ACW daily 10th May 17

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DA ILY NEWS Wednesday • 10 May 2017

The daily newspaper published in Munich covering Air Cargo Europe 2017

Digitisation is the buzz word

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ooperation, collaboration and digitisation are set to dominate discussions at this year’s air cargo europe and the wider transport logistic event at the Munich Trade Fair Centre.

Speaking at the opening ceremony, transport

logistic advisory board chairman, Dr Michael Kerkloh said it is clear it is all about digitisation, referring to it as the “buzz word of today’.

Kerkloh also hailed the expansion of air cargo europe this year which he said is represented

Qatar expands offering

Qatar Airways Cargo will open a new Climate Control Centre (CCC) next month and is to start a weekly Airbus A330 Freighter service to Heathrow Airport on 3 June.

The announcements were made at air cargo europe yesterday. The CCC is a 2,470 sq m airside transit facility for temperature-sensitive cargo. Qatar has also opened a 6,700 square metre transit facility for courier and mail in Doha with a capacity of 256,000 tonnes.

by all corners of the world and shows how the world is becoming “inter-connected”.

In his opening speech, the German government’s federal minister for transport and digital infrastructure, Alexander Dobrindt MP also highlighted the importance of digitisation

and its role in “enhancing” the collaboration taking place across the logistics supply chain.

During the opening event, key logistics players made up a panel discussion on the e-world and how it will shape the industry in the future .

Amazon Logistics general manager for transport in Germany, Bernd Schwenger called for a change in thinking as a whole within the logistics world. “If we do not manage to switch from supply chain to demand chain then we will run into problems.

"Logistics needs to be in a position to approach and interact with the customers and understand their requirements.”

He said Amazon’s strategy is to always focus on the needs of the customer and anything it introduces comes from the customer.

“Everything is done for the customer and their demands,” Schwenger said.

Panalpina chief executive officer (CEO), Stefan Karlen said the logistics industry is “tremendously challenging” and he said it has to become “more productive and efficient” as customers expect this.

And in the opinion of Flexport CEO, Ryan Petersen software will be the “key differentiator” moving forward for industry players.

This year’s transport logistic is set to attract about 56,000 visitors and exhibitors are spread over the equivalent of 40 football pitches.

Emirates and Cargolux sign partnership Emirates SkyCargo and Cargolux Airlines have signed a memorandum of understanding to work together operationally as part of a strategic partnership.

The MOU was penned at air cargo europe in Munich today and will see the two carriers work together to utilise aircraft capacity.

Emirates SkyCargo will utilise capacity on the Boeing 747F aircraft from Cargolux - to service customers with heavy/outsized cargo.

Both will carriers will also further develop block space and interline agreements for use on each other's networks permitting access to capacity on routes where they do not operate.

As part of the MOU Emirates SkyCargo will also start a freighter service from Dubai World

Central to Luxembourg Airport in June with cargo being handled at the same facility in Luxembourg.

Cargolux will also increase the frequency of freighters to DWC from its current three times a week to five so it can "facilitate better connectivity" between the two hubs. The carriers say handling cooperation at both hubs will enable the seamless movement of cargo.

INDUSTRY FLOCKS TO MUNICH KEEPING IT COOL THE REGION OF STRUGGLE ON RECOVERY PATH Q&A WITH DR ALEXIS VON HOENSBROECH HEATHROW CONSOLIDATION APP LAUNCHED

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Etihad renews ULD contract Etihad Cargo has extended its unit load device (ULD) management with Jettainer until 2021, and so-called ‘smart-ULDs’ will also be introduced in that time.

The smart-ULDs autonomously provide information about the container’s position, temperature and maintenance status and Etihad Cargo will be the first airline for the new containers, which are fitted with GPS for constant traceability.

Etihad Cargo senior vice president, David Kerr says Jettainer is a "great partner" saying: “The renewal of our agreement is testament to our strong collaboration, and will ensure our customers continue to enjoy a consistent delivery of products and services.”

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ACW DailyNews

Industry flocks to Munich for opening day Qatar Airways Cargo has grown rapidly in recent years and shows few signs of slowing. Its stand saw a constant stream of visitors.

Hall B1 was the place to be on 9 May as Air Cargo Europe got underway. The hall was a hive of activity as air cargo professionals were busy visiting stands and checking out company's products and services, networking and doing business with industry leaders.

Delegates were busy checking out stands, networking and talking business.

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Published in Munich 9, 10 and 11 May 2017

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DAILY NEWS Editor:

Justin Burns

Staff Writer:

James Muir

Contributors:

Michael Mackey • Graham Newton David Craik • Mike Bryant

International Sales Director:

Rosa Bellanca

International Sales Manager:

Valeria Curzio

Commercial Director:

Anthony Smith

Development Director:

Michael Sales

Design and Production Manager:

Alex Brown

Operations Manager:

Kim Smith

Data and Accounts:

Sarah Archer

Directors:

Norman Bamford • William Carr • Dawn Jolley

PUBLISHED BY

AZURA I N T E R N AT I O N A L

T +44 (0)1737 645777 • F +44 (0)1737 645888 E sales@azurainternational.com

The views and opinions expressed in this publication are not necessarily those of the publishers. Whilst every care is taken, the publishers cannot be held legally responsible for any errors in articles or advertisements. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by electronic, mechanical, photographic or other means without the prior consent of the publishers. USA: The publishers shall not be liable for losses, claims, damages or expenses arising out of or attributed to the contents of ACW Daily News, insofar as they are based on information, presentations, reports or data that have been publicly disseminated, furnished or otherwise communicated to ACW Daily News.

Printed in Munich by Peschke Druckerei GmbH

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ACW DailyNews

Keeping it cool Air cargo’s share of the pharmaceutical market is dependent on having global quality standards in place. Graham Newton casts an eye on the sector.

