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The weekly newspaper for air cargo professionals Volume: 19

Issue: 34

29 August 2016

Air cargo markets continue to remain weak, ACI says

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irfreight markets continued to show weakness in the first six months of 2016 and grew year-on-year (YOY) by 0.5 per cent, according to the Airports Council International (ACI). The airport trade association says the sluggish performance was largely due to subdued growth in emerging markets and developing economies and only a modest recovery in advanced economies. In the first half of 2016, the 0.5 per cent uplift in global volumes comprised of a 0.3 per cent rise in international freight and one per cent growth in domestic cargo. Three regions plunged into negative figures in terms of YOY changes in volumes on a year-todate basis. North America, Latin America-Caribbean and Africa posted freight traffic losses of 2.1 per cent, 0.9 per cent and 0.1 per cent, respectively. However, Asia-Pacific and Europe reported traffic growth of one per cent and 2.3 per cent respectively, while the Middle East saw 4.5 per cent growth.

ACI explains: “The lacklustre performance of global industrial activity and trade due to China’s economic transition, the weak growth of the Japanese economy and the weaker than expected growth of the United States, combined with recessions in Brazil and Russia, have all had a negative impact on airfreight markets.” Europe’s positive growth of 2.3 per cent was driven by the three largest markets in Germany, the UK and France. They saw a 1.9 per cent, 3.6 per cent and 3.6 per cent uplift, respectively, in the first six months of 2016, but struggling

Airlander 10 crash-lands

Turkey fell a sharp 12.4 per cent. Asia-Pacific’s one per cent rise in the first half of the year, was down to domestic freight, which grew 2.4 per cent, while international cargo was up 0.5 per cent. China, accounting for over a third of traffic in the region, grew 3.9 per cent, Japan - the second largest market dropped 2.7 per cent during the first half of 2016. Hong Kong saw a 0.8 per cent fall, but India posted a significant 9.6 per cent rise. Malaysia and Indonesia saw declines of 18.5 per cent and 8.8 per cent, respectively. The Middle East continues to

The world’s longest aircraft the Airlander 10 airship was damaged while landing during its second test flight at Cardington Airfield in Bedfordshire (UK) on 24 August - a week after its first flight on 17 August. The £25 million ($33 million) 92-metre long airship sustained damage to its cockpit after nose-diving, and developer, Hybrid Air Vehicles, says: “The Airlander experienced a heavy landing and the front of the flight deck has sustained some damage, which is currently being assessed. Both pilots and the ground crew are safe and well and the aircraft is secured and stable at its normal mooring location.” It later said the vehicle’s mooring line did make contact with a power line outside the airfield but no damage was caused to the aircraft from it. The Airlander 10 will be able to stay airborne for up to five days and can be used to carry cargo payloads. Hybrid hopes to build 10 a year by 2021.

capitalise on the strategic location of airports but its 4.5 per cent growth is slower than usual. Qatar was the largest contributor with Doha up 20.3 per cent for the first half of 2016, equivalent to an additional 129,230 tonnes. Latin America-Caribbean 0.9 per cent fall was largely driven by the decline in traffic in Brazil, which was down 9.4 per cent. Colombia and Mexico increased by 0.3 per cent and 5.8 per cent, respectively. Out of 22 countries in the region reporting figures to ACI, 10 posted traffic losses, evidence of the fragile state of air cargo in the region. North America’s fall of 2.1 per cent included a 0.6 per cent growth in domestic freight, but international fell 5.7 per cent. In Africa, security risks in Northern Africa curtailed traffic while plummeting oil prices stunted economic progress. The freight decline of 0.1 per cent included modest growth in South Africa of 2.2 per cent, but there was dips in other major markets, such as Egypt (-7.4 per cent), Kenya (-6.9 per cent) and Nigeria (-1.7 per cent).

TIACA’s Brittin to retire

Doug Brittin (left) is to retire as the secretary general of The International Air Transport Association (TIACA) after three years in charge. A selection committee chaired by TIACA vice chairman, Sebastiaan Scholte, has been established and will review and recruit candidates to replace him. Brittin will stay with TIACA in an advisory capacity once a successor has been appointed to smooth the transition. Brittin says: “TIACA is the only association representing the entire air cargo community and the role of secretary general is a vital one. “I continue to be dedicated to attaining our goals on behalf of all segments of our industry, and am looking forward to a great ACF [Air Cargo Forum] in Paris in October.” TIACA chairman, Sanjiv Edward says it is “business as usual” in the meantime and TIACA is looking forward to ACF in October.

PACTL POSTS 2% UPLIFT IN VOLUMES

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QATAR KEEPS IMPROVING AND INNOVATING

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YIELDS SLIP AT FINNAIR CARGO

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NETWORK EXPANSION HELPS SCHIPHOL GROW

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Smyth appointed as chief at WFS WORLDWIDE Flight Services (WFS) has appointed former Menzies Aviation chief Craig Smyth as its new chief executive – replacing Olivier Bijaoui who stepped down from the position in July. Smyth will take the helm at the cargo and ground handler on 29 August. He spent 20 years at Menzies. WFS was taken over by Platinum Equity in October last year and has made a few acquisitions since, buying a 51 per cent stake in Fraport Cargo Services and purchasing US cargo handler Consolidated Aviation Services in January. Platinum Equity’s head of the European investment team, Bastian Lueken says: “Craig has the right combination of leadership skills and industry expertise to build on WFS’s success and deliver on our long-term goals for the company. “He is one of the most experienced and respected executives in the aviation services industry and has proven himself over a distinguished 20 year career.” Smyth says: “I’m thrilled about the opportunity to join WFS, an ambitious and fast growing company with a sterling reputation for customer service.” He will be located in Paris.

