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CROSS POLLINATION ASIAN DEMAND FOR LATIN AMERICAN GOODS STRENGTHENS TRANS-PACIFIC LANES - Air Cargo World
THE SOURCE FOR AIRFREIGHT LOGISTICS
                                International Edition • AirCargoWorld.com • April 2015

CROSS POLLINATION
   ASIAN DEMAND FOR LATIN AMERICAN GOODS                       CANADA’S OVERNIGHT
      STRENGTHENS TRANS-PACIFIC LANES                                     WONDER
                                                                                         p.30
                    p.24
                                                                    SHINING STARS:
                                                              THE 2015 ACE AWARDS
                                                                                         p.36
CROSS POLLINATION ASIAN DEMAND FOR LATIN AMERICAN GOODS STRENGTHENS TRANS-PACIFIC LANES - Air Cargo World
CROSS POLLINATION ASIAN DEMAND FOR LATIN AMERICAN GOODS STRENGTHENS TRANS-PACIFIC LANES - Air Cargo World
Contents
                                                                                                                                                                       Volume 18 • Number 3 • April 2015

                                                                               CROSS POLLINATION
                                                          ASIAN DEMAND FOR LATIN AMERICAN GOODS STRENGTHENS TRANS-PACIFIC LANES
                                                                                                                                                                                                                      24
News Inside:                                                                                                                 CANADA’S OVERNIGHT WONDER
6 UpFront
	A tribute to Boeing’s Joe Sutter; saving endangered
  parrots; lingerie shortage averted (whew!) and more.

10 Asia
	What’s behind the Japan Post and Kintetsu
  logistics acquisitions?

14 Europe
          Why did things go so wrong, so quickly at Air France-KLM?
                                                                                                                                                      CAN CARGOJET’S CANADA POST EXPRESS
                                                                                                                                                       CONTRACT BE A WIN FOR ALL PARTIES?                            30
18 Africa & Middle East
	Airports in Europe and South Africa sign historic
  development agreement

20 Americas
                                                                                                                              SHINING
4
          Outlook stormy as the open skies debate rages in the U.S.

Departments
          Editorial
                                                                                                                              STARS
                                                                                                                              RECOGNIZING LEADERS IN
8         Cargo Chat: Jan Krems

                                                                                                                                                                                                                     36
22        People                                                                                                              LOGISTICS AT THE 2015 AIR
42
43
          Bottom Line
          Marketplace
                                                                                                                              CARGO EXCELLENCE AWARDS
44        Forwarders’ Forum
45        Events / Advertiser’s Index
46        The Manifest by Ned Laird
Air Cargo World (USPS 364-590) (ISSN 1933-1614) is published monthly (except December and January are combined) and owned by Royal Media. Air Cargo World is located at 1080 Holcomb Bridge Rd., Suite 255, Roswell, GA
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CROSS POLLINATION ASIAN DEMAND FOR LATIN AMERICAN GOODS STRENGTHENS TRANS-PACIFIC LANES - Air Cargo World
Editor’s Note

                                                           Air cargo’s butterfly effect
                     THE SOURCE FOR AIRFREIGHT LOGISTICS      Is it really true what they say about the flap of a but-
                  SENIOR EDITOR
                     David Harris                          terfly’s wings on one side of the planet causing a hurricane
               dharris@royalmedia.com                      on the other? Sounds remotely possible in theory, but cer-
                     EDITOR                                tainly not very likely, right?
                   Randy Woods
     rwoods@aircargoworld.com • (206)-801-8478                The theory in question is actually “chaos theory,” which
                 ASSOCIATE EDITOR                          is a branch of mathematics focusing on the behavior of
                      Linda Ball                           systems that are highly sensitive to initial conditions.
       lball@aircargoworld.com • (206)-237-0799
                                                           Minute differences at the start of a complex system, the
            SPECIAL CORRESPONDENT
                 Martin Roebuck                            theory goes, can yield widely diverging final outcomes. In
             CONTRIBUTING EDITORS
                                                           other words, what may seem insignificant at the start may      Randy Woods
              Roger Turney, Ian Putzger                    end up having profound effects down the road.
                     COLUMNISTS                               Consider, for instance, trade between Latin America and Asia, our cover story
                      Doug Brittin
                     Brandon Fried                         this month (page 24). If you’re a shipper of perishable produce like asparagus, one
                       Ned Laird                           quick glance at the vast ocean between you and the equally vast Chinese market
                                                           gives the first impression that airfreight between these distant markets would be pro-
                     PUBLISHER
                     JJ Hornblass
                                                           hibitively expensive.
              hornblass@royalmedia.com
                                                              But when you look at the growth of air hubs such as Viracopos in São Paulo, El Do-
                  VP OPERATIONS                            rado in Bogotá, and Miami in the United States, you can see how it’s not too difficult
                   Molly Stewart
                                                           to send feeder flights to the U.S. or Europe, consolidate shipments and tie into the ro-
               EDITORIAL DIRECTOR
                    Phil Ryan                              bust northern trans-Pacific trade corridors. Then, when you factor in the growing ap-
                CREATIVE DIRECTOR                          petite in Asian markets for exotic perishable goods from South America, the distance
                   Alex Kwanten                            traveled becomes less of an issue. Eventually those insect wings don’t seem so tiny.
              akwanten@royalmedia.com
               ASSOCIATE DESIGNER                             We also address the new Canada Post/Purolator contract won last year by Cargojet
                  Adnan Jusupovic                          and starting officially this month. Looking back at the fleet situation at the start of
                                                           2014 for general cargo carrier Cargojet and the previous contract-holder, Kelowna
                    CIRCULATION                            Flightcraft, a casual observer may have predicted disaster. How could Cargojet pos-
             circulation@royalmedia.com
                                                           sibly double its capacity in one year? How could Kelowna possibly survive as a carrier
      AIR CARGO WORLD HEADQUARTERS
      1080 Holcomb Bridge Rd., Roswell Summit
                                                           after losing its main express customer? As you’ll see in our feature on page 30, the
      Building 200, Suite 255, Roswell, GA 30076           outcomes for both carriers – and for the Canadian forwarding community – may seem
         (770) 642-9170 • Fax: (770) 642-9982              a lot brighter given the preparations made over the previous 13 months.
                 WORLDWIDE SALES
           U.S. Sales & Emerging Markets                      While it might be easy, even prudent, to make snap judgments about small-but-
                     Sales Director                        growing niche markets or risky business plan overhauls based on broad, historic
                       Tim Lord
       tlord@aircargoworld.com • +1 678 775-3565           trends, it’s also important to keep track of the smaller details – the countless little
      Europe, United Kingdom, Middle East                  butterfly wings making subtle changes in the market that might lead to the next para-
                      David Collison                       digm shift in the airfreight business.
     dci.collison@btinternet.com • +44 192-381-7731
         Hong Kong, Malaysia, Singapore                       Finally, we also want to congratulate the winners of Air Cargo World’s 10th Annual
                      Joseph Yap                           Air Cargo Excellence Awards, many of whom are profiled in this issue (page 36). The
       jospeh@asianimedia.com • +65 6-337-6996
                                                           airports and carriers who made the cut, from the Certificate of Excellence recipients
                       India                               to the Gold, Platinum and Diamond Award winners, all deserve a round of applause
             Faredoon Kuka RMA Media
        kuka@rmamedia.com • +91 22 6570 3081               for going above and beyond in providing excellent cargo service to their customers.
                        Japan                                 It was a pleasure traveling to Shanghai, China, in March to meet the attendees at
                   Mr. Mikio Tsuchiya
    mikio.tsuchiya@worldmedia.jp • +81 45-891-1852         our ACE Awards event, held in conjunction with IATA’s World Cargo Symposium.
                         Korea                             Many thanks to IATA for yet again being such a gracious host. I look forward to
                   Mr. Jung-Won Suh                        attending many more symposiums in the future. And to watching those butterfly
        sinsegi@igroupnet.co.kr • +82 2785-8222
                                                           wings flutter.
                       Taiwan
                    Ms. Paula Liu
       paulaliu99@gmail.com • +886 2-2523-8268
                    Thailand                               Randy Woods,
              Ms. Anchana Nararidh                         Editor, Air Cargo World
     anchana@worldmedia.co.th • +66 26-412-6938
                                                           rwoods@aircargoworld.com
                     Marketplace
                    Alyssa Stebbins
      astebbins@royalmedia.com • +1 212 991-6735

