First of a series…
     Everyone in the air cargo industry knows that the world is changing more rapidly than ever. Globalization continues its march. Gaps in power between developed and emerging countries continue to narrow, driven in part by the politics and economics of energy. The financial landscape is in turmoil, driving increased regulation.
     Aging populations and the different demands of the younger generation (Gen Y) challenge the workforce model that has existed for decades.
     Technology continues to alter how we communicate and act. And climate change concerns challenge how businesses operate.
     There is simply no way that executives using or delivering air cargo services can understand the near-term (or long-term) future of their industry without understanding the broader context within which the industry operates.
     The mega trends that follow are listed in order to highlight the most influential trends in this changing world — some that are driving the change, and some that are driven by it:

     •   The accelerating shift of power from West to East….we discuss how the engine of growth in the global economy has moved from developed to emerging countries, how commodities and the advent of a new middle class are accelerating this move, and how emerging market multinationals are not just here to stay, but likely to become global champions in many industries.
     •   The changing financial landscape…. we look at the rise of the new power brokers (sovereign wealth funds, PE, hedge funds etc.) and how the financial crisis will impact their trajectory, as well as discussing how banking is being transformed and how governments are taking a more active role in financial markets.
     •   Overhaul and globalization of the regulatory environment ….we look at two key trends in regulation — the move toward greater regulation and the move toward more globally consistent regulation — and consider the role the financial crisis will play.
     •   The rising economic importance of energy and commodities ….we look at the scarcity challenge, the impact of uncertainty in oil price, the rise of clean tech and the drive toward greater energy efficiency.
     •   Responsibility firmly on the corporate agenda: we consider the increasing environmental, social and ethical expectations and obligations on businesses and their associated opportunities and risks, and we look at the possible impact of the financial crisis.
     •   The next wave of technological innovation:  we discuss how technology developments are still driving change — for businesses and consumers — and how the next wave of digital technology takes this even further.
     •   In the increasing challenges of managing and developing talent we look at the difficulties in attracting, managing and developing a global workforce — a challenge compounded by changing demographics, the different demands of Gen Y and increasing diversity — and consider the impact this has on businesses worldwide.

MEGATREND #1:
The Rebalancing
Of Power

     The global economic landscape is changing, and the emerging markets are playing an increasingly significant role. Economic power is moving from developed to emerging economies — from West to East and North to South.
     Emerging economies accounted for 44% of global GDP in 2007; while projected GDP growth rates for major developed markets in 2009 are now predicted to lie between -0.2% and 0.5%, emerging markets are expected to grow at 6.1% on average, with China (9.3%) and India (6.9%) performing even better.

