ACW 29 June 15

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The weekly newspaper for air cargo professionals Volume: 18

Issue: 25

29 June 2015

China to see major cargo merger?

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hina Southern Airlines declined to confirm Chinese government media reports of a merger between the carrier’s cargo arm and Air China Cargo and China Cargo Airlines, but tells Air Cargo Week (ACW) the topic is, “very hot”.

According to the state news agency Xinhua, Air China Cargo, China Cargo Airlines and China Southern Cargo are in talks to join forces.

China Southern Airlines director of cargo industry and alliance, Yuhua Lin, tells ACW: “It (the merger) is very hot recently, but not confirmed. Therefore no comment.” The other two carriers were not available for comment.

In the report by Xinhua there was no timeline or valuation given for the merger. The Civil Aviation Administration of China’s (CAAC) deputy director, Zhou Laizhen, is quoted at the China Civil Aviation Development Forum, which took place in Beijing from 24-25 June.

Laizhen says work on the merger

is being, “actively pushed”. This year, China and the Asian region as a whole have seen economic growth falter and airlines are seeing a slowdown in volume rises (see page two). Demand for cargo is now growing at a modest rate compared to previous years.

According to data on CAAC’s website, airfreight has continued to rise in China and in the first quarter (Q1) the country’s airports handled 3.1 million tonnes of cargo, a year on year (YOY) rise of 4.6 per cent. China Southern Cargo has its main hub in Guangzhou (China) and continues to expand

its freighter services. On 20-21 June it launched new cargo routes to London Stansted Airport and Paris Charles de Gaulle Airport (see page five) using a Boeing 777 Freighter. On arriving at Stansted, China Southern’s freighter was met with a water salute (see picture).

Speaking at the Stansted launch on Saturday 20 June, China Southern Cargo’s senior vice president for cargo, Zhao Fengsheng, tells ACW the carrier’s focus is to, “provide more services to customers,” and grow cargo volumes. He did not mention anything to ACW about the merger with other cargo

carriers in China. Last year, China Southern Cargo’s revenue freight tonne kilometres (RFTK) reached five billion, up 16.8 per cent on 2013. It carried 1.4 million tonnes of cargo, up 12.2 per cent.

In Q1 of 2015, Air China Cargo, which is a joint venture between Air China and Cathay Pacific Airways, reported capacity, in available freight tonne kilometres (AFTK), as increasing by 21.4 per cent YOY to 2.8 billion. Cargo traffic in RFTK rose YOY by 25.4 per cent to 1.4 billion.

January to April this year, China Cargo Airlines, which is a joint venture between China Eastern and the China Ocean Shipping Company, reported RFTK increased YOY by eight per cent to 1.2 billion.

China is set to develop its aviation infrastructure to boost its flagging economic growth and strengthen its trade infrastructure.

The Xinhua news agency reported on Wednesday 24 June that CAAC is investing about 500 billion yuan ($81.7 billion) in 193 domestic projects this year.

Emirates plans more 777 for UK regions With its Airbus A380s reducing its cargo capacity out of Heathrow Airport and Gatwick Airport, Emirates is looking to its regional approach with Boeing 777s to continue the UK service it has been providing.

Emirates SkyCargo UK cargo manager, Phil Rawlings, spoke to Air Cargo Week, about the airline’s regionalisation in the country. “When we changed to the A380s from the [Boeing] 777-300s we halved our capacity out of Heathrow,” he says.

Rawlings explains that the planning for the A380 operating to and from Heathrow meant his team had plenty of time to prepare for the change.

Part of the solution was to use Gatwick and Birmingham International Airport for the,

“overspill,” from Heathrow though there is extra handling involved as SkyCargo is trucking freight into the other airports for export.

To adapt further, 777s have been flying into other UK airports, such as Birmingham, and Rawlings adds that that city is about to get another daily service bringing it to three 777s a day. He praises the 777 and says: “It can take eight pallet positions no problem at all, but the A380 is a bit of a challenge.” That challenge, limited bellyhold space, has come to Gatwick, which Rawlings says is now, “all A380,” while previously it had been Heathrow’s “safety valve”.

He explains that the bulk of Emirates’ UK export and import cargo comes through the London region and some forwarders would

rather truck freight from Newcastle in Northern England down to the capital city for consolidation and export. But, Rawlings points out that the ability to get freight around the UK’s roads to other airports is not difficult. “It’s growing in the regions as we are feeding it freight from London,” he says.

Rawlings sees Emirates introducing more freighters, not into Heathrow, but into Gatwick or London Stansted Airport or Manchester Airport. However, he stressed that Southern airports were more likely to be beneficiaries because flying to Manchester, for example, adds more time and costs, such as fuel.

He does not see a revived Manston Airport as an option because in the past it had not made commercial sense to use the gateway.

china southern cargo launches first uk service competitive times for gsas on the continent europe static but global markets grow post-crisis peak at last

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Funding raised for cargo drone

KROSSBLADE AEROSPACE SYSTEMS has raised the $200,000 needed to start production of its SkyProwler vertical take-off and landing drone.

The target was reached on 19 June, at the second attempt. The Phoenix (US)-based start-up hopes to begin manufacturing the airframe next month and to be shipping drones by December.