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NEWSWEEK

LM-100J commercial freighter making progress

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ockheed Martin’s development of the first LM-100J Super Hercules commercial freighter continues to make “significant progress”, reaching major production milestones at the Lockheed facility in Marietta, Georgia. The LM-100J is the commercial version of Lockheed’s C-130J Super Hercules aircraft. The LM-100J will perform as a multi-purpose freighter. Lockheed says recent production accomplishments include the completion of the aircraft wings; delivery of the empennage, manufactured by the Tata Lockheed Martin Aerostructures joint venture in India; commencement of cabtop construction; and the arrival of the LM-100J’s cargo deck, manufactured at Lockheed’s facility in Meridian, Mississippi. In July at the Farnborough International Airshow, it was announced Brazilian logistics firm Bravo Industries had agreed

to purchase 10 LM-100J Super Hercules freighters. Bravo’s Logística division, which consists of Bravo Cargas and Bravo MRO (maintenance, repair and overhaul), will operate the LM-100J for a range of air cargo operations in Brazil. Lockheed’s vice president and general manager of air mobility and maritime missions, George Shultz says: “Our existing L-100 operators have repeatedly shared

with us that the only replacement for a Herc is a Super Herc, and we are proud to meet this demand with the LM-100J. There is a significant global requirement for commercial freight operations to support operations in more austere areas.” The first LM-100J will progress through final production phases over the next few months, with an anticipated first flight in the first half of 2017 with an FAA type certificate update prior to delivery in 2018.

EBIT plunge for Qantas Freight

QANTAS Freight says business is well positioned for the future despite EBIT falling by 44 per cent in the 2016 financial year due to a tough market and weak yields. Earnings before interest and tax (EBIT) for cargo was down to 64 million Australian dollars ($48.8 million) in the 12 months up to 30 June 2016, which Qantas Freight says was because of the difficult market and the end of favourable legacy agreements with Australian Air Express hit yields. Qantas Freight says it is well positioned for the future with new long-term deals with Australia Post and Toll for the domestic market and international opportunities on Australia – China – US routes. Profits for the airline were up 57 per cent to A$1.5 billion, which Qantas says was the best in its 95-year history. Domestic EBIT for both Qantas and Jetstar was up to A$820 million and international EBIT was A$722 million.

DHL and Budapest sign agreement DHL Express and Budapest Airport have signed an agreement to develop a new 13,000 square metre base, to be ready by July 2017. The facility will be built near Terminal 1 and will accommodate 300 employees in a large warehouse and office complex. At present, DHL Express connects Budapest with two aircraft, one Airbus A300-600F to its European hub in Leipzig and inbound volumes from Brussels on a Boeing 737. It is the second large-scale investment by the Deutsche Post DHL Group in recent years, following DHL Global Forwarding moving into a facility in the Airport Business Park in 2013. Budapest Airport chief executive officer, Jost Lammers says: “The construction of the new DHL Express facility is an integral part of our BUD 2020 development program, which earmarks 50 billion HUF ($182 million) for airport development over the next five years.” DHL Express Hungary managing director, Zoltán Bándli says the investment will reach 25 million Euros ($28 million).

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NEWS WEEK CHEP wins ULD management contract with LATAM Airlines

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ATAM Airlines Group has awarded the management of its unit load devices (ULDs) to CHEP Aerospace Solutions. The agreement will see CHEP managing one of the largest outsourced ULD fleets in the industry, and meet LATAM’s ongoing objective to deliver operational efficiencies. Following the acquisition of LATAM’s existing 13,000 ULDs, CHEP will start operations on the 1 September 2016. As part of the five-year agreement, CHEP will have ULD management staff in Santiago, Chile and São Paulo, Brazil as well as opening a regional operations centre in Miami, US to support ULD management functions across the Americas. LATAM Cargo senior vice president of operations and services, Carlos Larrain says the management of ULDs is a critical business

activity, and the decision involved an in-depth and detailed analysis of several ULD management options offered in the industry. He adds: “The unique capability of CHEP to combine ULD management with its global ULD repair services was the decisive factor. We chose CHEP’s hybrid ULD solution given that the containers are part of a dedicated, co-branded fleet retaining weight savings, and the pallets being supplied from CHEP’s pool. “Thanks to CHEP’s network synergies and

lean business model LATAM will be able to operate with approximately 30 per cent less ULDs. “This considerably reduces operational costs and improves efficiencies, allowing the company to focus further on its clients’ needs and providing the highest level of service in the industry.” CHEP Aerospace Solutions president, Dr. Ludwig Bertsch (second left) says CHEP is committed to providing the highest level of service to LATAM, adding: “With LATAM’s dense network in South America, CHEP now serves even more airports on all continents. “The participation of such a strong airline in our unique ULD pooling model will provide further synergies and more benefits for all our customers which confirms that sharing standardised assets across the industry drives cost savings and improves efficiencies.”

