The top nine carriers in the 56th edition of IATA’s recently released World Air Transport Statistics for 2011 — ranked by scheduled freight-tonne kilometers in domestic, international and total tonnage categories — were unchanged from the previous year. There were significant movements in the rest of the top 50, determined largely by geography, but this is the year in which the tectonic plates are really beginning to shift. When the league tables for 2012 are published in a year’s time, the world could see a reshuffling of the pack right from top to bottom. read more
Air Cargo World Magazine - Features
Doing business in an emerging market can sometimes feel like driving a car without a seat belt — there is significant risk, and the road is littered with potential dangers. Uncertainty is something Larry Wenrich, vice president of government services at Pilot Freight Services, learned about the hard way when Pilot made its foray into the African market four years ago. He reveals that Pilot, which regularly handles shipments to Africa via a partnership with the U.S. military, encountered a lack of transparency among African businesses.
“For us, the hardest part of establishing ourselves in Africa was finding dependable companies to partner with,” Wenrich says. “I don’t want to say that it was trial and error, but that’s what it was.”
Wenrich says it’s not a problem anymore, as the U.S.-based forwarder has found two African companies to employ. But he acknowledges that fraud, or the potential for misrepresentation, is more prevalent in Africa than in many other regions. “We had some issues where shipments would be delayed, or we realized that somebody couldn’t get something out of Customs because they had no expertise, when they told us they did,” Wenrich says. “So we ran into that kind of stuff a lot.”
Dealing with African border disputes has also been an obstacle, he says, albeit a surmountable one. Instead of trucking goods from one contentious nation to another, Pilot Freight Services often ships cargo on alternative routes to avoid altercations. In fact, he says, Pilot may have to fly freight traveling only a few hundred miles thousands of miles out of the way to prevent violence or theft.
Some in the aviation sector think the problems in Africa are overblown, however. Yannick Erbs, CEO of Togo-based AfricaWest Cargo, says that although security breaches do exist in Africa, they aren’t exclusive to the continent. Erbs also maintains that African airports take strong measures to protect cargo. “Based on AfricaWest Cargo’s 15 years of operation, I can say that [security issues] are very marginal at most airports in Western and Central Africa due to the strict and efficient security measures that are put in place,” Erbs says. “In addition to this, it should be made known that there is an assuring presence of a large group of security personnel roving around the concerned areas, who are well-trained and reliable.”
Like Erbs, Air France-KLM Cargo’s Joost Ruempol says that his company’s operations in Africa haven’t been impaired by safety breaches. He also asserts that cargo theft — a problem commonly cited in South Africa and the western region of the continent — hasn’t been an issue for the airline. “Safety and theft in Africa are no bigger of a problem than in other parts of the world,” Ruempol says.
As evidence of AF-KLM’s confidence in Africa, the Dutch carrier recently ramped up its service to the continent. Earlier this year, AF-KLM launched routes to Luanda, Angola, and Lusaka, Zambia, with thrice-weekly service to Zimbabwe’s Harare International Airport recommencing in late October after a 13-year hiatus. The latter route — which Ruempol says will complement partner carrier Martinair’s B747 freighter service to Harare — will likely be inundated with mining equipment, he projects. After all, Zimbabwe is a land known for its rich natural resources.
Ruempol says mining equipment is also a key commodity on the carrier’s flights to Luanda. “Angola’s oil and gas industry is developing,” he says, “and therefore we mainly transport equipment related to this industry, complemented with personal effects.”
Flights to Zambia, however, are commonly filled with spare parts, in addition to oil and gas equipment. And without airfreight, Ruempol says, such goods might not reach the Southern African nation.
“There is no seafreight option to Zambia, and therefore the success of international trade depends a great deal on air cargo.” Still, he thinks the industry has only begun to realize the potential of the Zambian market. Take the nation’s flower export sector, for example. Ruempol says the launch of additional, nonstop flights from Europe could better address the market and its potential for growth.
Whether more carriers target this market or not, one thing’s for certain: Cargo in Africa is on the rise. Nowhere is this more evident than in the International Air Transport Association’s June statistics. Although carriers in several regions reported lagging airfreight volumes in June, African airlines recorded a 15.9 percent, year-over-year, increase domestic cargo in traffic amid a 12.1 percent, year-over-year, capacity surge.
Despite this positive development, African carriers also reported an alarmingly high accident rate in June. On June 2, an Allied Air Cargo freighter overshot the runway at Ghana’s Kotoka International Airport and crashed into a minibus, killing a dozen passengers. One day later, Dana Air Flight 992 slammed into a residential building in nearby Nigeria. The crash — which reportedly stemmed from an engine fire — resulted in 159 casualties.
