrier said. Other sectors targeted on the new service include pharmaceuticals and healthcare products as well as newspapers and general cargo. Meanwhile, Cargolux has also added Ouagadougou, the capital of Burkina Faso, to its network of African destinations. Ouagadougou is the country’s largest city with food processing and textiles its main industries. The first Cargolux flight was operated on 24 April and is followed by weekly flights. The service is spurred by growing demand from markets in France, as well as in Asia and the Americas. Supplies and equipment for the mining industries in Burkina Faso are among the main commodities, which rely on airfreight because the country is landlocked. Exports from Burkina Faso primarily include perishable goods – mainly fresh beans and mangoes.

Cargolux adds Tripoli, Ouagadougou to network

Lufthansa continues cautious capacity cut

European airlines seek level ETS playing field

Cargolux Airlines Int’l has introduced a new air cargo service to Tripoli, Libya’s capital and largest city from 16 April, followed by weekly services on the route Luxembourg – Tripoli – Johannesburg. Cargolux said that with the political situation in Libya on a stabilising path, demand for airfreight to and from the North African country is steadily growing, spurred by an economic development that is driven by the oil and gas industry. Thanks to its nose-door equipped B747 freighter fleet, Cargolux is well positioned to accommodate a modal shift from sea to air caused by rising demand for faster

Lufthansa Cargo carried nearly 400,000 tonnes of freight and mail in the first quarter of the year – a decline of 7.2 per cent compared with the year-earlier level. The cargo carrier did, however, raise its aircraft utilisation through cautious capacity management which saw capacity scaled back by 7.4 per cent. Sales fell by a smaller 5.9 per cent, improving load factors by more than one percentage point to 71.4 per cent. In the course of the year, Lufthansa Cargo is expecting a marked pick-up in demand, as chairman and CEO Karl Ulrich Garnadt emphasised: “We intend to utilise market opportunities

and grow profitably again. To that end, we are investing in our route network and making our services even more attractive to customers.” In March this year, Lufthansa Cargo commenced twice-weekly connections to Guadalajara in Mexico. The cargo carrier has also marginally stepped up services to China again in the summer flight schedules after cutting back capacity in a difficult market on that route in the past few months. It is now operating an additional freighter service weekly to Shanghai and Hong Kong.

Air Cargo Germany suspends operations

Frankfurt Hahn-based Air Cargo Germany suspended all operations from 18 April with no official reason given by the cargo airline, but lack of funds is widely suspected to have caused the grounding of its fleet of four B747-400ERF/SFs. CEO Michael Schaecher said in a statement on the company website: “The suddenness of this interruption is beyond our control and was neither expected nor foreseen in any way. Our shareholders are supporting in any way possible and you can be assured that we work around the clock to find sustainable solutions to recommence our services.” He added the company remains confident operations can be resumed in the next few days. The privately-run German cargo airline commenced operations in mid-2009 connecting Frankfurt-Hahn airport with destinations in East and Central Asia. Later, routes to the Middle East, Africa and both South and North America followed. In spring 2012 AirBridgeCargo’s Russian parent Volga-Dnepr stepped in as shareholder acquiring 49 per cent of the capital shares. Shortly after ACG announced plans for upping the fleet by taking over two of ABC’s B747-400 freighters, but these expansion plans were shelved before the end of the year due to the ongoing sluggish global market situation and dwindling rates.

IAG Cargo relaunches route to Sri Lanka

Supplies and equipment for the mining industry in Burkina Faso are driving cargo demand.

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Af ter a 15- ye ar hiatus , I AG recommenced service to Colombo, Sri Lanka from 15 April. Freight operations to Colombo will also resume, via IAG Cargo, and take advantage of the nation’s prolific high-end retail, produce and rubber sectors. IAG will utilise B777s on the thrice-weekly route, which includes a stopover in the Maldives. The belly-hold PAYLOAD ASIA | May 2013

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GATEW AYS capacity will benefit Sri Lankan business by providing global connectivity to the more than 350 destinations currently served by IAG Cargo, it said.

Azerbaijan’s AZAL starts first long hual to Beijing

AZAL Azerbaijan Airlines has chosen Beijing Capital (PEK) as its first longhaul destination with flights from Baku Heydar Aliev International (GYD) expected to start from 10 May. The Azerbaijani national airline will operate the flights twice weekly using using its fleet of B767-300s. Currently, AZAL flies throughout the subregion along with destinations in Israel, Eastern and Western Europe and Russia.

Air France-KLM in talks to sell Cityjet

Air France-KLM is currently in negotiations with “two or three” interested bidders regarding the sell-off of its Irish subsidiary, Dublin-based Cityjet. According to a report in the Irish Times, two of the bidders have been identified as ASL Aviation Group and Intro Aviation. ASL controls cargo operator Air Contractors, French cargo and charter airline Europe Airpost and South African cargo and ACMI specialist Safair. Intro Aviation owns a majority stake in Austrian regional carrier InterSky and is also said to be one of the bidders for a stake in Adria Airways. At present, CityJet operates an ageing fleet of nineteen ARJ-85s, twelve Fokker 50s wet-leased from Antwerp-based VLM and two Do328-100s wet-leased from Suckling Airways on routes on behalf of Air France AF-KLM group and on an own network from London City (LCY).

Transaero takes delivery of first Tu-204 freighter

Transaero Airlines has added its first freighter to its fleet, a Tu-204C, the first of two ex-Aviastar Tupolev Tu-204-100Cs leased from Ilyushin Finance Co. The freighters join Transaero’s passenger fleet of 92 aircraft, comprising 22 Boeing 747s, 13 777s, 15 767s, 39 737s and three Tu214s. Transaero CEO, Olga Pleshakova has said that, aside from the favorable financial terms the airline had been offered by Tupolev, “the addition of Tu-204C aircraft would allow Transaero to carry out their MRO (Maintenance, Repair & Overhaul) together with their fleet of three Tu-214s”, which resumed scheduled flights as of mid-March. Pleshakova added that “the freighters will perform mostly domestic flights with a large share of operations in Russia’s Far East.”

LCCs, Gulf carriers squeeze Euro carriers

European network carriers including Air France-KLM Group and Lufthansa face a heightened challenge from both local discount airlines and Gulf operators serving routes to Asia, according to analysis by Amadeus IT Holding. Low-cost carriers led by Ryanair lifted their share of European traffic four per cent to 38 per cent in 2012, while travel from Europe to Asia via the hubs of Emirates, Qatar Airways and Etihad Airways grew 20 per cent, according to data from Madrid-based Amadeus’s global booking system. Air France, Lufthansa and Iberia of Spain are among former flag-carriers revamping short-haul operations in an effort to end losses and stave off the advances of

Ryanair and its peers. Lufthansa said last month it might also establish a low-cost operation to Asia in response to airlines that have exploited the Gulf’s geographical position to grab a growing share of lucrative inter-continental transfer traffic. Low-cost penetration is greatest in Europe, according to Amadeus. The nations there with the highest proportion of departing passengers using discount airlines are Spain, on 57 per cent, and the UK, home country of EasyJet and the location of Ryanair’s biggest base, with 52 per cent. In the long-haul market, Gulf airports in Dubai, Doha and Abu Dhabi have already grabbed a 15 per cent share of air traffic from Europe to the Asia-Pacific, according to the report.

IAG increases London-Seattle capacity

IAG Cargo announced that due to an increased frequency of British Airways passenger flights between London and Seattle, it will be able to offer customers additional freight capacity on this route. The three new flights a week will commence on 27 October 2013 and will be served by a B777-200, allowing for an increased weight of cargo, with additional available capacity of 108 tonnes per week. Customers will benefit from increased access to IAG Cargo’s cargo network, which supports more than 350 destinations worldwide, the carrier said. Seattle is a growth market for IAG Cargo, with a strong catchment area that includes the medium-sized manufacturing bases of Portland and Boise. In 2012, the London-Seattle route generated 4,660 tonnes of cargo, including everything from aircraft parts and perishable goods, such as ferns and cherries, to consumer goods and e-retail purchases, sent to markets across the world. IAG Cargo operates 55 wide bodied flights per day from the US and Canada, which equates to over 800,000 kilogrammes shipped from the area every day. The carrier also operates three B747-8 freighters per week on the US route.

‘Eccentric’ load proves Ruslan capabilities

Transaero Airlines has leased two former Aviastar Tupolev Tu-204-100C freighters as it makes its first foray into maindeck capacity. The Tu-204C can carry up to 30 tonnes of cargo at a 2,400 km range and up to 12 tonnes at a 6,750 km range.

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Ruslan International – the company which manages and markets the combined Antonov An-124 fleets of its shareholders Antonov Airlines and Volga Dnepr Airlines – has arranged the successful movement of a 101-tonne oil platform component from Bergen (Norway) to Busan (Korea) on an An-124 flight. Some 5,000 kilos PAYLOAD ASIA | May 2013

GATEW AYS of additional equipment, required for unloading at destination, were carried on a separate flight. The load – comprising a ‘separator’, along with two support frames and other loading equipment – weighed a total of 114,000 kilogrammes, coming close to the giant aircraft’s capacity for the route flown. The large dimensions of the piece – 11.59m long x 3.92m wide x 6.04m high – exceeded the aircraft’s main cabin height of 4.4m, so Ruslan International’s load planners designed support cradles that enabled the load to be supported after rotating it 90 degrees. The load’s resultant offset (eccentric) centre of gravity within the cargo cabin then required special approval from the aircraft’s designers, Antonov Design Bureau. The An-124 aircraft flew from Bergen to Busan via Helsinki, Novosibirsk (Russia) and Tianjin (China). The flight was one of a series required for the same project.

Ruslan’s cargo comprising a ‘separator’, along with two support frames and other loading equipment weighed a total of 114,000 kg.

organisational restructuring of its main divisions and regional operations to better address the needs of its 240 member airlines, it said recently. Senior management changes were also announced to support the new structure which will take effect from 1 July 2013. A key guiding principle of the restructuring is the concept of ‘Global IATA undertakes major Development, Regional Delivery’. “IATA is restructuring changing to deliver even greater value to The International Air Transport its members. Strengthening our regional Warehouses • PRESS MAG • 190an x 135 mm • Remisewhere le 17/08/2012 Association (IATA) announced structures we are closest to our

members will help us to understand and meet their needs better. We have also regrouped activities that have grown organically over time with the goal of being more intuitive to those we deal with. This will optimise our ability to develop, modernise and deliver the global standards which are the foundation of aviationenabled global connectivity,” said Tony Tyler, IATA’s director general and CEO. IATA’s regional operations will be consolidated from seven regional structures into five. These will be based around the five hubs (Amman, Beijing, Madrid, Miami and Singapore) where IATA has already been amalgamating activities associated with its industry financial systems. North and South America will be consolidated into an Americas region and based in Miami while Africa and Middle East North Africa will be combined into one region to be known as Africa and Middle East. Asia-Pacific, North Asia and Europe will continue to serve members in those regions as in the current structure with regional offices in Singapore, Beijing and Madrid. IATA’s four externally-focused head PGI • BATinto office divisions will be re-organised

MEMBERS SHARING THE SAME WAREHOUSES SO YOUR CARGO ALWAYS FEELS MORE AT HOME. • More efficiency from resource sharing. • Simplified transit via one-stop service. • Safer and faster service for your consignments.

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17/08/12 11:00

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GATEW AYS five in order to bring together activities sharing common stakeholders and focus. These are: Airports, Passenger and Cargo Services (APCS), a newly created division that will combine the association’s main activities with respect to airports (including infrastructure development and financing), security, passenger and cargo services. It will be led by Thomas Windmuller, currently senior VP (SVP), Member and Government Relations. Other divisions include: Member and External Relations (MER); Safety and Flight Operations (SFO); Financial and Distribution Services (FDS); and Marketing and Commercial Services (MACS).

Americas American Airlines Cargo loss improves

AMR Corp., the parent company of American Airlines, reported a net loss of US$341 million for the first quarter of 2013, a 79.4 per cent improvement from the net loss of $1.7 billion for first quarter 2012. Excluding reorganisation and special items worth $349 million, the company’s quarterly profit was $8 million, a $256 million increase year-on-year and AMR’s first profitable first quarter since 2007. Revenue in the first quarter was $6.1 billion, the highest first quarter revenue in the company’s history and one per cent higher on 1.3 per cent less capacity compared to the same period last year. Quarterly cargo revenue was $155 million, dropping eight per cent year-on-year. AMR is also currently anticipating a merger between American Airlines and US Airways, which is expected to be completed in the third quarter of 2013.

ICAO, TIACA to strengthen cooperation

The International Civil Aviation Organisation (ICAO) and The International Air Cargo Association (TIACA) have signed

(l-r) Boubacar Djibo, director Air Transport Bureau of ICAO and Michael Steen, chairman of TIACA.