WorldNews THE board and membership of the International Air & Shipping Association (IASA) have paid tribute to founding member and former president, Al Hageman who has passed away. IASA says it is “deeply saddened” to learn of the death of Hageman who was a key figure in the establishment of IASA in 1971, which it says allowed independent forwarders to compete with integrators and worldwide operators. DUBAI World Central handled 430,132 tonnes of freight in the first half of 2016 – a fall of 2.9 per cent compared to the first half of 2015 when the airport handled 443,011 tonnes. Dubai’s second gateway is the main freight hub for the Emirate and is home to 34 scheduled cargo operators.

Atlas agrees deal with FedEx

ATLAS Air Worldwide Holdings has signed a five-year agreement with FedEx Express to provide it with five Boeing 747-400 Freighters for peak flying seasons beginning in 2017 and lasting through to 2021. Peak season flying usually occurs in December and potentially earlier. An agreement to provide five aircraft for the 2016 peak season flying is already in place. Atlas Air president and chief executive officer, William J. Flynn says: “We have worked closely and successfully with FedEx for many years, but this is our first agreement that allows both companies to plan for the longer term. “We are excited to continue to serve FedEx and its customers.”

IAG to run short-haul freighters

IAG Cargo has started two new short-haul freighter routes operating from Madrid to Amsterdam and Frankfurt to London via Paris. The Airbus A300 freighter Madrid – Amsterdam service was launched on 18 August and will enable easier access for shipments between the Dutch capital and Latin America. The A300 has a 42 tonne payload and IAG Cargo says the operation will significantly reduce transit times via truck. The same aircraft will be used on the once a week Frankfurt – Paris – London route, which starts on 24 August and trucking connections will be available for the Frankfurt – Paris flight from London Luton to Heathrow and Gatwick. IAG Cargo head of sales, Camilo Garcia says: “This European capacity expansion comes as a direct result of customer demand and complements upgrades made to the Milan and Oporto services at the beginning of 2016.” “The new Madrid – Amsterdam service in particular will enable highly efficient access to and from the growing Latin American pharmaceutical market, while the new Paris, Frankfurt, London “triangle” enables us to offer important capacity in two key European markets.” The Madrid – Amsterdam flight will operate on Thursdays and Saturdays and the Frankfurt – Paris – London route will fly on Wednesdays, adding to the Saturday Paris – London.

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NEWSWEEK Cambodia the ticket for Panalpina

PANALPINA has expanded into Cambodia with an office in Phnom Penh offering air and ocean freight services, customer brokerage, in-land transportation, cross-border trucking, container freight station consolidation and warehouse and storage services. The freight forwarder says the South East Asian nation offers opportunities in the textile, agriculture and construction industries. Airfreight volumes at Phnom Penh International Airport grew 14 per cent in 2015, with demand for Cambodian textiles coming from Europe and the US, with garment and

footwear exports growing 6.7 per cent compared to 2014, valued at $6.3 billion. Panalpina Cambodia country manager, Benny Ong says: “Our new office in Cambodia demonstrates Panalpina’s interest in the emerging economies we believe will provide strong opportunities for business growth. “Having a physical presence in the country means that our customers can feel confident conducting business here, knowing that Panalpina is on site to provide the services they need to support their logistics and freight forwarding requirements.”

PACTL posts 2% uplift in volumes

SHANGHAI Pudong International Air Cargo Terminal (PACTL) has seen its strongest first seven months of the year in its history with growth of two per cent to 919,461 tonnes. Import volumes were up 2.9 per cent to 382,929 tonnes while exports rose 1.4 per cent to 536,532 tonnes. International imports were up by 3.6 per cent to 355,920 tonnes though domestic imports fell by 4.8 per cent to 27,009 tonnes. For exports, international volumes were up 1.4 per cent to 504,707 tonnes and domestic exports saw a two per cent increase to 31,825 tonnes. PACTL vice president, Lutz Grzegorz (pictured) says: “Despite challenging market conditions, we succeeded in beating last year’s record results within the first seven months of 2016. First of all, this is due to the fact that international imports and domestic exports are increasing again. “Secondly, we managed to grow our busi-

ness with both existing and new customers by continuously maintaining and improving our excellent service and quality standards and by investing in our infrastructure.” In the first seven months of 2016 PACTL gained five new customer airlines including Aeroflot and Iberia Airlines. PACTL also officially inaugurated its new International Air Transport Association Centre of Excellence for Independent Validators (CEIV) certified Cool Centre in April 2016. The new eco-friendly cool centre (pictured above) was opened just after it obtained CEIV and has boosted cool chain activities. The centre provides an annual handling capacity of 100,000 tonnes of temperature-sensitive goods and it is spread over more than 3,500 square metres. Commodities handled include biomedical and pharmaceutical products, dairy products, seafood, exotic fruit and vegetable, frozen meat and poultry.