Earlier this month, Krossblade revealed the findings of a case study on how SkyProwler’s cargo drop door module could be used in an urgent medical emergency. The scenario envisages a SkyProwler dropping an adrenaline auto-injector at the home of a man suffering from a severe allergic reaction.

Krossblade gave an estimated response time of six to eight minutes, at a cost of $50. It claimed that the same trip, by ambulance, would have taken 10 to 15 minutes and at a cost of $1,500.

NEWSWEEK

Modest rise for Asia Pacific airlines in 2015

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irlines in Asia Pacific saw airfreight volumes rise, “modestly,” by 6.3 per cent during the first five months of 2015, according to preliminary figures released by the Association of Asia Pacific Airlines (AAPA).

The association says freight tonne kilometres (FTK) were 26.8 billion for January to May this year, up on the 25.2 billion that was recorded from January to May in 2014.

For May, AAPA says FTK was 5.4 billion, a year on year (YOY) increase of 2.9 per cent, which is the second highest monthly FTK figure this year. This compares to April when FTK was 5.3 billion, in March it was 5.9 billion, in February 4.8 billion and in January FTK was 5.1 billion.

Capacity in available freight tonne kilometres (AFTK) in the first five months of 2015 was up 5.6 per cent to 41.6 billion,

compared to the same period in 2014. In May alone, AFTK was up YOY by 5.1 per cent to 8.5 billion. This was higher than the 8.4 billion AFTK figure in April, but down on the 8.6 billion in March. It was up on the 7.4 billion in February and also up on the 8.3 billion in January.

The strong AFTK total in May led to a YOY 1.4 percentage point decrease in the average freight load factor for the month to 63.5 per cent. The freight load factor

for the first five months of 2015 is 64.5 per cent, a 0.5 percentage point fall on the same period last year. AAPA director general, Andrew Herdman, says: “International air cargo markets recorded further growth in May, albeit at a moderate pace compared to the preceding months when demand was boosted by congestion in US West coast maritime ports. Overall, Asian airlines registered a 6.3 per cent increase in international airfreight demand for the first five months of the year.”

Herdman explains that the demand environment for air cargo markets also remains positive, though the pace of expansion appears to be slowing. “Asian carriers are continuing to strive for further operating efficiencies with an eye on improving overall profitability this year after some disappointing results in 2014,” he adds.

Marginal gain for Asia Pacific airports

AIRPORTS in the Asia Pacific region saw marginal year on year (YOY) airfreight growth of 2.6 per cent in April, the Airports Council International (ACI) Asia Pacific reports.

The trade body says the continued fall off in cargo volumes growth, “reflected weaker demands from Europe and a slowdown across Asian export markets”.

But, ACI Asia Pacific says that the Middle East saw sustained strong growth of 14.5 per cent in April, due to expansion in capacity and networks.

The April figure for Asia Pacific, including the Middle East, was the second lowest YOY growth this year, but up on the rate in March when airfreight volumes at airports in the region rose YOY by 1.4 per cent.

These were both significantly down on February, when there was YOY growth of 14.3 per cent. In January, Asia Pacific gateways saw YOY cargo growth of 3.4 per cent.

In April, ACI Asia Pacific says among the major airfreight airports in the region, New

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Delhi Indira Gandhi International Airport led Asia Pacific with the highest growth rate of 19 per cent. Volumes could continue to grow at the Indian airport, as in April the airport signed a memorandum of understanding with Amsterdam Airport Schiphol to collaborate and promote cargo business between the two gateways.

ACI Asia Pacific says airports in the Middle East were led by Dubai in April. It explains the combined cargo aggregate of Dubai International Airport and Al Maktoum International Airport at Dubai World Central rose by 19.6 per cent in the month.

ACI Asia Pacific also says of the region’s busiest three airfreight airports, two saw rises in April and one a fall. The busiest by volumes, Hong Kong International Airport (see picture above) saw a YOY monthly decline of 0.7 per cent, Shanghai Pudong International Airport saw a YOY increase of 3.8 per cent and Incheon International Airport a YOY uplift of 1.8 per cent.

Volumes fall in April at Dubai International Airport

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ubai International Airport has seen airfreight volumes drop year-on-year (YOY) by 3.6 per cent in April, as the shift of freighter operations continues to result in declining figures.

Operator Dubai Airports says cargo reached 204,075 tonnes in the month, down on the 211,588 that was registered in April last year.

The figure was also a fall on March when 216,879 tonnes passed through the airport,

which itself was a YOY drop of 4.9 per cent.

April was up on February, when the airport handled 191,002 tonnes, a small YOY rise in volumes of 1.2 per cent, and the only month this year where volumes have risen. In January, 186,230 tonnes were processed, which was the largest fall in the first four months of the year, of 5.5 per cent.

For the first four months of 2015, cargo volumes have reached 798,771 tonnes, a con-

traction of 4.7 per cent compared to the 837,837 tonnes handled during the same period in 2014.

Dubai Airports explains: “The decline is caused by the shift of all freighter cargo operations to Al Maktoum International Airport at Dubai World Central last year.” The operator made the strategic decision in May last year to move all freighter services to Al Maktoum.

As a result, last year, Dubai International saw cargo volumes fall by 3.1 per cent to 2.3 million tonnes. Al Maktoum has now become the regional cargo hub and has seen volumes increase significantly. In 2014, the airport saw cargo volumes surge by 262 per cent to 758,371 tonnes, which was a rise on the 209,209 tonnes in 2013.

