Air Cargo World Magazine - Departments

 

Jun

1

The integrators are coming!

Posted under Air Cargo World Magazine, Americas, Departments, World News

Sluggish freight volumes out of Asia and shifting product mixes stifled UPS’ first-quarter growth, despite a 10-percent, year-over-year, surge in diluted earnings. But the integrator’s recent movement on the acquisition front should help boost future revenues.

UPS made a significant investment on March 19, when it bought Dutch shipper TNT Express for $6.77 billion. Its February acquisition of Brussels-based Kiala is also expected to expand the integrator’s service portfolio. In a conference call discussing the company’s first-quarter earnings, UPS CEO Scott Davis commented that Kiala’s “retail delivery network and unique technology will benefit UPS, as we continue to look for ways to serve the growing [business-to-consumer] market, especially outside the U.S.”

For its part, FedEx has been acquiring companies in the first quarter to expand its European reach. One month after the firm agreed to purchase Polish shipping company Opek Sp.z o.o., FedEx announced plans to procure French business-to-business express company Tatex. The exact terms of the deal haven’t been disclosed, but the acquisition will give FedEx Express access to a domestic ground network that handles 19 million shipments a year and generates approximately €150 million in annual revenue.

Frederick W. Smith, CEO of FedEx Corp., said the Tatex acquisition will boost the company’s operations in Europe even more. “FedEx has always recognized the importance of our Europe, Middle East, Indian Subcontinent and Africa — EMEA — region and its many unique marketplaces to global trade, and this acquisition shows we are continuing to systematically and strategically invest in growing our network and value proposition in these important areas of the world,” he said in a statement.

“The Tatex business complements FedEx’s existing operations in the French market, and will enable the company to provide additional local services in one of Europe’s largest geographies, to its customers around the world,” Smith continued.

FedEx is also branching out product-wise, taking the company’s SenseAware monitoring service to the UK, Australia, Singapore and Canada. According to FedEx’s Chris Swearingen, officials hope to offer the service in a significant number of countries by the end of 2012.

“There’s a large demand for the product,” he said, pointing out that it was originally targeted at the life sciences industry, but the scope has broadened to auto parts, perishables, art — pretty much anything.

SenseAware provides customers with real-time information about their shipments, and Swearingen said that some clients are now requiring SenseAware data long before their freight is loaded onto the plane. “It’s really about giving that end-to-end visibility inside the package,”he said.

UPS’ product expansion is occurring on the time-critical side, branching those products out to its Latin American network, a region where it more than doubled its freight capacity in the first quarter. UPS has added Honduras and Nicaragua to its UPS Express Freight network, offering the two Central American nations day-definite transportation services.

Scott Aubuchon, UPS’ director of international airfreight, said Nicaragua, in particular, demanded time-critical cargo service. According to Aubuchon, the nation exports nearly 58 percent of its commodities to the U.S., including seafood, apparel and gold; trade between Nicaragua and the U.S. has increased 21 percent per year over the last two decades.

Trade between Honduras and the U.S. has also surged in recent years. After reinforcing its manufacturing capabilities to serve the North American auto industry, Honduras now ranks as the third largest exporter of automobile wiring harnesses to the U.S. Aubuchon expects imports from Honduras and Nicaragua to the U.S. to continue to grow, thanks to near-sourcing and the continued effects of the 2006 free-trade agreement among the Dominican Republic, Central America and the U.S.

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Jun

1

Mutual recognition key to total supply-chain security

Posted under Air Cargo World Magazine, Departments, Forwarders’ Forum

Since achieving the goal of 100-percent screening of cargo on passenger flights leaving domestic airports, the U.S. government is aggressively pursuing the same objective for airfreight destined for the U.S. from other countries. The vehicle used to accomplish this task is the National Cargo Security Program, an initiative that places a high priority on achieving harmonization agreements on screening procedures.

Many see NCSP as the path to recognition of foreign screening requirements. So far, the initiative has seen some success, but progress has been slow, with only about four countries agreeing to participate in the initiative; there are currently 20 more agreements in the pipeline. The absence of a screening agreement with the U.S. should not imply that those countries are failing to inspect cargo on U.S.-bound planes. All countries are taking steps to secure departing flights in order to avoid the introduction of explosive devices, but these steps may not be consistent with current U.S. practices.

The Certified Cargo Screening Program continues to be a successful tool in implementing a cohesive set of laws to govern air cargo screening in the U.S. Industry players have been successfully checking cargo away from airports for almost two years without incident. Performing the task at offsite locations known as Certified Cargo Screening Facilities has alleviated congestion while facilitating a much more manageable screening process for all concerned. With significant investment and vigorous TSA oversight, most in the program are glad they participated and continue to reap the payoff in profits and faster processing.

However, there does not exist a U.S. government industry-certified program for trusted supply-chain partners to perform screening before tendering cargo to passenger air carriers on foreign soil. Since 80 percent of freight transported on these flights is tendered by multinational forwarders who are well known to and regulated by the TSA through the CCSP, certifying these trusted companies to screen cargo overseas would be a major step toward achieving the screening goal.

Pre-departure targeting of shippers is now underway through the Air Cargo Advanced Screening program. Shipment data reviewed under ACAS, when combined with participation in trusted entity programs, plays a major role in deploying screening resources toward elevated-risk cargo.

The absence of mutual program recognition within the supply chain, combined with the inability to certify screening practices in other countries, places the screening burden on airlines overseas. This necessitates the need for forwarders to dismantle consolidated pallets and skids at the airport to meet the TSA piece-level screening requirement. This is time-consuming, expensive and, as the result of lessons learned through the CCSP, completely avoidable.