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he International Air Transport Association (IATA) created its Center of Excellence for Independent Validators (CEIV) in pharmaceutical logistics back in 2014. The goal was simple, if ambitious: to develop global standards for the handling of pharmaceuticals.

Basically, air cargo wasn’t doing a great job at that point. There were temperature excursions,

and issues with compliance and transparency.

IATA estimates that annual product losses at the time reached into the billions of dollars. To underline the problem, air cargo’s share of the pharmaceutical market had dropped from 17 per cent in 2000 to 11 per cent in 2013.

And it wasn’t just that air cargo’s share of the market was falling. It was falling in a market that was growing strongly. Failure to provide

the kind of service the pharmaceutical industry wanted was a double whammy for aviation.

In total, the pharmaceutical market could be worth $1.6 trillion by 2020, according to PwC. Pharma, it notes on the PwC website, “has never had it so good”.

Even before CEIV Pharma, business was good where the aviation value chain had quality management in place. When Miami International Airport became the first airport in the US to achieve CEIV certification, for example, it estimated that the value of pharmaceutical products passing through the airport had grown 62 per cent between 2010 and 2015.

But it was clear that realising the full potential of air cargo’s ability to serve the

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ACW DailyNews pharmaceutical sector meant drastic change in air cargo processes was needed.

BECOMING CERTIFIED

STEVEN POLMANS

“CEIV Pharma, operated in partnership with industry stakeholders worldwide, offers a standardised, global certification program that trains people to handle pharmaceuticals for transport and conduct consistent, on-site assessments,” informs IATA’s senior manager for special cargo, Andrea Gruber.

CEIV Pharma has become a badge of honour in the sector, assuring the customer the handler has been validated against the highest standards.

It takes about six months for the average certification process, from the initial visit by an independent validator, through a gap analysis report and a final audit. Certification lasts for

three years. Companies also need to send two employees from each of its locations to training courses in pharmaceutical handling.

“The feedback received from the industry on this program is positive,” Gruber insists. “There has been a growing expectation to see standardisation and transparency across the supply chain. As a result, CEIV Pharma is expanding globally.

“Stakeholders across the supply chain are now embarking on the program,” she adds.

“They recognise the added value and benefit brought forward by the certified entities, such as being recognised as meeting the regulatory requirements as well as the standards in term of operations, adequate facilities and trained staff.”

Since its launch, CEIV Pharma has attracted increasing interest from cold chain logistics businesses and locations. Some 46 such entities were registered as CEIV certified as of December 2016, with 88 more undergoing the certification process.

CEIV certification can also be obtained through a community approach, first seen at Brussels Airport. All the relevant stakeholders – airlines, airport, freight forwarders – work together to undergo the process simultaneously. There are some cost benefits but the main advantage is garnering an improved under-

Transport by air remains the best possible solution

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standing of the challenges faced by partners in the aviation value chain.

Brussels Airport Company head of cargo and logistics, Steven Polmans notes that the airport and several pharmaceutical producers helped develop the initiative.

Currently, 18 companies active at BRUcargo, the cargo site of the airport, are participating in the program. “Manufacturers call on transportation services that, on the one hand, ensure the shortest route to the final customer and, on the other hand, maintain the quality of the product through an unbroken cold chain,” he says.

“For these companies, transport by air remains the best possible solution. That is why Brussels Airport made it a strategic choice to be best-in-class in cool chain handling.”

One innovation recently launched by the airport is the airside pharma transporter, a trailer on which an insulated cool box is installed. The technology installed allows the temperature and location of the refrigerated transporter to be monitored in real time.

“It also operates with solar panels so that the refrigerated unit can adopt or retain the required temperature at any time,” Polmans continues. “Thanks to this innovation, the transporter is not only energy neutral but also more efficient and a larger number of transports per day is possible.”

Brussels Airport has also invested in a community platform at Brucargo, an open cloud-based system that enables companies operating at Brucargo to exchange data and work together more efficiently.

It has even set up a worldwide organisation, pharma.aero so that the local expertise and know-how at each airport can be shared. This organisation set up with Miami International Airport continues to grow and aims to create pharma trade lanes via airport airfreight communities, all CEIV certified and adhering to the same high quality handling and processing standards.

Members also include Mumbai International Airport and Singapore Changi Airport.

ACW DailyNews freeze room and direct access to the apron.

Other investment in temperature-controlled handling by the airline in recent years includes the Opticooler – developed in conjunction with Dokasch – an extremely reliable refrigerated container that works on compressor technology rather than dry ice.

RAISING THE BAR

MAXIMUM RELIABILITY For airlines, handling temperature-controlled pharmaceuticals is an equally demanding exercise.

Lufthansa Cargo is just one of six airlines that are CEIV certified throughout their global network. “Being one of the first airlines worldwide to receive IATA's new international certificate is the fruit of the work we have done on our Cool product over the last few years,” says Lufthansa Cargo board member of product and sales, Alexis von Hoensbroech.

“Pharmaceutical shipments are extremely challenging and demand maximum reliability from airlines. Adhering to the required temperature is crucial to ensure medication can be used as planned following shipping.”

Lufthansa Cargo’s Cool Center in Frankfurt has also received CEIV certification. The carrier recently announced plans to develop the facility.

“After five years of success, we want more,” says von Hoensbroech. “That is why we intend to further upgrade and significantly expand our Cool Center in the coming year.”

From late summer 2017, the Cool Center will cover 8,000 square metres, up from 4,500 square metres. Upgrades will occur throughout the building, which boasts four cold-storage rooms set to different temperatures, a deep

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The logistics of transporting pharmaceutical products are complex. Any deviation from the strict requirements can mean a compromised product. It’s not just a question of losing money either. Many products are desperately-needed healthcare items.