In April, China Airlines was the latest carrier to relocate its regional cargo base to Al Maktoum. It joined the likes of Emirates SkyCargo, Cathay Pacific Cargo, Etihad Cargo, MASkargo and Turkish Airlines Cargo in moving its freighter operations.

NEWS WEEK WorldNews CELEBI DELHI CARGO has begun handling Air Asia’s domestic cargo operations at Delhi Indira Gandhi International Airport. The collaboration began late last month with four flights a day. A fifth was added on 16 June. Celebi is Turkey’s oldest ground handling services company. The firm continues to expand into overseas markets, with an emphasis on the Indian market.

ETIHAD CARGO has launched a freighter service from Abu Dhabi to Maya-Maya Airport, Brazzaville, in the Republic of Congo. Operating twice weekly using a Boeing 777 Freighter, it will fly from Abu Dhabi to Brazzaville via Lagos Airport. The aircraft has a capacity of 100 tonnes and will transports tools, machinery, general cargo, electronics and project equipment.

Hong Kong busiest cargo hub AIRPORT AUTHORITY HONG KONG (AA) claims that in the 2014/15 fiscal year Hong Kong International Airport was the world’s busiest cargo airport for the fifth consecutive year.

The authority explains that cargo throughput from 1 April 2014 to 31 March 2015 reached 4.4 million tonnes, an increase of 5.5 per cent over the previous 12 months. In the first five months of 2015, the airport handled 1.7 million tonnes, up 1.4 per cent on the January to May period in 2014.

For the 2014/15 fiscal year, AA says revenue and profit surged 10.5 per cent and 12.4 per cent, respectively, to 16,367 million Hong Kong dollars ($2.1 billion) and 7,254 million. Earnings before interest, taxes, depreciation and amortisation rose year-on-year by 13.8 per cent to 11,314 million Hong Kong dollars.

AA chief executive officer, Fred Lam, says the airport is operating at over 90 per cent of its capacity and it will reach saturation in the near future. “Because of this, we must continue developing the airport in order to maintain its competitiveness. Several projects are under planning or already in the pipeline,” he adds. The authority is proposing the expansion of Hong Kong into a three runway system. AA is pursing statutory requirements and arranging finances for the project. It wants to start construction in 2016 and complete it within eight years.

New cargo system at Helsinki

FINNAIR CARGO has signed an agreement with Lodige Industries for the delivery of a cargo handling system at Helsinki Airport.

Lodige will provide a software suite for Finnair’s cargo terminal, which is scheduled to open at Helsinki Airport in 2017. It is hoped the terminal’s technology will ensure the smooth handling of Finnair’s cargo volumes which are expected to grow significantly in the next few years. Finnair is expecting cargo capacity to increase by 50 per cent by 2020.

The new logistics system will feature a storage and transport system for containers and pallets with two 15 foot (4.5 metre) elevating transfer vehicles which have a 6.8 tonne capacity. The system includes truck and airside interfaces and three separate temperature zones.

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NEWSWEEK Staff changes at Lufthansa Cargo

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ufthansa Cargo has announced a number of senior staff changes within its product and sales division, effective from 1 August.

Frank Naeve (see picture) will assume responsibility for Asia Pacific as vice president.

He has been in charge of the eCargo programme,

but has held a number of executive positions in Asia. He is a former general manager of the Chinese cargo airline, Jade Cargo International.

Naeve will succeed Helge Krüger-Lorenzen, who has been appointed vice president of capacity management. Krüger-Lorenzen has worked for the Lufthansa Group since 1987 and has overseen its cargo business in Asia Pacific since September 2010. He will be responsible for market and network planning, and for revenue management.

Boris Hueske, the interim head of capacity management, will move within Lufthansa Cargo, but his new role will be communicated at a later date.

Global sales management will be headed by Dorothea von Boxberg, who has been appointed vice president in charge of worldwide pricing and sales strategy and steering. She has been director for customer experience at Lufthansa’s passenger airlines.

October change for Swiss cargo head

ASHWIN BHAT has been appointed head of cargo and head of Swiss WorldCargo, effective from 1 October.

Bhat (see picture) has been Swiss WorldCargo’s head of global area management, in charge of worldwide sales of the airline’s cargo products. He is an Indian national

and joined Swiss WorldCargo in 2002. Bhat has served in various capacities within pricing, revenue management, controlling and operations. He was appointed head of area management Asia, Middle East and Africa in 2010. Responsibility for the Americas was added to his remit in November 2012.

“In Ashwin Bhat we are appointing an experienced executive with extensive expertise in the airfreight sector to head our cargo business.

“We are delighted to have found a strong internal candidate to succeed Oliver and take over the leadership of Swiss WorldCargo, which is an essential contributor to the profitability of Swiss”, says chief executive officer, Harry Hohmeister, and chief financial officer, Roland Busch.

He succeeds Oliver Evans, who is stepping down after 13 years in the position.

Virgin Australia Cargo launched

VIRGIN AUSTRALIA CARGO will launch on 1 July 2015, allowing Virgin Australia Group to compete in the domestic and short haul international cargo market for the first time.

