Lufthansa Cargo Raises Rates

     Lufthansa Cargo intends to increase rates by ten percent on average. This was announced today in an e-mail to customers.
     According to the message the general rate hike will become effective March 1, 2010 and includes all the markets the carrier is serving.
     Despite a stiff cost-cutting program, the reduction of transport capacity as a result of sidelining four freighters, a general freeze of investments, the introduction of short-time work schedules within Germany and the shedding of jobs at most international stations, “we ended the past business year with significant losses,“ the email said.
     Further cost savings would reduce the services offered by the carrier and lower the transport quality substantially.
     As a result “we feel compelled to raise our rates worldwide by an average of ten percent.”
     It is the carrier’s second price increase within six months, the first a 25 percent rate hike at the beginning of last October. Lufthansa Cargo’s step then triggered a general price round by air fright carriers worldwide.
     “Due to massive losses the air freight industry is confronted with still unstable market conditions in many parts of the world. Lufthansa’s rate increase will seen be followed by others,” predicts Dirk Steiger, market analyst of Frankfurt-based Aviainform GmbH.
Heiner Siegmund

     As the financial crisis impacts China, the country’s logistics industry is being reshaped by three major dynamics. While many companies hope to just weather this storm, others will seize the opportunity to leapfrog competition and reposition for long-term success.
Dynamic 1: continued downward pressure on demand coupled with shifting mix call for assessment of service offerings.
     Declining international and domestic trade have created downward pressure on demand for logistics services. Along with decreasing international trade, domestic cargo volume growth has also been declining across the different modes of transportation, including rail, waterway, road and air.
     However, logistics companies can offer customized and potentially higher margin offerings when they are attuned to and adjust for changing customer demands, such as:
          •  Export growth opportunities are still strong in select top 25 lanes where trade has been less impacted by the crisis
          •  Domestically, government policy and manufacturing companies are driving the shift of manufacturing bases inland and consequently accelerating inland demand for logistics
          •  Companies are restructuring their supply chains and directly impacting requirements for logistics services, as they opt for flexibility and scalability on top of cost.
          •  Increased need for more high value-added and specialized logistics services due to industry upgrades in coastal cities.
Dynamic 2: declining profits compounded by more volatility require aggressive cost restructuring.
Since Q4 2008, prices have continued to drop across almost all sub-sectors of China’s logistics industry due to overcapacity resulting from the economic downturn. In addition, operational complexity, a changing legal environment, and a new competitive paradigm are complicating cost drivers and structures.
     For example, the recently launched “Fuel Price Reform Policy” calls for the retail fuel price in China to be tied more closely to the global market, increasing volatility in an industry of tight margins. If the crude oil price increases by 20 percent, the margin of a typical road transportation business will be reduced from 3 to 0 percent, as it becomes more difficult to pass fuel cost increases to customers in this over capacity market.
     For a company’s short-term survival and longer-term competitiveness, bold and sweeping cost optimization actions are critical, such as:
          •  Linehaul – network optimization, routing improvements, fleet management
          •  Labor – process and activity, optimization, workforce management, capacity adjustment.
          •  Operations – outsourcing of fixed assets, consolidation, and achieving economies of scale.
Dynamic 3: renewed investment interest signals further industry consolidation.
Despite the effect current market conditions have on China’s short-term growth, China is expected to rebound and continue to develop as one of the major global manufacturing bases. Logistics companies with relatively strong financial positions are already expanding their capabilities by pursuing mergers and acquisitions (M&A). M&A activity is stimulated because of:
          •  Market demand for expanded capabilities and network
          •  Targets supporting companies’ longer-term growth strategies are becoming available at attractive prices, driven by low valuation
          •  The government of China’s legal and financial support for consolidation in the logistics industry
     One should anticipate M&A activity to ramp up quickly and significantly change the competitive landscape.
     As these three dynamics reshape the logistics industry and alter the competing paradigm, companies need to be proactive with cost re-structuring, competitive positioning, and a long-term growth and investment strategy. Logistics companies have several strategic options depending on their desire for growth, financial positioning, and risk appetite – defend, rebuild, and/or attack.
Gordon Feller

