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Air Cargo Hopes on the Rise

Aug. 14, 2007
The perception of stability in the world's air freight sector is largely because no major airline is in bankruptcy, since both Delta Air Lines and Northwest

The perception of stability in the world's air freight sector is largely because no major airline is in bankruptcy, since both Delta Air Lines and Northwest Airlines emerged from Chapter 11 protection. For air carriers, 2006 wasn't all that bad for moving cargo with continuing strength shown in those geographic areas that have been growing over the past few years.

Last year the Asia/Pacific region accounted for 35.9% of the world's total air cargo; followed by North America, 33.3%; Europe 24.2%; Africa/Middle East, 6.8%; and Latin America/Caribbean, 2.2%. (These figures are provided by Logistics Today's sister publication, Air Transport World, that conducts an annual authoritative World Airline Report.)

As the industry moves through 2007, these same geographic regions are experiencing growth, according to midyear figures from the International Air Transport Association (IATA). However, there has been speculation that air freight shippers are becoming more sensitive than ever to price and that although international cargo is booming, ocean seems to be taking a greater share of the business.

With its end-of-July report, IATA indicated that cargo demand for the first six months of the year was just 2.7%. Strongest growth for air freight continued to be for Middle East airlines that saw increases of 11.7%. Asia/Pacific enjoyed a 7.4% growth in freight business in June, after climbing up 7.6% in May. For the first six months of 2007, the region was up 4.6% year over year. While Europe had modest growth of just 0.7%, North America was down 1.2% and Latin America/Caribbean down 3.8%.

"Over the next months we will be closely watching the impact of several changing conditions," says Giovanni Bisignani, director general and CEO of IATA, "including intensifying competition from other modes of transport and structural changes such as manufacturers producing lighter goods."

Competitiveness is key to maintaining and expanding air freight business for the world's airlines. Service to the shipper, cargo's ultimate customer, is what is seen by organizations coming together to improve air freight business processes.

IATA's e-freight initiative has been an effort to move to a simple, industrywide, electronic, paperless environment for shipping. Beginning this year, IATA has aligned e-freight with Cargo 2000 that seeks to establish and maintain quality and industry standards for the global air cargo industry. Cargo Network Services, an IATA subsidiary that serves the US cargo market, is exploring joint activities with e-freight and Cargo 2000.

"Since Cargo 2000 was founded, IATA has been supportive of us," recalls Lothar Moehle, the organization's program director. "We have been successful together in many details because IATA's e-freight project is right in line with what Cargo 2000 is doing."

Cargo 2000 members include airlines, forwarders, industry associates including ground handlers, trucking companies and IT providers. In creating a route map to serve all of the entities involved in moving air freight from one point to another, Cargo 2000 has a threephase milestone program in which key events have metrics and electronic means to measure them.

In a straight-forward nine-step pattern the metrics are
1. Freight collected from the shipper and arrived at a freight forwarding facility.
2. Loaded for departure to the airport.
3. Accepted by the carrier.
4. Departed from the origin airport.
5. Arrival at the destination airport.
6. Collected from the carrier by the freight forwarder.
7. Arrival at the freight forwarder facility.
8. Departure for delivery to the consignee.
9. Freight delivered and Proof of Delivery captured.

While this may seem almost simplistic, it is designed to work electronically through its entire process and requires having all of the entities involved. In fact, the program's Phase 1 is completed and Phase 2 is underway in which a route map is created from the shipper's door to the airport. "Phase 2 involves work to be done by forwarders," explains Moehle. "Phase 2 is gradually happening right now. We have a deadline of the middle of next year. By then, all forwarders are supposed to be Phase 2 certified."

By the end of the year Cargo 2000 will launch its Qcargo Network that will enable medium to small freight forwarders to become compliant with and ultimately certified.

One aspect of Cargo 2000 paperless processing is the Unisys-operated Cargo Portal Service (CPS) that permits electronic booking and shipment management service. Shanghai is the top city in the world for CPS bookings. Toronto has become the second-largest city in the world for CPS bookings, with some 1,000 made per week by 54 local forwarders. Free of charge to forwarders, North America makes up 40% of all CPS bookings.