GDP certificate for Yusen in Indonesia

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usen Logistics Indonesia has been awarded good distribution practice (GDP) certification for handling pharmaceutical cargo. The company is the first logistics business in Indonesia to acquire the industry standard of quality for the storage and transport of medical and pharma products. Yusen Logistics Indonesia says with demand for advanced quality rising, it invested in acquiring GDP certification to verify the quality of its

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services to customers. For air shipments, through using cargo management techniques, Yusen Indonesia says its Customs clearance services are faster and more efficient; achieving greater service accuracy. As part of Yusen Logistics’ medium term business plan, “GO FORWARD, Yusen Logistics – Next Challenges” - the firm has taken measures to expand its healthcare logistics services across Europe, most recently opening a new GDP warehouse at Amsterdam Airport Schiphol.


NEWS WEEK

Saudi Arabia awards SATS cargo handling tender at KFIA

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ATS has become the first international cargo handler to win the tender for a cargo handling licence to operate in Dammam, Saudi Arabia – at King Fahd International Airport (KFIA). The tender has been awarded subject to terms and conditions being agreed by both parties and marks the first step by the General Authority of Civil Aviation of Saudi Arabia (GACA) to introduce a second player into the cargo handling market at KFIA and in the Kingdom of Saudi Arabia. Granted to its subsidiary SATS Saudi Arabia, the cargo handling concession is valid for 22.5 years and SATS will build a new cargo terminal in the vicinity of KFIA and within the Kingdom’s new cargo village. Construction of the new facility is expected to be completed by the first quarter of 2019. The facility will be capable of handling 150,000 tonnes of cargo annually. It will also incorporate a dedicated cold chain facility to meet the growing needs of the pharmaceutical and food industries to ship high value, temperature-sensitive goods. Saudi Arabia is a key aviation hub in the Middle East and is the second largest in terms of cargo throughput among the Gulf Cooperation Council member states. GACA, KFIA and SATS have formed

a strategic tripartite partnership with the aim of elevating service standards and introducing new service offerings at Dammam to position KFIA as a key air cargo hub in the Eastern Province of the Kingdom of Saudi Arabia. King Fahd International Airport director general, Turki

Al-Jawini says: “We believe this strategic partnership with SATS will further enhance KFIA’s position as a gateway for cargo in the Eastern of Saudi Arabia. “The introduction of a second cargo terminal operator will result in enhanced services, options and increased air cargo capacity for the marketplace. KFIA looks forward to working together with SATS to grow cargo activity and services.” Through its experience and expertise in operating cargo terminals in China, India, Indonesia, Oman, Singapore, Taiwan and Vietnam, SATS says it will introduce high-end cargo handling standards and new technology to ensure an efficient and effective cargo terminal operation. SATS president and chief executive officer, Alex Hungate says: “We have confidence in the future of the Saudi economy and in the continued growth of Dammam as the major industrial city in the Eastern Province. We look forward to working with our airline customers to connect KFIA into our growing network of cargo hubs across Asia and the Middle East.” This investment builds on SATS presence across Asia and the Middle East and aligns with its vision of feeding and connecting Asia.

A350 set to boost business for Virgin

VIRGIN Atlantic Cargo says its new $4.4 billion order for 12 Airbus A350-1000 aircraft will boost its cargo capacity and in turn provide added benefits to customers. The airline says the investment demonstrates the strength of its commitment to customer experience as it continues to focus on delivering sustained profit in the long term. It is part of a fleet modernisation programme, which will see 50 per cent of Virgin Atlantic’s aircraft replaced in a six-year period. The carrier says it will also deliver a significant improvement in lower deck cargo capacity of between 10 per cent and 22 per cent depending on configuration. Virgin senior vice president for cargo, John Lloyd says: “We are confident the A350 will be the best cargo aircraft we’ve ever had in our fleet when we start to take delivery in early 2019. It is another demonstration of the airline’s focus on investing in the future for our customers.” The A350-1000 will replace Virgin’s remaining Boeing 747-400s and Airbus A340-600s. Initially the aircraft will fly to key US destinations from Heathrow Airport.

Freight load centre opened by Qatar Airways QATAR Airways Cargo has launched its Freight Load Control Centre in Doha, and it says the system will be an integral part of effective pallet loading procedures for its freighters. It says automating the weight and balance system will simplify manual processes by reducing the time required to set-up the load-sheet prior to flight departure. The system reduces time for load planning and weight check processes, allowing the carrier to manage operational and flight turnarounds. The carrier says with the support of accurate data from the system it will be able to optimise payload and minimise lateral imbalance of each aircraft, significantly reducing fuel consumption. Chief officer for cargo, Ulrich Ogiermann says: “Automation and technology is seen as a highly strategic enabler for any business. In addition to the numerous benefits this brings to customers and the business, the reduction in fuel consumption will further reduce carbon emissions as part of our commitment to environmental management.”