4   APRIL 2015 ACW
CROSS POLLINATION ASIAN DEMAND FOR LATIN AMERICAN GOODS STRENGTHENS TRANS-PACIFIC LANES - Air Cargo World
CROSS POLLINATION ASIAN DEMAND FOR LATIN AMERICAN GOODS STRENGTHENS TRANS-PACIFIC LANES - Air Cargo World
UpFront
     Please, please, please join in the debate. The

                                                                                                                                     Photo: ACTP
     effect of e-commerce will affect your operation.                                         Winged migration
                                                                                              Two small blue parrots – Spix’s
                            —Stan Wraight, executive director and co-founder of Strategic
                              Aviation Solutions, imploring air cargo professionals at Air    macaws, to be exact – named Carla
                              Cargo 2015 in New Orleans to modernize their equipment          and Tiago were flown from Berlin
                              and train their staff to handle e-freight.                      to São Paulo on an Iberia flight for

    Ode to Joe                                                                                their release into the wild. Born in
                                                                                              captivity, they were flown with their
    In early March, Cargolux took delivery of a new 747-8F, and as it’s the carrier’s         human keepers, who handed them
    custom to name its freighters, this one was named Joe Sutter, after the “Father of        over to Brazilian authorities. Carla
    the Boeing 747.” Joe Sutter was the lead                                                  and Tiago are part of a breeding
    engineer and project manager for the                                                      project by the German Association
    development of the original jumbo jet                                                     for the Conservation of Threatened
    in the late 1960s, when engineering was                                                   Parrots (ACTP), and will be re-
    done with slide rules and drafting pens.                                                  leased into their native territory in
    Joe’s still going strong at well over 90                                                  2021. Only 93 specimens of the bird
    years old, and when the first 747-8 flew                                                  exist today, and all are in captivity.
    in 2010, he was there.                                                                    Precious cargo, indeed.

    Tenth anniversary gift: Pharma                                 No shortage of lingerie Ready for launch
                                                                   No secret here – Victoria’s
                                                                                                    Satellites may be built for
                                                                   Secret loves airfreight. The
                                                                                                    orbital speeds, but they still
                                                                   lingerie retailer avoided any
                                                                                                    have to get to the launch
                                                                   shortages of shorties going
                                                                   to its stores by eluding the     pad at a slightly slower pace.
                                                                   West Coast port labor dis-       That’s where Volga-Dnepr
                                                                   pute. Sharen Jester Turney,      Airlines stepped in to deliver
                                                                   president and CEO, said the      two Russian telecommuni-
                                                                   decision to move Vicki’s goods   cations satellites – Express
                                                                   by air helps the chain move      AM7 and Express AM8 –
    What better way is there to celebrate a 10th anniver-          quickly to adjust to customer    from Toulouse, France, to
    sary than a 747 full of drugs? In 2005, Cargolux, in co-       tastes. “We’re so passionate     Kransnoyarsk, Russia, to the
    operation with forwarder DB Schenker, started weekly           to air everything,” she said.    Baikonur Cosmodrome in
    freighter service from Luxembourg to Indianapolis,             “There’s not going to be a       Kazakhstan. The AM7 was
    U.S. A year later, the frequency bumped up to twice a          reduction in airfreight. It      scheduled for a March 19
    week. Last month, Cargolux, in its 10th year operating         more than pays for itself.”      launch, with AM8 following on
    the Indy route, delivered its first full charter flight car-                                    April 6. To keep the delicate
    rying critical and valuable pharmaceuticals. Cargolux,                                          equipment safe, Volga-Dnepr’s
    which now serves 15 destinations with healthcare                                                experts ensured the An-124-
    products for DB Schenker, ensured the chartered phar-                                           100 cargo hold was main-
    ma was kept at an ambient temperature of 68 degrees                                             tained at very specific pres-
    Fahrenheit by using a thermal Tyvek cover. It’s always                                          sure and temperature. Volga-
    nice to have fancy wrapping on your anniversary.                                                Dnepr delivers one in three of
                                                                                                    all satellites in the world.