CPS is hardly the only booking system available to air freight shippers. For example, American Airlines Cargo offers an online booking service, EZBook, that provides access to premium flight capacity for smaller shipments—those that are 220 lbs and 75 cubic ft or less. EZBook is available to those using the airline's express freight product, Expeditefs. Shipments that move with Expeditefs are guaranteed to be flown-as-booked and may be tracked through the carrier's AACargo.com web site.

Beside ease of booking and the ability to track shipments, as with other modes, carriers of air freight are seeking alliances and cargo joint ventures in order to serve and capture more of the international market. European airlines are engaged in talks over just such ventures.

DHL and Lufthansa Cargo, for example, will share a new cargo airline, presently with the code name, "NewCo." Although negotiations are not public, it is believed that the new carrier will begin operations in 2009 with a freight fleet that will serve the international market with routes to Asia, India, the Middle East and US.

Air France-KLM has entered into exclusive discussions with China Southern Airlines to explore the possibility of creating a cargo joint venture in China. The two airlines already have cooperative cargo service connecting Paris and Amsterdam with Beijing, Shanghai, Chengdu and Guangzhou.

China is the appeal, as well, from third party supplier, SEKO. Specifically for anticipated increases in peak season shipping, the company is offering three dedicated charter flights each week from Hong Kong to Chicago's O'Hare International Airport. In addition to the flights, SEKO will handle Hong Kong pick ups and transport to the airport, customs brokerage and clearance operations, pick up at O'Hare and final mile delivery to the consignee.

There are a variety of tools and services for the international air freight market from a number of organizations and service providers in addition to the airlines. Added to the increasing strength of global sourcing, there is some reason for the cautious optimism being expressed by the air cargo industry.

UPS's jumbo freighter enters into service
The express delivery carrier has taken delivery of its first 747-400 freighter that will serve long range international routes. It's the first plane in the company's fleet with a hinged nose.

The plane can handle 273,300 lbs and has a range of 4,400 nautical miles. Initially it will fly into the Asia/Pacific region. Ultimately it will be used on UPS's around the world flights.

UPS will take delivery of three new 747-400s in 2007 and an additional five in 2008. It will also acquire five more from other carriers in 2010, for a total fleet size of 13.

A voice silenced
Ron Cesana, Cargo 2000 project director, died suddenly on June 8th. He was a passionate supporter of the program, always maintaining focus on its ultimate benefits to international air cargo shippers.

In that regard, both in person and in telephone interviews over the years, Ron Cesana always took time to inform, instruct and clarify with patience and kindness. He was an impressive advocate and will certainly be missed.

EU Troubled Over US Open Skies Response
Foreign investment in US airlines has resurfaced as the sticking point in the hard-won open skies agreement. Media reports noted the absence of Sir Richard Branson during the launch of Virgin America. The US start-up airline was allowed to proceed after an open skies agreement reached between the US and European Union was concluded in April. That agreement gave very little on the US side relative to restrictions the government places on foreign airline involvement, control, or ownership of a US airline. Branson's absence was clearly intended to reflect that attitude.

Europeans, particularly the UK, expressed some concern when the deal was announced, saying they had gotten very little in exchange for opening EU markets to more US flights. While US carriers gained the right to fly between EU member states, EU carriers do not receive the reciprocal right to cabotage in the US.

The pact is barely begun and already government officials on both sides are expressing concerns. US Representative James Oberstar (D-MN) is challenging some of the long-term goals of the agreement and has said he will closely monitor the implementation of the agreement. The US balked when the EU tried to subject US and other international airlines into carbon emissions trading.

EU Transport Commissioner Jacques Barrot, reportedly expressed concerns directly to Oberstar and to Mary Peters, Secretary of US Department of Transportation, saying the US should not prevent implementation of the deal.

The Financial Times reported that EU approval of the agreement hinged on expectations of what would come in the next round of talks and the EU's Barrot could be pressed to withdraw benefits granted to the US if a protectionist attitude in the US prevails.

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