CEIV Pharma raises the bar in the sector, complementing the various other regulations that have been put in place to ensure air cargo can properly serve the pharmaceutical industry.

The IATA Temperature Control Regulations, the compulsory use of the Time and Temperature Sensitive Label and the Acceptance Checklist all play their part as does the Time & Temperature Task Force.

But, ultimately, it is CEIV Pharma that offers air cargo its greatest chance of playing a greater role in transporting sensitive pharmaceutical products around the world.

“The best recognition of the effectiveness of a standard is when it is adopted by the industry,” concludes IATA’s Gruber.

“In the framework of continuous improvement aimed at having global certified trade lanes, CEIV Pharma has taken the industry and moved it to another level. Recently, Kuehne + Nagel obtained CEIV certification for their entire network – an industry first.

“That means pharma shippers in 86 countries now have an extra level of assurance that their critical life-saving pharma products are being delivered where they are needed in impeccable condition. And the industry is one step closer to achieving global alignment on the shipping standards for pharma products.”

ACW DailyNews

The region of struggle on recovery path The Latin American airfreight market has been having a hard time of it as powerhouse economy Brazil continues to have troubles. However, it is on its way back led by pharma and perishables. David Craik reports.

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ccording to figures from International Air Transport Association, Latin America (LATAM) was the only global region to register a downturn in freight tonnage in 2016.

The region, hit by economic turbulence particularly in the huge market of Brazil, saw airfreight tonne per kilometres fall 4.2 per cent for the year as a whole. In North America there was solid growth of two per cent in 2016 as both the US and Canada performed well, led by a strong US dollar.

This year has seen some recovery though in LATAM with the Airports Council International noting better performances in volumes in LATAM but it is still the region of doom and gloom.

So, what can we expect as the year continues – what are the inherent strengths and weaknesses of the regions? There are certainly enough major airlines focused on the region who are trying to ensure that the fragile upturn continues.

Qatar Airways commenced twice weekly freighters to and from Sao Paulo, Buenos Aires, Quito and Miami in early February.

“We were already seeing full loads on the bellyhold flights to South America and decided to introduce freighters offering more capacity for the growing imports and exports especially perishable and pharmaceuticals out of these key markets,” explains Qatar Airways chief officer cargo, Ulrich Ogiermann. “Miami in particular is an important distribution hub for our airfreight moving to and from the Latin American and Caribbean regions.”

senger aircraft will start operating to new destinations Las Vegas in the US as well as Santiago and Rio de Janeiro in South America.

“The combination of efficient belly space plus freighters that can flexibly adjust to the needs of the cargo business is the most ideal and cost-efficient combination you can have, and this is

what we offer our customers,” Ogiermann explains.

Last June, Air Canada Cargo also began to respond to increased demand from the Americas by wetleasing Cargojet freighter aircraft to operate in and out of Bogota, Colombia, Lima, Peru and Mexico City. The 767-300 ER provides 52 tonnes of freight

We are confident the rise of exports in the Americas this year will drive demand The freighters depart from Doha via Luxembourg, its European hub and stops at Sao Paulo in Brazil, Buenos Aires in Argentina and Quito in Ecuador before arriving in Miami. On the return trip, the freighter stops at Liege before arriving back to Doha. The 200 tonnes of weekly cargo capacity offered supplements belly capacity on Qatar's daily flights to Sao Paulo, Buenos Aires and Miami.

“We are confident the rise of exports in the Americas this year will continue to drive demand for air cargo service. We are currently offering more than 2,400 tonnes of combined freighter and bellyhold space every week from the Americas,” notes Ogiermann. “The Americas region is one of the key contributors to our business. We offer freighter services to 12 destinations in the Americas and bellyhold cargo space to 13 cities in the continent.

Last year we successfully launched freighters to Dallas and New York, as well as our first Canadian freighter destination, Halifax.”

Through this weekly freighter out of Halifax customers are offered a direct lift from Halifax to Qatar’s global network of over 150 destinations via the hub in Doha.

“There is significant reduction in transit time from preparation of the product until delivery at the airport, as customers at Halifax no longer have to truck their seafood to other destinations,” adds Ogiermann. “The freighter services out of Halifax facilitate the transport of the much-in-demand Nova Scotia lobster and seafood to Europe, the Middle East, South and North East Asia via Doha.”

Qatar states its expansion in the Americas will continue as pas-

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ACW DailyNews capacity.

“Prior to the launch of the freighter, we were had belly capacity in and out of the region with widebodies to Bogota and Lima and narrowbodies to Mexico,” explains Air Canada’s director of marketing and sales in the Americas, Vito Cerone. “We knew the market demand to and from the Americas to Canada, Europe and Asia was there. Our Toronto provides great connections to Europe and Asia, and we felt freighter service was the best way to service the Americas and to feed our global network. We’ve recorded healthy volumes to date.“ The main goods being moved Northbound from Lima and Bogota are perishables with an 85 per cent share compared to 15 per cent for dry goods, with a 50-50 share from Mexico. There is also a lot of manufacturing trade between Canada and Mexico.

The freighter service has developed with a third weekly stop into Bogota to meet growing demand for cut flowers. The Lima and Mexico service remains twice a week.

“We are looking at other destinations in the Americas but we need to make strategic decisions. There is price volatility and we need to be sensitive to that,” says Cerone. “Aside from the usual

governmental and regulatory challenges that come with starting up a new route, what the market wants in South America is to know that you have a long-term commitment and are not just there as an overnight operation.

“We keep a close eye on the economic performances in the region and also on the weather conditions as perishables are so dominant. But this is a growing market helped by high demand for their goods in Europe and Asia.”