    Fast & Luxurious                                                                                An AN-124 arriving at Baikonur
                                                                                                    with Express AM7 in the hold.
    Etihad Airways and Universal Pictures unveiled the
    luxury “Fast & Furious” 777 airliner at LAX. Actor/
    producer Vin Diesel was on hand as Etihad Airways
    Flight 171 arrived from Abu Dhabi to kick off the
    global junket and world premiere of his latest film,
    “Furious 7.” The aircraft will fly directly between
    Abu Dhabi and L.A., a route Etihad opened last June.
6   APRIL 2015 ACW
CROSS POLLINATION ASIAN DEMAND FOR LATIN AMERICAN GOODS STRENGTHENS TRANS-PACIFIC LANES - Air Cargo World
CROSS POLLINATION ASIAN DEMAND FOR LATIN AMERICAN GOODS STRENGTHENS TRANS-PACIFIC LANES - Air Cargo World
CargoChat
                           Jan Krems on the turnaround at United Cargo
                         Before launching his successful career in aviation, Jan Krems earned a bachelor’s degree in
                         commercial economics from Utrecht University in the Netherlands and a post-graduate de-
                         gree in marketing. He then spent 27 years at Air France-KLM, where he was instrumental in
                         merging Martinair’s operations into the AF-KLM cargo business. Last year, Krems crossed the
                         Atlantic to become president of United Cargo. In this role, he is responsible for all aspects of
                         United Cargo’s operations, customer service, sales and marketing activity, revenue manage-
                         ment, product quality and technology solutions. Within weeks of his arrival, in June 2014, the
fortunes of the then-struggling cargo operation began to improve, along with the rest of the industry. We spoke with
Krems to get some insight on the secrets to United Cargo’s success and see how he’s handling the transition to another
carrier after his long tenure at AF-KLM.
United Cargo has enjoyed strong RTK growth in recent                Was it difficult transitioning from the freighter-
months. To what do you attribute this turnaround?                   focused Air France-KLM operation to the belly-only
I believe the turnaround is the result of a three-step process      approach at United?
that has involved our whole team and is still ongoing. First,       Many of the lessons learned from bringing the KLM and Air
we shifted our focus from internal to external, then we lis-        France – and then Martinair – cargo operations, technolo-
tened to our customers to learn specifically what they want-        gies and cultures together have been very valuable at Unit-
ed from us, then we focused 100 percent of our energies on          ed. With a freighter or a passenger airline, the fundamental
fulfilling our customers’ needs. The reversal started in the        mission is the same: to maximize the value of the carrier’s
second half of 2014, as we began to fully recover from two          cargo capacity. The best way to do that is to provide the
major challenges: implementing a completely new technol-            products and services customers need most, and then de-
ogy system and transitioning many of our warehouse service          liver consistently reliable service they can trust.
partners. Customers told us expressly that we needed to             How has the drop in oil prices affected your operation?
get back to basics and execute our operations at the highest
level possible, so we concentrated our efforts, and our ser-        Lower oil prices have definitely been an advantage for the
vice levels made a steady recovery. The attitude and quality        airline industry, though the impact of hedges has reduced
of our team are also key factors. We have a number of new           the level of benefit. We continue to work closely with our
people with fresh ideas, and the entire staff is re-energized       customers on the issue of fuel surcharges, and we will do
by our recent successes. Everyone is working together to-           what is best for our customers and for United. One thing I’ve
ward a single goal – improving our service and our business         learned in my years in the industry is there are few things
to earn and retain customer preference.                             less predictable than the movement of fuel prices. You may
                                                                    plan for prices to move a certain way, but you should be
How has the planned joint venture with                              ready for the opposite – or nothing at all – to happen.
ANA progressed?
                                                                    What are the biggest challenges United Cargo
Because the strengths of the two carriers mesh and support          faces today?
each other so well, we believe our proposed trans-Pacific
cargo joint venture with ANA would generate significant             I think our primary challenge is the same as nearly every
service benefits for the customers of both carriers. So ANA         business: how to remain consistently successful through all
and United Cargo are continuing our very productive series          the turmoil – good and bad economic conditions, incidents
of meetings, with the shared objective of realizing the cus-        and factors that impact the global business climate, etc. Our
tomer and carrier benefits as soon as possible.                     response to this challenge is to gain customer preference
                                                                    by being highly reliable and easy to do business with, and
                                                                    then grow our added-value products and business. This is
                                                                    the best way to reduce the impact of any future negative
                                                                    economic cycles.
                                                                    What’s your economic outlook for the cargo industry
                                                                    in 2015 and beyond?
                                                                    At United Cargo, we believe the long-term outlook for air
                                                                    cargo is positive – better than it has been in recent years.
                                                                    We realize the global recovery is not benefitting all regions
                                                                    equally, and we know a few positive quarters won’t fix the
                                                                    industry’s chronic overcapacity. But along with the favorable
                                                                    economics, we sense there is a willingness in our industry
                                                                    to confront a number of issues we must address to ensure
Krems came to United from Air France-KLM, which used to carry       our sustainability – and that we’re gaining traction toward
much of its air cargo on freighters. Now at United Cargo, he must   solutions. 					ACW
learn to work with the ample belly capacity of United’s fleet of
widebodies, such as this 777.

8   APRIL 2015 ACW
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Around the world
                      ASIA

                                                                                                                                                           Photo: Toll Group
Japanese players buy international logistics heft
By Ian Putzger

H
     ow much global logistics clout can       U.S.-based customers. According to one                               global logistics player and has selected
     one purchase in a single day? On         Japanese logistics executive, Kintetsu                               Toll as the key growth platform.”
     Feb. 17, two Japanese firms may          has a stronger need for growth outside                                  Andrew Jillings, CEO of Hong Kong-
     have given us a rough idea.              its home market than its larger rival,                               based Tiger Logistics, which focuses on
   Within hours of each other, Kintetsu       Nippon Express, which has closer ties                                international e-commerce, commented
World Express announced an agreement          with many of Japan’s leading manufac-                                that the acquisition of Toll takes the
to acquire APL Logistics for US$1.2           turers and formed joint ventures with                                postal agency “into the global freight
billion, and Japan Post unveiled a deal       them in recent years, essentially taking                             market and probably gives them some
to fork out almost $5.1 billion for Toll      over their in-house logistics subsidiaries.                          synergies with Toll’s Australian express
Group. Both purchase prices reflect              Toru Takahashi, president and                                     business and their postal parcel business.”
premiums of around 50 percent on the          CEO of Japan Post, described the Toll                                   Fukuyama of Logi-Rex, on the other
share value of the acquired companies         takeover as the start of a new chapter                               hand, questioned the synergies between
at the time the deals were announced.         of “looking outward and becoming a                                   the two. He noted that the announcements
   Faced with tepid prospects at home,        leading global player” for his outfit.                               from both offer no clear indications of
Japanese logistics firms are reaching         “We believe the combination of Japan                                 future directions or shared goals.
deep into their coffers to build up a         Post and Toll will be a transformational                                Toll grew aggressively in Asia a few
stronger international footprint. The         transaction for both our companies,” he                              years back, but has slowed down its
question is whether these two pairings        declared in a statement.                                             expansion in the wake of the global
will be the right fit at the right time.         According to Japan Post, Toll will                                downturn. Its results for the first half
   “In general, logistics demand in Ja-       generate about 24 percent of the com-                                of fiscal 2015, which were released
pan is not increasing. If anything, it is     bined revenues, not counting Japan                                   in mid-February, show a 2.6 percent
decreasing,” said Tomoyasu Fukuyama,          Post’s banking and insurance business-                               decline in revenues and a 22.3 percent
                                              es, which exceed the mail and logistics                              drop in net profit. Management attrib-
president of Tokyo-based logistics firm
                                              arm’s revenues. Postal operations will                               uted this largely to challenging condi-
Logi-Rex. The exodus of manufacturing
                                              account for 49 percent.                                              tions in Australia, a reflection of the
to other parts of Asia has largely run its
                                                                                                                   relative magnitude of its home market
course, but an aging and shrinking pop-          Toll’s board of directors, which ad-
                                                                                                                   in its overall business.
ulation in a lackluster economic climate      vised shareholders to give their bless-
augurs meager domestic prospects for          ing to the proposed takeover in a vote                                  Besides questions over Toll’s interna-
logistics firms, other than in niche mar-     due in May, noted in its comments that,                              tional position, observers wonder about
kets, he adds.                                “Japan Post is aiming to be a leading                                the future of the Japan Post-Toll axis.
                                                                                                                   The future parent has signaled that it
   Japan Post has not been impervious                                                                              intends to run Toll at arm’s length, un-
to these conditions, not to mention the                                                                            der its current name and management.
                                                                                        Photo: ©niconico0/flickr

decline in traditional letter mail. In the                                                                         In a similar vein, Satoshi Ishizaki, group
first half of fiscal year 2015 – which runs                                                                        president and CEO of Kintetsu, said,
from April 1, 2014, to March 31, 2015 –                                                                            “We intend to retain the headquarters
its revenues declined. 2.6 percent.                                                                                of APL Logistics in Singapore and to
   Kintetsu – which saw net earnings                                                                               run it as a separate unit.”
drop 14.2 percent in the period from                                                                                  Fukuyama noted that this stance
                                               Japan Post vans sit idle. Japan’s declining
April 1 to Dec. 31, 2014 – stands to          population, the country’s troubled economy                           may be due, in part, to the structure
boost its international position sig-              and the decline in letter mail have all                         of many large Japanese companies. With
nificantly with the acquisition of APL                 pushed Japan Post to seek growth                            relatively small international departments,
Logistics, which has a strong roster of                     opportunities outside Japan.                                                  Continued on page 12