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AIRLINE SURVEY Qatar keeps improving and innovating with 21% growth

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atar Airways Cargo has seen freight tonne kilometres increase by 21 per cent so far in 2016 and is working on continuing to improve and innovate services for customers, chief cargo officer Ulrich Ogiermann (pictured) tells Air Cargo Week (ACW). It has seen the launch of a number of new services, both for freighter and passenger bellyhold flights, with more due this year. Qatar has also launched its QR Express product for airport-to-airport time-critical shipments and QR Live for transporting live animals. Other premium products such as QR Pharma for pharmaceuticals and QR Fresh for perishables have also been performing strongly. Ogiermann says: “Further tonnage growth is expected for the rest of 2016 as more aircraft join the expanding fleet and more destinations are

added to our network. The total freighter fleet will increase to 22 freighters by 2017.” He describes the pharmaceuticals, manufacturing, changing trade patterns and e-commerce as the bright spots of global trade while perishables, garments and textiles are also growing. Ogiermann tells ACW: “Pharmaceutical products are of great importance for us as we have been working hard to get trade lanes certified by the big shippers. We see tremendous growth in the pharmaceuticals, textiles and perishables air freight this year.” Qatar is also putting its QR Charter product to good use, with Ogiermann commenting: “Increasing demand for large charters for the oil and gas, construction, airline, equestrian events and entertainment industries drove us to add a second B747F to our fleet and enhance our QR Charter product.” Infrastructure projects means there is

high levels of cargo demand, Ogiermann says: “With large-scale events such as Qatar Rail project and the Qatar 2022 World Cup on the horizon, the State of Qatar is seeing substantial growth across a wide range of infrastructure and industrial-related projects that stimulate demand for cargo-related services.” Qatar Airways has expanded at an average of 40 per cent year-on-year and to keep up this growth, it has added new destinations and added more aircraft to its fleet. The airline has started six new freighter destinations this year to Dallas, Budapest, Prague, Ho Chi Minh City, New York and Halifax. Passenger routes with bellyhold capacity have started to Los Angeles, Ras Al Khaimah, Sydney, Boston, Birmingham, Adelaide, Yerevan, Atlanta, Marrakech and Pisa. Ogiermann says Qatar plans to become a major player in the Transpacific, Australian and South American markets and expanding the fleet will help it do this. “This major enhancement of our network is made possible by the constant growth of our fleet, which now includes ten Boeing 777F, eight Airbus 3330F and two Boeing 747F aircraft, as well as the opening of its new European hub in Luxembourg.” Based at Hamad International Airport in

Doha, Qatar Airways Cargo is at the crossroads of East and West, within six hours flying time of 80 per cent of the world’s population. A second cargo terminal is being constructed at Hamad, which will provide an additional three million tonnes of capacity, bringing the total to four million when scheduled for completion in 2018. Further expansion will take place once this is completed eventually bringing the total capacity to seven million tonnes. Ogiermann believes though innovations such as 3D printing, mode shift, security, in-shoring and new modes of air lift such as blimps are business threats, he does not see them as existential dangers. He says: “Air cargo serves a specific function in the supply chain and as long as we keep offering an affordable, efficient and reliable service, this will remain the case.” The industry may be facing challenges but Ogiermann remains confident about Qatar’s future, telling ACW: “Despite this challenging environment, our investments in qualified staff, a flexible freighter fleet, a well-planned network and visionary management, we are confident that with ongoing commitment to investment and expansion we can continue to overcome the challenges in this industry.”

Air T Q1 losses increase to $8 million Air T has seen losses increase from $736,000 in the first quarter last year to $7.99 million following the acquisition of printing technology company, Delphax Technologies. Air T, which provides overnight air cargo services for FedEx, saw revenue increase by 36 per cent to $30.5 million during the period despite the loss. Overnight air cargo revenue increased by 29 per cent to $3.7 million with operating income rising to $1.07 million from $979,000 helped by higher administrative fee revenues and the greater fee amount paid under the dry-lease agreements. Maintenance revenue increased due to

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higher hourly maintenance labour rates under the agreements. Ground equipment sales revenue increased by five per cent to $4.2 million and losses decreased by 73 per cent to $141,000 while ground support services revenue was up 25 per cent to $6.8 million and operating losses down 67 per cent to $110,000. Through its subsidiaries of Mountain Air Cargo and CSA Air, Air T provides feeder services to FedEx on daily flights throughout the Eastern US, upper Midwest and the Caribbean. Air T pilots make over 100 daily flights via FedEx Cessna Caravans and ATR aircraft.


AIRLINE SURVEY

North American profits fall and load factors down

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irline profits fell by 15 per cent to $5.6 billion in the second quarter of 2016 due to declines in North America, the International Air Transport Association (IATA) says in its Airlines Financial Monitor. The profits of the 22 sampled airlines were down from $6.7 billion in 2015 with North America seeing the biggest fall from $5.6 billion in 2015 to $4.3 billion in 2016. Asia Pacific profits increased from $171 million to $281 million, Europe was up from $876 million to $980 million and Latin America rose from $29 million to $53 million. IATA says there is both good and bad news for freight, commenting: “The latest freight volumes data point to an improvement from the weak conditions seen earlier in 2016. “But familiar headwinds persist, and low

freight loads are keeping downward pressure on cargo yields and revenues.” The freight load factor was 42.5 per cent in the first half of 2016, 2.3 percentage points below the same period last year. IATA says: “The seasonally-adjusted load factor has recovered somewhat from the lows seen in Q1 2016. But low freight loads are keeping yields and revenues under pressure, and remain a particular headwind for Asia Pacific carriers, for whom cargo is a key part of their business.” Freight capacity has grown due to increasing numbers of passenger aircraft with bellyhold space. Capacity growth has outstripped demand for the 16th consecutive month, particularly in Africa, where available freight tonne kilometres are 22 per cent higher than a year ago.

