As 2011 draws to a close, a handful of air cargo leaders have taken the time to reflect on a tumultuous year. From supply chains ravaged by the Japanese tsunami to economic instability permeating the U.S. and the eurozone, the airfreight industry has taken numerous hits throughout 2011. But can the lessons gleaned from these difficult times be used to avoid similar fates in the future?
In this initial installment of a three-part series, Gulf Air Senior Cargo Manager Rory Black; Kuehne + Nagel Air Logistics Board Member Tim Scharwath; DHL Express Americas CEO Stephen Fenwick; and Nippon Cargo Airlines Americas President Shawn McWhorter share their thoughts about the past year and their prospects for 2012.
What was the most significant storyline of 2011?
Rory Black: The elephant in the room this year has been the fragility of the global recovery, the continuing shocks to the financial system, and where this is all heading. Market confidence is vital for the airfreight industry. Without it, consumers who are concerned about their jobs will not spend, and businesses will not invest in new production if they are unsure about consumption. Both of these are the main drivers for our industry.
Tim Scharwath: The faster-developing volatility in the airfreight market was the industry’s biggest story this year.
Stephen Fenwick: Continuing uncertainty in the global economy, and particularly in the eurozone, has probably been the biggest storyline for most businesses. However, we have remained optimistic, albeit cautiously optimistic, about the situation, thanks to our strong positioning in those markets that have still shown momentum over the year — for example, Asia and the parcel business in Germany.
Thanks to the positive outlook from most of our customers on volumes, the structure of our business today, and the absence of any major red flags in our early warning systems, we have been able to add capacity to our network, while we’ve seen others reduce theirs. We are in a position even now, at year-end, where we still don’t know exactly what lies ahead in 2012, and that makes us both excited and wary.
Shawn McWhorter: The single most significant event for NCA in 2011 was the devastating, magnitude-9.0 earthquake and subsequent tsunami in Japan in March. It instantly resulted in the loss of more than 20,000 lives and damaged critical nuclear power plants in the region. Hundreds of thousands of people were displaced, and more than 300,000 buildings were damaged. [Our home base at Tokyo’s Narita International Airport] was at a standstill, and major manufacturing facilities were no longer operational.
Critical inventory that is required for the production of global products, such as high-tech computers and automobiles, was shut down. Sometimes, it’s hard to believe this level of destruction can happen so quickly. But just as soon as it happened, the support of people throughout the world came to the aid of Japan. Nonprofit relief organizations worldwide quickly set up ways to provide help for the region.
Through the use of airfreight, many tonnes of donated relief goods, medical supplies, and food were brought into to the region. And companies like Nippon Yusen Kaisha placed large ships at the nearby shore so that relief helicopters could take off and land for earthquake relief efforts. Helping the people of Japan was truly a global effort.
What lessons have you learned in 2011 that will help you have a successful 2012?
Black: Gulf Air has continued to ensure that it has a diversified business model that can withstand external events. We have spread our business geographically and by product so we are not overexposed in any one market. We will continue to do this in conjunction with delivering excellent customer service, which in a commoditized business really differentiates us from the competition.
2012 is going to be a defining year for the global economy and will set the tone for the next decade of trade. Trade will undoubtedly grow, and Gulf Air will be proactive in making sure we adapt to meet the evolving market needs.
Scharwath: Again, the new, faster-developing volatility in the airfreight market was the biggest lesson learned this year— therefore, carriers ought to put more focus on efficient capacity management than on obtaining market shares.
Fenwick: We have learned that logistics is becoming more important than ever. For instance, the DHL Global Connectedness Index, launched during the APEC Summit in November 2011, showed that the world is not nearly as globalized as many previously thought, and increased connectedness, helped by more international trade, could have a significant impact on global GDP. This, in turn, should support economies around the world in weathering the crisis and stimulating growth. Logistics providers, through their global networks and through the efficiencies they can bring to their customers’ supply chain, can play a major part in this.
McWhorter: This year, we learned that even in difficult economic times, people are willing to do what is necessary to help others. While we are all struggling with the effects of the global recession and working to slowly recover, it’s good to know that there are so many caring and helpful people in the world who will work together to help each other.