Virgin Australia’s existing exclusive arrangement with logistics specialist Toll Group will end on 30 June. Virgin Australia will continue its long standing partnership with Virgin Atlantic for the sale and management of cargo capacity on Virgin Australia’s long haul services.

The establishment of Virgin Australia Cargo is a key element in the Virgin Australia Group’s Virgin Vision 2017 strategy. Virgin

Australia Cargo group executive, Merren McArthur, says: “We understand that reliability and price are key drivers of customer choice in the domestic and short haul international cargo market.

“These are both areas in which Virgin Australia excels and so Virgin Australia Cargo will be well placed to compete in this market.”

She adds that the company has also launched a state of the art information technology system which will enable it to, “optimise its cargo capacity while providing tracking and customised reporting to customers”.

Aeroflot Group sees 2014 losses

AEROFLOT Group revenue in 2014 increased by 9.9 per cent year on year to 319.8 billion roubles ($5.9 million), shareholders at the 22 June annual general meeting (AGM) heard. But, the net loss for last year was 17.1 billion roubles.

They also heard that the Aeroflot Group’s core priorities remain profitable growth and to strengthen its position as, “a leader in quality of service among Europe’s airlines”.

In May, Air Cargo Week reported that the Aeroflot Group had seen cargo volumes in

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April increase by 9.2 per cent to 14,598 tonnes, but the total for the first four months of the year is still significantly down on the same period in 2014 - suggesting overall profitability will not be better. Aeroflot’s development strategy for 2016-2020 has been updated and its long-term goals and strategy for delivering them have been approved. Among these are cost control and a focus on efficiency. The AGM approved a motion not to pay a dividend on ordinary shares for the 2014 financial year.

NEWS WEEK China Southern Cargo launches first UK freighter service

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hina Southern Cargo’s inaugural service from Guangzhou Baiyun International Airport to London Stansted Airport landed on Saturday 20 June and the carrier is aiming to increase the frequency.

It will operate twice weekly with a Boeing 777200 Freighter. China Southern Cargo senior vice president for cargo, Zhao Fengsheng (pictured), tells Air Cargo Week (ACW) the service provides the country’s largest airline with a great opportunity and benefits both countries.

“In recent years trade between China and the UK has seen a very high growth trend. In our view the UK is a very important market to China. It is a very significant step for China Southern Cargo to extend our network in Europe. Stansted is a very cargo friendly airport and we can develop and make it beneficial for both the airport and us.”

China Southern Cargo also launched a three weekly service from Guangzhou to Paris Charles de Gaulle Airport on Sunday, 21 June. These European routes add to freighter services already run to Frankfurt Airport and Amsterdam Airport Schiphol.

Fengsheng explains to ACW that cargo from China to the UK will be mainly electronics, such as small household appliances

like lamps, but it will also transport perishables and garments and textiles. From the UK to China, aircraft will be loaded with machinery and equipment and milk powder.

There is also the potential in the UK’s cold months from November to March to focus on moving perishables. Guangzhou has a sub-tropical climate and can grow food in demand in the UK all year round.

Fengsheng says that the service to the UK was launched as the airline received two 777F this month and is set to have another

one delivered next month. He says the route will run twice a week to start with due to a limited number of crewmembers, but there are plans to increase the frequency. “At the end of this year or the start of next year we hope to fly from China to Stansted five times a week,” he explains.

Fengsheng adds that there are challenges in using Stansted and he explains that cargo will also be trucked down to Heathrow Airport, where the carrier operates daily flights. “There is a need to improve the distribution and trucking infrastructure at Stansted,” he tells ACW. China Southern Cargo remains committed to freighters despite the industry’s challenges, Fengsheng says. He hails the impact of the 777F. “In the current market situation it is challenging for everyone due to capacity and demand. For everyone operating freighters, making a profit and breaking even is a challenge, but the 777 freighter has high efficiency and is very economical.”

Fengsheng finishes: “It is an important milestone for China Southern Cargo to launch this freighter service from our hub in Guangzhou. We are excited by entering this growing market, with an aim to serve customer needs and strengthen the economic ties between our two countries.”

MAG targeting cargo growth MANCHESTER AIRPORT GROUP (MAG), which operates and owns London Stansted Airport, says there is great potential to continue to grow the airport’s airfreight volumes.

Speaking on Saturday 20 June to Air Cargo Week (ACW) after the arrival of China Southern Cargo, MAG business development manager for cargo and general aviation, Conan Busby, says the service will also boost cargo volumes in the UK. Busby explains MAG hopes the service will encourage UK forwarders to use UK capacity rather than truck cargo to Europe, which he says can add hours and even days to the transit time.

He explains that MAG hopes China Southern will grow as there is more demand for the service.

Busby says: “MAG sees great potential in further developing this aviation sector as we look to support growth in the world’s largest single aviation market; London. For MAG though there is no limit to how many services we will attempt to attract to Stansted and the other airports within the MAG portfolio.”

Growth opportunities Busby tells ACW, as the UK awaits the recommendations from the UK government’s Airports Commission on where it thinks airport capacity should be expanded in the South East of England, Stansted is a, “great spot,“ with the necessary infrastructure and runway capacity to support future growth for several years. The important thing, Busby says, is to see total UK air cargo volumes growing, rather than airports fighting over market share. “Cargo is a vital part of global trade, which in itself generates economic benefits and...therefore we will work to support any opportunities that arise in every way we can.”

