lyingTypers recently had a long chat with Andrew Herdman, the Kuala Lumpur-based Director General of the Association of Asia Pacific Airlines.
He compared the plight of the air cargo industry to the similar mismatch in supply and demand also apparent in most major shipping sectors.

      “As with shipping, demand is disappointing, trade growth minimal, and the industry is affected by severe overcapacity,” he said.


     Like container ships and bulk carriers, many freighter aircraft have also been idled. But there are some important differences, according to Herdman.
     He points out that because passenger markets have been growing steadily, this has led to a substantial increase in bellyhold capacity, further undermining the need for dedicated freighter aircraft.
     This has left many pure freighter operators in a perilous position and encouraged combination bellyhold and freighter airlines to cut capacity whilst relying on contributions from passenger services to sustain their cargo operations.


     “However, ocean’s situation is arguably worse than ours,” he explained. “The cycles for shipbuilding and vessel ordering are even more extreme than aviation.
     “New ships are ordered in great volume when times are good, production capacity expands rapidly, and then they have a glut of capacity.
     “Our industry has similar order cycles, but supply additions are limited because Boeing and Airbus generally maintain production at steady levels so even when orders spike, deliveries are smoothed out over time.”


     Herdman also commented on the impact of the Middle East carriers on the cargo market, with rapidly growing wide-body passenger fleets adding significant extra bellyhold space, leading them to compete more aggressively for cargo business.
     “Airlines like Emirates, Qatar, and Etihad are supplementing this belly capacity with freighters as they develop their global networks,” he said. “They are bucking the trend and gaining market share in a stagnant market."


     He believes global cargo markets will only pick up when global trade really starts to accelerate.
     “Global freight ton kilometres are now similar to volumes moved in 2008. “There was a rebound in 2010, but it has been stagnant since, and even declining.
     Weak demand and the resulting competitive pressure on rates, coupled with persistently high oil prices, make for a very tough operating environment,” he said.
     “Overcapacity will remain because although the global economy is in reasonable shape, world trade is not growing as quickly as it was.”
     “But we should not lose sight of the fact that the air cargo industry is still doing what it is there to do.
     “It carries 35 percent of the value of world trade, despite representing only 1 percent of the volume, so the global economy continues to benefit from this efficient global network, which delivers tremendous value.”
     And Herdman points out that some markets such as Africa and the Middle East are still growing, while the rise of a huge middle class in Asia is helping rebalance major East-West trades as luxury and cold chain items are imported into Asia in greater volumes, a trend that will continue in the years ahead.
     He points to an Airbus presentation which shows that the global middle class—classed broadly as households with daily expenditures between $10-100 per person—will increase from 30 percent of the global population in 2011 to 60 percent of a bigger base by 2031.


     “Most of that growth is in the Asia Pacific,” he said. “You are already seeing this in supply chains in China, where major retail outlets requiring technologically advanced supply chain management have spread from Beijing and Shanghai to every major city.
     “India is still struggling with infrastructure, but it will make progress.”
     “It will be a while before East-West trade is properly rebalanced, but it’s certainly already helping to form the basis of future growth.”
     “As people enter the middle class they travel more, and they buy more imports. So while hands are tied for people in the freight business at the moment, as they wait for demand to increase, that will come in time. As an industry, we need to be ready to respond to those future growth opportunities.”
SkyKing

t was the Umbrellas of Munich last month during Air Cargo Europe, as almost constant rains contributed to the worst soaking in Germany since the 17th century. But not even the rains could put a damper on the first worldwide sales meeting of ATC; the GSSA recently expanded its reach into USA through acquisition of Platinum Air Cargo.
ATC leaders from eleven countries and several geographic regions met together with CEO Ingo Zimmer and the Frankfurt-based ATC global management team to map out the growing GSA’s new strategic orientation and to explore new opportunities for continued growth.
     “Coming on the heels of our recent expansion into the Americas with the merger of ATC and Platinum Air Cargo, combined with exciting new developments in South America and Asia, we simply felt the time was right to lay the foundation for ATC’s Global Leadership Group (GLG) to begin working in a very structured way to sustain our future,” said Ingo Zimmer as the conference kicked off on June 1st, 2013.
     “ATC has a remarkable reputation for honesty and integrity, be it in our relationships with our airline partners, or the forwarding agents who support and sustain them,” remarked Ingo.
     “Given the intense competition in the GSA sector and when viewed against the growing economic pressures faced by our partners, these are the values that will sustain us over the long term,” he declared.
     “But at the same time, we must also remain keenly focused on the future – of course we continue to enhance and expand our current partnerships, but we are also now focusing on geographic expansion, and the new partnerships such expansion will bring, and of course a lot of effort is being spent on finding synergies amongst the group with regard to processes and management efficiencies.”


     Building on the theme of ATC’s expansion, one of the major topics of the conference was securing and enhancing ATC’s brand equity.
     “Brand Equity is about all of us—it’s not just how we identify ourselves to our partners or their customers, but also how these entities perceive the quality and superiority of the services we provide them,” said Dagmar Hanau, ATC’s Head of Marketing.
     “ATC is now a truly global brand, and we have to take careful steps to ensure, as we expand and grow, the core values associated with the ATC brand are carefully maintained,” she concluded.
     At the meetings GLG came forward to share how the company can best manage its partner relationships for the good of the group as a whole, without losing focus of what makes ATC unique and successful in each country or region.
     Integrated IT, outsourcing of some data entry, and accounting functions were just some of the areas the GLG explored.
     “As competitive pressures mount, cost saving initiatives will become more important to ATC and GSAs as a whole,” Ingo Zimmer said.
     “In this respect, ATC is far ahead of its peer group when it comes to structuring its responses to industry changes, and we intend to keep it that way,” Ingo assures.
     “ATC is now one of the top GSAs globally; we have an incredibly diverse and talented team of people.
     “We are growing and expanding and keeping pace with the needs of our partners. But nothing we have discussed will be possible to implement without the full involvement and support of every individual within the global ATC organization.”
Geoffrey/Flossie

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