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a Declaration of Intent to strengthen cooperation on technical matters. Under the terms of the new agreement, ICAO and TIACA will work more closely on air cargo and mail security and facilitation, accelerating the evolution from paper-based to electronic processes, environmental stewardship, the liberalisation of market access for air cargo services, and air cargo safety. ICAO and TIACA have agreed to consult, confer and cooperate on a continuous basis, over and above attendance at formal meetings. They will keep each other informed of project activities and programmes of work in the areas identified in the Declaration of Intent.

Boeing slows 747-8 production rate

Boeing has announced that it will adjust the production rate for the 747-8 programme from two aircraft to 1.75 aircraft per month because of lower market demand for large passenger and freighter aircraft. Boeing said it will continue to monitor market conditions and their effect on production rates moving forward. The company expects long-term average growth in the air cargo market to resume in 2014. To date, there are 110 orders for passenger and cargo versions of the 747-8, 46 of which have been delivered.

Rio Linhas Aéreas retires last B767-200F

Rio Linhas Aéreas has retired its second of two B767-200Fs and will now continue operations with its remaining fleet of seven B727-200Fs. The B767-200F has been returned to lessor Cargo Aircraft Management while the Brazilian cargo operator awaits the arrival of three former Royal Air Maroc B737-400s that are currently stored at both Tampa International (TPA) and Kiev Borispol (KBP) awaiting conversion into freighters.

New AA Cargo service ORD-DUS

Following the recent ‘New American’ tie up between their parent group and US Airways, American Airlines Cargo has begun a nonstop freight service between Chicago O’Hare (ORD) and Dusseldorf, Germany (DUS). Flying a B767-300F, the new service will aim to provide customers with more shipping options and offers Expedite and Expedite TC (Temperature Controlled) services. Pharmaceutical products, medical instruments and automotive and aircraft parts are expected

American Airlines Cargo anticipates pharma products, medical instruments, aircraft and automotive parts to be key commodities carried on its B767-300 freighter between Chicago and Dusseldorf.

to be key commodities between the two countries. DUS Cargo Logistics has been appointed as the carrier’s handling agent in Dusseldorf. The route is the earliest nonstop flight from Chicago, providing interline connections to the Middle East, as well as trucking to nearby Belgium, Luxembourg and the Netherlands. Dusseldorf also offers connecting opportunities to Moscow, Munich and Vienna with oneworld and codeshare partner, airberlin. Earlier this month, AA Cargo rolled out additional new and seasonal service to Europe and Latin America, including a new nonstop flight between Dallas/Fort Worth and Lima, Peru, and returning seasonal service between New York – JFK and Rome, Italy, Chicago O’Hare and Rome, Italy, and Chicago O’Hare and Dublin, Ireland. AA Cargo will launch its first-ever service to Seoul, South Korea, on 9 May.

Polar to start non-stop Cincinnati-Tokyo service

Polar Air Cargo Worldwide has confirmed its plans to initiate a daily non-stop B747-400 express freighter service between Tokyo, Japan and Cincinnati, Ohio – the main US hub for DHL Express. The new service will complement a daily B747-400 flight from the Japanese industrial city of Nagoya to Cincinnati, facilitating next-day deliveries to the US from all major cities and industrial areas in Japan. Polar will also double the frequency of its wide-body freighter connections to Australia from two to four days per week. The routing of this service, via Japan, will allow Polar customers such as DHL Express to optimise their intercontinental networks and introduce additional capacity both from the US and from key North Asian markets to Australia. The increase in Polar’s frequencies will be supported by the introduction of two new B767300ERF wide-body aircraft. Thomas Murphy, executive VP and COO of Polar Air Cargo Worldwide said: PAYLOAD ASIA | May 2013

GATEW AYS “In addition to the trans-Pacific trade lanes, we look forward to the continued growth of DHL and our other freight forwarder customers in the intra-Asia region.” Polar Air Cargo Worldwide’s sister company, Atlas Air, will provide operating service for the aircraft on the new routes.

New nonstop SFO-CDG for United Cargo

United Cargo has introduced a new daily non-stop service between San Francisco International Air port (SFO) and Paris Charles de Gaulle International Airport (CDG) with B767 aircraft from 26 April. “With this new widebody service, we can serve your shipping needs to more destinations in Europe than any other US carrier,” United said. United Cargo is offering EXP and GEN freight services in addition to PetSafe, UASecure, QuickPak, TrustUA and TempControl on its flights between San Francisco and Paris.

Africa

Leone Airways to launch in June

Sierra Leone-based Leone Airways

is set to start operations from 1 June with tentative flights to be offered from Freetown Lungi International (FNA) to London Gatwick (LGW). Once the airline has become viable, operations will then spread to encompass domestic and regional flights. Formed in 2011 out of a partnership between Nigeria’s Arik Air and the Sierra Leone government, the new national carrier will rely on Arik to initially provide it with both aircraft and technical skills. Since 2009, Arik has been Sierra Leone’s ‘designated carrier’ thereby allowing it to ply the lucrative Sierra Leone-UK route.

Air Algérie tenders for 14 pax, 2 cargo aircraft

Air Algérie has tendered for the purchase of 14 passenger aircraft – eight 150-seat, three 250-seat and three 70seat passenger aircraft – and two 13-20 tonne-capacity freighters, as part of its fleet renewal plans. Air Algérie announced in January that, along with the retirement of its three ageing B767-300s, it was eyeing a future medium/long haul fleet based on B787-8s, B737-800s and A330-200s. Facing increased competition on its international and regional routes, the state-controlled

airline plans to use the acquisition as part of a turnaround plan which will involve developing Algier Houari Boumediene (ALG) into a hub while reorienting the airline’s business model towards its previously neglected Africa market.

Avient Aviation continues operations

Zimbabwe-based Avient Aviation is set to continue operations despite its sales arm, Avient Ltd, going into bankruptcy administration following crippling losses. The new sales wing, to be called AV Cargo Airlines has reportedly been given approval to carry out the business of former Avient Ltd, by the administrators. AV Cargo Airlines has already obtained funding and has secured new aircraft. The first of a possible three MD-11F aircraft is set to enter active service shortly, with a second scheduled for delivery in May. Avient, Zimbabwe’s only registered all-cargo operator, specialises in the Europe-Africa market with scheduled services offered from its hubs in Liège Bierset (LGG) and Dubai International (DXB) to eight west African destinations.

CALE ND A R

European Air Cargo Supplement in July Issue

Advertising offices: Worldwide Yullie Tan Tel: +65 6521 9749 Fax: +65 6521 9788 Email: [email protected]

Russia Sergey Stanovkin Tel: +7 495 7750735 Fax:+7 495 7750736 Email: [email protected]

France Daniel Solnica Tel: +33 1 4246 9571 Fax: +33 1 4246 8508 Email: [email protected]

South Korea Kwangsok Hong Tel: +82 2 466 5595 Fax: +82 2 466 5596 Email: [email protected]

Japan Katsuya Watanabe Tel: +81 90 5321 6881 Fax: +81 3 6823 8994 Email: [email protected]

United States, Canada Matt Weidner Tel: +1 610 486 6525 Fax: +1 610 486 6527 Email: [email protected]

The upcoming European Air Cargo Supplement will examine current issues facing the European industry including the severe impact of the euro crisis and falter economic growth in many of Europe’s economies, how air cargo companies are positioning themselves for growth after the prolonged downturn, the impending European emissions trading scheme, the impact of intensified competition from the Gulf carriers, as Jun 4-7 Air Cargo Europe well as coverage from the Air Cargo Europe event in Munich – both from Munich, Germany www.aircargoeurope.com the show floor and the conference sessions.  This upcoming supplement will examine these issues and other key trends in the industry. For Jun 7-8 Federation of Asia Pacific Aircargo Associations (FAPAA) 40th ECM Jakarta, Indonesia editorial participation and contributions please contact the Editor, Donald Urquhart at email: [email protected] or call www.fapaa.org him at +65 6521 9760 (GMT +8). For advertising in July supplement, Jun 9-11 The Freight Summit Shanghai, China please contact Yullie Tan at email: [email protected] or www.thefreightsummit.com call her at +65 6521 9749 (GMT +8).

2013 CALENDAR OF EVENTS

www.payloadasia.com | May 2013

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LO GIS TI C S DHL opens Shanghai Fashion excellence centre

DHL Global Forwarding, the air and ocean freight specialist within DHL, is pioneering a new style of high-fashion logistics with the spring launch of its ‘Fashion Center of Excellence’ in Jiuting, on the outskirts of Shanghai, China’s high-fashion capital. At an investment of €4.3 million, the 10,500sqm centre is at the heart of a unique integrated end-to-end approach designed to meet the detailed needs of the high-fashion and luxury industry, according to DHL. The centre combines DHL’s valueadded services and a team dedicated to high-fashion and luxury to manage the entire fashion supply chain from source origin countries in Europe and the US to safe arrival at retailers across mainland China.   “China’s fashion industry has tripled in market size in the last 10 years,” said Kelvin Leung, CEO, DHL Global Forwarding Asia Pacific. “In 2012 alone, the luxury goods market grew six per cent with Chinese consumers now the number one buyers of luxury goods and globally responsible for 25 per cent of total sales. There is immense opportunity here for us to support the logistics needs and challenges of our customers and in turn, cater to burgeoning consumer demand. This Fashion Center of Excellence is not just a milestone for DHL but a timely response to the growing requirements for first-rate logistic solutions for the high fashion industry in China.” In establishing the centre, “DHL surveyed over a dozen of the world’s leading luxury fashion brands in China and has created a facility with a suite of services that we believe exceeds their expectations,” said Steve Huang, CEO, DHL Global Forwarding China. “In addition to comprising both bonded and non-bonded facilities, the DHL Fashion Center of Excellence has state of the art anti-theft and anti-counterfeiting security such as anti-pilfer crates, cages, IT and surveillance systems and dedicated operations and security management teams. However, it’s worth remembering that traditional good practices are just as important to avoid damage during handling. So is storage in a clean, temperature- and humiditycontrolled and dust free environment.” The 10,500sqm DHL Fashion Center of Excellence is spread over three floors and will employ over 100 specialist staff. The centre will offer customers an end-

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to-end solution designed around the specific needs of high-fashion retailers of a wide range of different products – from ready-to-wear and leather goods to jewelry and watches, fragrances, cosmetics and accessories. The centre will offer flexible, tailormade logistics solutions that address the industry’s top concerns of speed, security, and safety. Unique features include a ground-floor buffer zone that can be quickly reconfigured to cope with the massive seasonal influxes peculiar to the high fashion industry. Value-added services include sorting and picking, labeling, stitching and knitting, visual quality control, repacking, non-merchandise and sales order management as well as reverse logistics. Dedicated experts will design and manage solutions for import, safe storage and delivery all over China through DHL’s infrastructure and network capabilities. Last mile services include delivery and unpacking instore by DHL employees who are also trained to stock shelves and racks. The entire aforementioned flow is visible on DHL Global Forwarding’s integrated IT system. Mark Lau, Global Sector Head – Retail, DHL Global Forwarding said: “The high fashion industry’s three priorities are speed, because of the seasonality of their products, security, because of their high value, and safe handling at all stages because these are goods that are easily spoiled. The challenge – and opportunity for DHL – is providing all three cost-effectively in China where demand is soaring.” Research by McKinsey estimates that China’s luxury goods market will be worth RMB180 billion (€22.5 billion) by 2015.  As a result of anticipated growth, DHL Global Forwarding is currently evaluating the development of DHL Fashion Centers of Excellence elsewhere in China. Between 2006 and 2011, DHL launched a series of similar Fashion Centers of Excellence in India, Hong Kong, Pakistan, Sri Lanka, Vietnam, Bangladesh and Cambodia to capitalise on increasing fashion and apparel trade flows between Asia Pacific and Europe as well as Asia Pacific and North America. In 2011, DHL Global Forwarding restructured its consumer business launching retail as a separate division. This has become one of the company’s fastest-evolving new business sectors as global retailers and manufacturers have redesigned their supply chains

in response to the multi-channel purchasing options that customers prefer. The ability to fulfill multi-channel distribution through a single, optimised network has become critical to retail success, said DHL.

Work begins on new Toll UK HQ

Toll Global Forwarding will move to a brand new UK headquarters building at London Heathrow Airport in October this year after work commenced on the new site in early April. The new facility – on a secure 2.65 acre compound on the North Feltham Trading Estate, close to Heathrow’s cargo village – will include 4,645 sqm of warehousing featuring eight truck docks, a cargo handling system, storage for 1,200 pallets and a large, multi-zone chiller for perishables. The site will be accessed by a one-way traffic system. The building will also house 1,858 sqm of offices on three floors, featuring comfort cooling, solar shading and a two-storey-high reception area and will comply with BREEAM ‘Very Good’ sustainability standards. The new Toll base will replace its existing facilities at nearby River Gardens, Feltham and at Skyport Drive in Harmondsworth, which it acquired with the purchase of WT Cargo in 2011.