MAG sees several growth opportunities, some in emerging markets, but others in mature markets such as North America.

“China is such an important market, and yet this new China Southern schedule will be the only freighter service linking the UK with mainland China,” Busby claims. He says MAG is certain the levels of service will be superior to cargo shipments arriving into European airports, which are trucked to or from the UK. Busby oultines growth opportunities: “There is great potential....to grow considerably through growth of integrator traffic, new services such as China Southern, and through bellyhold cargo.” Last year, more than 230,000 tonnes was handled at Stansted and MAG handled 640,000 between Stansted, East Midlands Airport and Manchester Airport.

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NEWSWEEK BRÉGIER: Airbus A380P2F is possible

AIRBUS’ chief executive officer, Fabrice Brégier (see picture), said that an Airbus A380 passenger to freighter (P2F) programme could be possible, at his company’s end of Paris Air Show press conference on Thursday 18 June.

Years ago, in 2005, the Airbus A380 Freighter had been a programme with 27 firm orders and commitments from four

customers more than three years before its planned entry into service date of mid2008. According to Airbus information from 2005, the A380F would have had a capacity of 150 tonnes across its three decks with a volume of 1,132.6 cubic metres and a range of 5,600 nautical miles (10,400 kilometres).

At the time, Airbus said: “With pressure on yields and cargo densities declining, the cargo industry will be demanding lower unit costs and higher volumes, particularly on long haul routes to and from Asia “ Speaking at the end of this year’s Paris Air Show press conference, Brégier said that a passenger to freighter programme could be, “possible,” in future for the A380.

The Paris Air Show that week had seen the European aircraft maker announce an Airbus A320 family P2F programme.

Boeing 737NG conversion launched

GE Capital Aviation Services (GECAS) launched its Boeing 737-800 Next Generation (NG) conversion programme last week.

GECAS says it plans to convert up to 20 of its 737-800NG to Special Freighters (SF).

AEI Aeronautical Engineers (AEI) will perform the conversions at its facilities in the US and China. The first aircraft is scheduled for conversion starting in 2016 in order to earn the US government’s Federal Aviation Administration’s supplemental type certification in 2017. This will pave the way for the aircraft to be a leased freighter.

The converted freighter will be able to carry a payload of up to 23.5 tonnes.

GECAS executive vice president for specialty markets, Christopher Damianos, says: “We believe the 737-800NG freighter will be the best in class aircraft for both replacement and growth in the narrow body freighter sector.”

GECAS is the launch customer of AEI’s Boeing 737-800SF passenger to freighter and combi programme, which was launched back in October 2014. AEI senior vice president of sales and marketing, Bob Convey, says: “We expect that the 737-800SF will

be a mainstay in cargo operators’ fleets for the next 20 plus years.” AEI previously has produced Boeing 737-400SF conversions and that was for Aviation Capital Group (see picture).

On 17 June, Precision Aircraft Solutions announced it had been awarded the conversion of four former AerCap aircraft for Chinese delivery services company SF Express. The aircraft are Boeing 757. “We are thrilled to put the Precision capabilities to work for SF Express as it further develops its 757 fleet,” says Precision president, Gary Warner. Air China Technics, HAECO and AeroTurbine will convert the aircraft.

Precision Aircraft Solutions also announced plans on 10 June to undertake a Boeing 757-200 conversion for leasing company Vx Capital Partners. Conversion began at HAECO Americas in Greensboro (US), on 22 June. It is due for completion in the fourth quarter of 2015. Vx Capital Partners principal, Eric Adema, says: “Due to the high demand for freighters in the Precision 757 weight and volume class, we believe that now is the time to move forward with the 757.”

ICAO, ITF look at sustainability

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NTERNATIONAL CIVIL AVIATION ORGANIZATION (ICAO) and the International Transport Forum (ITF) at the Organisation for Economic Co-operation will work together for the sustainable development of air transport.

The organisations signed a framework on 23 June in Montreal (Canada). It commits them to engaging in joint research and events, and to exchange staff and information. The agreement identifies potential topics for co-operation. Among them are international air transport liberalisation and aviation infrastructure investment.

The organisations will also work together on statistics methodology and data aggregation, data analysis and forecasting and economic studies on the development of air transport.

“This collaboration will provide added value for both organisations and for their member countries,” says ITF secretary-general, José Viegas. “It will help strengthen ITF’s understanding

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of the aviation sector. And it will help us provide ICAO with additional policy perspectives that can also include lessons from other transport modes.”

Other potential areas for joint initiatives are crisis management, sustainable development and climate change mitigation, as well as the promotion of compatible regulatory approaches towards international air transport among states. ICAO and ITF will accord each other observer status at their meetings. The collaboration will extend over an initial period of three years.

“Working co-operatively is, and has always been, fundamental to the aviation sector,” says ICAO council president, Dr Olumuyiwa Benard Aliu.

“This new framework for enhanced co-operation with ITF will allow us to more effectively meet our objectives and, at the same time, share our experiences and best practices to the benefit of ITF and its member states,” he adds.

AIR CHARTER REPORT

2015 is looking good for business

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fter a period of low business sentiment, airfreight charter profits are expected to see moderate growth this year. The underlying optimism is, however, tempered by stiff marketplace competition, and it is not a place for the faint hearted.