    This may be less than was projected before the financial crisis, but emerging markets still demonstrate considerably stronger growth than the developed world. The financial crisis may have undermined decoupling theories, with emerging markets also suffering from issues of liquidity, investor confidence and over-valued assets, but their hunger for growth (alongside their rapidly industrializing economies and growing populations) should set them on the path to recovery more quickly.
      In China and Russia’s case, their huge accumulated reserves (China with US$1.9 trillion and Russia with US$560 billion) will no doubt ease the pain.
     The Middle-Eastern economies are likely to be another real growth story of the next few years — although they have not been immune to the immediate effects of the financial crisis, with issues around interbank lending and overinflated property prices causing some concern. They remain well placed, however, to capitalize on difficulties elsewhere.
     Even at US$50 per barrel, the Gulf Cooperation Council (GCC) states would earn a cumulative US$4.7 trillion by 2020, or 2.5 times their earnings over the last 14 years.
     This will afford them huge opportunities to buy up cheap assets or finance local infrastructure developments—as the rest of the world’s economies stall.
     Their relatively lax regulation and lenient tax regimes will be even bigger attractions as European and U.S. business environments tighten under the pressure of the recession.
     Africa has also been stepping onto the global financial stage. Its economy has been growing at 5.4% over the last decade and it has been a major recipient of investment and interest; Chinese enterprises invested over US$300 million in Africa in the first 6 months of 2008 alone, and interest in its natural resources has been the source of much political tension.
     However, the uneven distribution of investment (60.5% of total net foreign direct investment in sub-Saharan Africa in 2005 went to oil-exporting countries) and the large number of conflict-prone and resource-poor countries will likely keep much of Africa in the shadows of the BRICs for some time yet.
Beyond The BRICs
     While the BRICs (Brazil, Russia, India, China) are clearly the major players (with China alone contributing nearly 27% to global growth in 2007), another group of countries are emerging that have the potential to behave like the BRICs—driving growth and making waves in the global markets.
     South Korea, Mexico and Turkey may be the most commonly cited of Goldman Sachs’s “Next 11,” but countries as diverse as Egypt, Iran and Vietnam have been identified as having the potential and conditions to rival the BRICs—and some developed economies—in the future.
Emergence Of A New Middle Class
     Alongside the advantages conferred on many of the major emerging economies by rich supplies of commodities, political and demographic changes have played a large part in driving their growth.
     The fall of communism (or adoption of government-led capitalism) has opened up the world, resulting in a tenfold increase in the number of people served by the world economy in the last 25 years.
     The sheer scale of population growth in the emerging markets will also drive their economic development and relative strength; while the global population is predicted to reach 8.3 billion by 2030, from 6.7 billion today, only 3% of this growth will occur in the West.
     The mushrooming of the middle classes in emerging markets is a critical factor: since 2000, 600 million people have reached middle class status, spending on average US$4 trillion a year and an estimated 70 million more will join their global ranks annually.
The Emerging Global Champions
     Serving the needs of these people—and millions more around the world—are the emerging market multinationals (MNCs), companies previously little known outside of their own countries or regions (despite their colossal size) are now challenging the mega corps of the West.
    Globalization may just have been, in the past, a different word for westernization, but no longer—a new wave of globalization is in place, and emerging market MNCs are now exporting their brand of capitalism to the West. Tata, China Mobile and Gazprom are now familiar names and behind them are numerous other companies looking to secure their place on the global stage.
     Their rise has been swift: emerging markets had 70 companies in the Fortune Global 500 in 2007, up from 20 just a decade ago, and are likely to account for a third of the entire list within 10 years.
     It has also had effects, evidenced by some very high-profile activities across numerous sectors: Lenovo, Mittal and Cemex becoming household names for their acquisition activities with IBM, Arcelor and RMC respectively; Wipro and Infosys challenging the dominant IT outsourcing providers; Embraer challenging Boeing’s and Airbus’ dominance in certain segments; and TNK-BP and Gazprom showing their financial and political strength.
     These companies may have a competitive advantage over their western counterparts in reaching into other emerging markets, but they have not been afraid to compete in developed markets, too, increasingly challenging western MNCs for market share, capital and business activity on their home territory.
     These companies share few traits: they’re positioned across wide-ranging sectors; they have radically different governance structures (from each other, as well as from traditional western MNCs, ranging from state- or family-owned conglomerates to narrowly focused corporations), and they approach expansion in varying ways.
     However, they have growing clout and influence in common, as well as two other common features: they have confidence and they have scale; the ten largest emerging market companies had combined revenues just shy of US$1 trillion in 2008 —more than the entire GDP of Australia or The Netherlands.
Gordon Feller

Next Installment is MEGATREND #2: The Changing Financial Landscape.

Leading cargo events is IATA World Cargo Symposium held this year in Bangkok Thailand March 2-5,2009.
Here IATA DG Giovanni Bisignani and IATA Head of Cargo Aleks Popovich welcome first WCS held in Mexico City in 2007.