10   APRIL 2015 ACW
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•   Unique transit solutions thanks to shared warehouses and resources.
•   E-Freight implemented for optimal efficiency.
The cargo people.
AsiaNews
Continued from page 10
they lack the manpower and where-
withal to take over and manage over-
seas acquisitions, and are therefore in-
                                                 Indian airfreight expected to soar through 2018
                                                   The Indian airfreight market is often      FDI in existing airports and under au-
clined to leave them running as before.          described as an industry with great          tomatic routes, as well as 100 percent
  Japan Post had several international           potential but little follow-through on       tax exemption for airport projects for
forays via cooperation deals with large          planned projects. This may change            the next ten years.”
partners, such as TNT Express and La             over the next three years, according           India’s merchandise export and import
Poste, but none of these produced                to a recent report by market research        activity grew by an annual rate of 9.5
convincing results, he remarked.                 analysts at Frost & Sullivan.                percent, on average, from 2009 to 2013,
                                                    At its present compounded annual          which helped drive the nationwide
  The postal agency stands on the                                                             demand for air cargo to 2.26 million
                                                 rate of growth – 5.5 percent – cargo
brink of a large IPO due this summer.                                                         tonnes in FY 2014, the study found.
                                                 demand in India is expected to boost
Plans for its privatization, which were
                                                 the country’s airfreight services ca-           While growth has been strong, it has
released in December 2014, call for the          pacity to 2.8 million tonnes by 2018,
opening of the holding company and                                                            been hampered by the country’s
                                                 the report found. Most of this growth,       perennial lack of dedicated airfreight
two of its four subsidiaries (tasked with        however, will benefit foreign-owned,         warehousing, Frost & Sullivan said. As
banking and insurance) to investors,             rather than domestic, carriers. The          a result, most warehousing facilities
with the holding firm subsequently di-           aggregate demand for air cargo, the          that exist cater to international, rather
vesting itself of banking and insurance          analysts concluded, comes from a             than domestic, cargo. Restrictions
to concentrate on mail and logistics.            renewed emphasis on international            imposed on providing licenses to
Privatization of Japan Post has been on          trade over the last several years and        operate bonded warehouses have
the agenda several times before – the            a relaxation of regulations on the           caused severe capacity constraints.
most recent push in 2007 was derailed            amount of foreign direct investment
by a change in government.                       (FDI) allowed in India’s aviation sector.      “Evidently, opportunities for market
                                                                                              participants lie in common-user cargo
   One observer in Japan links the bid             “The Indian government’s FDI poli-         terminal development and manage-
for Toll with the IPO, suggesting the            cies have been particularly favorable        ment at airports, domestic air cargo
planned $5.1 billion acquisition could           towards private participants enter-          carrier services, commercial and
be largely a gesture to demonstrate              ing the market,” said Srinath Manda,         passenger cargo handling at airports,
readiness for a future in the open mar-          program manager, transportation and          and perishable cargo storage facilities
ket. But, so far at least, there seems to        logistics practice for Frost & Sullivan.     development and operation,” Manda
be no clear focus on where this foray            “Major policies fueling market growth
                                                                                              added. 		              –Randy Woods
                                                 include the allowance for 100 percent
is headed.

Shippers demand more data
     hippers gave the airfreight in-            what shippers are asking for. We need         1 to 10, as per IATA’s recent survey of
     dustry an earful regarding its             to support more IT people, instead of         shippers.
     slow progress on digitizing its            investing in another salesperson.”               Mellin also called for the creation
     processes, poor customer service              Robert Mellin, head of distribution        of one common airfreight data cloud,
and its reluctance to provide adequate          logistics at electronics company Ericsson,    within the next 12 to 18 months, for
data about shipments at IATA’s four-day         was particularly vocal about the need for     all parties to access – and leverage. “If
World Cargo Symposium in Shanghai,              more data within the airfreight process.      we get the solution in place … you will
China, last month.                              Mellin described how more information         take out cost, and I, as a shipper, am
  Joost Van Doesburg, of the European           and data should be passed on to ship-         interested in investing in this,” he said.
Shipper’s Council, said the industry            pers. This data should not just be about      “It would save billions of trees, give us
should try harder to satisfy its younger        pickup/delivery times, but also, for ex-      faster speed, better execution and
customers and embrace digital technology.       ample, data “on when things go wrong.”        better lead times.”
  “I represent your customer and, I             Presumably, this would include more              Ericsson, which has annual sales of
must say, your customer is not really           substantive geo-tracking data.                about US$35 billion, spent around $264
happy with your industry,” he said. “We            Airfreight “is so old-fashioned,”          million to ship approximately 80,000
need to invest in people who can create         Mellin said, adding that “everyone            tonnes of airfreight to more than 160
                                                knows what the problem is.”                   destinations last year, but only for

     We need to support more IT                    The “problem” is not solved just
                                                with electronic air waybills (e-AWB),
                                                                                              products for which express delivery
                                                                                              was absolutely essential. In fact, Mellin

     people, instead of investing in            he added. Rather, the entire airfreight
                                                system needs to be wrapped in greater
                                                                                              added, the 2014 airfreight figures for
                                                                                              Ericsson were reduced “quite drasti-

     another salesperson.                       data and information transmission.
                                                If it is, the satisfaction levels with air-
                                                                                              cally,” compared to other years, and
                                                                                              will continue to drop rapidly unless
                                                freight among shippers will climb above       customer service improves.
     —Joost Van Doesburg, Air freight policy
                                                the current level of 7.08 on a scale of               – JJ Hornblass & Randy Woods
      manager, European Shipper’s Council
12   APRIL 2015 ACW
AsiaNews
                                                                         Global For-      doubt faster, but … customers still
                                                                         warding’s        need an option in between.”
                                                                         Shanghai            Lothar Moehle, director of air security
                                                                         and East         standardization for Schenker AG’s glob-
                                                                         China re-        al airfreight division, said the forward-
                                                                         gion, duly       ing company naturally has embraced
                                                                         presented        rail, considering how Schenker is a sub-
                                                                         about DHL’s      sidiary of German rail giant Deutsche
                                                                         rail services:
Silk Road revisited: blending rail and air in Asia                       RailLine,
                                                                         for full-
                                                                                          Bahn. Rather than being a “Trojan
                                                                                          Horse,” the rail mode is not likely to un-
                                                                                          dermine the airfreight business, he said.
   The ancient Silk Road, popularized        container-load (FCL) shipments, and
                                             RailConnect, for less-than-container            “Customers of ours were caught in
in the West by Marco Polo in the 13th                                                     a double-whammy,” Moehle said. As
Century, has largely been overtaken by       load (LCL) shipments.
                                                                                          many moved freight on the ocean,
modern air and ocean cargo networks.            The service runs from coastal China       they were hit with the “slow-steaming”
   But during a session at IATA’s World      through the former Soviet republics          practices of some shipping lines to
Cargo Symposium last month on supply         to Europe, with one option using part        save on fuel, “so they were stuck with
chain management, the old land route         of Russia’s famed Siberian railway.          even longer wait times.”
from Asia to Europe was discussed            From there, cargo can be unloaded
                                             at air hubs and shipped by air to               DB Schenker’s rail service, he said,
as an economically viable option for                                                      uses standard 20- or 40-foot intermo-
today’s shippers. The main question          various markets in North and South
                                             America and Africa. Most of the cargo        dal containers to move freight from
was: Is this a threat to airfreight, or is                                                China to Duisberg, Germany, where
it multimodal opportunity?                   shipped so far has been high-tech
                                             electronics.                                 the containers are taken by bonded
   Session moderator Joost Van                                                            truck to air hubs such as Frankfurt,
Doesburg, with the European Ship-               Door-to-door service using this rail/     Luxembourg, Liége or Amsterdam.
per’s Council, emphasized the latter,        air option is 18 days, Jin said, com-        Total door-to-door time cited by
saying his clients still needed an           pared with about 41 days to make             Moehle was 23 to 25 days, compared
option that is “cheaper than air, but        a similar ocean journey. “Not every          to about 50 to 55 days by ocean vessel
faster than the ocean.” Nover Jin,           shipment is that urgent,” he told the        or four to five days by aircraft alone.
product head, airfreight, for DHL            packed session room. “Airfreight is no       			                       –Randy Woods