UK broker Chartersphere’s managing director, Paul Bennett, tells Air Cargo Week (ACW): “As usual there are still uncertainties on the horizon. The future of Greece and the Eurozone generally is up in the air. No one really knows where that will end or if the threat of contagion in the event of a Greek default has really been resolved. Like everyone else we will just have to wait and see and adjust our plans accordingly.

He adds that the fortunes of the Chinese economy and growing hopes that oil prices might finally be on the turn could, “ultimately be more significant to us”, particularly if this results in, “kick-starting investment in stalled oil and gas projects.”

Delta World Charter (DWC), which commenced operations in February 2014 from its base in Dubai, is bucking the trend somewhat as it continues to record significant growth. Its chief executive officer (CEO), Dmitriy Korshunov, describes business as, “terrific,” so far in 2015. “We have already contracted and

flown 71 flights, which includes relief flights to Kathmandu, Sulaymaniyah in Iraq and Conakry in Guinea, carrying medical supplies on behalf of humanitarian agencies.” He adds that revenues for DWC have quadrupled from five million United Arab Emirates Dirhams ($1.3 million) in 2014 to over 20 million this year. “The market response reassures us that Delta World Charter came to the market at just the right place, at the right time and with the right people,” Korshunov tells ACW. He explains that the air charter business is seeing different growth curves and paths in different economies of the world. “In the past much of the growth at global level came from the cargo industry,” he says. “Growth is now coming from all the sectors we operate in - private jet and commercial aircraft, as well as cargo.”

Roman Gilmanov, chief commercial officer for DWC, believes the private and commercial air charter business segment is redefining the business and operations of what was once considered a niche, luxury segment. “Higher economic growth, a rise in corporate spending and infrastructure development are all good signs for our industry. Certain cargo markets are seeing higher volumes for ad-hoc and on-demand flights.”

A very good picture

Air Charter Service’s group commercial director, Justin Lancaster, also paints a, “very good,” picture for the first half of 2015, which was buoyed by business created by the West coast port strike in the US. “What is very encouraging is the underlying growth and that we are seeing growth across all offices and not just in certain regions,” he says. “The charter market has been strong globally in many sectors, but for the future it is always hard to predict. Many factors which affect it are not controllable by us, but indications are good and the second half of the year is normally stronger than the first half.”

A link between Chartersphere and aviation software specialist WebCargoNet in February has created excitement in the market, according to Bennett. “We are pleased with the progress so far

and are already seeing a positive impact on our client base,” he tells ACW. “This, along with other initiatives, is helping us build market share and we are confident it will provide long term benefits for our customers and their businesses. We have witnessed a very promising first six months of the year which saw us continue our upward growth trend; something we are proud to have achieved every year since we started.”

In his view, the market has slowed in recent weeks, but it is too early to say whether this is a trend or merely a blip. “Whatever happens we are in a good place to deal with it. We certainly have significant momentum behind us,” he adds.

ProAir general manager, Andreas Wald, also sees positive trends. “In past years our focus has been on the expansion of the passenger charter services and our own airline, ProAir Aviation, with its fleet of 12 business jets and turboprop aircraft”, he says.

“This year, on the other hand, we seem to be heading back to our roots. ProAir was primarily a cargo charter broker in the beginning and so far in 2015 we have increased the number of cargo flights by more than 30 per cent year on year. This equates to around 150 to 200 extra cargo orders per year.”

Wald explains that both policy and market forces lie behind the increase. His firm decided to invest in additional sales staff despite being in a period where the cargo ad hoc market for bigger charters was rather low, and, fortunately, market demand picked up and led to a return on investment for its sales efforts.

“Our market presence of almost two decades and the exploration of new markets, as well as the opening of a branch office in Turkey can be seen as contributing factors to this success.”

The company’s Istanbul office opened in May with a staff of two offering charter services to the Turkish, North African and Middle East markets. “Close cooperation with an exclusive partner in the US have also lead to additional business in North and South America. Our target for the rest of 2015 is a consolidation of the various business segments with a further improvement in 2016,” adds Wald. For charter, it seems, the corner has been turned and the good old days are returning for those with the right approach.

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EUROPEAN GSAs REPORT

Competitive times for GSAs on the continent which is further increasing competition. His view is echoed by Global GSA Group chief executive officer, Ismail Durmaz, who explains to ACW it is a tough operating environment as margins are under pressure and rates are lower. This, he says, is especially evident from Europe to the Far East, although business is still there. “It was not what we expected in March and April, but May was better and hopefully it will be more stable,” Durmaz says.

He says in Europe tonnages are good, but rates are dropping in and out of the continent. Durmaz adds margins are still just there on the continent and as some airlines struggle they are pushing for more cargo from Europe to the Far East and from China into Europe.

ECS Group chairman and chief executive officer, Bertrand Schmoll, tells ACW competition is fierce for GSAs, which he says is clear when it tenders for contracts, but on the ground it is a more positive picture and he feels the key is having a worldwide network. The first half of 2015 has been good for ECS, Schmoll explains, with an increase in capacities and he adds: “The euro has decreased against the dollar and the fuel rate is reasonable, which makes exporting easier.”

T

he European general sales agent (GSA) marketplace is challenging, but there are opportunities as airlines grow capacity through network expansion and continuing development of emerging markets.