Wobbly Latin American economies have also caught the attention of Lufthansa Cargo head of Latin America and the Caribbean, Gunnar Lohr. He believes concerns over the health of the Brazilian economy have been overdone.

Lufthansa flies belly to Rio and Sao Paulo and a five times a

We are looking at other destinations in the Americas but we need to make strategic decisions. There is price volatility and we need to be sensitive to that week freighter service into Viracopos via Natal in the North. They also stop in Argentina and Uruguay before returning to Germany.

“We are moving a lot of fruit from Natal and we are seeing some good volumes. Brazil’s market is not as bad as the news suggests.

Our volumes are stable as we shifted from dry cargo automotive industry to perishables. But there are hopes for rising GDP in Brazil and we expect this year to be better as will 2018,” he states. “Argentina by contrast is struggling with not much cargo in the market and fierce competition. We need to focus on that compared to Brazil and the other markets which are developing nicely with products such as perishables.”

It has six freighters a week to Mexico City, via Germany and Chicago with other freighter services to Guadalajara via Dallas and Frankfurt. “Both imports and exports are running very well both on freighter and belly,” Lohr explains. “The mood in the Mexican market is very positive. It is not just perishables there either, dry cargo is really growing.”

In the Caribbean, its subsidiary Eurowings is flying cargo into the Dominican Republic, Jamaica and Barbados. It is also hoping to fly into Cuba sometime this year when “complex” legal requirements are finalised. “We haven’t been active in the Caribbean for a while so are taking our time re-building it and getting in contact with customers again,” states Lohr.

“It’s coming along nicely.”

He says the demand for fresh fruits from Europe and Asia will continue to give airfreight an advantage over sea freight options. “It’s helping us,” he states. “There are also signs that the pharmaceuticals market is also set to recover out of Brazil and Puerto Rico where we work with partner airlines to use their capacity. Finding good partners is vital in this region.”

GUNNAR LOHR

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QA ACW DailyNews

&

How has business been so far 2017?

2016 was primarily a difficult year in a challenging environment, but the year-end rally had a positive effect on air cargo demand and Lufthansa Cargo was satisfied with the peak season.

questions answered by ...

DR ALEXIS VON HOENSBROECH LH CARGO BOARD MEMBER PRODUCT & SALES

Lufthansa Cargo had a challenging year in 2016, making a loss of €50 million, though the year ended well. James Muir spoke to board member for product & sales, Dr Alexis von Hoensbroech, who has recently had his contract renewed until November 2022 about what Lufthansa Cargo is doing to strengthen its position and remain in the Champions League of the air cargo industry.

What are your expectations for the rest of 2017?

We are carefully optimistic. However, we expect the volatile air cargo market to remain challenging and thus we continue to manage our large network flexibly to meet our customers’ demand in the best possible way.

What is Lufthansa Cargo doing to tackle challenges such as overcapacity and falling yields?

Lufthansa Cargo is monitoring developments very closely and will adapt to changes quickly to meet our customers demand in the best possible way. At the beginning of the year, we have also further improved our organisational structure to get even closer to our customers. With td.Basic and myAirCargo we have started offering innovative online products and we will continue to push digitisation in the industry to unlock further potentials.

How is Lufthansa Cargo planning to use its extensive fleet of freighter and passenger aircraft, and capacity on other group aircraft to strengthen its position in the market?

Lufthansa Cargo is enhancing the advantages a combination carrier offers by cooperating with cargo airline partners. Further-

Our vision is to be the first choice when it comes to air cargo more, our charter product Network-on-demand complements the various products we offer to perfectly meet our customers’ needs. Lufthansa Cargo has been successfully marketing the cargo capacities of the Eurowings long-haul fleet since March 2016. This has allowed Europe’s leading cargo carrier to expand its network to include more destinations for its customers directly from Cologne/Bonn (CGN). Starting with the assumption that there will be two brands and two air waybills, our One Cargo project is currently investigating how we might cooperate more intensively with Swiss World Cargo.

How is Lufthansa Cargo planning to modernise facilities and further improve infrastructure in Frankfurt in 2017?

Frankfurt is and remains our hub, here at the heart of Europe with Passage’s extensive belly network. The decision on the future of our Lufthansa Cargo Center should be forthcoming by the end of the year or early 2018, taking developments on the market into account. The predicted growth underpinning a completely new Cargo Center has not materialised as planned. A modular solution thus seems the most feasible option at the moment.

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What progress is Lufthansa Cargo making with its Lufthansa Cargo 2020 future programme?

Lufthansa Cargo 2020 became Cargo Evolution last year. With this adjusted strategy, we are adapting to the changed market conditions to make sure we are on the right track for the future.

Our vision is to be first choice when it comes to air cargo. Firstly, this involves renewing and strengthening our core business. Hav-

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ACW DailyNews ing a competitive cost position, along with innovative products and revenue solutions, is all part of this. On the cost side, we will get ourselves on an efficient footing with C40. On the revenue side, we intend to make things easier for our customers (“easy to deal with”) and generate higher revenue from our capacity through innovative products. Besides continuing to develop our core business, we are also trying new initiatives. We are expanding our offering selectively with products such as myAirCargo to attract customers in new segments as well. In this context it is also worth to mention that we are working on improved solutions for the growing e-commerce sector. We are also increasing our network coverage within and outside of the Lufthansa Group, such as by selling capacity for Eurowings and through our global cooperation with All Nippon Airways (ANA) and Cathay Pacific, for example. Digitisation will revolutionise our industry and we intend to help actively shape the future by digitising our core processes and using new technologies throughout the entire value chain. Our goal is to improve the quality, efficiency and speed of the value chain for our customers.