Yields slip at Finnair Cargo

Finnair Cargo has seen revenue fall by 8.5 per cent in the first half of 2016 to 82.2 million euros ($93 million) with yields taking a hit due to overcapacity in the market. After a difficult year in 2015, volumes are recovering again in 2016 with the first half seeing a 14.7 per cent increase to 70,977 tonnes. Revenue tonne kilometres (RTK) have increased by 15.4 per cent to 427 million and available tonne kilometres are up by 7.3 per cent to 725 million. Cargo traffic unit revenue per RTK has fallen by 20.7 per cent to 19.25 cents. Revenue for the Finnair Group rose by 3.8 per cent to 1.1 billion euros in the first half with losses increasing 16.1 per cent to 16.1 million euros. Finnair Group chief executive officer, Pekka Vauramo (pictured) says: “In the second quarter, our organisation continued to prepare for accelerated growth in the longer term in accordance with our strategy. The training and supplementary recruitment of flight personnel progressed as planned. “After taking delivery of two new A350 aircraft during the second quarter, we now have six of the new aircraft in our fleet.” Finnair has ordered 19 Airbus A350 XWBs from Airbus, of which three were delivered in 2015, joined by another three so far this year. Another should join the fleet by the end of the year, along with another four in 2017 and all 19 by 2023. Finnair plans to phase out the last Airbus A340 by the end of 2017 as it replaces them with the A350. Finnair is planning efficiency improvements to make savings of 20 million euros by the end of 2017, with plans to be finalised in the next few months. Vauramo says: “In order to be able to invest in growth and continue on our chosen path, we must ensure that our unit costs continue to decline.”

Avianca Cargo revenue declines Avianca Cargo posted a revenue fall of 5.4 per cent in the first half of 2016 to $298 million. Cargo revenue was also down in the second quarter, declining by 5.5 per cent to $151 million. Revenue tonne kilometres were up by 0.3 per cent to 610 million though capacity in available tonne kilometres increased by 9.1 per cent to 1.1 billion pushing the load factor down to 52.8 per cent from 57.4 per cent in 2015. Revenue for parent company, Avianca Holdings fell to $1.9 billion in the first half of 2016 from $2.1 billion last year and it made a loss of $20 million compared to a profit of $10.6 million in the same period of 2015.

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CARGO GATEWAY AMSTERDAM

Network expansion helps Schiphol grow tonnage

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onnage at Amsterdam Airport Schiphol was up two per cent yearon-year (YOY) in the first seven months of 2016 - as July boosted the figures when YOY growth was 4.4 per cent reaching 139,650 tonnes. During the period, Europe has performed strongly, up YOY by 42.6 per cent and driven by the addition of new carrier Silk Way Airlines, from Baku, and Jet Airways to India, while AirBridgeCargo Airlines, has extended services via Moscow, and DHL and Cargolux have also upped frequencies. Schiphol’s network is set to grow further and cargo director, Jonas van Stekelenburg (pictured) says it is in a number of promising discussions with carriers, and is looking to announce more at the end of the year.

The Far East has delivered despite concerns about the Chinese economy, as imports were up YOY by 4.1 per cent in the first seven months of the year. Indeed, van Stekelenburg puts much of the growth down to Schiphol’s strong connectivity into Asia Pacific, the hub’s biggest market. He is confident the airport remains an attractive hub for the rising amounts of e-commerce shipments coming from the region despite uncertainty in China, and it experienced only a 0.9 per cent YOY dip for Asia during July. For 2016 as a whole, van Stekelenburg predicts based on Schiphol’s own performance and the rest of the market, it will see YOY growth of two per cent on 2015. He explains: “The upcoming half-year will further boost our stronger

verticals such as perishables and drive up the high-tech market, particularly from Asia, as more and more gifts are bought online.” Schiphol is somewhat of the flower hub in Europe, which keeps its performance in the perishables sector strong and steady, while van Stekelenburg says it is also seeing promising results in pharmaceuticals and e-commerce. Pharma has been boosted in part by the Pharma Gateway Amsterdam (PGA) initiative at Schiphol, put in place by the whole community and van Stekelenburg says it means through clarity and tracking Schiphol is providing the “best service ever” to pharma customers. He adds: “E-commerce has surprised us with the performance; through conversations with Dutch Customs, with whom we work closely, it is clear that the number of small shipments are up, and they are seeing an increased number of declarations each month. We see this particularly as an area of opportunity to improve service delivery.” 2016 has not shown the same strong increase in bellyhold tonnage, which it saw last year but rather held at consistently high levels, a trend it attributes to the increase in e-commerce shipments, as smaller parcels are transiting Schiphol in ever increasing numbers, a sentiment he notes is echoed by colleagues in Customs.