Tragic coincidence or not, these incidences highlight the aviation problems that have long plagued Africa — issues that IATA addressed in its 2011 global accident rate report. Although the total number of accidents among African carriers fell from 18 in 2010 to eight in 2011, Africa is still the most problematic region in the industry, according to IATA.
In fact, IATA reports, the accident rate for African carriers not appearing on the IATA Operational Safety Audit registry is quintuple the global average; the rate among African carriers on the IOSA registry, however, is nearly equivalent to the world average.
Such a discrepancy led aviation authorities to devise the Africa Strategic Improvement Action Plan. The plan, sanctioned by IATA and the International Civil Aviation Organization, calls for all African carriers to complete IATA Operational Safety Audit registration and contains specific ways to improve aviation safety in Africa from now until 2015. Key objectives range from the establishment of independent African civil aviation authorities to the implementation of flight data analysis and safety management systems. IATA and ICAO also encourage African officials to employ “transparent” safety oversight systems and accident-prevention measures, with the latter focused on runway safety and loss of control.
Tony Tyler, IATA’s director general and CEO, believes such developments could drastically improve Africa’s aviation infrastructure. “Over the years, there have been many initiatives to improve African safety,” he says. “While progress has been made, the problem has not been solved. This time could be different.” After all, Tyler says, “The eyes of the word are on the continent’s economic expansion.”
Much of Africa’s economic growth is stemming from intra-regional trade, insiders say. AfricaWest Cargo, for instance, has seen such strong volumes out of Western and Central Africa that it is looking to serve 10 new African destinations in the near future. Demand for petroleum, oil and gas equipment, and telecommunications products is propelling the need for increased services, Erbs says. He reveals that AfricaWest Cargo has also been eying the Far East for growth, in hopes of better addressing the Africa-to-China trade lane.
Pilot’s Wenrich expects more carriers to follow suit, as “more people want to get their hands on the natural resources that Africa has to offer.” He says some are even referring to Africa as the “new India or China.” Industry hype or not, trade in Africa shows no signs of slowing down, Wenrich maintains. “And Africa’s is an interesting place because we still don’t know the potential there,” he says.
Whether that potential is hindered by the continent’s high accident rate and cross-border violence or fostered by improvements to Africa’s aviation infrastructure remains to be seen, however.
The word “volatile” has become a common descriptor of the air cargo market for, it seems like, the past couple of years. No matter who is doing the talking — representatives from carriers, integrators, forwarders or shippers — everybody has been echoing the same phrases. Though the wider market has turned around in some areas, for freight forwarders, uncertainty and, yes, volatility are still very much present challenges.
In this awkward, if not quite dark, scene exist the top forwarders in the world. Ranked by Armstrong and Associates according to gross revenue and all-around tonnage (air and sea), these 25 companies represent the best of the best when it comes to international freight forwarders. Some of them rely heavily on the ocean, and a few take a more balanced approach than others, but all the busiest forwarders are on the list. From the top-of-the-pack DHL Global Forwarding to Sankyu, which handled 18,060 tonnes in 2011, many firms have stayed in the top positions all throughout the downturn and the slow recovery. (Air Cargo World has taken the original rankings and listed the companies, top to bottom, by airfreight volume.)
Dachser, which was ranked last in 2010, rose to 23rd last year on the strength of gross revenues of $5.92 million. Though still a small player in the international airfreight industry, company officials feel the seismic shifts of the market just as much as the larger firms.
In the current market, Thomas Reuter, Dachser’s managing director of air and sea logistics, is seeing less demand for the company’s services from important, established economies. This, he says, leads to a diminution of important freighter services. In spite of this, the air business is growing, with the success of Dachser’s GLOBAL program and the inauguration of its second iteration. According to Reuter, the second part of the program will coincide with new offices in 21 countries and a planned doubling of activity to 2.2 billion. The company’s strongest trade routes are China to Europe and to the U.S.
According to Reuter, Dachser recently ramped up its activities in Singapore and Malaysia, with an increased presence in Vietnam coming soon. “The airfreight market is still a very volatile business,” Reuter says. “Rates and surcharges are rising and falling within short time frames, which makes it challenging to predict stable rates, especially when it comes to tender requests.”
Though Dachser has experienced increasing success with airfreight, the path forward, Reuter says, is still rife with challenges. Cargo screening is always an issue when dealing on the international airfreight stage, and while the U.S. and EU recognition of worldwide programs has helped alleviate screening headaches a little bit, bottlenecks still exist. Fuel is also a very-present concern, as is the resulting shift toward seafreight. But even though Dachser’s path is a bit obscured, Reuter is optimistic.