The market is as competitive as ever, according to Air Logistics Group chief operating officer, Stephen Dawkins, but he tells Air Cargo Week (ACW) business is no different from how it has been for the last decade. “It has always been tough since the financial crisis, but there has been more pressure on yields,” he explains. Despite challenges, he says figures are up year-on-year (YOY) in 2015: “Things are bumping along and I am sure we are going to see things moving along in the second half of the year.”

Dawkins says it is a changing market and carriers are moving to a regional focus, awarding contracts to GSAs for entire regions,

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ACW 29 JUNE 2015

Network opportunities

Business for the first half of the year at the HAE Group is up YOY, according to director, Neville Karai, but he describes the GSA marketplace as, “brutal”. He says as airline networks are changing it, “offers opportunities” but at the same time makes like-for-like comparisons difficult due to, “destination mix” when it comes to yields and revenues. Karai explains: “Once you think you are competitive on service and cost, another service provider will come into the picture and effectively buy the business to keep themselves in the market.”

Dutch firm Kales Airlines Services, explains in the first half of the year it has performed well, but volumes are similar to the same six months in 2014 and chief executive officer, Peter Kales, says it is, “remarkable,” after it lost Air China in Germany. It

started its own sales activities, processing 2,500 tonnes a month.

“We have again been able to find new clients and new businesses, whereby we recently opened up Kales in New York and Toronto, widening our playground, besides our presence already in South America, ” says Kales.

He adds that airlines it represents are opening up new routes and new contracts, which is helping it continue to grow. Kales explains that May was slow, and prices have been under pressure a lot, specially to China and to the US, which was busy in the first half of 2015 due to West coast port strikes.

The market is changing though. Karai says large GSAs are emerging by, “swallowing vibrant independent local heroes,” which is not good for airlines, as services become commoditised.

“A number of independents, ourselves included, have started to collaborate and signs are positive that a mixture of brands can be a competitive solution to regional or sub-area opportunities,” Karai says.

Remaining an independent GSA is something Schmoll feels is becoming harder. “Our way to expend ourselves and becoming better is to remain worldwide and develop our network by acquisitions of new GSA or by opening new offices,” he explains.

SCHMOLL Our way to expend ourselves and becoming better is to remain worldwide and develop our network by acquisitions of new GSA or by opening new offices

EUROPEAN GSAs REPORT

Europe static but global markets providing growth

I

n a competitive marketplace, ECS Group chairman and chief executive officer (CEO), Bertrand Schmoll, says his firm is finding customers are expecting delivery to be faster while the increase of global trade, development of e-commerce and online sales is raising flows in Latin America (LatAm), Africa and Asia, especially India, but it is all about being global.

“Europe remains an important market. We are wondering if growth of airfreight is going to flow the same as increases in passengers,“ Schmoll says. ECS is targeting every market, but specifically Asia, the Indonesian subcontinent and LatAm. The mature European market is fairly static, according to Air Logistics Group chief operating officer, Stephen Dawkins. His company is focusing its attention on Asia, where it thinks the strongest growth opportunities exist. “There is year on year double digit growth in Asia through Australia, Hong Kong, Singapore and others. We are growing organically and through acquisitions,” he says.

Global markets

Global GSA Group is focusing on LatAm according to its CEO Ismail Durmaz, to grow its footprint in the region. He says it will be representing four or five airlines in LatAm and adds: “We are going to open up four or five offices across Brazil, Argentina, and Bolivia.” Asia continues to offer good growth Durmaz says, and it now represents sales for Air India.

As for the performance of different markets for the HAE Group, its director, Neville Karai, says business to and from LatAm is on the rise and targeted due to high yields, but sales East bound across the Atlantic is down, driven by widely available capacity.

He adds: “Our business to Africa continues to grow as does our business in the Middle East and parts of Asia.” HAE is targeting North America and LatAm, mainly driven by airline networks.

Karai says Europe and Asia are also a focus, as demand is growing for e-commerce and Africa through network development and demand for project cargo and charters. Karai says HAE has won

contracts in Ireland for Singapore Airlines and in the UK for Sri Lankan Airlines.

Kales Airlines Services says airlines still require strong GSA partners who can provide them with quick access to new markets. Kales has planned new acquisitions in the Far East. As for Europe, Kales’ CEO, Peter Kales, says: “The European market is still quite good, although imports from Far East have slowed down. Exports still continue to grow, but not so much felt due to lots of new cargo capacity...by the Middle East carriers.”

As competitive as the market is, there are growth opportunities for GSAs in Dawkins’ view, as e-commerce, pharma and mail thrive. “In the medium and long-term people are ordering more from the likes of Alibaba. E-commerce is the future for the next five to 10 years.” Dawkins sees plenty of room for growth as sales through third parties only account for 20 per cent of the market: “If third party sales continue to grow and we can maintain the yields, then there will be good growth. Airlines are looking to improve sales and the GSA is key to growing business.”

Karai also sees growth being driven by pharma and e-commerce, as companies are feeding postal lines and business to consumer GSAs. Growth will be mainly through capacity, Karai feels, but with slow economic growth and increased competition,

it remains a, “buyers market,” where good service is the minimum requirement, but yields will decline as carriers work to increase market share. Like Karai and Dawkins, Schmoll says e-commerce is important along with pharma and ECS is focusing on these areas. He explains that ECS now represents Royal Air Maroc in the US, Ukraine International Airlines in Turkey, Jordan and China, and SkyGreece Airlines in Slovakia.