What is Lufthansa Cargo hoping to achieve with its new products such as myAirCargo and td.Basic? td.Basic is Lufthansa Cargo’s new online product, offering our service at the lowest possible price. The product can be booked directly online once there is availability, and is immediately confirmed by Lufthansa Cargo. There has not been too much going on with td.Basic yet due to the good capacity utilisation in the market. But this is a very welcome problem to have. The new myAirCargo product allows private customers to ship bulk goods (standard cargo) door to door internationally, including all the

2017. German economic growth (GDP) was a robust 1.9 per cent in 2016 as well, even topping the already relatively strong performance in previous years. The forecasts for 2017 signal a decline in growth of 0.6 percentage points. Shippers and forwarders are somewhat more optimistic with regard to 2017, especially due to

strong demand towards Asia and the euro’s continued weakness against the US dollar.

The new year has started on a very positive note, especially with demand for Chinese transport remaining high. Overall, our performance has been well above that of last year and the targets set for 2017. The demand for long-term contracts for the 2017 summer schedule starting on 26 March has been very encouraging.

Possible one-off effects, such as imports to the US being moved up in case of the new government implementing its tariff plans or spill-over effects from sea freight seem to be having a continued impact on the air cargo business. However, despite decelerated offer growth there are still overcapacities in some markets, and overall demand may approximate to the previous year’s level again over the summer months.

And what is Lufthansa Cargo doing to make sure it is in a strong position in the future?

With Cargo Evolution, we are on the right track to remaining in the Champions League of the air cargo industry, also on the cost side. We believe we will be back in the black in 2018.

customs formalities. The product is available in 27 European countries and the US.

What has Lufthansa Cargo achieved with its partnerships with ANA and Cathay Pacific Cargo? And will customers benefit from the continuation of these partnerships and the planned cooperation with United Cargo?

Customers benefit from the larger network offering, with more shipment options but also improved service recovery possibilities, along with greater flexibility and time savings. The customer can now book ANA and Cathay Pacific cargo flights via Lufthansa Cargo booking channels as well and vice versa, for a one-stop shop solution. And while Lufthansa Cargo covers all of ANA Cargo’s handling needs in Germany, for example, the roles are reversed in Japan.Cathay Pacific Cargo and Lufthansa Cargo have also completed a “Move Under One Roof” in respect of handling in Hong Kong and Frankfurt. Exports can now be picked up and imports delivered at the one location, saving customers time.

There are plans to enhance the product offering in the next phase of the ANA/Lufthansa cooperation.

The Cathay Pacific Cargo/Lufthansa Cargo cooperation is expected to start operating from Europe to Hong Kong in 2018.

We are currently working on optimising our process setup so as to maximise the customer benefit here as well.

How do you see the German, and European airfreight markets developing in the coming years?

Global trade volume is expected to increase again slightly in

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ACW DailyNews

German handler seeks dialogue

Handlers are having to contend with a changing marketplace.

Justin Burns spoke to LUG CEO, Patrick Tschirch.

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argo handlers are dealing with new norms and having to meet different challenges and demands placed on them due to the ever-changing air cargo industry.

Germany-based LUG aircargo handling, part of the Bremen-headquarterd Dettmer-Group handles freight for eight carriers at Munich Airport and 16 at Frankfurt Airport is itself battling a variety of headwinds.

Managing director and chief executive officer, Patrik Tschirch says on a positive note though, business has though been strong this year with tonnage surging, but dealing with this has also brought its own challenges.

He says LUG has in recent times been pushed to the limit operationally as it gets to grips with a new contract won earlier this year with Etihad Cargo at Munich and Frankfurt.

Tschirch says he expects this to lead to extra 50,000 tonnes a year being handled through two belly flights a day to each of the hubs and full freighters (Airbus A330F and Boeing 777F) which serve Frankfurt twice a week.

He says being associated with Etihad is a feather in its cap as they have “high expectations” which matches what it wants to achieve, while he notes he is always happy to have demanding customers, but this new contract has proven a challenge and further ramped up the strain on operations just as air cargo picks up.

“It is challenging. I have been in the industry for 27 years and the one thing that we have not learnt in that period of time is how to deal with adjustments – either in volumes picking up or volumes dropping. Right now, the trend seems to be that business is picking up and the trouble is none of us have the luxury of being over-staffed,” Tschirch explains.

PATRIK TSCHIRCH

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But Tschirch wants industry change and top of his list is more communication with cargo handlers from across the air cargo supply chain, as this he notes this is having an impact on planning, recruitment strategies and overall efficiency of processes for handlers.

“We don’t talk – we are absolutely in silence. I appreciate you cannot foresee a pick up in demand to the point, but for us as a handling company and I think it is for every single handling company, it is the same - we only know what we get when we open the truck door,” Tschirch says.

He adds: “That is a challenge and especially in today’s environment at least in Germany where unemployment is more or less almost non-existent – hiring extra staff is a very cumbersome procedure that takes a long time because the quality of the people has deteriorated and in general the market has changed.

“As an industry an area we must potentially address deeper in the future is communications. I do believe shippers and forwarders have a better idea what is coming now for the next six months and we need to share more.”

Cargo handlers are left in the dark it seems by other

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ACW DailyNews parts of the supply chain, critically by carriers - its key partner and whom it signs the air cargo handling contract with and demands it has to meet first.

Tschirch believes this has to change and finds it puzzling, believing it is the same for every handler: “I find it annoying as we are crucial part of the entire supply chain, but for whatever reason we have a hard time talking to all the players.

“Some say they will not talk to us as they have an agreement with the carrier and as such we would have to talk to the carrier – others do not see the necessity. It is just bizarre because we deliver the product and the carrier just flies the cargo.

“I appreciate they do more than that but at the end of the day the handling agent is the one delivering the product and yet nobody really has any interest in talking to us.”