     Baseball in America has its “World Series,” much derided by our British cousins in particular. Air cargo has events that combine exhibitions and conferences, including:
• IATA World Cargo Symposium
• CNS Partnership Conference
• ACF/TIACA
• Air Cargo Americas
     Then there are specialized meetings, such as the Cargo2000 Board meetings; Airports Council International’s Air Cargo Subcommittee; FIATA’s Air Freight Institute; Transport Logistic in Munich and others.
     Apologies for those not mentioned here by name – any omission is unintentional.
     Were the true key decisions making air cargo executives to participate in most, if not all, of “the one”, “the only”, “critical”, “exciting”, “trend-setting” meeting, it would account for 15% or more of their time every year, not to mention the costs.
     The business climate for 2009 looks nothing like the expectations for 2008, yet purchasing, production and logistics functions are more closely interconnected than ever before.
     We are going into what is probably a global recession.
     Remember, the Dow Jones average was over 14,000 a little over a year ago! Everything has changed.
     Looking at the events listed above in terms of what they accomplish - not what they advertise, who attends and why, the picture is instructional.
     They differ in no small measure in terms of structure, locale, objectives and style – all of which drive attendance.
     The IATA World Cargo Symposium, (number three kicks off in BKK in two weeks) although perceived as a newer event, is an evolution of the IATA Cargo Week of former years, albeit expanded and improved by IATA’s dynamic new Head of Cargo Aleks Popovich.
     WCS incorporates in its program an element of regulatory process for maintaining industry-wide standards through its conferences with the adoption and amendment of resolutions/recommended practices and their subsequent dissemination in the technical meetings.
     This includes the annual meetings of the cargo services and the cargo agency conferences and their respective groups.
     Much of the rest of the Cargo Symposium, in my view, is window dressing and fulfills the need of IATA to generate revenue, first and foremost.
     Its “industry priorities“ listed for 2008 identify a single cargo related objective – “Implement e-freight pilots at 8 additional locations (14 total) by end 2008”.
     No fundamental change of the original format since the mid 90’s.
     Comparing the meetings then and now shows that the E-freight Industry Action Group and the Air Cargo Security Industry Forum have been added while the CASS Policy Group, Cargo Services Conference, Cargo Agency Conference, Dangerous Goods Board and Live Animals and Perishables Board fulfill the annual meeting schedule.
     There is a certain dichotomy between serving your members and the revenue generation aims of the Secretariat, but that’s a topic in its own right, better left for another time.
     A review of a list of Symposium attendees reveals a mix of airline delegates, vendors participating in the IATA Strategic Partnership programs (18 companies are currently listed in cargo services and 8 in cargo standards) and other, non-participating vendors, postal authorities, airport representatives, forwarders and the trade press. Regarding executive meetings, by far the most sought after, cherished and exclusive airline cargo club in the world is considered to be the IATA Cargo Committee consisting of twelve elected heads of cargo, a.k.a. “the cargo bulls”. Understandably, while the vendors are seeking access to its members, because they have budget authority, the “bulls” are usually well insulated from such “inconvenience”.
     Mere mortal conference delegates can be lobbied but their influence is rather limited in both policy matters and purchasing decisions.
     What stands out for this observer for the upcoming 2009 event is that the agenda for the ‘plenary sessions’ as IATA calls them, the third pillar of the Symposium construct, is eerily devoid of any topics that reflect the current outright scary business environment with airlines bleeding money and a deepening global recession looming.
     Although IATA Economics analyze “economic and policy developments affecting the financial performance of the global airline industry” you need to go elsewhere to discuss the impact or the means to combat its effects on air cargo. Yet the show must go on!
     The CNS Partnership Conference is another one that yours truly has participated in for many years in various capacities and which has lost its ways in my humble opinion.
     As long as its honestly declared objective was to provide a pure networking and R&R venue for airline cargo and freight forwarders, with some light sessions and panels, it did well.
     It didn’t pretend to be anything else, and the golfers always looked forward to it, that is, until it all changed.
     From the perspective of a vendor looking for business opportunities, the exhibition aspect of this conference never worked. After several fruitless attempts, the companies I was involved with dropped it from the potential exhibition agenda for good.
     The last CNS with Charlie Rose interviewing Richard Anderson, the Delta CEO just didn’t fit and looked a bit as going overboard.
     The aggressive stance of the U.S. authorities in the fuel surcharge scandals didn’t help and kept foreign attendance to a minimum.
     The jury is still out regarding any CNS role in Cargo2000 as well as new leadership.
     The chances of it being or becoming a ‘must go’ to event in 2009 aren’t great I’d say, given the prevailing winds.
     ACF/TIACA has been very recently covered by Geoffrey in depth and in detail with his usual clear eye and straight talk and a bit of ‘tough love’ all mixed in.
     Suffice it to say that apparently the only positive side of the story is that the TIACA Board is aware the problem.
     In my experience, Cargolux management usually means one can expect results and it chairs the organization next year.
     We wish them well in stepping up to the plate again and hopefully bringing back what was a class act.
     Speaking of Luxembourg, the 1992 Forum there remains a vivid picture in my mind for what this event has once been!
     The now defunct Atraxis’ red stand cum live bar in Washington in 2000 was a definite standout—if for the wrong reasons.
     Air Cargo Americas has been a personal favorite of mine because it has always succeeded in blending the right mix of business, shop talk, networking and while never flashy, its solid exhibitions had participants mingling and walking the aisles throughout the entire event without needing to be prodded.
     From its humble 1991 beginnings, it retained a workmanlike hands-on feel. Given its special role and traditional Latin American component, I think it will continue to serve as a productive venue for air cargo meetings.
     Miami is easy to reach and there are plenty of reasonable accommodation alternatives.
     The halls and every corner and alcove have always buzzed with animated business discussions, demos and familiar as well as new faces.
     We all attend various events for many different reasons; this time factoring in the global economic and financial climate, the “could we just teleconference” is making a remarkable comeback!
     Whereas the basic idea for a conference is to meet prospective clients, transact some business with several side meetings set up within a single venue, serve as an introduction and learn about new products and technologies, we want more.
     We look for the one event where we find an opportunity to analyze the existing situation honestly and draw up recommendations for action in tough times that we can take home and get to work on.
     And have the measurements to assess how we did!
     A business associate of mine sent around a quote of the week I find appropriate and would like to repeat here:
     "If you don't like change, you're going to like irrelevance even less."
Ted Braun