                                                                                                                      ACW APRIL 2015   13
Around the world
                           EUROPE

                                                                                                                                 Photo: ©Maarten Visser
AF-KLM Cargo: From here to obscurity
By Roger Turney

W
        here did it all go wrong for Air   dam, requiring the French members          the outgoing freighter capacity. Ironi-
        France-KLM Cargo?                  to commute between the two hubs.           cally much of that belly hold capacity
           The short answer probably       Boudier was soon to be effectively         is being provided by the passenger
        is, “from Day One.” That’s when    sidelined by this strategy. It was per-    variant of the 777. But even so, that
the cargo divisions of two of Europe’s     haps from here that the plight of what     does not really chime with any
strongest airlines became allied as part   has become of AF-KLM Cargo today           ambition to be a major force in cargo.
of a grand merger between Air France       began to evolve.                              When the freighter realignment is
and KLM. That was more than a decade          According to Cargo Facts, the sister    completed by the end of this year,
ago, in 2004, in a move which brought      publication of Air Cargo World, prior      main-deck capacity will be responsible
together what was then recognized as a     to the merger, Air France operated         for just 15 percent of the group’s cargo
couple of air cargo’s most professional    an oceanic-sized fleet of twelve 747-      production, as compared previously
outfits, with a perhaps slight deference   400Fs, while KLM Cargo was able to         with 30 percent. It was perhaps not
to Lufthansa Cargo, to create Europe‘s     field a fleet of three 747-400Fs. That     such a difficult call to make after it was
biggest cargo carrier.                     combined total was further boosted         revealed that freighter operations have
   But the seeds of uncertainty were all   when fellow Dutch carrier Martinair        been responsible for half of the con-
too quickly sown. As the lead partner,     was brought into the Air France-KLM        tinuing losses of the cargo business.
Air France demanded overall control        fold in 2008 and, with it, seven MD-          And no one can argue with the
of the passenger business of the new       11Fs and four 747-400Fs. AF-KLM-           catastrophic scale of the cargo results
joint venture. For KLM, well it could,     Martinair Cargo, it seemed, would be       that have haunted AF-KLM over the
by way of a concession, take care of       invincible. But that is not how it has     last three years and, with it, serious
the cargo side. Immediately, the two       turned out.                                questions about its entire viability.
business strands were split between          The glut of freighter capacity proved       Posted results for 2014 show
Paris and Amsterdam.                       to be a burden rather than a bonus.        continuing high operating losses of
  This arrangement came despite the        Appalling operating returns have           US$240 million, exceeding losses of
fact that Air France Cargo probably        forced a rapid divestment. The AF          $230 million for 2013. The group says,
had the stronger business model. It        Cargo 747 freighters have gone and,
certainly had the stronger candidate       even more telling perhaps, the carrier
to head up the new organization in the     will only retain two 777Fs, for which it
form of Marc Boudier, an industry vet-     was the launch customer.
eran known for a close accord with his        KLM Cargo has fared little better.
workers, and thereby the unions.           Its cargo fleet, rolled-up with that of
                                                                                                                                  Photo: ©Seno Hrebek/iStock

   KLM Cargo, on the other hand, had       Martinair, has also been depleted. All
a relative newcomer at the helm, with      that will soon be left will be three
Michael Wisbrun walking into the job       747-400ERFs. This could spell the end
just four years before the merger. He      for Martinair, which last month an-
already had the unenviable task of tak-    nounced the layoffs of more than 100
ing over from the legendary Jacques        pilots and 220 ground staff – a move
Ancher, who had guided KLM Cargo           that is being protested by Martinair’s          A decade after its merger with KLM, Air
for so many years.                         works council in Amsterdam.                 France Cargo has been forced to shed most
                                             It is argued that new passenger air-     of its freighter fleet, caused by severe main-
 The new cargo set-up created a core                                                  deck overcapacity on the market. Operating
management team, based in Amster-          craft equipment will replace much of
                                                                                              losses for 2014 were US$ 240 million.
14   APRIL 2015 ACW
EuropeNews
if the effects of a strike by Air France
pilots last year are excluded, the
cargo losses would be reduced to            Swissport fortunes boom after Servisair deal
                                            S
$215 million. Even so, there has been            wissport International Ltd., the          without Servisair, Swissport’s opera-
little year-on-year improvement from             ground and cargo handling service,        tions alone represented a 6 percent
the $253 million in losses incurred              saw its overall revenue increase          increase in revenue, compared to the
in 2012.                                    by 38 percent in 2014, partially due           previous year.
  And it does not look like it is going     to its late 2013 acquisition of Servisair         Swissport’s cargo business deliv-
to get better any time soon. The most       and the ground handling business that          ered a positive year, accounting for an
optimistic forecast the airline can         came with it.                                  increase of 5.4 percent in airfreight
come up with is that its cargo business       Total revenue and operating income           tonnage, year-over-year. Aircraft
will break even by 2017.                    for the year was US$2.94 billion. Even         turnaround frequencies increased
  The majority of the losses incurred                                                                               Continued on page 16
so far are laid at the door of KLM Car-
go, it being argued that AF Cargo still
runs a tighter ship. That leads to the
notion it is poor management on the
part of the KLMers that has marred
the entire business.
  Certainly, there seems to be a lack
of depth in the ranks of KLM Cargo.
Jacques Ancher was, by no means,
a one-man show and included in his
team such latter-day industry luminar-
ies as Oliver Evans and Stan Wraight.
   Yes, it is still a tough market out
there, with increasing competition in
particular from the Gulf carriers. But it
                                                               For the oil and gas industry.
is a situation faced by all the European                       Logistics solutions tailored to your needs.
carriers. Put into perspective, stand-
alone Lufthansa Cargo achieved cargo                           • The fastest connections to over 300 destinations
revenues of $3.75 billion in 2013, a 3.9                       • No weight restrictions
percent fall, while the combined force                         • Individual charter solutions
of the Franco-Dutch duo could barely                           • Highest safety and environmental standards
match those returns, with joint rev-                           • Realtime tracking possible
enues of $3.74 billion, reflecting a 5.1                       • Oil and gas – 24/7 emergency hotline: +49 69 696-50099
percent decline.
   Could it get any worse? Well yes, it                        Find out more at: lufthansa-cargo.com/oilandgas
could. AF-KLM Cargo effectively became
a rudderless ship at the beginning of
the year when Erik Varwijk, it’s execu-
tive vice president, announced that he
would not be seeking renewal of his
contract in July. Instead, he packed his
bags and departed on March 1.
  Time for a decisive response? Not
necessarily. The response, as such,
has been to shoe-horn Bram Graber,
current CEO of Transavia, the group’s
Dutch budget carrier, into the job.
Graber, a former KLM Cargo executive,
will retain his role at Transavia and
hold the reins at AF-KLM Cargo on a
temporary basis for a few months until
… well, until another decision is made.
   AF-KLM Cargo, it would seem,
still has plenty of challenges ahead.
Jacques Ancher, where are you now?
   			                             ACW