The marketplace is a competitive one and players like Swissport and Worldwide Flight Services (WFS) continue to grow fast while demands are rising.

But in a tough current handling environment, Tschirch says it is still not clear what is expected of the handler. He says: “A simple example is Amazon (staff pictured left) - they still use normal carriers and normal forwarding agents – the expectations is very clear what they want, when the goods needs to be there, yet they don’t necessarily match with the times that we have agreed with the carrier.

“I am not saying we can achieve those, but we don’t know what the deal is and have to stick to something that might trigger unhappiness - to put it mildly on the receiver’s side as they have an expectation that cannot be matched.”

But how does Tschirch think the supply

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chain can be changed in future to benefit cargo handlers and the industry as a whole? “We need more transparency throughout the supply chain and we also need more collaboration. For example e-freight is an issue where I find it very mind-boggling.

“We just lost Cathay Pacific to Lufthansa because of their joint venture. Once Cathay left the e-AWB penetration rate went down the drain within our customers as Cathay is really pushing this but everyone else is not - I am not pointing fingers but I am questioning what the deal is,” he says.

Tschirch adds: “On the other hand we have experienced a lot of forwarders not picking up paperwork anymore as they apparently already have it in a digital form already, yet the paperwork is not ours, but we cannot just chuck it away and destroy it - but what are we going to do with it?

“This came up because people were asking if they could get new cupboards as the boxes would not fit anymore as they had too much paperwork and then you ask questions - and it came up that forwarders were not picking their paperwork up.”

Tschirch is behind full digitisation of the supply chain, which in turn is sure to improve transparency and collaboration. “I think as an industry as a whole we are dinosaurs and the biggest challenge we have is resistance to change as a whole,” he says.

LUG itself has restructured and has created a new department of strategic product development headed by Wolfgang Voigt to better deal with future market challenges, while Axel van Hees has been promoted to manager of operations in Frankfurt.

Tschirch says it has realigned the management team to “strengthen competitiveness and responsiveness” to the ever growing, new challenges in the air cargo business.

He adds: “Our aim is to strengthen our innovation power so that we can maintain our position. We want to grow again and offer our customers an even more comprehensive service portfolio.

“We are contemplating to expand our activities by accepting more daily routines from airlines such as reservation services and weight and balance calculations. The potential is there.”

ACW DailyNews

Charter brokers spread their wings

DAN MORGAN-EVANS

One of the industry's most unpredictable markets is air charter. Mike Bryant speaks to brokers about how business is.

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ir charter brokers are branching out and growing their portfolios with new streams like on-board courier (OBC) services, but core sectors such as automotive, aerospace and oil and gas (O&G) still remain at the heart of business.

Air Charter Service (ACS) global cargo director, Dan Morgan-Evans only took over the role in December last year, has been concentrating on ensuring all ACS’s offices work to the same very high standards.

And it’s been a good time to be an ACS cargo broker. O&G-related business is starting to pick up again, as seen in the increasing numbers of enquiries for ad-hoc charters to support the international energy business being received, though the longer-running project cargo charters may, Morgan-Evans says, take a little longer to recover from the dip in oil prices the global economy experienced last year.

Other areas of ACS’s cargo business are continuing to do well, he adds. The automotive sector was strong last year, and is again this year, though the implications of Brexit might at some point be felt in this market, if European car part imports are hit – and ACS does a lot of automotive charter business into the UK. “We’ve got contingency plans” for such an eventuality though, Morgan-Evans points out. And, if the worst comes to the worst: “We’ve got to dig deep and find business elsewhere.”

ACS would be well placed to do just this, should there be any downturn in any given market, whether it be in a specific industry sector or in any given geographical market. It has the global footprint and it has the business across the various industry sectors to withstand any shocks.

Moreover, it has the “broad portfolio of customers” that Morgan-Evans notes is so critical for the long-term success of a cargo charter broker.

One particular area of growth has been ACS’s OBC service, expansion of which in 2016 is described by Morgan-Evans as having been phenomenal For OBC, ACS now has “exactly the right people in place, all of them going the extra mile for their customers,” he says. And his brokers love having the OBC option to hand, he says, giving them another service to offer to customers in a one-stop shop offering.

LOOKING FOR NEW OPENINGS

Chapman Freeborn is on the lookout for new opportunities in the air charter market, explains group cargo and OBC sales director, Reto Hunziker.

He explains the broker saw a strong end to 2016, and the start of this year has also been solid in terms of charter demand. “Of the key developing markets, Africa is one of the main focuses for us in the next 12 months – but we’re also keen to continue

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RETO HUNZIKER

building our market share in other regions such as Asia,” he says.

“It seems there is growing confidence in the general cargo market. Over-capacity is still a key issue – but at the same time it can sometimes provide opportunities to try new things.

“As a broker, we’re always looking for new openings in the market and the growing flexibility of operators means we’re able to react to gaps not served by existing scheduled services.

A good example of this is the B747-400F we currently have running between Europe and US for Senator International – with Chapman Freeborn managing the spare ad hoc charter capacity between rotations.”

Global brokers like Chapman Freeborn offer more than a traditional charter broker service and while charter is still very much its core business, the variety of

its client base means its in-house expertise goes beyond that, Hunziker observes. “For example, placing an aircraft on long-term lease for major projects, or moving components via our OBC division.” OBC is another one of Chapman Freeborn’s value-added services that it is continuing to develop, he explains.

In terms of any potential economic instability that may (or may not) be engendered by the UK’s Brexit planning and/or by the election Donald Trump to the US presidency earlier this year: “In terms of the US – Mexico market there’s an element of uncertainty about what the future will bring. In recent years we’ve done well with movements in and out of markets like Mexico – both for time-critical charters and OBC shipments – particularly for second-tier manufacturers that supply components to the major automotive companies.