FedEx Trade Networks expands into Latin America

FedEx Trade Networks, the freightforwarding arm of FedEx, has expanded its presence in Latin America. Over the last several months, the company has opened new offices in Brazil and Mexico. Though the company has operated in both countries since 2009, it added new locations in Rio de Janeiro, Guadalajara and Monterrey. “FedEx Trade Networks is committed to delivering reliable supply chain solutions where our customers do business,” Fred Schardt, president and CEO of FedEx Trade Networks, said. “Trade volumes continue to increase in Latin America, and our expansion efforts provide customers with greater access to superior freight forwarding in these emerging markets.” FedEx Trade Networks also established strategic alliances with locally-based regional service providers to enhance its coverage to 19 countries throughout Latin America. The company has a new strategic alliance with Portlink PAYLOAD ASIA | May 2013

14 ASIAN DESTINATIONS

In summer 2013 - new routes to Hanoi & Xi’an Read more at finnaircargo.com

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LO GIS TI C S Logística Multimodal, one of the largest freight forwarders in southern Brazil and constitutes the company’s largest alliance in Latin America. The new alliance has enabled FedEx to launch new freight forwarding options such as an air consolidation service between Mexico and Brazil. The new service combines customers’ shipments to help streamline their supply chain between the Benito Juárez International Airport and São Paulo-Guarulhos International Airport, the company said.

delivering e-commerce supply chain solutions, handling both flat and hanging garments, accessories and shoes for many leading fashion brands, as well as the transport of different kinds of products purchased online, offering full visibility of all orders. CEVA has also established competence in reverse logistics management and provides efficient and integrated solutions that deliver progressive cost optimisation and constant visibility of all goods within the supply chain, including returns.

Sweden begins price fixing investigation

DHL expands cold chain accreditation

Sweden’s competition authority (SCA) has raided 10 logistics companies for suspected price fixing, seizing computers, invoice books, company records and banking documents. The investigation follows six months of investigation after whistleblowers exposed the alleged cartel action last year.

CEVA to manage Liu-Jo’s e-commerce activities

CEVA Logistics has signed a new five year e-commerce contract with Liu-Jo, a leading Italian company in fashion apparel, accessories and footwear, operating approximately 310 mono brand stores and 5,100 multi brand stores worldwide. Under the terms of the contract, CEVA will provide Liu-Jo with solutions for online sales, such as packaging, gift packaging and the management of Liu-Jo returned apparel, bags, shoes and accessories at CEVA’s warehouse lo cate d in Cortemaggiore, near Piacenza, Italy. CEVA said it will also provide highly customised value-added services, such as the personalisation of products on an individual consumer basis and also manage transport activities across Europe. CEVA boasts a solid and deep experience in the fashion market and

DH L Glob al For w arding ha s expanded its Qualified Envirotainer Provider (QEP) Accreditation to 30 stations in locations as far afield as Germany, France, UK, the US, Egypt, Dubai, Japan and China. By adding the QEP Accreditation to its major stations, DHL’s network is further integrated with Envirotainer operational requirements – to ensure customers proper shipping of temperature-sensitive life sciences and healthcare products. In the upcoming months, the company plans to add 48 stations to the QEP Training and Quality Program. DHL operates a network of 120 Life Sciences and Healthcare facilities across the globe. “The QEP Accreditation supports our cold chain objectives to deliver excellent customer service with product integrity and regulatory compliance in mind. Our expanded certification network covers already over 90 per cent of our current Envirotainer volume, and we will continue to enroll additional stations worldwide to the program, starting with Frankfurt, Germany”, says David Bang, CEO of LifeConEx, DHL Global Forwarding’s temperature management specialists. Envirotainer provides active temperature-controlled air freight containers maintaining product temperatures within the temperature ranges +2 to +8°C, +15 to +25°C and >-20°C in nearly any ambient condition appearing along shipping routes globally.

K+N Q1 profit up on air freight, contract logistics

CEVA will manage Italian fashion label Liu-Jo’s e-commerce business including personalisation of products on an individual consumer basis.

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The Kuehne + Nagel Group (K+N) today reported its net income in the first quarter of 2013 at CHF134 million (US$142 million), jumping 97 per cent from CHF67 million in the first three months last year. The Schindellegi,

Switzerland-based company also booked a European Union antitrust fine of CHF65 million francs. Revenue rose 5.4 per cent to 5.09 billion francs. The company’s air freight business realised a five per cent increase in volume for the quarter, driven by demand for Asian exports and a moderate increase in tonnage in outbound traffic from Europe. Meanwhile, K+N’s contract logistics unit’s turnover rose by 2.5 per cent versus the first quarter of 2012. However, the road and rail logistics sector was negatively impacted by the European economic situation, as well as adverse weather conditions.

Air Logistics Handbook targets fresh grads

Virgin Group chairman Richard Branson has urged university graduates, college students and school leavers to explore a career in air logistics, calling it ‘an outstanding industry that needs well educated executives and entrepreneurs who will be tomorrow’s leaders and innovators’. In a written introduction to the new ‘Air Logistics Handbook’, aimed at promoting the industry to young people and the educational sector, he states: “Air travel has transformed all of our lives and helps us experience different cultures and make new friends all over the world. However, airlines are not only about passengers. To make them work successfully, you also need to build a growing and award-winning cargo service and at Virgin we’ve done that too. “Air logistics is a phenomenal industry and has become even more important not only to the success of airlines but also to every consumer and business leader around the world. Before aircraft, products moving between countries spent weeks at sea. Today, it takes just hours to move imports and exports from one side of the world to another, putting air logistics at the very heart of world trade. Without the flow of goods and passengers around the world, our way of life and the development of poorer countries’ economies wouldn’t exist. I encourage you to explore the many career opportunities this outstanding industry offers.” To be published in May 2013, the 280page Air Logistics Handbook, authored by Michael Sales who has worked in the air cargo industry for over 20 years, aims to provide a simple and straightforward guide to the industry. PAYLOAD ASIA | May 2013

YOUR GATE TO RUSSIA

R

ussia intends to boost its relations with APAC countries with the aim to increase their share in Russia’s foreign trade turnover up to at least 50%. This ambitious goal was announced by the First Deputy Prime Minister Igor Shuvalov not long before the recent APEC summit in Vladivostok. The current APAC share in Russian foreign trade accounts for around 20% and is steadily growing. In 2012, the turnover with China as the main Russian partner in this region reached $87.5 billion showing an increase by 5.1% from 2011, with $100 billion and $200 billion benchmarks set for 2015 and 2020 respectively. The success in achieving this goal will greatly depend on investing into the country’s transport infrastructure and creating additional trade incentives. Hence, the Russian government has promoted solid steps for such development, where the newly established special economic airport zone (SEZ) in Ulyanovsk – a city lying in the center of European Russia and unofficially called the aviation capital of Russia – will play an important role. SEZ is located directly next to Ulyanovsk-Vostochny International Airport. The airport’s 5 km long and 100 m wide runway (one of the world’s longest) was built back in Soviet Union’s time as an alternate landing strip for the “Buran” space shuttle program, the USSR’s answer to its widely known US counterpart. The airport is capable to accept all types of aircraft and serves as the home base for two Russia’s largest air cargo carriers operating unique AN-124 heavy transport aircraft – Volga-Dnepr Airlines and Polet Airlines. However, its capacities far exceed current use and create many opportunities for prospective new-comers. SEZ is meant to provide ideal conditions for businesses, specifically for distribution centers specializing in goods imported to Russia from other countries. The incentives, among other benefits, include the reduced income tax from 20% (standard rate in Russia) to 2%, as well as zero-rate property, transport and land taxes for SEZ residents. Another important advantage is the free customs zone regime. This means that any goods imported from overseas are exempt from customs/excise duties and VAT as long as they stay within SEZ, allowing large imports without provisioning of funds for customs payments until the goods are sold in Russia. Moreover, all necessary customs infrastructure will be created in SEZ, including a separate customs office to serve exclusively SEZ residents, which will significantly accelerate customs formalities. The SEZ general infrastructure construction, as well as connections to all utilities are financed by the government. The SEZ managing

company (RUSSEZ) and the Ulyanovsk Region provide comprehensive support to investors in implementing their projects. The city of Ulyanovsk is situated in the European part of Russia, 850 km east from Moscow, on the air routes connecting South East Asia and Europe over the Russian territory. The city has population of 650,000 people, with 75 million people and many large cities, including Moscow, within the 1,000 km radius. Ulyanovsk region is industrially and financially developed and has an extensive road and rail infrastructure, creating all necessary conditions for distribution of goods. RUSSEZ invites all manufacturing, trade and logistics companies, which are interested in delivery of goods to Russia, to explore opportunities of a distribution center in SEZ – a project that will include a multimodal cargo terminal, warehouse and exhibition, as well as hotel and business center facilities. RUSSEZ also invites aircraft industry manufactures and MRO providers to establish or expand their presence in Russia through the special economic zone in Ulyanovsk. Our contacts: 29 40-Let Pobedy Street, Ulyanovsk, 432059, Russia Tel: +7 (8422) 20-70-81 E-mail: [email protected] www.ulsez.com

More about Ulyanovsk The city has many specialized aircraft industry enterprises, including the largest aircraft factory in Russia – Aviastar-SP. Aviastar-SP formerly produced AN-124 heavy transports and now concentrates on TU-204 passenger aircraft and a new modification of the IL-76 freighter. Russia’s United Aircraft Corporation (“OAK”) also selected Ulyanovsk as the site for its composite wing factory for Russia’s prospective MS-21 widebody project.

E XPR E S S & MA IL UPS appealing EC’s TNT ruling

UPS is appealing the 30 January decision of the European Commission to prohibit its acquisition of TNT Express. A UPS spokesperson says the company believes the EC’s decision was factually and legally erroneous. “We are challenging the decision in order to ensure a more accurate assessment of the EU competitive landscape and that no precedent is established by the EC that would limit international growth opportunities,” said Peggy Gardner, UPS spokesperson. “If the appeal is successful, the prohibition decision would be ‘annulled,’ which essentially means the prior decision could not be used as a basis for future decisions by the EC.” Gardner said the appeal should not be interpreted as a renewed interest in TNT Express.

Command Center at FedEx Custom Critical headquarters. This team provides the initial setup with the customer, monitoring during the shipment, communications if there are issues that need addressed and followup after the shipments if necessary. The service is currently available within the US and to and from Canada, Puerto Rico and the UK.

TNT chairman blames UPS attitude for fail

TN T Express chairman Antony Burgmans told shareholders that the collapse of the UPS takeover was down to the American company failing to understand the culture of the European Commission. Burgmans was speaking at the TNT Express annual general meeting on 11 April to respond to questions about why the deal collapsed in January. Facing shareholders questions as to FedEx Custom Critical why management had been so confident launches ShipmentWatch of success before the EU Commission blocked the €5.2 billion deal in January, FedEx Custom Critical, a subsidiary Burgmans said TNT itself had “no of FedEx Corp., has launched a new control” over the process of seeking monitoring service called ShipmentWatch regulatory approval, it was all down to which utilises SenseAware devices to UPS. “With the benefit of hindsight you track customers’ shipments. The service could say that the way the project was run includes programming the device to meant it did not have the right result,” the customer’s requirements prior to said Burgmans. the shipment, sending the device to the The Commission stated in January shipper and then proactively monitoring that it did not want the deal to go ahead the shipment from pickup to delivery. because of the impact on competition During transit FedEx Custom Critical within the European cross-border small can monitor location, temperature, light package delivery market if Europe lost exposure, humidity and barometric one of the big four integrators. pressure through the SenseAware device The TNT Express chairman said and web-based application and can be candidly that the lessons his company used on FedEx and non-FedEx shipments. had drawn from the debacle was that All ShipmentWatch moves are “whenever you’re dealing with Brussels, monitore d by the S e c ureComm you must make sure that you’ve done your homework very carefully.” He suggested that the world’s biggest package delivery company had not been sufficiently “humble” in its dealings with EU officials in Brussels . “Brussels has a totally different culture than in Washington,” the TNT Express chairman said. “UPS was fully in charge of everything. From this side of the table we did everything we could to give all the information about the Brussels culture. If you wish to operate successfully in The SenseAware device includes GPS as well as Brussels, you’ll have to accept temperature, light exposure, humidity and barometric the Brussels culture.” He also pressure monitoring and automatically turns itself on commented that former CEO, and off during aircraft flight.

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Marie-Christine Lombard, “did not leave in a civilised manner”.