                                                                                                                        ACW APRIL 2015   15
EuropeNews
Continued from page 15
5.8 percent, year-over-year. Including
Servisair, the number of turnarounds
in 2014 totaled 2.1 million flights, and
                                             CHEP’s high-tech ULD wins IATA Innovation Award
tonnage moved came to 4 million.                At the end of four days of meetings,   help determine liability in cases of
                                             workshops, networking and discus-         damaged cargo.
   In addition to the Servisair acquisi-     sion about the dire need for innova-
tion, growth came from new contract                                                      CHEP’s IT director Floris Kleijn ac-
                                             tion in the airfreight industry, IATA     cepted the award on behalf to the CAN-
wins, including the multi-year, pan-Eu-      closed its World Cargo Symposium
ropean ground handling contract with                                                   Track team, saying the ULD system is
                                             last month by announcing the winner       being tested on trial basis with Air Can-
Germanwings; a multi-year agreement          of its inaugural Innovation Award:
with Saudia                                                                            ada and Hawaiian Airlines. If expanded
                                             CHEP Aerospace Solutions.                 throughout the industry, he added,
Airlines
Cargo for                                       The award honors individuals and       CANTrack has the potential to reduce
Brussels and Amsterdam; global stra-         companies that have created prod-         ULD damage rates and increase avail-
tegic partnerships with Cargolux and         ucts or services aimed at making the      ability of container stock worldwide.
Transaero; and contracts with United         air cargo business more competitive
Airlines at London Heathrow and              compared to other modes of trans-
Washington Dulles International.             portation. The winner receives a
                                             trophy and a US$20,000 prize.
   “2014 was an eventful year for
Swissport, mainly characterized by the         CHEP’s winning entry was a high-
complex but successful integration           tech ULD called CANTrack, which is
of Servisair, the biggest acquisition        powered by solar-charged batteries
in Swissport’s history,” said Per H.         and contains a GPS/GSM tracking
Utnegaard, group president and CEO           system that allows operators to
of Swissport International. “For 2015        record its movements in real time.
we have a well-defined strategy and          The units also have a temperature
will put a special focus on ensuring we      sensor that can alert shippers, han-
achieve our high global quality and          dlers and forwarders if the contents
operational standards.”                      are getting too warm or too cool, as
			                        –Linda Ball       well as an impact sensor that can

     To understand how the Maastricht Airport’s cargo product can
     give your supply chain a competitive edge in Europe, please contact
     Mr. Wiel Dohmen, Cargo Development Manager at +31-43-358-9999
     or by email: w.dohmen@maa.nl

16   APRIL 2015 ACW
EuropeNews
                                               Lufthansa Cargo eyes more joint ventures
                                               B
The two other finalists in the Innova-             uilding on the success of the 2014      in 2014, while capacity declined 0.8
tion competition included an intuitive             joint venture with Japan’s ANA,         percent to 12.35 billion RTKs.
decision support tool called CLIVE,                Lufthansa Cargo is in talks with           The ANA partnership, which started
and an online claim management sys-            other parties interested in a similar ar-   in December 2014, enabled Lufthansa
tem called Cargo Claims, by Cargo-             rangement. CEO Peter Gerber spoke at        to send an extra 300 consignments via
Hub. These runners-up – Niall Van de           the company’s annual press confer-                ANA’s aircraft that it would oth-
Wouw, managing director at CLIVE,              ence on March 19, Reuters re-                        erwise not have been able to
and Kiona van de Burg, business                ported, but said he could not                          accommodate because its
                                               give any other details about                            own aircraft were already
development manager at CargoHub
                                               which companies he is in                                 full. The partnership with
– each accepted checks for US$8,000
                                               talks with due to antitrust                              ANA covers routes from
for being finalists.     –Randy Woods
                                               approvals needed for such                                Japan to Europe, and will
                                               a partnership.                                           be expanded to include
                                                 Gerber said the first                                 service from Europe to Ja-
                                               two months of 2015 have                               pan this summer.
                                               been good, and with low fuel                          Lufthansa Cargo has been
                                               prices and a weak euro supporting            plagued with pilot’s strikes since
                                               exports from Germany, he expects it         October 2014, including one as recent
                                               to be a good year. The company’s 2014       as late March 2015. The carrier wants
                                               annual report states Lufthansa Cargo’s      to build a new €700 million cargo
                                               operating profit of €100 million for the    center in Frankfurt and would like to
                                               year was up 26.6 percent compared to        exercise some of its options to order
        Innovation awards finalists, from      2013, with a cargo load factor of 69.9      more 777 freighters from Boeing, but
         left to right: Floris Kleijn, Kiona   percent, up 0.8 percent. Cargo traffic      Gerber said, “given the situation in the
         van de Burg, Niall van de Wouw        for the year was down 1.4 percent           group with the labor strikes, it’s not
                 at the IATA World Cargo       from 8.73 billion revenue tonne kilo-       getting any easier to get approval for
                   Symposium in Shanghai       meters (RTKs) in 2013 to 8.61 billion       investments.” 		             –Linda Ball

                                                                                                                     ACW APRIL 2015   17
Around the worldAFRICA
                                                   &MIDDLE EAST                         A South African Airways Airbus A340 fronts
                                                                                               several heavies at Johannesburg OR
                                                                                                                    Tambo Airport.