“However, in reality even if change does come, it’s likely to be gradual. We’ve been an established presence in the US cargo market for over 20 years now – so we’re well versed in adapting our business model and finding solutions for changing requirements of our clients,” Hunziker points out, while he adds it is too early to say there is any impact of Brexit in Europe.

KEEPING AHEAD

Another broker in which 2017 has gone well so far is Gatwick Airport based Air Partner and director of freight, Mike Hill says it saw the market drop slightly across the entire freight sector in 2016, but it is expecting 2017 to be better, with continued demand from the automotive and aerospace sectors in particular.

“We are also seeing increased activity in the O&G sector now that the oil price has started to climb again,” Hill adds.

Hill continues: “There have been some significant changes in the operator world already this year, especially in regards to the project cargo sector as regards the Antonov AN-124’s availability [with the changes at Ruslan],

which has opened up further opportunities.

“Also, as the fuel price has remained low for some time now, some operators have brought more aging aircraft back onto the market, which has offered us a greater variety of aircraft types to work with.”

Like ACS, the automotive sector has been a significant part of business in recent year, Hill says, adding: “But it’s a fast-paced industry where commercial boundaries are often blurred.

“We continue to foster our long-term relationship with the forwarding and logistics community, meaning we only work with the freight forwarders and not the shippers – as per the traditional broker company model.

“It’s largely due to this, along with our time-critical expertise, that we have become a leading player in the automotive sector in Europe, and we are always seeking to take more share of this market. Further afield, we grew our New York office last year in line with our plans to expand our US presence.”

Also like ACS, as well as Chapman Freeborn, Air Partner has grown its OBC work. “We have offered global OBC/hand-carry alongside our core charter product since around 2012 – when we formally introduced our specialised time-critical service and accompanying REDTRACK system to the market – and the sector has remained quite strong since then.

“As our clients are freight forwarders, many will often arrange OBC with their own staff where they can, but our services come into play when they cannot cover it themselves – for example, if it is a particularly short notice trip, a long-haul journey, or if a visa is required.

“For import shipments, we will often have a courier in a region where the client does not usually have its own office and staff available, so we find imports from the Far East and the Americas into Europe are the more common routes.”

The charter marketplace is as unpredictable as ever, but there remains opportunities across various sectors and regions.

We are also seeing increased activity in the O&G sector now that the oil price has started to climb again MIKE HILL

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ACW DailyNews

New movers and shakers in forwarding As the air cargo industry evolves so does the freight forwarding market. Mike Bryant delves into any new trends.

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“In regards to the air freight transportation process, this translates into improving data integration of ground and terminal services in order to achieve a real-time visibility, door-to-door,” he adds.

EXPLOITING OPPORTUNITIES

B&H Worldwide, a freight management and forwarder company based at Heathrow Airport – a particular focus of which is the aerospace industry – is all set to exploit any opportunities that the market might throw up this year.

Regional managing director for the EMEA (Europe, Middle East and Africa) region, Mark Nightingale says customers are demanding more technology to support their complex supply chains.

“For example, OnTrack is a market-leading tool which provides not only simple ‘track and trace’ but order management and financial reporting amongst other things, which allows our customers to go into detail at part number, serial number and tail number level – critical for our customers to manage their supply chains.

“Our aim is always to improve the efficiency of the

ne of the big changes in the logistics business in recent times has been the rapid development of new players in the freight forwarding sector.

Companies that had not previously been seen as potential movers and shakers in the airfreight business are now mixing with the long established players.

CEVA’s senior vice president for global product airfreight, Peter Baumgartner believes that there are two particular issues to bear in mind when considering the effect of these new influences – giants such as Amazon and Alibaba – on the way more traditional air freight forwarders operate their business.

“Firstly, the general increase in e-commerce sourcing directly impacts and changes distribution flows/patterns (which impacts airfreight flows too), but more importantly, the role shifts in the supply chain, where the management of distribution logistics is a key success factor for e-commerce companies,” he explains.

“The differentiation for these companies lies not in the products they offer, but rather in their widely different distribution capabilities. Amazon and the like are therefore not mere ‘shippers’: some of them are logistics suppliers themselves and therefore compete with the established 3PL (third-party logistics) and 4PL (fourth-party logistics) providers.

“On the other side of the coin, e-commerce opens up opportunities for 3PLs/4PLs to grow e-commerce business outside the huge players like Amazon and Alibaba. It is one of the fastest growing markets for this year,” Baumgartner says.

CEVA has its own plans, of course, to continue to compete successfully in the airfreight forwarding sector. “Operational excellence is crucial: that’s on-time performance, no defects and shipment status visibility, the whole service offering from an operational perspective,” Baumgarter notes. “We have been putting some considerable effort into achieving this, including passing the Cargo iQ audit last year, as well as investing in internal training and auditing throughout our operations.

“We have also adjusted the organisation in such a manner that operational decisions are made with the customer – and much faster (than before).”

Technology in this industry is changing fast, and the effects of that, too, have to be considered. “What the industry really needs is a better integration of the supply chain process, through technology. That’s where e-commerce companies like Amazon and Alibaba have an advantage compared to the traditional role split, which involves many handovers/interfaces throughout the (supply chain) process,” Baumgartner says.

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aerospace supply chain. So, we work alongside engineers in the hangar or airside on the line, and bridge the operational and visibility gap between the aircraft and our global freight

network. We believe there will be many opportunities to continue doing this during 2017,” Nightingale predicts.

“We are continuing to improve our technology offering, as well as our airside delivery capability, and will have some exciting news in the third quarter of this year – the launch of the next generation of our OnTrack software, which will offer customers more features and functions.