Expansion needed

Integrators are doing particularly well, while freighters and bellyhold are currently on par, with full freighter movements up 7.1 per cent in the first seven months of 2016. Expansion of cargo infrastructure is also on the cards and van Stekelenburg says he is in the planning stage with all stakeholders, but the hub needs to make sure it gets development right from the very beginning. But it is much needed as due to passenger numbers rising each year, Schiphol is facing new considerations regarding airport capacity, especially when planning any expansion. He says: “A month ago airport movements at Schiphol were second largest in Europe with an almost 10 per cent increase compared to last year. We celebrate such positive results and look forward to tackling the challenges they present.

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“Currently we’re considering how we would accommodate for idle aircraft and other spaces, a decision we expect to involve our whole cargo community in making.” The big opportunity for Schiphol is the pharma sector in van Stekelenburg’s opinion as the PGA initiative is able to provide customers with the levels of quality and transparency they expect: “Forwarders, handlers and airline members of PGA work together to devise and hold one another accountable for a single set of high quality pharma handling standards.” Hot on the heels for opportunities is e-commerce, which is an area of huge growth at Schiphol especially for small parcels and the gateway is embracing the cargo landscape and working with the cargo community on initiatives aimed at providing customers with the best quality they can.

E-freight drive

Like many airports with major cargo flows, digitising processes and going paperless is seen as vital to improve efficiency and drive business. Schiphol was an early adopter of the e-freight process, and is part of the International Air Transport Association 360 program and e-freight at Schiphol continues to grow and now represents 40 per cent of all freight. This is likely to grow further and van Stekelenburg says uptake for the Schiphol Cargo Community’s eLink program, which is based around a smart card enabling paperless transfer of all shipment data to handlers at the airport, has risen steadily throughout 2016. He says Schiphol is committed to working with all sectors of the industry to accelerate the implementation of e-freight across the supply chain, with eLink integral to this, van Stekelenburg says: “The benefits of eLink are significant and has been shown to save up to 25 per cent of time on some ground handling processes. “The elimination of data rekeying also helps with accuracy, which will become even more important as new security initiatives including advance data requirements are brought in. “The challenge is to engage all sectors of the air cargo chain and at Schiphol we are doing just that.”


PAKISTAN

CHAMP partners with Penta for forwarders

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HAMP Cargosystems has formed a partnership in Pakistan with Penta Solutions Private Limited (PSL) - which is aimed at boosting business for small and medium sized freight forwarders. As part of the collaboration, Penta Solutions will introduce Logitude - a CHAMP community software program for forwarders – into the Pakistan cargo community. Penta Solutions’ customers will be able to benefit from access to the cloud based SaaS software of Logitude for air and ocean, enabling them to manage quotes, shipments, bookings and consolidations more efficiently and cost-effectively. CHAMP Cargosystems vice president of global sales and marketing, Nicholas Xenocostas says: “We are delighted with this agreement with Penta Solutions providing instant value to the airfreight market and community in Pakistan. “Small and medium sized forwarding agents can enhance their competitiveness with Logitude. They will be able to reduce costs, time, and data errors. Similarly, they will be able to contribute to the industry’s e-AWB targets by easily adopting e-AWBs without the need of expensive and time consuming IT installations.“ PSL chief executive officer, Hasan Raza says CHAMP is not new to airlines and freight forwarders in Pakistan and has pioneered cargo management systems and a cargo community integration platform, which cargo agents and forwarders have been using for many years and Logitude is the “first true freight forwarder online solution developed for the cloud”. Raza adds: “Logitude professionals combine hundreds of manhours of experience in international trade and logistics solutions. They are committed to providing easy-to-use solutions. Many freight forwarders in the global market already use Logitude.”

Freight forwarders can access Logitude World anytime and anywhere. The software allows them to run their entire day-to-day operations. It supports data messaging, data validation, data sharing with other logistics partners, the storage of messages, printing on demand of labels for AWB and HAWB, interfacing with accounting systems and other business tools. There are three services offered to suit different budgets and business requirements – including Economy Class with full freight forwarding solution with just the essential functionalities; Business Class, which comes with document storage, quotes functionality and customisation ability and is typically aimed at the middle management; and First Class, which connects all critical business functions such as sales, finance, and operations through a full CRM platform.

PIA to upgrade its fleet

BOEING’S vice chairman, president and chief executive officer, Ray Conner (pictured below) has written to Pakistan’s Prime Minister Muhammad Nawaz Sharif to show an interest in converting Pakistan International Airlines’ (PIA) existing B777-300ERs into new 787 Dreamliners. Reports claim his move is driven by the strong growth in the country’s aviation market. Boeing has shown keen interest in transforming PIA’s operations and helping it restore to profitability and take back market share. In the letter, Conner expressed his view that Boeing sees a viable opportunity to convert the PIA’s existing 777-300 ERs into the new 787 Dreamliner to fulfil the vision of the Pakistani PM. He also urged PM Sharif to work with Boeing to complete the substitution process enabling PIA to operate the “most technologically advanced aircraft in the world so that people of Pakistan will “proud to fly” with PIA once again. Meanwhile, PIA’s fleet upgrading and expansion continues as it has also signed a contract for the wet-lease of three Airbus A330s from Sri Lankan Airlines. The contract has been penned after a series of negotiations between the two carriers with the first of these aircraft already delivered, while the rest will be in the coming months. Each A330 aircraft is in brand new condition and start allowing PIA to start regaining its market share and help it meet its new customer offering PIA Premier, which was launched on 14 August to London with three flights from Islamabad and three from Lahore, but will be expanded on other routes in the future. PIA has also expanded its route bellyhold network into Saudi Arabia this year to meet demand in Hajj from 9-14 September. During the 2016 Hajj operation PIA will now operate flights from 10 cities of Pakistan including Islamabad, Karachi, Lahore, Peshawar, Quetta, Faisalabad, Sialkot, Sukkur, Multan, and Rahimyarkhan.