The TSA should establish a voluntary initiative that would enable trusted forwarders and shippers to perform cargo screening upstream in the U.S.-bound international supply chain. The TSA could individually verify and audit foreign sites in much the same way it does with CCSP locations here in the U.S. Furthermore, participation could be leveraged with existing globally recognized trusted-entity programs. In countries without NCSP Recognition, this program would help reduce duplicate documentation, handling and screening to meet equivalent alternative requirements.

The U.S. Department of State currently recognizes more than 190 countries. Since not all countries have flights directly to the U.S., shipments from those not in the CSP may now need to be screened several times before reaching U.S. soil. Such a repetitive screening requirement is both time-consuming and foolhardy. Allowing trustworthy forwarders and shippers vetted by the TSA in these locations would not only accelerate the pace in meeting the mandated objective, but would ensure the U.S. remains a preferred trading partner.

— Brandon Fried is the executive director of the U.S. Airforwarders Association.

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Jun

1

Fuel costs, belly freight could define cargo in 2022

Posted under Air Cargo World Magazine, Departments, Viewpoint

The biggest risk to the air cargo sector in the next decade is the potential continuation of historically high fuel prices. There are very limited tools for the industry to manage this quantum increase in our cost base — “slow steaming” does not work for the air cargo industry. The only positive aspect of the fuel-cost increase is that it is accelerating the move toward modern, more fuel-efficient planes.

The environmental benefit from new planes is obvious, with significant reductions in CO2 emissions per kilogram. Our industry will be forced to modernize, and we will significantly reduce our environmental impact. As technology continues to improve post-2020, we have a good chance of reaching our goal of reducing our CO2 emissions, as an industry, on an absolute basis.

The flipside of fleet modernization is that smaller operators who are unwilling or are financially unable to make large commitments to new aircraft will go out of business. There will remain small niches for operators of gas guzzlers; however, these will become few and far between, as global operators expand their passenger and freighter networks.

Another key trend moving forward is the growing percentage of cargo that will be transported in passenger bellies. The improved performance of the most modern Airbus and Boeing twin-engine, wide-body passenger aircraft does allow increased payload on all but the longest flights. The U.S. carriers have already made the move to become passenger-only operators, Japan Airlines has followed, and others have moved to a wet-lease arrangement with the likes of Atlas. The jury is out as to whether carriers that wet lease can operate profitably given the high capital cost of large freighters and the need for Atlas to also meet its margins.

Large freighter fleets will only make economic sense for a smaller number of mega-hub operators; smaller operators are likely to increasingly focus on optimizing their significant belly space. These modern, wide-bodied passenger aircraft are, after all, mini-freighters. Refocusing on revenue management of the cargo bellies has already proved to be a successful model for a number of carriers.

Security will continue to be a focus for the whole industry. Increasingly, the cargo side will follow the passenger side in pre-screening advanced information on shipments. This, overall, will increase the efficiency of the whole system and will focus resources on high-risk freight. A need will arise for even closer cooperation between shipper, forwarder, airline officials and the responsible government departments. Security will be the true driver of e-freight.

Regionally, manufacturers will continue to chase low labor costs and will be forced to continue to move around the area as economies develop and labor costs become unsustainable for their business model. Indonesia, the Philippines, Mexico, Turkey and India — places with large populations — will increasingly benefit. These are both risks and opportunities for carriers. Cathay Pacific has faced this first hand with the movement firstly of garment manufacturing from the Pearl River Delta to Vietnam and other areas with cheap labor; currently, high-tech manufacturers have moved first to the Yangzte River Delta and now increasingly to inner China. While this movement complicates Cathay’s model from being purely reliant on the YRD to being a true hub operator, it also brings huge opportunities. Our network expands exponentially with each new port, adding hundreds of additional flight combinations.

The growth of consumer consumption in Asia is also likely to deliver increasingly more balanced cargo flows — rates from Europe and from America into Asia are now increasing due to both capacity reductions from carriers and healthy export demand. Within the coming decade, it is likely that flows and rates on the main, long-haul trade lanes into Asia will equalize. China, while remaining a manufacturing superpower, will also be driving global consumer demand growth, particularly in luxury goods and perishables.

— James Woodrow is the general manager for cargo at Cathay Pacific Airways.

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Jun

1

We’re going to party like it’s 1942

Posted under Air Cargo World Magazine, Departments, Editorial

Back in February, we decided to commemorate Air Cargo World’s 70 years as a magazine by beginning a nostalgic romp through our archives, picking out interesting bits of history along the way. That feature, Back Pages, continues this month with a reprint of the magazine’s very first editor’s note, written nearly seven decades prior to me sitting down at the computer to type this out. The piece, which is from our maiden issue, is accompanied by some vintage ads for a fun look at how the industry publicized itself back then.

The industry has changed immeasurably in the short time I’ve been with the publication, and what I’ve seen pales in comparison to the memories and experiences of Richard Malkin, the first, and longest-serving, editor. I journeyed up to New York last year to chat with him about the industry’s infancy and evolution, and I was enthralled by his stories. No birthday issue would have been complete without a look at Malkin and his place in air cargo.

Anniversaries are as much about looking into the future as they are about remembering the past. Cathay Pacific’s James Woodrow, who wrote a short column this month, thinks a move toward more belly capacity and the menacing specter of high gas prices will define the industry moving forward. Space, that infinite

frontier, will define cargo in the coming years as well. Right before we went to press on this issue, the first commercial cargo flight took off from Florida, destined for the International Space Station. If successful, the project will mark the beginning of an exciting new chapter in air cargo’s history book.

There’s a lot to cover in 70 years, and I hope we’ve done a good job paying tribute to all the changes and innovations that have occurred in the airfreight industry across seven long decades. Please read through this issue, and then send me a note either via Twitter, on our Facebook page or as a comment on our website, sharing your memories about the industry and your hopes for the future.

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