DHL Express boosts Asia-US, intra-Asia

DHL Express is adding wide-body capacity to new and existing services in Asia. The company said it is introducing a new non-stop B747-400 freighter service to improve delivery capability from Tokyo to the Americas, with daily flights between Nagoya and DHL’s hub in Cincinnati. The return flight will mean a two-day delivery service for customers in the US, Canada and Latin America shipping to Japan. DHL said its aircraft will have a capacity of more than 100 tonnes, and will be operated by partner airline Polar Air Cargo Worldwide. Jerry Hsu, the DHL Express Asia Pacific chief executive, said the new flight was being introduced as trade between Asia and the US was predicted to grow 10 per cent a year up to 2020. “We are improving service and adding capacity between Asia and the US to support the continued two-way growth we see on the world’s biggest trade lane,” said Hsu. Along with an additional wide-bodied aircraft to its global aviation network, DHL said it has made improvements to its intra-Asian connections to open up trade lanes between Asia and the Americas. The improvements should be launched by the end of April 2013. A new wide-bodied freighter flight will link Taiwan’s capital, Taipei, with Incheon in Korea and Nagoya, Japan. DHL is also set to double the frequency of its wide-bodied freighter connections to Australia, from two to four days per week. Routing shipments via Japan, it will be reinforcing its daily US to Australia connection and adding daily capacity from key North Asian markets into Australia, with two additional B767300ERF aircraft offering a capacity of more than 55 tonnes. As with the new Japan to US flight, the 767-300ERF aircraft will be operated by Polar Air Cargo Worldwide.

Brazilian express carriers to merge

The imminent merger of T WO Aviation and Flex Aero, to form TwoFlex, will create the largest express carrier in Brazil, said Flex Aero president Rui Aquino. The new operation expects

PAYLOAD ASIA | May 2013

EXPR E SS & MA IL to command 60 per cent of the country’s air cargo market, with 18 aircraft and 11 bases throughout the country. Flex Aero’s operations are stronger in the north of Brazil, and TWO’s in the center and south. “Now, I can go from the north of Brazil to Porto Alegre in the far south. Before, I couldn’t offer that,” said Flex Aero president Rui Aquino.  The joint venture will have 18 Cessna Grand Caravans – nine from each partner – with plans to add 12 more of the same model by year-end, along with a pair of ATR twin turboprops, raising their current combined average annual 7,500 tonnes of cargo carried to 10,000 tonnes. “The Grand Caravan was designed to meet FedEx’s need for a lowcost cargo plane, and our [Caravan] fleet will already be 10 per cent the size of Federal Express’,” said Aquino, noting that the aircraft is particularly well adapted to Brazil, as it can land on unpaved and short runways. “The airlines and regional carriers serve only 130 of Brazil’s more than 5,500 municipalities, and Two-Flex will be an alternative to the country’s current infrastructure problems,” he

www.payloadasia.com | May 2013

added. Two-Flex will be based at Jundai Airport in São Paulo state. “It operates 24 hours a day, and is never closed by weather,” said Aquino.  With Brazil’s two major domestic air carriers shrinking passenger capacity, there is a corresponding reduction in bellyhold space where air express packages go and fewer connecting flights, according to Aquino. “At a hub like Brasilia, at day’s end there are a lot of packages left over that didn’t get sent on to their destination,” he said. Currency transport for banks is just one activity in Brazil that depends on express freight services, as well as such critical functions as conveying auto parts.

DHL offers cross-border B2C in Australia

DHL Global Mail has launched a new cross-border shipping service to help retailers to source goods from Asia and deliver direct to consumers in Australia. In the past, the international mail division of Deutsche Post DHL has focused on exporting – shipping business

mail, packets and parcels to more than 200 countries. But it is now introducing inbound solutions for items up to 20kg in weight, providing an end-to-end service that particularly has Australia’s growing e-commerce sector in mind. Retailers will be able to have their suppliers fix a generic barcode label to a product and provide DHL Global Mail with a manifest file, then DHL will deliver the item direct to the consumer’s door. DHL handles the customs clearance into Australia, final mile labeling and manifest, and then final mile delivery is provided by Australia Post. The new service, which offers delivery confirmation but not live tracking, will allow consumers to buy items sourced in various Asian countries, although initially the service is focusing on Singapore, Hong Kong and China. The company says its new solution will “significantly” reduce the costs of importing items and delivering them to consumers in Australia. DHL Global Mail is now planning to roll out an inbound solution for the UK and the US later this year.

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A IR PORT S & G R O U N D H A N D LIN G Strong Q1 growth at Lambert-St. Louis

Lambert-St. Louis Airport in the US mid-west has posted its strongest first-quarter freight throughput since 2011. Volumes surged 3.5 per cent, year-on-year, in the first three months of 2012, with outbound mail recording a substantial 39.5 per cent, y-o-y jump. Inbound freight and mail also grew, although more moderately during the first quarter of 2013, rising 2.5 per cent and 7.7 per cent, year-on-year, respectively. “We have seen healthy growth in all sectors of our business so far this year: domestic and international cargo, and mail,” said David Lancaster, cargo development director at Lambert-St. Louis airport. Although he says it’s premature to assert whether this growth trend will continue, Lancaster added, “there is certainly more optimism among our community than has existed for some time.”

Düsseldorf welcomes daily American B767-300

The northern German airport of Düsseldorf saw the arrival of the first American Airlines daily flight from Chicago O’Hare on 12 April. The B767-300, offers an average of around eight tonnes of belly cargo capacity on this route. An American Airlines spokesperson noted the huge potential for cargo uplift between the two destinations. The flight connects transit passengers and cargo with many other carriers such as Air Berlin, Emirates, Etihad, Air China and Lufthansa, operating at Düsseldorf, the airport said. There is a realistic expectation of increasing cargo traffic on the route, said the spokesman. DUS Cargo Logistics, the main cargo handler at the airport handling over 30 airlines, has been appointed to handle the airline. Thomas Schürmann, manager, marketing and sales, said: “We are very pleased to welcome American Airlines to this airport. We are established as the lower-deck specialist airport – offering more than 180 intercontinental destinations worldwide and providing the hub for two of the three big airline alliances, the Star Alliance and the One-World. The hub is increasingly important for the big forwarders and logistics companies. The airport’s ready access to a wide range of lower-deck capacity, together with an independent trucking network based in a high

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potential catchment area is stimulating Düsseldorf ’s further cargo growth”  

as prescribed by the Qatari Department of Civil Defence.

Gatwick criticises Heathrow ‘mega-hub’ model

New cargo handling JV for South Africa

In its submission to the UK’s Airport Commission, Gatwick has claimed that competing London gateways would trump a single hub by cutting travel costs and safeguarding connectivity. While Heathrow sees a focus on a single large hub as the best way to safeguard London’s connectivity, Gatwick argues most passengers through the city start or end their journey there. “IATA figures show that the majority (93 per cent) of journeys using London airports are for passengers that either begin their journey from our airports or fly to them as a final destination,” said Gatwick in a statement. For Gatwick, travellers stand to gain more from competition between gateways than from a focus on a single hub. Its vision is to spread capacity so that three two-runway airports – Gatwick, Heathrow and Stansted – can compete for airlines and customers. Heathrow and Gatwick have already clashed on the issue with Heathrow claiming Korean Air’s decision to drop a Gatwick–Seoul service reveals the problems of running long-haul flights from a non-hub airport. But Gatwick CEO Stewart Wingate described a mega-hub solution as “yesterday’s solution to tomorrow’s problem.” Gatwick sees recent new routes to Moscow and Indonesia as evidence it can safeguard London’s connectivity, especially for key emerging markets. While Heathrow’s slots are full, Gatwick has 25 per cent spare capacity – mainly outside business peak hours – opening up longhaul options, said a Gatwick spokesperson.

Qatar’s new airport delayed again

Qatar Airways was forced to cancel the inaugural flight to Doha Hamad International that was scheduled to open on 1 April on very short notice. While the national carrier of Qatar had only planned to move cargo and some charter flights to the new airport from 1 April, ten other carriers including lowcost airlines were scheduled to move to the new airport already as part of a soft opening. The airport’s inauguration, delayed now for a fourth time, has been hampered by a lack of conformity to strict new safety and security standards

With a solid launch customer in the form of Emirates SkyCargo, in Johannesburg and Cape Town, Africa Flight Services (South Africa) Pty, a new joint venture partnership between the world’s largest provider of cargo handling services, Worldwide Flight Services (WFS), and the South African airline, SA Airlink has taken off. AFS (South Africa) has opened a 3,000 square metre cargo handling warehouse facility at O.R. Tambo International Airport in Johannesburg and a 2,340 square metre freight centre at Cape Town International Airport. Barry Nassberg, group COO of Worldwide Flight Services, said: “Africa Flight Services (AFS) is a new brand for our expansion plans in Africa. This is an important and growing market for us and we want to give it a dedicated focus but with the ability to draw on all the expertise and resources of the WFS global network. AFS will enable us to enter into local partnerships and joint ventures, and to customise services and tailor resources to the needs of customers in this dynamic and rapidly growing market.” The ground handler has been struggling to put the fiasco at Dube Tradeport, the cargo terminal at Durban’s flagship King Shaka International Airport which opened in May 2010, with stateof-the-art facilities and government investment, behind it, as allegations of corruption between WFS’ franchise partner and Dube Tradeport’s CEO continue to the dog the operation with legal proceedings imminent.

Q1 volumes up, Hactl sees slow recovery

Hong Kong Air Cargo Terminals Limited (Hactl) announced its tonnage throughput for the first quarter of 2013 with volumes up 1.6 per cent, year-onyear. The year kicked off with January cargo volumes of 228,140 tonnes and February saw the monthly tonnage at 168,860 tonnes, followed by a rise to 246,912 tonnes in March. Cumulative tonnage in the first quarter was 643,912 tonnes in total with export volume reaching 318,004 tonnes and import volume recorded 153,976 tonnes. Transhipment volume registered PAYLOAD ASIA | May 2013

A IR PORT S & G R O U N D H A N D LIN G 171,932 tonnes. “Febr uar y ha s alw ays b e en a traditional slower month due to the extended Chinese New Year holiday, Mark Whitehead, chief executive of Hactl, said. After adjusting for the seasonal factor, the overall first-quarter figures were satisfactory. Looking into the second quarter, we expect that it will be at best flat compared to 2012 as slow economic recovery persists.”

UK manufacturers back Heathrow expansion

Britain’s manufacturers have called on the UK government to give the green light to a third runway at Heathrow Airport. The Engineering Employers Federation (EEF) wants ministers to “take the politics out of infrastructure” by setting up a wide-ranging independent infrastructure commission to take major decisions out of the hands of government. Roger Salomone, EEF’s head of business environment policy, said: “World-class air links are critical to export-led growth and attracting inward investment. To keep up with the competition we need investment

AHMEDABAD AMSTERDAM ATLANTA AUCKLAND BANGKOK BARCELONA BEIJING BELGRADE BERLIN BOGOTA BRATISLAVA BRUSSELS BUDAPEST CHICAGO COLOGNE COPENHAGEN DELHI DUBAI DUBLIN EAST MIDLANDS FRANKFURT GUANGZHOU HAMBURG HANOI HELSINKI HO CHI MINH CITY HONG KONG HOUSTON ISTANBUL JONANNESBURG KUALA LUMPUR LISBON LONDON LOS ANGELES LYON MADRID MANCHESTER MARSEILLE MIAMI MILAN MUMBAI MUNICH NAGOYA NAIROBI NEW YORK OSAKA PARIS PHUKET PORTO PRAGUE PRISTINA RIO DE JANEIRO ROME SAO PAULO SEOUL SHANGHAI SINGAPORE SOFIA STOCKHOLM STUTTGART SYDNEY TALLINN TBILISI TEL AVIV TIANJIN TIRANA TOKYO VALENCIA VIENNA WARSAW WASHINGTON ZURICH

across the board, in Heathrow and in regional airports. Maintaining our status as a global aviation hub is critical to our international standing and expanding runway capacity at Heathrow is the most viable way to secure this.” The call comes on the back of a major survey published by EEF, the manufacturers’ organisation, showing the potential threat from the UK’s stretched infrastructure to business competitiveness. The survey comes ahead of the publication of the government’s transport strategy and Spending Review this summer. Salomone added: “Political prevarication and policy reversals have left Britain in the slow lane in developing its infrastructure for decades. The forthcoming transport strategy is an opportunity to address this. Government must reassess its investment priorities, act faster on major issues like airport capacity.”