“It is hard to predict the next months to come, as air and seafreight business is and was always tightly connected with the international world trade economy,” he says. “In times like these, where European economies are losing ground, where the U.S. economy was on hold due to the presidential elections, and even China starts to lower their own economic expectations, it really does become a challenging environment for air and seafreight forwarders.”
Georges Van Hove, corporate airfreight director at SDV/Bollore Logistics, saw his company clear 520,000 tonnes of activity last year, up from 500,000 tonnes in 2010. The 2011 total puts SDV at No. 10 on the list. Van Hove says the current market seems positive, but lower than last year. He’s holding out hope for a peak toward the end of the year, which could possibly mean activity mirrors 2011’s results, which, in his estimation, would be excellent. At SDV, the company is more attuned toward airfreight than some others on the list, with 35 percent of the group’s turnover dedicated toward air cargo as opposed to about 17 percent geared toward seafreight, he says.
Most of this airfreight comes from Africa, where SDV is at the top of the heap, Van Hove says. The company has 250 offices in 43 countries in the continent, which gives them great positioning for a shift that van Hove says is coming. “Overall, our activities have remained quite steady; tonnages are following the global economic trends. But the center of gravity, which was China to Europe, is now moving from China to Africa,” he says. SDV workers are also focusing on what they see as the top emerging market: the area of India and Pakistan.
Van Hove, though, anticipates more of a problem in seafreight. He’s seeing a “more and more frequent translation” of airfreight to seafreight due to the cheaper ocean voyages. Customers that need goods flown to Asia are now asking him to ship commodities to a hub point like Singapore and then fly the goods to their final Asian destinations.
Even though Van Hove has experienced some positive signs during the first few months of the year, he’s not hopeful for anything more than a flat year for 2012. Early expectations were for 5-percent to 10-percent growth, but the way things are looking, a steady path forward might continue for at least another year. “The worrying thing … is that nobody really talks recovery,” he says. “It’s flat growth at the best — at least for 2013, which will again be a bleak year.”
DB Schenker Supply Chain and Global Forwarding saw nearly 1.15 million tonnes of airfreight in 2011, slightly down from 2010’s mark of 1.225 million. Thomas Lieb, chairman of the DB Schenker Logistics board, says the slight contraction in airfreight has carried through to this year. He estimates the market fell by 3-percent to 4-percent in the first half of the year.
Lieb describes the aim to reach 2011’s activity as a fight. The firm’s activity from Asia, which accounts for half of its volumes, is weak. He points to new challenge of communicating across the board electronically as another reason for the airfreight declines. Finally, a bit of in-house reorganization in Schenker’s domestic U.S. market, which occurred last summer, has also contributed to slow airfreight numbers.
“New aircraft deliveries and a shrinking market create difficulties for our carriers in the meantime,” he says. “Reasons for the shrinking market are the softening economies and the shift of cargo to other modes of transport.”
Lieb’s other concern, of course, is the sea. He says that once customers make the switch from airfreight to seafreight, there’s really no reason for them to return to the skies. If transporting goods by sea works well, and it saves money, why would they switch back? “Also in the past years, we have seen new or better technology on the ocean side, which made transportation of traditional airfreight goods in a container possible,” Lieb says. “Intercontinental railway solutions are on the rise as well.”
Route-wise, he sees Asian routes, both within the region and between Asia and North America and Europe, as the biggest lanes, purely due to market size. He does say, however, that Latin America and Africa could become larger players as production and labor costs in Asia increase.
Even with darkening prospects, Lieb remains confident that airfreight will be of major importance to Schenker moving forward. He declares that a return to growth will occur, at the latest, by the end of 2013. He notes that nearly one-quarter of Schenker’s revenues is derived from airfreight, a mode of transport he calls “a major building block of our sophisticated product offering toward our customers” — words that enforce the importance of airlines to Schenker’s path forward.
But, of course, it won’t be easy. “Ever since mid-2008, the airfreight industry has been a roller coaster ride,” he says. “Unfortunately, after 2010, the market has not yet returned to pre-crisis growth rates, but rather stagnation to small losses.”
The challenges have been targeted, and Lieb has a plan. To return to profitability, he’ll steer airfreight in a few new directions, while maintaining the course in areas where activity will soon return. “Building on our healthcare expertise, which is now organized within a vertical market setup, we will further extend our pharma competence and activities,” he says. “In addition, we are looking into other niche markets, like perishables, which also mostly originate from those regions where we expect the fastest growth rates within the next years.”
The year is 2016. Demand for freighters and wide-body, belly-hold cargo, which had been rising at an annual rate of 5 percent, has sucked up all the world’s extra cargo capacity. Carriers have been retiring older planes at a steady pace in order to fill their fleets with new-production aircraft. Passenger-to-freighter conversions continue in this new utopia, but at a low level. Welcome to the perfect scenario. read more