“Using state-of-the-art technology, customers will be able to brand the software to their own requirements, use graphical dashboards for key performance indicator (KPI) management and use a new interface to navigate more easily between different modules.”

He says they will also notice increased flexibility of integration to various message types and the next generation of OnTrack will also be capable of being used across multiple screen

sizes including mobile devices.

Nightingale notes elsewhere, the rigorous and ever-changing Customs compliance procedures in the aerospace sector can be complex, time-consuming and daunting for anyone who is not fully up to speed with the latest development and regulations.

“So, our International Trade Compliance services, which are constantly evolving to meet ongoing changes are an essential part of our toolbox and will be further enhanced during 2017,” he adds.

Nightingale was, like Baumgartner, asked about the potential threat to his company’s business posed by the likes of Amazon and Alibaba.

“As a specialist aerospace logistics provider, we do not believe that Amazon et al pose a threat to our business, although we watch their activity with interest. We work in very different arenas,” he believes.

IT and other technology will be the key differentiator. We continuously invest in innovation and technology

EXPANDING FOOTPRINT

Rhenus Logistics is itself focusing on expanding to all corners of the globe and having a presence in more and more markets.

Chief executive officer for air & ocean Europe, Jörn Schmersahl says the strategy is based on expansion through the opening of global offices.

“In 2016, we opened offices in South Korea and Dubai and entered into a joint venture in Japan which allowed us to expand our global network of air and ocean freight services even further. In South America we are concentrating on expanding our service portfolio out of São Paulo, Brazil,” Schmersahl explains.

Another key priority for Rhenus will be optimising its offering through making the best use of new technologies. Looking forward, he notes: “There will be more pressure on digitalisation of processes and products to increase efficiency and transparency. This influences the freight forwarding industry in general.

“The different business units of the Rhenus Group are working together on digital solutions for our customers. And our long-standing expertise in document logistics helps us to implement digital strategies.”

Schmersahl is not afraid of such a high-tech future. “We will continue to focus on further digitalisation of air freight processes and work closely with industry partners such as IATA on global initiatives to increase efficiency.

“Plus, with our global launch of the Rhenus Freight Logistics Air Network Manual, we are currently streamlining our air freight products through modular services and global quality standards.”

Rhenus is looking at how technology can make for a greener future, as well as how a more connected IT environment can improve supply chain transparency.

“Furthermore, we will offer our cus-

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tomers the added service of booking airfreight shipments directly in our customer portal and track the shipment via our new track and trace solution,” Schmersahl says.

He insists: “IT and other technology will be the key differentiator. We continuously invest in innovation and technology, like in our global logistics platform with modular IT services that can be flexibly selected and integrated into the supply chain of our customers. Furthermore, the digitalisation of processes and transparency will lead to lean and visible processes.”

What is clear, while the likes of heavyweight forwarders Kuehne + Nagel, Panalpina, and DHL Global Forwarding continue to lead the way and remain strong, smaller forwarders are chipping away in the airfreight forwarding sector and growing their business.

Competition is high and this looks a sure bet to stay as air cargo changes and evolves.

MARK NIGHTINGALE

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Heathrow launches freight consolidation app

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eathrow Airport is inviting trucking companies and freight forwarders to reduce emissions by using its new load consolidation app, part of Heathrow CargoCloud.

Cargo operators will be able to consolidate freight loads coming in and out of Heathrow, with the aim of not only improving efficiency but also reducing the number of trucks and emissions on the road around the airport.

Companies subscribing to Heathrow CargoCloud will be able to exchange and share information about any spare capacity on their vehicles, or ask for help on a load they need transporting, and the app will work to match them and they contact each other offline and discuss the opportunity.

Heathrow head of cargo, Nick Platts (pictured left) says: “Operating a cleaner, leaner and more efficient freight operation is an essential part of delivering on our ambition to be the best airport in Europe for cargo. CargoCloud offers benefits to the whole industry.”

“For our cargo partners it allows them to reduce their costs, our local communities will experience less congestion and improved air quality, and Heathrow will build on its strength as an airport of choice for cargo.”

Heathrow worked in partnership with Nallian to create the app, and chief executive officer (CEO) Jean Verheyen adds: “Today, this vision is made concrete through the new tool to reduce emissions and traffic congestions. Tomorrow, shared data can be used to further synchronise cross-company processes, allowing clusters of independent companies to achieve efficiency levels that are historically reserved to fully integrated players only.”

DHL Global Forwarding CEO BELUX, Luc Jacobs says: “As a driver of innovation in our industry, we fully support initiatives that allow us to do our job a little bit better every day. We are big supporters of cloud based community systems because when done well, they have the potential to enable substantial efficiencies and eliminate waste in the supply chain at the same time.”

Chapman takes 75% share in Magma Chapman Freeborn has increased its stake in Magma Aviation to a majority shareholding of 75 per cent to support the company’s long-term growth plans.

The charter company has held a minority share in Magma since its launch in 2010 to commercially and operationally manage dedicated wide-body aircraft, contracted on an exclusive basis for airline partners.

Magma will continue to operate as a stand-alone business, with the two founding shareholders, Ross Wilson and Tom Wrigley, retaining the remaining capital share and running the company as joint managing directors.

Chapman Freeborn chief executive officer, Russi Batliwala says: “Over the past seven years Magma has proved itself to be a highly-respected and dynamic supplier of all cargo capacity to niche destinations.”

Wrigley adds: “We continue to be committed to providing flexible, cost-effective solutions to our customers and with their support we look forward to further expanding our route network and charter capabilities on a global basis.”

Magma operates a fleet of two Boeing 747-400Fs, operating regular flights to and from key African countries including Benin, Cameroon, Central African Republic, Congo, Democratic Republic of Congo, Egypt, Gabon, Kenya and Togo with onward air and road connections across sub-Saharan Africa.

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