                                                                                                                                 Photo: Fedor Selivanov /Shutterstock
South African, German airports sign historic accord
By Randy Woods

S
     ome of the toughest hurdles facing      communications and perishable indus-       grow by an average rate of 4.3 percent
     the growth of the airfreight industry   tries, an active exchange of experi-       for Europe, 5.2 percent for North
     in Africa have been a lack of cooper-   ences and analyses of potential will       America and 6.6 percent for Asia,
     ation between the various countries     develop the capacity and reach of both     through 2033, according to Boeing-
and inadequate infrastructure to handle      airport management companies,” said        released data.
the growing demand. At the third bien-       Markus Kopp, CEO of Mitteldeutsche           With a population of 1.1 billion peo-
nial Air Cargo Africa Conference and         Flughafen AG. The company has simi-        ple, Africa has the world’s fastest grow-
Exhibition, held Feb. 25-27 in Johannes-     lar cooperation agreements in place        ing continental economy, Crabtree
burg, South Africa, both of these topics     with four Asian and two North Ameri-       said, with an expected average annual
were front and center, prompting a his-      can airports, but this is the first with   economic growth rate of 4.6 percent
toric agreement between South African        an African airport.                        per year up to 2033. At that rate, air
and European airports.                          Also during the Air Cargo Africa        cargo traffic on African airlines is pre-
  Airports Company South Africa,             2015, Tom Crabtree, regional direc-        dicted to grow faster than any other
manager of the nine largest airport          tor for market analysis with Boeing        regional block — at 6.1 percent per year
hubs in South Africa, signed an accord       Commercial Airplanes, shared some          until 2033.
with Mitteldeutsche Airport Holding,         encouraging statistics about the vast
                                                                                          Other panelists agreed that Asian
representing Leipzig Halle Airport           potential of greater trade opportuni-
                                                                                        imports to the continent will be the most
(LEJ), that will increase cooperation        ties across Africa. Citing a study from
                                                                                        important driver for growth of African-
and share expertise between LEJ and          the United Nations’ Commission for
                                                                                        Asian trade, and that e-commerce
OR Tambo International Airport (JNB),        Africa, Crabtree said that more than 80
                                                                                        and the rising demand for consumer
as well as expand cargo handling op-         percent of Africa’s exports (about 1.73
                                                                                        goods, particularly in India and China,
erations in the South Africa hub.            million tonnes per year) is destined for
                                                                                        will boost air trade growth in the Asia-
                                             outside markets. Europe has always
   “This strategic partnership will                                                     to-Africa direction. Others remarked
                                             been the largest trade partner, he said,
provide industry-leading guidance                                                       that there is a critical need for “just-
                                             but its lead is rapidly shrinking from a
in developing the company’s cargo                                                       in-time” shipments into Africa of less
                                             high of roughly 70 percent of exports
business model and approach,” said                                                      than five days, as opposed to the cur-
                                             to around 57 percent today. Much of
Tebogo Mekgoe, chief operating officer                                                  rent average of seven to eight days.
                                             the change is coming from inroads be-
of Airports Company South Africa. The                                                      In his keynote address at the start
                                             ing made by Middle Eastern and Asian
agreement follows the recent creation                                                   of the conference, Nico Bezuidenhout,
                                             carriers, whose shares of the export
of a Cargo Management division at                                                       acting CEO of South African Airways,
                                             market have grown by 14.4 percent
JNB, which is the largest air cargo hub                                                 encouraged the removal of barriers to
                                             and 12.9 percent, respectively.
on the African continent.                                                               trade in Africa and called for an “open
                                              “There is massive growth potential
    “Given the centrality of air cargo to    within African air trade,” he added. In    trade” environment that would allow
... the automotive, electronics, tele-       fact, African air trade is expected to     air cargo to be a catalyst for growth
                                                                                        throughout the continent. He said the
                                                                                        industry has only seen the “tip of the

      This strategic partnership will provide industry-leading                          iceberg” of potential African airfreight
                                                                                        opportunities.

      guidance in developing the company’s cargo business                                  According to STAT Times, the organiz-
                                                                                        ers of the event, the conference attracted

      model and approach
                                                                                        a record-high 527 delegates, 80 exhibi-
                                               —Tebogo Mekgoe, COO,                    tors and nearly 3,000 trade visitors came
                                                 Airports Company South Africa          to the three-day event.              ACW

18   APRIL 2015 ACW
Africa & MiddleEastNews
Qatar adds L.A. as 4th U.S. cargo destination
T
    his month, Qatar Airways will go                             The flights will depart Doha on            L.A. is also becoming a major player
    Hollywood. Beginning April 4, the                         Wednesdays and Saturdays from Lux-         in the perishables market. Last year,
    Gulf carrier will start twice-weekly                      embourg, connecting through Mexico.        100,000 tonnes of perishable products
777 freighter service to Los Angeles,                         LAX ranks fifth in the U.S. in terms of    were exported by air from LAX,
providing 100 tonnes of cargo capacity                        air cargo volumes processed. In 2014,      including 40,000 tonnes sent to the
with each flight. The move makes                              the airport handled more than 2 mil-       Middle East and Europe. Qatar Air-
LAX the fourth freighter destination                          lion tonnes of air cargo, valued at more   ways Cargo intends to tap into this
for Qatar in the United States. The                           than US$91.6 billion. Qatar Airways        market with its dedicated QR Fresh
other cities are Houston, Chicago                             carried more than 49,000 tonnes of air-    cool-chain handling and storage
and Atlanta.                                                  freight from the U.S. market in 2014.      facilities.            –Randy Woods

 Cargolux to India via Oman
    In its quest for new routes to India,
 Cargolux Airlines has found a new
 partner in the sultanate of Oman,
 which has been looking to expand its
 cargo capacity. Beginning April 15,
 the all-cargo carrier will begin full
 freighter service from Luxembourg to
 India by way of Muscat, Oman.
    Oman Air and Cargolux also signed
 a letter of intent last month, with a
 formal signing to take place April
 16, when the first Cargolux freighter
 arrives in Muscat International. The
 agreement enables Cargolux to use
 Oman Air’s facilities in Muscat, Sa-
 lalah and Sohar.
   The Times of Oman reported that
 Oman recently launched a pan-Gulf
 Cooperative Council (GCC) and pan-
 European trucking services, as well
 as a joint cargo service with DHL
 operating between Oman and Dubai,
 United Arab Emirates.
                                       Photo: ©Alex Kwanten

    After the program rollout, Car-
 golux plans to increase frequencies
 to Oman to several each week, with
 connections to Chennai, Mumbai and
 Hyderabad in India. Other cities in
 India are under consideration, as well
 as connections to Europe, China, Af-
 rica and the United States. Oman Air
 will provide access to Cargolux to use
 the bellies of its passenger planes,
 which fly to 11 destinations in India
 and three in Pakistan, plus other des-
 tinations in Nepal, Bangladesh and
 Sri Lanka.                –Linda Ball