Global freight down 6.3% in February: ACI

Global passenger traffic rose 1.8 per cent in February, while global air freight volumes continued lingering in the

doldrums, down 6.3 per cent year-onyear, according to the Airports Council International (ACI). Most of the growth came from Asian airports with both Hong Kong (HKG) and Beijing (PEK) reporting robust increases of 15 and 7.3 per cent respectively. However HKG and PEK, in addition to many other Asian airports, witnessed a significant air freight decline in February 2013 compared with February 2012 as a result of the Chinese New Year taking place in February 2013, as compared with January 2012 and distorting the statistical comparison. This factor, coupled with a high concentration of international air freight among Asia-Pacific airports, resulted in a 6.3 per cent year-on-year decrease in total air freight and an 11.8 per cent decrease in Asia-Pacific air freight. Of all regions, only the Middle East posted gains in both passenger and freight traffic. Total passenger and air freight traffic both grew by nine per cent year-on-year in Middle Eastern airports. Dubai (DXB), the region’s key hub, experienced double-digit growth in passenger and freight traffic at 11.4 and 15.9 per cent respectively.

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CO VER STORY

Change when change is needed Facing a serious set of challenges, the general air cargo sector needs to take a leaf out of FedEx’s playbook and change – and that change includes a rebalancing of capacity with less dedicated freighter capacity says David Cunningham, FedEx Express president for Asia Pacific. By Donald Urquhart in Hong Kong.

T

he air express veteran who has been with the US giant for over 30 years, 20 of which he has spent in Hong Kong, gave his take, at the recent Cargo Facts Asia conference in Hong Kong, on the changing nature of the air cargo industry and what it needs to do to become more sustainable. It is an industry that has become a “tremendous value creator for the globe,” he highlights, noting that it has a global market size of US$78 billion, creates 32 million jobs and generates $3.5 trillion in economic activity. “And of course Asia is at the heart of it, with a 40 per cent share of that market,” he adds. Looking back, Cunningham notes that while some of the core commodities shipped 30 years ago remain, they have fundamentally changed over the decades. Electronics were a key commodity back then, but not quite the same as today – they were big and they were expensive. The high tech world was driven by Japanese manufacturers with some assembly in Southeast Asia. Over the last 15 to 20 years this has shifted to China, “which has really been the heart of the manufacturing,” during this time he says. For the air cargo and express industry, the value proposition of the day was about speed, reliability, door-to-door service and customs clearance. The global economy of the 1970s was fueled by cheap labour, cheap fuel and productivity that the new technologies were creating. “And the best part – capacity couldn’t keep up with demand. It was a wonderful time to be in the air cargo and air express business,” he says with a grin. “Today, it’s a different world. We’re still lifting a lot of electronics and they’re still important, but capacity far exceeds the demand out there.” And another key difference: The electronics are now much cheaper, “almost disposable consumer items” he says in reference to new products that come and go regularity, having shelf lives of only six months in many cases. The customer base has changed as well: From large global multinational companies that produced goods and shipped them on a regular basis, to

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David Cunningham

small and medium sized enterprises increasingly reliant on e-commerce, he says. These companies now represent 36 per cent of the global market, he adds. The air cargo market has changed in other ways too. It’s now all about specialisation – healthcare, pharmaceuticals, medical devices, luxury consumer goods and in the case of FedEx, even the odd panda bear shipment. “But what’s intrinsic about this new environment, is that shipment size is shrinking – it’s getting a lot smaller, both in terms of consignment and shipment size,” something that has been going on for the last 15 -20 years and will likely continue into the future. Fuel costs have also altered the air cargo landscape with Cunningham noting that as recent as 1999 fuel was only US$16 a barrel, a far cry from 2008’s record high of $147 and even today’s $80-100. “This has huge implications on our business moving forward,” he notes. The equipment has also changed significantly with far more fuel efficient, longer range aircraft impacting global travel and the movement of cargo. They also have a lot more belly capacity than a B747 or other widebody aircraft of past, he adds, noting many of them have the capacity of a B737 freighter just in the belly. Customs and security issues have

also dramatically changed, “making our world a much more difficult world to do business in.” But it’s not just about what’s going on in the air that’s having an impact, he cautions. Looking at the larger cargo sector, Cunningham notes that over the period 1994-2004 ocean freight and air express have each gained five per cent market share over the period, while the general air cargo market share has shrunk by 10 per cent. And importantly, the growth rates of ocean and air express have been in the high single digit rates while general air cargo has remained virtually flat, particularly between 2004 and 2011. And while a slowdown in the global economy helps boost the ocean sector, it’s more than that, he argues. “The ocean industry has gotten a lot more efficient and lot more reliable.” While the latest generation of aircraft are “great technology, fabulously reliable and much more fuel efficient, effectively when you think about it, that B777 or B747-8 compared to the B747 of the 1970s when it was first introduced, are about the same capacity.” Meanwhile, he says, the ocean industry has dramatically increased its size and scale with Panamax, New Panamax and in the near future the fuel PAYLOAD ASIA | May 2013

COVER S TORY efficient, giant Triple E (18,000 twenty foot containers). A New Panamax is 6-7 times the capacity of the largest ship of the 1970s and burns only marginally more fuel. “It’s a thousand times more efficient on a fuel basis – and when you talk about fuel being at rates of $80-100 that’s significant, but of course ships don’t burn Jet A, they burn bunker fuel which is far cheaper.” And to make matters worse, in 2014 the Panama canal expansion will open up and when it does these big ships will begin operating not only to the US west coast but the east coast as well. “So, the ships are larger and much more efficient and of course the ocean industry is also integrated with ground and rail transport and they’ve applied the same technology as we use – tracking and tracing with all the information visible. It’s all about having the right product, at the right time, in the right place, so in my view that’s one of the reasons why, beyond just the economy, that the ocean industry continues to grow,” says Cunningham. “It’s clear looking forward that one of the things that’s changed is the economic outlook and with it, the air cargo market. In past 15-20 years we’ve seen strong single digit growth and even double digit in some cases. But look at the forecast of 2.7 per cent for 2013, on the back of very weak last couple of years. It’s a very different growth rate that we’ve historically seen and this has major implications for the business.” But Cunningham is quick to point out that all of this doesn’t mean it’s the end for air cargo and particularly air

express which has been growing and ultimately will continue to do so. “For air cargo there’s going to continue to be a relationship between value and total distribution cost and that means certain products, at certain times, need to move by air, but again my point is I don’t see the days of past being the days of the future in terms of the amount of demand that’s out there.” Advice for the industry Payload Asia asked Cunningham what, in his view does the general air cargo sector need to do to address this smorgasbord of challenges, including competition from his own sector. One problem he notes is that the consumer electronic launches every six months or so, creates “massive episodic demand,” that traditionally has moved in freighters and “it’s one way traffic, then it’s gone. Then what do you do? “Many of the flag carriers around the region over the last 15 to 20 years have identified the cargo sector as an important sector to grow in and then what they’ve done, is they’ve identified the right point of leverage between passenger and cargo operations at about 30-40 per cent of revenue contribution from cargo. “But when you move from marginally costed belly space and a limited amount of main deck cargo capacity which was the old model, to an environment today where you’ve got a goal of 30-40 per cent of your revenue being generated by cargo, you’ve got a lot more main deck capacity than you need. You’re flying a lot

more main deck capacity, your moving that main deck capacity from here to there, chasing whatever that episodic demand is and you’re hoping that’s going to work out. “I think fundamentally that with the miniaturisation, with the long range, large belly capacity aircraft and this episodic demand there has to be a rebalancing of capacity.” Passenger carriers can still make money on a go-for basis, he says, “but you’ve got to use your marginally costed belly space and a limited amount of dedicated main deck space relative to the models that we’ve seen over the past ten years or so. “You’ve got to have a lot less dedicated capacity because when you’ve got all that dedicated capacity you’ve got to fully burden it – you’ve got the pilots, you’ve got maintenance, the crews, you’ve got to fly somewhere and if you don’t you’ve got the ownership cost of it just sitting on the ground. And so I think over time there’s probably going to be a rebalancing of that model in the mixture of cargo capacity to passenger belly capacity.” He also sees a continuing role for the maindeck and specialist carriers, but again feels there’s going to be a rebalancing. “The macroeconomic issues are not going to change and those long range, large belly capacity airplanes are just going to keep coming.” FedEx not immune But as successful as both the air express sector and FedEx Express has and continues to be, neither could escape the impact of the global downturn with the

FedEx and its operating units.

www.payloadasia.com | May 2013

27

CO VER STORY

Packages fresh off FedEx Express aircraft move along the conveyor belt at a FedEx sorting hub.

division reporting a sharp 13 per cent decline in international priority freight revenues, while international air freight revenues fell by 17 per cent year-on-year during the third quarter. For the first nine months of the fiscal year ending May 2013, these figures were down seven per cent and six per cent respectively. “What we’ve seen is a reduction in demand for our fastest, highest yielding products and a growing demand in what we call our deferred product which is 24-48 hours slower, but customers still want the information – the tracking and tracing and the reliability that goes with it.” FedEx has taken the same strategy as many on the general air cargo side and that is to reduce capacity. “We’re taking capacity down, but in concert with that reduction in capacity what we’re not doing, is we’re not reducing service and that’s a function of the way we built

our network. We built our network so effectively there’s a redundancy in connectivity built in, so we can take units of capacity out and not affect the transit time,” he says. FedEx is also moving deferred and lower yielding products into other lower costs networks. “We are going to use other carriers and belly capacity and to some extent main deck capacity where it makes sense to do so. Up to the beginning of this year the express carrier was operating up to 10 wide body flights a day on the transpacific. “We can scale back that capacity quite a bit without affecting service and we operate three flights between Asia and Europe with basically a dozen or so flights a day connecting intraAsia through our hub in Guangzhou.” All change “One of the things that is really easy to do is to take analytical forecasting

FedEx Express has taken delivery of 23 efficient B777Fs with orders for 20 more.

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models, look at the history and say what the future will look like. But when you introduce significant macro economic factors of the magnitude I’m talking about I think you have a significantly different industry than the one we’ve seen in the past and that has significant implications as we go forward.” Having been with FedEx for 30 of the company’s 40 year history, “I’ve seen our world change many times in that period and there is one constant that has made FedEx successful and that is, that we change when markets and the world change – that’s what successful businesses do.” He says this why the company has spent significant time and resources building out its freight forwarding capabilities, ocean forwarding businesses, ground businesses in the US, LTL (less than trailer load) business, as well as developing and growing its European business including ground capabilities there. “I don’t have a crystal ball, but there are significant macro economic trends that are driving our business – long range aircraft, new ships, higher fuel cost, nearand on-shoring, demographic changes and of course use of technology and use of supply chain management – and I do believe that the vertical segments of healthcare, medical devices, pharma, e-commerce are all going to be value drivers in the future.” “I’m also optimistic about China,” he says, despite what he identifies as a number of problems including bureaucratic hurdles, high domestic logistics costs and the need to transition the economy away from a focus on exports to domestic consumption. “China has been critical to all of our success and has certainly been critical to our success on a global basis, but it’s one that faces many different challenges in that environment. “I’ve been in the region long enough to know that one of the advantages that the Chinese economy has in terms of being a state-led economy, is the ability to change – to recognise change, drive change and execute change. China has faced many daunting challenges in the past and successfully navigated them, so I’m confident that is going to happen, but that change is going to have to be to transition toward a domestic-led economy and I think it’s going to have to be about improving the software and making it easier to do business for Chinese citizens and effectively the world.” PAYLOAD ASIA | May 2013

P RO FI L E

Swissport keen on Asian expansion With its formidable presence in more than 85 airports around the world and handling in excess of 3.5 million tonnes of cargo annually, Swissport Cargo Services has a fairly major blank spot on its world map. Although it has cargo operations in Korea and Japan, nowhere else in Asia does the Swiss ground handler have cargo operations and this is something it’s keen to remedy by promoting its high level of service standards. Michael Mackey has the story.