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KOREA Korean and Asiana feeling the impact of falling yields

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oth Korea’s airlines, Korean Air and Asiana Airlines are reporting upticks in business although not across the board. Korean Air, the larger and more established of the two, reported total tonnage carried rose three per cent with Korea outbound the star pupil rising by 10 per cent in a second quarter business summary given to Air Cargo Week (ACW). Capacity rose by a wafer thin 0.7 per cent to 2,687 million available freight tonne kolometres (AFTK) versus 2,669 million AFTK the year previously. However in terms of traffic there was a dip to 2,060 million FTK from 2.071 million FTK in the first quar-

ter of 2015. All this of course added to the pressure on yields which fell 5.5 per cent when measured in terms of the Korean Won but by 10.9 per cent when measured in US dollar terms. Sources at the carrier were approached but problems with sister company Hanjin Shipping, itself a distinct downward pressure on Korean Air’s balance sheet, limited their ability to give information. Luckily, Asiana Airlines the younger and possibly more dynamic of the two could be more open and reported a similar situation adding details about improvements. “During Q1 16, the yield decreased owing to oversupply on

the market and base effect through US West Coast port strike in 2014 and 2015. Fortunately, the decrease rate has narrowed starting from this April. Since this June, the cargo sales volume has surpassed that of the same period last year and we expect this trend to be continued during the second half year as well,” Asiana Airlines’ manager of cargo sales management, Hongkyu Jung explains to ACW. Interestingly Korean Air also reported in their business summary a June improvement with traffic rising 5.3 per cent to 703 million FTK after two months of decline. Among the products being moved are smartphones and display panel manufactured by Korean electronics companies according to Asiana who report its seven US cargo destinations (Miami, Dallas, New York, San Francisco, Seattle, Chicago and Atlanta) generated 45.9 per cent of the whole cargo revenue in the first quarter of this year. This is corroborated by Korean who report that 43 per cent of their cargo revenues in the second quarter came from America whilst China, by contrast, generated only 10 per cent of the total. US Revenues were also down sharply by 15 per cent. Nice though this is for Asiana its maybe not the future as it reported “US routes are showing the best performance while China market emerges,” Jung says. Asiana Airlines operates cargo flights to four destinations (Shanghai, Tianjin, Xi`an and Guangzhou) and mainly transports plastic products and electronic parts for semiconductors and display panels, he adds although there is a surprising new product in the market. “Recently, as many Korean fashion/beauty/cosmetics brands have gained popularity among the Chinese, the volume of those products continue to grow. During the Q2 16, cargo sales to China marks 9.8 per cent of the total sales, showing 1.4 per cent increase compared to the same quarter last year,” Jung says.

The rise of e-commerce

Both airlines have a similar response to the uncertain position they find themselves in: “Asiana Airlines does believe this recent rise of e-commerce will bring a favourable business opportunity thus therefore, all staff in the cargo department is trying their best more than ever to attract clients with globally. We also have interests in transporting high-value added products and special cargo items such as medicine and medical supplies and fresh goods,” says Jung. Korean Air’s response is perhaps the more interesting and also possibly the one with more potential as it wants to provide flexible capacity utilising belly space in its extensive passenger fleet. This gives it a lot of extra capacity to play with. Currently its passenger fleet of 132 is weighted very much towards the long-haul end of the market as befits an airline built on the Trans Pacific market. It is also more of a Boeing than anyone else carrier with 39 B777s, 39 B737s, 15 B747s as well as 10 Airbus A380s and 29 A330s. By contrast its 29 cargo aircraft fleet is all Boeing and is comprised of 17 B747-400Fs, six B747-8Fs and six B777Fs, four of which are due for delivery by the end of this year. This is similar to the smaller Asiana cargo roster of 10 B747F and one B767F. Asiana also have a smaller passenger fleet of just 72 aircraft. There is a precedent for how that capacity is used even if its only the deep reach that having so many aircraft allows for. Korean could serve the emerging economic superpower of Brazil till it closed its Sao Paolo flight and it can access niche markets that bring in different and sometimes lucrative markets. An example here is the seafood market it was able to tap in Canada that served consumers in China by getting live lobsters to them. Minimum uplift is 40 tonnes of the shellfish, but before major Chinese festivals that can more than double to 100 million tonnes. It was the first same direct service to a major Asian hub, Incheon, and it might not be the last with all that implies for operations, consumers and the bottom line.

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