                                                                                                                                   ACW APRIL 2015   19
Around the world
                AMERICAS

Outlook stormy as U.S. open skies debate rages
By Linda Ball

W
      hat began as a slow-simmering                In February, representatives from            According to a Reuters report, Sul-
      disagreement over the use of              the American carriers met with U.S.           tan bin Saeed al-Mansouri said “You
      government subsidies – one that           government officials to express their         cannot throw accusations without
has lasted for years – has recently             discontent with Emirates, Etihad and          proof. The ‘subsidy’ word is misused in
mushroomed into a thunderhead of                Qatar Airways, complaining that these         many situations. Unless there’s proof
angry rhetoric, threats of lawsuits and         “Big Three” Gulf carriers have received       and you put it there, you should not
proposed legislative action to roll back        US$40 billion in interest-free loans          use the word ‘subsidy.’”
open skies agreements. The major                from their home countries of United              Mansouri said that the increasingly
U.S.-based carriers continue to accuse          Arab Emirates and Qatar since 2004.           heated exchanges between airline ex-
Middle Eastern airlines of exploiting           On March 4, representatives from the          ecutives was not healthy and could af-
the American market with an unfair              Air Line Pilots Association Interna-          fect relations between the various na-
advantage.                                      tional, the Allied Pilots Association and     tions. “We shouldn’t underestimate the
   The debate is centered on six major          the Association of Professional Flight        value of the aviation industry in terms
airlines: the top three legacy carrers in       Attendants, joined the U.S. carriers in       of its contribution to nations – Ger-
the U.S. (American, Delta and United)           Washington, D.C., to campaign against         many, the U.S., Europe,” Mansouri said.
vs. the three rapidly expanding Persian         the Gulf carriers.
                                                                                                The actions of the U.S. airlines also
Gulf-based carriers (Emirates, Qatar               The U.S. carriers proposed action to       raised the ire of FedEx Express and
Airways and Etihad). While most of              alter the government’s current open           Boeing. The Gulf carriers’ orders from
the routes in question involve passen-          skies agreements with the Gulf carriers       Boeing have been robust, mainly be-
ger aircraft, the amount of belly space         to limit their ability to operate in the      cause of the open skies agreements
being used to carry cargo is enough             U.S. market. They claim Qatar Airways         they have negotiated. FedEx pointed
to have a profound impact on how                benefitted from billions of dollars in un-    out to government officials that the air
airfreight is imported and exported             secured loans from the state that do not      cargo industry is an essential compo-
throughout the rest of the world.               have to be repaid; that Eithad received       nent of a rebounding American econ-
                                                $6.3 billion in direct equity, plus $4.6      omy that would be impossible without
  The ‘subsidy’ word is misused                 billion in interest-free loans; and that
                                                Emirates was allowed to remove $2.4
                                                                                              the use of open skies agreements.
                                                                                                 “The connectivity we provide for
  in many situations. Unless
                                                billion in 2014 oil hedging losses from
                                                its books while it received $2.3 billion in   U.S. businesses, both small and large,
                                                subsidies for airport expansion in Dubai.     is critical for their global expansion,”
  there’s proof and you put it                    Emirates, Qatar and Etihad have
                                                                                              said David Bronczek, president and
                                                                                              CEO of FedEx, in a powerful letter

  there, you should not use
                                                repeatedly denied charges that they           sent to the U.S. secretaries of State,
                                                receive illegal subsidies, saying they        Transportation and Commerce.
                                                are run as completely independent
  the word ‘subsidy.’                           businesses, despite the fact that they
                                                are state-owned.
                                                                                                Bronczek pointed out that the U.S.
                                                                                              carriers that are complaining don’t fly
      —Sultan bin Saeed al-Mansouri, Economy
                                                                                              as extensively between foreign points
                                                  The economy minister for the United         as FedEx, so they believe they have
        Minister, United Arab Emirates          Arab Emirates fired back on March 9.

20   APRIL 2015 ACW
AmericasNews
little to risk by limiting foreign carrier      Stan Wraight, executive director and
access to the U.S.
   “Under the [open skies] agreement
                                             co-founder of Strategic Aviation Solu-
                                             tions, said the Middle East carriers              LATAM opens new São
with the U.A.E., we have established
a hub in Dubai, where FedEx flights
                                             aren’t growing because of subsidies,
                                             but because of cargo. No other major
                                             carriers have voiced an opinion on the
                                                                                               Paulo cargo terminal
from the U.S. criss-cross with our                                                                The LATAM Airlines Group has
flights from India and Asia in order         matter as Air Cargo World went to
                                             press, although JetBlue had expressed             opened its largest cargo facility in
to move U.S. products into local mar-                                                          Brazil, at Guarulhos Airport in São
kets,” Bronczek continued. “Presently,       general opposition to any changes in
                                             open skies.                                       Paulo. The US$11.5 million facility,
FedEx alone operates almost two-                                                               intended exclusively for domestic
thirds more flights to the Middle East          Reuters reported that Emirates Pres-           cargo, has a total surface area of
than all the U.S. passenger carriers         ident Tim Clark has hinted at legal ac-           nearly 162,000 square feet.
combined. Modifications to this agree-       tion over potential harm that could be               The largest and most modern
ment might spell the end of these op-        done by the U.S. carriers’ complaints.            cargo terminal that LATAM owns
portunities.”                                Clark said the service provided by his            in Brazil, the facility will have the
   What the carriers really want, Bron-      American rivals is “shoddy,” suggesting           capacity to handle more than 1,000
czek said, is for the U.S. government        that perhaps they should focus instead            tonnes of cargo daily. At 36 feet in
to protect them from competition – to        on improving their own product.                   height, the terminal allows for the
stop the Gulf carriers from adding any          Speaking at an arts conference in              simultaneous handling of cargo
new flights to the U.S. until their al-      Doha, the always outspoken Qatar                  transported by freighters or in bellies.
legations have been considered. “The         Airways Chief Akbar Al-Baker said, “I                The new terminal is fully auto-
U.S. should not capitulate to the inter-     am delighted that Richard Anderson of             mated, with an intelligent identifica-
est of a few carriers who stand ready        Delta is not here. First of all, we don’t         tion system. Cargo and platforms are
to put their narrow, protectionist           fly crap airplanes that are 35 years old.         labeled and tracked using bar codes,
interests ahead of the economic ben-         The Qatar Airways fleet [average age]             allowing for products to be easily
efits that open skies provides to the        is only four years and one month. We              located throughout the supply chain.
people of the United States,” he wrote       have ultra-modern airplanes. We have              A 1,000 square foot cold storage
                                             invested – my country has invested –              area, with 76 rack positions, is designed
in the letter.
                                             huge amounts to make sure we are the              to store perishables including fish
   As reported in our sister publication,                                                      and pharmaceuticals. Perishables –
                                             lowest CO2 contributor in the aviation
Cargo Facts, the U.S.-based carriers,                                                          along with electronic products, auto-
                                             industry.”
while making these accusations, have                                                           mobile parts, and other machinery –
also ignored the question of whether            Others echoed Al-Baker.                        are the most commonly transported
they are just as effectively subsidized         “As one of the newest national air-            products through Guarulhos, mostly
through their access to Chapter 11           lines anywhere in the world, we’ve had            catering to markets in northern and
bankruptcy protection, which each of         to create everything from scratch,”               northeastern Brazil.
them has sought in the past.                 said James Hogan, president and CEO                  Guarulhos Airport’s cargo imports
   At Air Cargo 2015 in New Orleans          of Etihad Airways, addressing the U.S.            and exports grew 3 percent, while
                                             Chamber of Commerce Foundation                    the overall market dropped by the
last month, Stephen Alterman, presi-
                                             in Washington, D.C. “In many cases,               same amount in 2014. Throughout
dent of the Cargo Airline Association,
                                             those [U.S.] established airlines were            the year, the airport oversaw more
said open skies are an absolute neces-                                                         than 255,000 tonnes of international
sity, and that they keep more people         gifted amazing infrastructure – air-
                                             ports, terminals, slots, landing rights           cargo, compared to 248,000 in 2013.
flying where freight needs to go.                                                              The airport handled 508,000 tons in
                                             – over decades. To take them on, we’ve
  Are the Big Three right about the Middle                                                     2014, maintaining a 33 percent
                                             had to work smarter. That’s called
East carriers, though? Perhaps not.                                                            market share.               –Linda Ball
                                             competition.”		                      ACW

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