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t the moment its only Asian operations are Korea and Japan – in the former it has a base at Seoul’s Incheon airport and in Japan since November last year it has been offering cargo services at both Narita and Osaka airports. Given the scale of Japan’s economy and Korea’s role in air cargo and their respective import and exports needs in these markets are not inconsequential operations, but huge swathes of Asia are without any Swissport presence something the ground services group is looking to end by building its profile in the region. In this it is helped by a number of different factors: The West to East load imbalance, whilst still there, is diminishing and the growth of Middle East passenger carriers now offer very attractive options for connectivity with good capacity. Balancing this, Asia’s growth is undoubted but increasingly the talk in the market is of a modal shift from airfreight to sea freight. “Asia is of course very high on the list of Swissport priorities,” said Ruedi Steiner, SVP Cargo Asia and Middle East in an interview with Payload Asia. “It remains a region of high growth, high output, and increasingly, increased consumption. As such it needs air freight operations, and therefore air cargo handlers, such as Swissport.” Open though the company is about its general intentions, like many a business it is not particularly forthcoming about specifics, although some countries simply cannot be ignored. Market entry to China “remains a priority” said Steiner, adding the company already handles many Chinese carriers throughout its global network. He goes on to acknowledge the building up of a presence in Asia is a time-consuming process whilst pointing out what some of the specific problems are. Expansion challenges “Current barriers to entry start with licensing in still duopolistic handling environments, but we continue to follow up all opportunities and there is a real

www.payloadasia.com | May 2013

Ruedi Steiner

desire within the customer portfolio to see Swissport expand in Asia. We continue to raise service levels, safety and quality throughout the network. Sooner or later, our service offering will be compelling in all markets.” Balancing this there is a suggestion in the global market of a modal shift from air freight to ocean freight. Swissport is neither worried nor perturbed and might best be described as confident. “The jury is still out and only time will tell, but just as we see an all-cargo carrier undergo difficulties, we see another Middle East carrier adding brand new freighter capacity. The market is vey fluid with capacity, demand, fleets and products constantly changing. “The integrators also continue to increase market share in certain lanes and commodities. The global market shows a similar pattern. More people, more consumption, and more desire to move goods quickly. We remain in a growing market overall and I still believe the future is bright for air cargo and those of us that facilitate its benefits.” Attention to detail How it is doing this, is attention

to detail that might be described as astonishing. This ranges from focusing on warehouse layout and infrastructure to support new products, or increased capacity for services such as Constant Climate. New technology, a bit of a Swissport thing, is also a part of it as it moves towards being a paperless company. Among the examples given by the company as working with smartphones and i-pads helps to better manage special cargo. Hand held terminals, such as in Cargospot, also allow immediate access to AWB data which helps the process further. There is also Shield, a system which sees all scanned documents move through the same system. Upon receipt at the destination this allows customers to immediately access lost freight information, POD details and reduces the cost of physically storing documents, explained Steiner. Nor is this company-wide process likely to remain static. The strategic plan for cargo, according to Steiner, “is very simple and driven by customer demand. Carriers want a one-stop shop to facilitate their business ambitions. That includes cargo, but is not limited to that.” It is for example heavily involved in fuelling and airport logistics. As for cargo though details are hard to come by but some changes are upcoming. “We are looking into a replacement for Cargospot and have made good experience reducing door waiting times for our customers through an own developed software which will be deployed to other stations,” said Steiner. There is also an initiative underway to identify suitable hardware to measure physical shipment piece volumes. This is to ensure that volume information can be verified upon receipt at its facilities with the attendant security and commercial benefits for our customers, added Steiner. And as for the biggest change of the lot, the possible and much-discussed privatisation of Swissport. “I will update you, as soon as I have news on that,” said Steiner. 29

I T & E QU I P MEN T Nordisk certified by Chinese Aviation Authority

Nordisk Aviation Pro ducts , a subsidiary of AAR Corp. has received Chinese technical standard order (CTSO) approval on several of its products through a working arrangement between the Civil Aviation Administration­ of China (CAAC) and the European Aviation Safety Agency (EASA). Nordisk is the first manufacturer from Europe to benefit from the cost-saving collaboration between the Chinese and European airworthiness authorities since it was adopted in 2010. Accepting each other’s applications for CTSO approval eliminates redundancies in inspections, evaluations and testing, preserving safety and environmental compatibility. “This process is a roadmap of how industry can get the necessary approvals from the overseas authority to gain access to its market,” said Markus Görnemann, deputy head of Products Department at EASA. “The working arrangement allowed both authorities to define minimum requirements, acknowledge existing systems on each side and avoid duplication of work.”

Schiphol partners sign info sharing deal

Schiphol Cargo, Cargonaut, KLM Cargo and Air Cargo Netherlands are among the signatories to a covenant by a broad spectrum of Dutch business and government, to create a revolutionary new approach to information exchange between parties in the logistics chain. The “Neutral Logistics Information Platform” (NLIP) is being developed to give the Dutch logistics sector a competitive advantage in Europe. NLIP will enable all supply chain partners to input information once, and then share it throughout the entire chain. Originators of information will control who has access to it and when. The aim of NLIP is to assist shippers, logistics providers, ports and government departments to optimise supply chains, reduce administration and work more efficiently. Says Schiphol Cargo senior VP Enno Osinga: “We are very pleased to be a partner in this exciting and groundbreaking initiative. We strongly support any move to drive inefficiencies from the supply chain, and the NLIP’s goals exactly match our own. In the short term, NLIP will further strengthen 30

Schiphol’s position as an integral element of the Netherlands’ multi-modal hub proposition. Longer-term, we hope our logistics model will set an example globally, and contribute to a healthier future for the entire industry.” There are sixteen signatories to the covenant: Air Cargo Netherlands, Schiphol Cargo, Cargonaut, Dutch Customs, EVO (Dutch Shippers’ Council), Fenex (For warders Association), the Port of Amsterdam, the Port of Rotterdam, KLM Cargo, the Dutch Ministry of Economic Affairs, Portbase, Rijkswaterstaat, Strategic Platform Logistics, TLN (Transport & Logistics, the Netherlands), VRC (Port Shipping Agents) and VRTO (Port of Rotterdam Terminal Operators).

UPLIFT crosses 1 million EDI message mark

 India’s UPLIFT – Universal Platform for Logistics & Integrated Freight Transport – has successfully transmitted one million EDI messages within a short span of two years. Leading Freight Forwarders, Custom House Agents, Carriers, airports are utilising this platform to realise significant savings in terms of time, money & resources. UPLIF T is India’s first cargo community platform and a pioneering initiative to connect the Multi-modal Logistics network in India. Promoted and co-developed by Kale Logistics Solutions Pvt. Ltd in association with the Air Cargo Agents Association of India (ACAAI), UPLIFT is India’s first and only multi modal cargo community system (CCS). Currently UPLIFT is connecting 30 per cent of Indian FF/CHAs electronically with 10 leading carriers (representing over 65 per cent of India’s air freight market) and Indian Customs. With 2,500+ users across seven cargo hubs in

El Dorado International Airport is ranked among the world’s 50 busiest airports in terms of: Passenger traffic (ranked third in Latin America with 20,427,603 passengers in 2011); cargo traffic (ranked first in Latin America (33rd worldwide) with 648,221 tonnes in 2011); and traffic movements (ranked second in Latin America (45th worldwide) with 304,330 aircraft movements in 2011).

India and shipment filing to more than 450 destinations globally, this platform is helping Indian logistics players become compliant with global e-freight initiatives. The only e-freight application from India recognised by International Air Transport Association (IATA) and has an in principal global arrangement providing connectivity to 114 carriers. “We are pleased by the fact that UPLIFT has seen the fastest adoption compared to any of the CCSs worldwide,” said Amar More, VP Kale Logistics Solutions. “With UPLIFT, India is geared up to be one of the leading nations participating in the global e-cargo movement. This platform is revolutionising the way cargo information is exchanged by the Indian cargo community. “Industry participants are already realising the benefits of visibility across the supply chain, a more predictable shipment status and far more secure cargo movement. India is on the cusp of a cargo EDI revolution. This platform will form the foundation of India’s National Single Window for electronic transactions which is emerging as a key requirement from World Trade Organisation. We are confident that UPLIFT will contribute in lowering the logistics transaction costs in India and increasing India’s EXIM competitiveness.”

SITA helps transform Bogota airport

  SITA, the global air transport IT and communications specialist, has transformed Bogota El Dorado Airport (BOG) as part of a US$1 billion modernisation and expansion project. SITA is the master systems integrator for the project, and has provided 15 new solutions in collaboration with Johnson Controls, a building systems expert, for Operadora Aeroportuaria Internacional (OPAIN), the company that manages the airport. In the first phase of the project, SITA provided the technology for the new international terminal (T2), which opened in October 2012. Work is currently underway to extend the terminal, which will also handle domestic flights starting in July 2014. El Dorado International Airport is Latin America’s largest airport in terms of cargo movements and its third largest in terms of passenger traffic. In 2012, the airport handled nearly 310,000 national and international flights and almost 23 million passengers. PAYLOAD ASIA | May 2013

Celebrating Excellence in the Air Cargo Industry Award Categories

Editor’s Choice Awards

     Overall carrier of the year

     Lifetime achievement award

     Rising star carrier of the year

     Personality of the year

     Combination carrier of the year

     Marketing award of the year

     Maindeck/Specialist carrier of the year

     Media award of the year

     Airport of the year      Ground handler of the year      ACMI/Charter operator of the year      Global express operator of the year      Regional express operator of the year      Global logistics provider of the year      Regional logistics provider of the year      Global freight forwarder of the year      Regional freight forwarder of the year      IT provider of the year      Charter broker of the year      GSA/GSSA of the year      Corporate social responsibility Award

Date: 17th Oct 2013 Venue: Pan Pacific Singapore Please contact your Payload Asia sales representative for more information: Yullie Tan, Account Manager, Tel: +65 6521 9749 | Email: [email protected]

http://awards.payloadasia.com Gold Sponsor

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economi c ou t lo o k

Structure of world trade changed in 2012: WTO

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he year 2012 was, to put it mildly, not a good year for world trade. In fact it was quite simply bad, with world trade growing by only two per cent, far below the average figure of six per cent for the last twenty years, according to a report from the World Trade Organisation (WTO). And it represented a major reduction as compared to the 5.2 per cent growth seen in 2011. One of the most remarkable aspects of 2012, according to the WTO report, was the change in the structure of the growth of world trade. It appears that the relationship between world trade and the underlying world gross domestic product (GDP) has changed. Normally, world trade grows at twice the rate of world GDP. Last year, however, the two grew at roughly the same rate. The WTO said that it expected a “partial return toward the usual ratio”, although very slowly, with world trade still expected to be less than the usual multiple of world GDP growth by 2014. In the nearer term, the WTO is not very optimistic in its predictions for world trade growth this year, anticipating an expansion of only 3.3 per cent. The organisation is even uncertain about this prediction, pointing to the volatility around the Euro crisis as a continuing threat. Indeed, it has been the Eurocurrency countries in particular that have driven down the rate of growth, due to a decline in imports to the European

World trade versus GDP growth

* Growth in volume of world merchandise trade and GDP, 2005-2014. * Figures for 2013 and 2014 are projections.

Union (EU), rather than exports. Imports to the EU fell by five per cent in 2012, not just from the rest of the world, but also between EU economies. This fall in economic activity had a disproportionate effect on world trade, both due the size of Europe economically, but also due to the scale of trade between European economies, according to the WTO report. Japan also saw significant volatility in

*

Source: WTO Secretariat.

2012, attributed to difficulties regarding its trade links with China which resulted in an 11 per cent decline in exports during the second half of the year. The US continued to see reasonable export growth for most of the year, while China and much of the developing world saw strong growth – although the declines in commodity prices may be a indication of harder times ahead for the latter group, according to the WTO.

Forwarders’ volumes continue below expectations

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ollowing five consecutive monthly increases, the overall Stifel Logistics Confidence Index fell 1.0 index points to 51.5 in April. Despite the decline, the index remained above the significant 50 mark, denoting expansion, for the third consecutive month. However, a look at the present situation reveals that both air and sea freight volumes are below those expected relative to the time of year. The index for current air freight volumes fell 1.2 points to 42.0 for the month of April indicating an even greater decline relative to the volumes expected for the time of year. Although the index for sea freight remained virtually flat at 47.4 in April (down 0.1 points from March), it still

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indicates a decline in volumes. Meanwhile, In terms of year-on-year comparisons, the index for air freight was 2.7 points lower compared with the same month last year. In contrast the sea freight index was 1.4 points higher in April 2013 compared with April 2012. Since the Index’s inception over a year ago, the outlook for the next six months has remained very optimistic with respondents consistently anticipating positive volume growth. Although this trend continued in April, with the index at 58.4, it fell 1.3 points which suggests respondents are perhaps becoming less confident in a market revival taking place any time soon. Lucy Palmer, economist at Ti, explained:

“Following an encouraging start to 2013, it appears that confidence has since begun to waver. After the shut down for the Chinese New Year, the second quarter of the year generally records an improvement in volumes. However, we are yet to see any sign of this increase and as a result positivity for the outlook has declined”. In this month’s one off question, survey participants whether they are experiencing an increase in greater opportunities within domestic markets and intra-regional trade compared with inter-continental trade. Over half of respondents (52 per cent) indicated that they had experienced such a change in opportunities, while 37 per cent had not. The remaining 11 per cent were ‘unsure’. PAYLOAD ASIA | May 2013

economi c ou t lo o k

Economic recovery seeds sown: ABN AMRO

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ccording to an 18 April ‘Global Macro View’ research report by ABN AMRO, the makings of an economic recovery are becoming clearer. “The seeds are being sown for an economic recovery,” the investment bank said, adding that “systemic risks to the financial system and the global economy have declined notably, despite the bailout of Cyprus.” Meanwhile, monetar y stimulus continues at an aggressive pace with the balance sheets of the G4 central banks having reached US$9 trillion and signals from the US Federal Reserve and evolving monetary policy at the Bank of Japan signal that further easing lies ahead, the report said. In addition, private sector balance sheet repair is advanced in the industrialised economies, while domestic demand in the big emerging markets will benefit from easing financial conditions, strengthening labour markets and infrastructure investment. The bank noted however, that aggressive fiscal consolidation means that the improvement in global economic conditions will not be very significant this year. The good news is that 2013 will likely mark the peak in terms of the pace of budget cuts, it added. “Together with the improvements that are taking place

in the private sector, this means that the foundations are being set for above-trend global growth in 2014, when cyclical tailwinds will convincingly offset fiscal headwinds.” But the Eurozone economy will lag behind in this process as domestic demand suffers from bank deleveraging and rising unemployment, it said. Financial markets will continue to be driven by the prospect of stronger growth later this year and in 2014, according to ABN AMRO, as increasing signs emerge that the US economy is shaking off the effects of the fiscal drag and growth in emerging markets is firming. Emerging markets On emerging markets the report noted that once again 2012 saw improvements in the credit ratings of many emerging countries, while those of industrial countries deteriorated further. “Despite a more favourable economic climate, we expect only a limited number of upgrades among the emerging countries in the coming two years.” Asian economies have been showing a mixed picture and there are increasing downside risks for the region, it noted. India’s economy is still failing to pick up, while South Korea is facing many challenges for a swift recovery.