Forwarder Handicaps TSA 2010

     Joachim (Jo) Frigger, Chairman and CEO of the freight forwarder EMO TRANS USA states that his company is ready to comply with the mandated 100% screening in August 2010.
     “Similar to other government regulations related to international air or ocean transportation, EMO TRANS has always been at the forefront of those issues for the benefit of security and our customers.
     “As far as screening is concerned, we have purchased and installed screening equipment in a number of our cargo terminals and obtained the needed approval from the authorities as certified screening facility.
     “Other medium sized forwarders should be able to rely on the airlines or can use independent facilities like the one EMO is offering.
     “After all, the carriers are quite eager to get the goods from the forwarders, therefore cooperation amongst everyone involved in the shipping process should include security.
     “But generally speaking I can say that 100% mandated screening requirements will increase the cost of air freight on passenger aircraft.
     “Ultimately the cargo will have to pay for the costs, not unlike passengers for their tickets.
     “We would have preferred that the TSA perform screening, just as the agency does with screening of luggage and passengers but this is obviously not to be.
     “No matter who does the screening, the liability issue should a catastrophic incident occur remains unresolved.
     “Our understanding is that the TSA will abandon the known shipper program after August 2010 but I’m not sure this is a wise decision.
     “As example, the UK has successfully maintained a combination of cargo screening and known shipper programs. “It is not clear to me, why the TSA would give up this element of added security.
     “A mixture of security procedures would make it more difficult for potential terrorists to succeed.
     “But in a broader sense the best way to insure workable global air cargo security is for everyone to utilize best practices and maybe even more importantly for the dialogue to ramp up between nations for a major exchange of ideas as all of us work to get security right.
     “Everyone’s future depends on getting cargo security right.”
Geoffrey Arend

SkyCargo Eyes
Bi-Level Trucks

     Take two air freight containers instead of one, pile them up on a truck for building two layers and send the vehicles with their high reaching loads right across Dubai.
     That’s the basic idea Emirates SkyCargo has come up with to secure fast transits of shipments between newly built Dubai World (Jebel Ali) airport and the carrier’s existing hub, Dubai International.
     Both sites are roughly 50 km apart with no rail linking them.
     The solution became evident after plans for constructing an exclusive and fenced in corridor for transferring both passengers and cargo from airport to airport had been shelved.
     “This ambitious project is definitely on ice,“ confirms Emirates’ Senior VP Cargo, Ram Menen.
     Costs ran out of reach for building a bonded express way.
     But time is short since Jebel Ali is scheduled to open its doors this summer.
     Hence a cheaper, but nonetheless efficient alternative seem to be the truck colossus with their bi-level loads. Bridges or tunnels are no problem, says Jean-Pierre De Pauw, Dnata Cargo’s Divisional Senior VP.
     “Vehicles and containers reach a maximum height of 4.60 meters.
     “That gives them 40 centimeters of air left between the top of their loads and the bridges and tunnels they have to pass on their way.”
     Ram estimates that Dubai World will need eight to ten years to be fully built, including five runways, various passenger terminals and a number of cargo terminals.
     From the very beginning EK SkyCargo will run an offline station there enabling local clients to hand over their air freight shipments right on the spot. There, they will be consolidated and sent by double-decker truck right across the city to where the Emirates fleet will be based in the coming years– Dubai International.
Heiner Siegmund

Women In Cargo Hall Of Fame

Karen Rondino

Air Cargo News FlyingTypers leads the way again as the world’s first air cargo publication to connect the industry to the broadly expanding and interactive base for social commentary—Twitter.
     Here are updates from Twitter. To be added to this 24/7/365 service at no-charge contact: acntwitter@aircargonews.com

Back in the game. Jet Airways CEO Naresh Goyal (right) shakes hands and says that he is buying airplanes again and that suits Deputy Prime Minister & Minister For Defense Mr Teo Chee Hean (left) at Singapore Airshow. Second Minister for Defense Dr. Ng Eng Hen (center) concurs.

Febuary 1:  Emirates opens second month of decade now going twice daily DXB/FCO. EK to launch DXB/TYO March 28, AMS May 1, PRG July 1, MAD Aug 1.

Febuary 1:  "Singapore Airshow 2010 basically boils down to a chest-thumping, spear-waving testosterone fest," CNN reports.

Febuary 1:  International Transport Workers’ Federation with 635,000 aviation members demands immediate dialogue after IATA revealed aviation peril.

Febuary 1:  Qantas says A380s cost less to fly & have fewer problems as compared to B747s when they were new. B787s "a real game changer," airline says.

Febuary 1:  Jet Airways says December biz surge drive first profit in three reporting quarters. CEO Naresh Goyal says company has 400m for new aircraft.

January 31:  IATA says JAL bankruptcy proves "no one is immune" in today’s global economy, predicts more insolvencies in 2010.

January 31:   Singapore Air Show opens. A330F spotlights December global cargo uptick while IATA says airlines need three years to recoup 2009 losses.

January 30:  Don't look for NCA Cargo merger with bankrupt JAL Cargo anytime soon. Last August the pair started talks with agreement expected by April.

January 29:  Thinking of better air cargo industry awards to replace all those dubious achievement honorariums—how about an IATA Cargo Award for courage?

January 29:  Biggest no surprise statements this decade (so far) are Boeing & Airbus trying to sell airplanes whilst telling everybody demand will rise.

January 29:  Global air cargo up 24% in Dec. IATA said. Industry minus 10% in 2009 versus 2008. "Downturn means several years of growth lost,” IATA notes.

January 29:  Triple Play as three freighters—a historic first are offered for sale. Boeing markets B7478F, B777F, Airbus A330-200F delivers this summer.

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