In the view of Durmaz, GSAs must change and diversify their services. He tells ACW that Global GSA Group is among three firms tendering to operate Maastricht Aachen Airport. Durmaz says the company wants a hub in Europe where it can service carriers, as the market is changing and is trying to think like an airline.

“If the airline sees the GSA as a customer, saying no to a GSA is more difficult. We would like to not only be the GSA, but want to offer trucking, handling and other services, becoming a partner with the airline,” Durmaz says. He adds the Global GSA Group is changing its model, and winning the tender would add a new dimension to the business. “As a GSA we are in between and need to take the risk and have assets. I do not think the kind of GSA we have now will stay,” Durmaz adds.

Business is tough for European GSA’s especially within Europe, but there are still global opportunities to take advantage of.

durmaz As a GSA we are in between and need to take the risk and have assets. I do not think the kind of GSA we have now will stay

ACW 29 JUNE 2015

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ICELAND REPORT

I

celand will become the first European country that hit the financial crisis in 2008 to beat its pre-crisis peak of economic output this year. Combined with a reduction of capital controls and tempered by the 39 per cent tax on investors looking to take their money overseas, it continues to make progress.

All of which is good news for its growing and strategically important airfreight business. The country’s airline Icelandair has been

Post-crisis peak at last

the main catalyst in bridging North America and mainland Europe through Iceland. In May, it announced further expansion of its global network with a new year-round service from Chicago O’Hare International Airport. Flights will begin next March with four weekly round trips to Iceland on Mondays, Wednesdays, Fridays and Sundays, with onward connections to more than 20 destinations in Europe. According to the International Air Transport Association’s (IATA) electronic air waybill (e-AWB) statistics, the company’s airfreight division Icelandair Cargo is leading Europe in e-AWB penetration with 46.1 per cent for March 2015 on e-AWB use from Keflavík; an increase of 12.7 per cent from February. Icelandair Cargo had set a target of 40 per cent for the end of 2015. Icelandair Cargo managing director, Gunnar Már Sigurf-

innsson, tells Air Cargo Week (ACW) that both export and import figures shaped up well for the first part of 2015. “In May, we were threatened with one of the biggest strikes in the history of Iceland and as a result we saw a slowdown in imports, but despite this the figures have been acceptable. European markets remain on a par or slightly up on the previous year, but the most growth in our network is between Iceland and North America where we are seeing good export numbers from Iceland,” he says.

The addition by Icelandair Cargo of a freighter flight to Boston in late 2014, early 2015, proved successful and it plans to reinstate the service for the late 2015, early 2016 period. “We are using passenger aircraft to all the destinations we have and this is reducing the need for extra freighter flights, though we do have one more flight to [John F Kennedy International Airport in the next few months],” Sigurfinnsson says.

From March 2016, Icelandair will start operating Boeing 767300, flying them on its key bellyhold routes to Boston, New York, London Heathrow and Amsterdam. “This is a big change for us as we will be able to multiply our belly capacity to those markets at the same time,” says Sigurfinnsson. “We are eagerly anticipating this change as it will not only allow us to offer more capacity, but also improve the quality of our service, offering a containerised service on passenger flights. We will continue to operate our two freighter flights between Iceland to North America and Europe.”

Expanding in square metres

Icelandair Cargo underlined its ambitions for expansion with the opening of a 1,000 square metre cooled area extension to its warehouse facilities in Keflavik Airport in May, and at the same took over the sales and marketing of airfreight services for Air Iceland. Air Iceland, which operates a freight department for domestic flights, has seen an increasing growth in airfreight between Iceland, Greenland and the Faroe Islands and decided the more specialist Icelandair Cargo would better serve its customers on international routes. Air Iceland’s freight division joined Icelandair Cargo staff from 1 May, but remain at Reykjavik.

Air Iceland will continue to receive and deliver cargo at its destinations using its own aircraft.

Iceland’s Cargo Express, established in 2008 and representing air cargo sales for several airlines flying in and out of the country, reports overall exports and imports as being, “more or less flat,” compared to last year. Cargo Express managing director, Róbert Tómasson, tells ACW: “Despite this our numbers are up by approximately 20 per cent year on year so we are pleased with our increased market share of the Icelandic market.” Expansion

by Icelandic low-cost carrier WOW has added year-round destinations such as Dublin, Amsterdam, Boston and Baltimore to the Cargo Express network.

Air Atlanta Icelandic provides aircraft, crew, maintenance, and insurance services, or ACMI services. Atlanta senior vice president for sales and marketing, Baldvin Hermannsson, tells ACW: “On the freighter side of things, we continue to grow, we just recetly added [aircraft] and probably will add another one or two for the remainder of the year or in the next six to eight months. Most likely leased unless we got the right aircraft, at the right price.” Most of the aircraft will be operating Hong Kong to Europe, connecting Eastern Europe. Atlanta has also been looking for opportunities for Airbus A330 for the passenger market. It has one A330 and it is looking at taking on one or two more within 12 months. It maybe on the top of world, but Iceland’s industry is growing in all the directions of the compass.

HERMANNSSON On the freighter side of things, we continue to grow, we just recently added [aircraft].

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