China is showing somewhat stronger dynamics with the bank expecting GDP growth in the region to remain above six per cent in 2013 and 2014. China’s first quarter GDP growth was somewhat softer than expected, rising 7.7 per cent y-o-y, down from 7.9 per cent in the last quarter of 2012. Industrial production, which accounts for 40 per cent of GDP was the main factor behind the slowdown. The figures are likely to be impacted by the Chinese New Year. We expect a slight pickup of economic activity in the coming months, on the back of a modest global recovery and stronger credit growth in China in the first half of the year. ABN AMRO is maintaining its forecast of eight per cent growth. For emerging Europe, where protracted Eurozone weakness impacted growth throughout 2012, the report expects regional growth to mildly accelerate this year gaining further momentum in 2014. And for Sub Sahara Africa, the report describes it as a region on the rise, although “the region is far from an oasis of peace and calm, it has witnessed a growth spurt in the past ten years, not least driven by China’s insatiable hunger for commodities.”

E-commerce takes bite out of US retail sales

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owever, a look at the present situation revUS retail sales tumbled in March ending a disappointing first quarter for many retailers. March retail sales declined 0.4 per cent from February, the biggest decline in nine months, according to US Commerce department statistics. This follows a 1.0 per cent increase in February from January and a 0.1 per cent decline in January from December. Department stores, electronics retailers and sporting goods outlets all reported lower sales with a number of major retailers including Target, Family Dollar and Nordstrom’s issuing profit warnings for first quarter. But while brick and mortar sales have been on the decline, e-commerce sales have been moving in the opposite direction as consumers increasingly compare prices, facilitated by the ease of using mobile devices such as smartphones and tablets. www.payloadasia.com | May 2013

While data for the first quarter will not be available until sometime in May, the US Commerce department’s fourth quarter e-commerce report published in February shows e-commerce sales growing 1.4 per cent from third quarter and 15.6 per cent from fourth quarter 2011. As an overall percentage of total retail sales, e-commerce sales constituted 5.4 per cent for the fourth quarter, which increased from the first quarter 2012 figure of 4.9 per cent. The trend is expected to continue as retailers continue to invest in multichannel activities.

E-commerce logistics solutions are also ramping up to meet this changing consumer buying behaviour. To remain competitive, retailers are utilising stores as fulfillment options, while same day delivery services continue to expand despite some reports suggesting consumers are not interested in such a service, TI said citing the example of Macy’s plans announced in February to expand online fulfillment from 292 stores to 500 by end of 2013. Internet giant Google also recently launched its same day delivery service to compete against existing services from Ebay, Amazon and Walmart. While US total retail sales will likely continue to be sluggish throughout 2013 as the economy continues to grow at a slow pace, e-commerce will likely grab an increasing percentage of retail sales as consumers look to compare prices, buy goods 24/7 and learn to demand same day delivery services, said TI. 33

FREIGHTER Supplement

FREIGHTER Supplement Freighters: Going the way of the dinosaurs? With ongoing global economic lethargy causing continued stagnation in air cargo markets and new capacity mostly in the form of passenger bellies, continuously being added, many have questioned the long term viability of freighters. But a recent industry panel comprised of key executives from all-cargo carriers, combination carriers and a freight forwarder, unanimously agreed freighters are here to stay, but that a market correction – possibly with casualties – is inevitable. Donald Urquhart reports from Hong Kong.

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s Robert Kunen, director Hong Kong & Southern China for Air France, KLM and Martinair Cargo notes, many legacy carriers – AF-KLM group included – are applying “very strict capacity management” to cope with the downturn. This generally means either reducing freighter services, or parking them – either on the tarmac or in the desert. “We are reducing our exposure to the downturn by focusing more on belly capacity than freighters, because the bellies are of course a shared cost with our colleagues on the passenger side, which is an advantage for us.” He notes however that not all carriers are doing this and freighter capacity is still being added. “Therefore despite the economic improvements that we are expecting over the next year we do believe there will still be over-capacity in the market,” he adds. Speaking from a freight forwarding perspective, Corey Mahjoubian, global airfreight director at Toll Global Forwarding noted that aside from the macro-economic factors at work, “we know that it’s going to be a challenge,

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just based on the supply and demand situation we find ourselves in.” On the demand side he feels the industry is caught in what he describes as an ‘innovation gap’. While people now often own multiple cell phones, computers and flat panel televisions, these consumer electronics have nearly become disposable items. The question then he says, “is what’s the next industry, the next thing that’s going to drive air cargo. I don’t see it coming.” Also on the demand side the global economic situation is driving modal shift, with cargo being pushed out of traditional air cargo into either the express sector, or into ocean freight. “We’re clearly seeing modal shift into ocean and we’re actually seeing that accelerate over the last 10 months,” he adds. And crucially, on supply side there is the massive influx of aircraft, primarily wide-body freighters with such high belly capacity they’ve been called ‘hidden’ or ‘invisible’ freighters. “When you take an old B747 passenger aircraft off a route and you throw on a brand new B777-300ER, the capacity

that you’ve added especially if it’s a daily flight, is a hidden freighter you’ve thrown on that route.” Indeed as Nick Rhodes, director of cargo at Cathay Pacific points out, the new passenger aircraft are almost like the old Combis – “you can get almost 25 tonnes on a B777 or A350 in the future. You’ve got a huge space, you buy the aircraft and you’ve got to use the space,” he says. This type of capacity expansion is largely unintended and the result of forward planning four or five years earlier Mahjoubian adds. Similarly on the freighter side. “You ordered those B747-8Fs five years ago and oh boy, here they come now!” A great deal of this widebody passenger belly capacity is coming from the Middle East carriers who have made record aircraft orders to support their surging passenger business. But as Mahjoubian notes, at the end of the day “it’s still adding cargo capacity.” “Hopefully we will see a correction somewhere,” he says. “Either we’ll see increasing demand because the next thing will happen, or we’ll see a significant amount of capacity removed from the market – either a combination carrier deciding freighters are not for them, or an all cargo carrier exiting the business.” Agreeing with this sentiment Cathay’s Rhodes highlights the extreme difficulty in making a return on assets in the current market. “Something needs to change if we are to continue PAYLOAD ASIA | May 2013

FREIGHTER Supplement – I am optimistic in the long term that economies will come back, it’s cyclical and air cargo companies will lead the rebound,” he affirms. “But , I think there will be a correction. I also think that during this sustained downturn there will be casualties. Some capacity will come out of the market – it has to happen and that will be freighters. “Combination carriers like Cathay have to look very carefully at the number of freighters we operate on top of the passenger bellies. Our projections are a little more conservative in 2013 than they were in 2010 [when Cathay placed it original B777F orders]. “The only option is to park freighters and sit it out – it is a tough market in the short term, but in the longer term I’m more optimistic,” he says. Paradigm shift? For AF-KLM’s Kunen the rising tide of belly capacity resulting from the surging new widebody fleet is “definitely creating less of a need to have freighters in addition to belly

capacity for a combination carrier.” But he adds the need is still there and in the longer term he doesn’t think many combination carriers will go to the model that Delta and other carriers like United have adopted, as a belly-only cargo carrier. “It can work but not everybody is in a position to have enough belly hold capacity to be offering the whole range of products to customers. So I think indeed there will be a new balance, but I don’t think the freighters will go away.” In agreement, Rhodes highlights the traditional model for combination carriers. “The priority for a combination carrier is you’ve always got to fill the belly if you can and then you make your freighter schedule around that.” As a combination carrier there is always a role for a freighter, he says. If a carrier decides it needs two or three freighters then it needs to ask the question whether to use ACMI because it may be more economical to use a contract provider, he says. On the other hand if it needs 10 or 20 freighters then it might be better to own them.

nt eve 3 1 ! 20 pen

the w o ing ion no c n t nou tra An egis

EVA INTERNATIONAL MEDIA LTD AVIATION PUBLISHERS & EVENTS SPECIALISTS

R

HOSTED BY

25th-27th September Tivoli Lisboa Hotel, Portugal To be chaired by Chris Notter VP Cargo Operations Of Qatar Airways

CONFERENCE DAY ONE 08.00 REGISTRATION OPENS 09.00 CHAIRMAN’S OPENING REMARKS 09.15 COAG: ONE YEAR ON 10.00 A HEALTHY COOL CHAIN 10.45 BREAK FOR REFRESHMENTS AND VIEWING OF EXHIBITION 11.15 BRIGHT SPOTS AROUND THE WORLD 12.00 WHAT THEY REALLY, REALLY WANT 12.45 BREAK FOR LUNCH AND VIEWING OF EXHIBITION 14.15 SYSTEMS UPDATE 15.00 QUALITY, STANDARDS AND STANDARDISATION 15.45 BREAK FOR REFRESHMENTS AND VIEWING OF EXHIBITION 16.15 CRISIS? WHAT CRISIS? 17.00 END OF DAY ONE 19.00 GALA DINNER

“We will be combination carrier for the long term, but we are evaluating how many freighters we need and whether we want to own them,” he adds. But while freighters may have a secure place in the air cargo industry going forward, what of the all-cargo carriers that don’t have the flexibility and economic advantages of marginal cost belly capacity. For Wolfgang Meier, executive VP, AirBridgeCargo, operating an all maindeck fleet offers the ability to offer more tailored services that offer better scheduling for customers. “I still do see the need for all-cargo carriers, not just because I represent one, but I’m 30 years in the business and all-cargo carriers design schedules as per customer’s requirements, not because of the passenger side. We design schedules that fit into the supply chains of our customers, which is the forwarding community. This is something that has to have value in the future,” he says. “Different horses for different courses,” says another maindeck

nted rese tion p y onl ocia day in Ass e n a o for ol Ch And the Co by

To be chaired by Sebastiaan Scholte, CEO of Jan Der Rijk B.V. and Chairman of CCA

CONFERENCE DAY TWO 09.15 OPENING REMARKS FROM THE CHAIRMAN WORKING GROUP SESSIONS 09.30 AIRLINES: WHAT ARE AIRLINES DOING TO FURTHER IMPROVE AIR CARGO HANDLING QUALITY AND EFFICIENCY? 10.00 SHIPPERS & FORWARDERS: WHAT ARE SHIPPERS AND FORWARDERS DOING TO IMPROVE THE AIR CARGO HANDLING CHAIN? 10.30 BREAK FOR REFRESHMENTS AND VIEWING OF EXHIBITION 11.00 CARGO HANDLERS: WHAT ARE HANDLERS DOING TO IMPROVE AIR CARGO HANDLING QUALITY AND EFFICIENCY? 11.30 AIRPORTS: WHAT ARE AIRPORTS DOING TO IMPROVE AIR CARGO HANDLING QUALITY AND EFFICIENCY? 12.00 WORKSHOP WRAP-UP 12.15 COAG REVIEW 13.00 FINAL WORDS FROM THE CHAIRMAN 13.15 LUNCH – CLOSE OF CONFERENCE

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PHARMACEUTICALS IN THE COOL CHAIN CONFERENCE

25th September 2013 CONFERENCE DAY ONE 08.00 09.00 09.15 10.00 10.45 11.15 12.00 12.45 14.15 15.00 15.45 16.15 16.45 17.00

REGISTRATION AND WELCOMING COFFEE OPENING REMARKS FROM THE CHAIRMAN COAG: ONE YEAR ON THE WEAKEST LINK BREAK FOR REFRESHMENTS AND VIEWING OF EXHIBITION MANAGING EMERGING MARKETS VISIBLY BETTER BREAK FOR LUNCH AND VIEWING OF EXHIBITION RESPONDING TO MODAL SHIFT FOOD FOR THOUGHT BREAK FOR REFRESHMENTS MOVING FORWARD CLOSING WORDS FROM THE CHAIRMAN END OF CONFERENCE

EVA International Media Ltd reserves the right to make changes to the speakers or programme, should this be necessary, without prior notification.

www.payloadasia.com | May 2013

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FREIGHTER Supplement proponent, Kersti Krepp, VP sales & marketing Asia Pacific at Polar Air Cargo. “Very simply there is a different customer that will use belly, a different customer that needs maindeck. At end of the day 60 per cent of all cargo rides on all-cargo aircraft, so there is a future for all cargo,” she says.

But Rhodes is not entirely convinced. Looking at the different categories he says the integrators are here to stay, particularly with people shopping online. “ACMI is a very robust model for people who want to contract more capacity. The belly only carriers I think obviously most are here more by default

than by design, and combination carriers of course will be here in the future – it’s just a question of how many freighters you need to supplement the belly. All cargo operators will be more challenging – it’s a question of whether they can fill special need like heavy lift etc.”

B757 feedstock for conversions hits sweetspot After a long hard winter that’s lasted for a few years, the conversion market for Precision Conversions’ niche area of B757-200 passenger to freighter and passenger to combi looks finally set to turn. And the timing couldn’t be better – record levels of feedstock are beginning to flow. By Donald Urquhart.

The Precision Conversions 757-200PCC Combi configuration incorporates 10 full pallets and  43 passengers seats (up to 54 passengers with current configuration).

“A

ircraft feedstock is increasing by the minute and you’re going to see seismic levels of airplanes being delivered out of the legacy carriers now that the B737-800NGs and 900NGs are being delivered at record levels, so that’s helping a lot,” said Brian McCarthy VP, marketing and sales at Precision. Currently Precision is finishing up a combi and starting up another conversion on 20 May, “so not nearly as many airplanes as I would like to see – we should have three airplanes up right now, but we don’t and that’s just a sign

of the times,” he concedes. “But we are getting far more inquiries now than we’ve ever gotten. Feedstock is now getting abundant and affordable feedstock has everything to do with the level of interest we get.” Currently there are over 100 aircraft on the market now – coming out of US legacy carriers like United and others. Precision also received certification for 757-200PCF conversions on winglet equipped aircraft, which McCarthy says “will open a few doors for us because only the newest, youngest aircraft have winglets, that’s

Shenzhen-based SF Express awarded Precision with a contract last year for half a dozen passenger-tofreighter conversions of 757-200s to 15-pallet PCF configuration, with all of the modification work to be done at TAECO’s Xiamen facility.

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just the way it went.” “We’ve got 300 plus aircraft that are candidates as we look forward, all that are well within age restrictions and age brackets that we’re looking for – low cycle airplanes that are 1992-2004 type of airplanes and so we’ve got a good feedstock base,” he says. “We can easily count a potential 50 or 60 airplane orders without even trying – from the various customers, including replacements and additions and we’re getting inquiries from new customers, so I would say I’m encouraged, but its been a tough few years. “Our biggest concern is we’ve got a ton of feedstock and it looks like its going to meet demand, but the big issue is it will then turn and flip over to not enough slots,” he said adding that Precision has been stocking up on conversion kits to ready itself for such a situation, “but we think we can meet and respond with enough MRO capacity and kits until we can get back up to speed and produce what is probably going to be 10 or 11 airplanes a year.” Aside from its relationship with TAECO, Precision also has its main facility – Flightstar Aircraft Services - located in Jacksonville, Florida and only last month a new agreement with Goodyear, Arizona based AeroTurbine Inc, MRO Facility for conversion and MRO work. While it may still be a bit premature to break open the champagne, the difference says McCarthy “is now we’ve got people making inquiries and actually out purchasing aircraft.” He notes the customer base is expanding as well with a new breed of cargo operator that is emerging out of logistics providers, “the guys who have ground components but are taking to the air,” like China’s rising star, Shenzhen-based SF Express. Precision won a contract last year from SF Express for half a dozen passengerto-freighter conversions of 757-200s to 15-pallet PCF configuration, with all of the modification work to be done at TAECO’s Xiamen facility. PAYLOAD ASIA | May 2013

FREIGHTER Supplement

Pemco to double B737-300 P2Fs

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emco World Air Services has said it will likely double its P2F freighter conversion of Boeing 737-300 and -400 aircraft and soon will announce a programme for a new 737 variant, according to Kevin Casey, president of the Tampa, Florida based conversion and maintenance company. The company, which underwent a b a n k r u p tc y co u r t- s u p e r v i s e d restructuring in 2012 completed nine conversions last year, with Casey saying the company expects to complete 1620 this year. A little more than half of the 2013 conversions will be B737-300s with about two-thirds of those being

Kevin Casey

full conversions to freighters and the rest will be combi-freighters, or quickchange aircraft.

Several factors are contributing to this year’s increase in conversions, including low acquisition costs on the aircraft, high fuel costs and aircraft age restrictions, according to Casey. The storage and retirement of B737 Classics increased by nearly 25 per cent in 2012. Casey says Pemco is also looking for ways to grow its maintenance, repair and overhaul business, which most likely will involve expanding its capacity in Tampa, or the “immediate vicinity.” The company is discussing that option with the local airport authority and some state officials, he added.

AEI selects fourth conversion centre

A

eronautical Engineers, Inc. (AEI), has announced that it has selected Commercial Jet’s (CJ’s) new 400,000 square-foot facility at the Dothan Regional Airport (DHN) in Dale County, Alabama as its fourth AEI Authorized Conversion Center (AACC). Commercial Jet’s Alabama facility will provide B737-300SF,B737400SF and MD80SF Passenger to Freighter Conversions and Maintenance for AEI customers. The Alabama facility joins a growing number of AEI Authorized Conversion Centers which include Commercial Jet’s Florida facility based in Miami Florida, Flightstar Aircraft Services, Inc. based in Jacksonville Florida and Boeing Shanghai Aviation Services based in Shanghai China. “It was critical that we secure another Authorized Conversion Center to keep up with ever increasing market demand,” said Robert T. Convey, VP sales & marketing for AEI. “CJ’s facility in Alabama will benefit from CJ’s Miami conversion experience and be able to tap into a local work force that is traditionally strong in aircraft structures and MRO. After the completion of the twelve million dollar construction renovation, CJ’s Alabama facility, with its planned six conversion lines will become the largest passenger to freighter conversion facility in the world.” John Schildroth, VP and GM for the Dothan facility, said Commercial Jet 38

plans to hire several hundred trained and experienced aircraft technicians in the local market within the next few years. “We are already getting a flow of new orders for our new facility, which will be open for business in the 2nd quarter of this year,” he said. Commercial Jet’s Alabama facility will initially open three production lines capable of converting 12 AEI 737SF and MD80SF aircraft annually with the first three B-400’s expected to enter into conversion in the 2nd quarter

Kenya Airways recently took redelivery of the first of two B737-300F P2F conversions from Aeronautical Engineers Inc. The conversion of these two aircraft are the first passengerto-freighter conversions done at Boeing Shanghai Aviation Services, a joint venture of Boeing, Shanghai Airport Authority and China Eastern Airlines.

of 2013. Based on the plans for 2014, capacity would reach 24 AEI 737SF & MD80SF conversions per year. Meanwhile, AEI also announced that it has been selected by Kahala Aviation of Ireland to provide two firm B737-400SF 11 Pallet Configuration conversions, with options for two additional conversions to be started in May of 2013. The first aircraft, a B737-400 was built in 1991 and will be converted at one of AEI’s North American Conversion Facilities. Both B737-400SF conversions are being converted on spec and are currently available for lease. Mark Thatcher, chief aircraft trader for Kahala said that among the company’s decision to convert with AEI was its reputation for quality and customer support and AEI’s B737400SF having the capability to carry up to 10 full height AAA containers, both of which “will without a doubt give us an advantage when marketing our AEI 737-400SF fleet,” he said. The order by Kahala follows closely from a similar order for one B737400SF 11 Pallet Configuration Freighter Conversion from Sideral Air Cargo of Brasil. The freighter was flown to back to Brasil in late March and is now the only B737-400SF operating in Brasil. The aircraft, an ex AirOne high gross weight B737-400 was built in 1991 and underwent freighter modification at AEI’s Authorized Conversion Center, Commercial Jet, Inc., located in Miami. PAYLOAD ASIA | May 2013

737 conversions. 0 comparisons. With more than 300 tailored cargo conversions – including 100 Boeing 737-300 and 737-400 – we are the world’s most experienced independent aircraft conversion company. And the first company you should call to spec out your next project .

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Belly A c he

This one is for all you ‘green’ fashionistas out there. Actually, here at Belly Ache Central, we love this clever idea – both for its creativity and its environmental friendliness. And it comes courtesy of Air France – who could really use a bit of extra income right about now. Air France, we give you a 9 out of 10 on the Belly Ache respect scale (we’re not quite sure what it takes to get a 10, but we suspect it involves complimentary swag, freebies and other bribe-a-licious goodies). It must be said, we tend towards the cynical around here, especially in terms of the reams of press releases – some of them printed on nice bleached white paper, inserted into equally nice white envelopes and mailed to us (good job FedOops!) – touting the impeccable green credentials of the particular company in question…but this one caught our attention from a slow day in the office trolling the net.

The proper way to exit an aircraft (and not spill your drink).

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So what are we rambling on about? In essence it is a tie-up between Air France and bilum – which in case you don’t know (and neither did we until we Googled it), is a traditional string bag made by hand in Papua New Guinea. Wait a minute! Oops, wrong Google definition. The other Bilum is a French company (that clearly had no reservations about appropriating a traditional cultural reference) that makes bags and accessories using recycled materials like heavy outdoor advertising banners and car seat belts etc. Bilum describes its products as “eco-ethical fashion”… ‘eco’ because it involves recycling materials that would be otherwise thrown away, burned or destroyed in some unpleasant manner and ‘ethical’ because they are made in special centres around Paris by disabled individuals or individuals with social problems in a bid to provide them employment and enable self-sufficiency. While certainly great stuff, we have to stop extolling the virtues of this before we get the urge to run out and volunteer or something! Basically, bilum has created a collection of travel cases made from recycled life vests!

How cool is that we ask you!?! Essentially those life vests under the seats in the aircraft – you would know what we are talking about if only you had paid attention to the onboard safety demonstration – have a limited life span (about 7-10 years Google tells us). And rather than destroy them, Air France turned to bilum to give them a new lease on life. Bilum refers to this as ‘upcycling’, not ‘recycling’ – “transforming redundant recyclable materials, or products into new objects of a higher value”. Wow, even we are impressed with that bit of PR spin! And at €19 for the flat case and €24 for the padded case, we would certainly agree about the ‘UP’ part of the equation. But still, we do love the idea and they are pretty cool – each one nearly unique because they are all cut from the life vests differently. Now after that sales pitch we’ll be watching the post box everyday for our own little bit of swag… if ya know what we mean…*wink wink, nudge, nudge!*

Origami airplanes. With Boeing set to announce in the near future the next variants of the popular 777, dubbed for now the 777X, we thought we would share our thoughts so that the clever engineering types up in Seattle can incorporate our feedback into their final decision. Of course possessing advanced aeronautical engineering degrees, as the Belly Achers do, we will try to give a simple explanation of what Boeing is likely planning for the next iteration of the 777. They are going to take the current model 777 and S-T-R-E-T-C-H it! Brilliant aren’t we? But there’s the rub: The plane will naturally need larger wings and these oversized wings will be a problem for existing airport infrastructure. Fear not as those same clever engineering types have come up with a seemingly simple solution – actually they came up with it in 1995 but for some reason never actually implemented it – folding wings! We don’t know about you, but the very idea of a wing that folds in half just doesn’t seem like a great idea – what if it decides to fold up, flap or break off in the middle of a flight (we’re guessing you don’t believe our aeronautical engineering credentials now). And ok… it’s really only 2-3 metres of the wing that folds, but still! And as the keen news hounds that we are, we are proud to bring you an EXCLUSIVE, never seen before, photo of the prototype 777X (it will be a bit bigger than the prototype pictured above however, in order to actually seat more than just the pilot). Remember, you saw it here first! PAYLOAD ASIA | May 2013

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