Vol. 8 No. 37                                            WE COVER THE WORLD                                                   Wednesday  April 1, 2009

Air Berlin TUIfly Partnership

     Germany’s number two and three ranked airlines agreed on a mutual ownership by exchanging 19.9 percent of their shares. While TUIfly acquired the Air Berlin stake for €68.4 million Euros, Air Berlin paid €36 million Euros for the deal.
     Both airlines announced a close strategic alliance beginning this October.
     At that point, Air Berlin will wetlease 17 Boeing 737-800 aircraft on long term conditions from Europe’s leading leisure company and tour operator, Hannover-based TUI.
     The passenger planes will be deployed on German and European city routes like Cologne-Rome or Berlin-Nuremberg. Parallel TUIfly will keep 24 of their aircraft within their own fleet for carrying tourists to destinations around the Mediterranean Sea, the Canary Islands or destinations at the Red Sea in Egypt.
     Further to the financial and operational pact both enterprises have just inked, Air Berlin announced the purchase of 15.3 percent of the airlines’ shares by Turkish ESAS Holding.
     Formerly this package belonged to U.S. billionaire Leonid Blavatnik who sold the shares last January.
     ESAS stepping in could now pave the way for a new German-Turkish airline pact since the investor possesses Istanbul-based leisure carrier Pegasus Airlines together with IZair of Izmir.
     "I could well imagine that there will be opportunities for both the passenger and cargo business," stated Aydin Alpa, VP Cargo at Pegasus when asked by Air Cargo News FlyingTypers.
     Meanwhile Air Berlin increased its €40 million euros mounting deficit of fiscal 2007 by posting newly made losses after taxes of €75 million Euros in 2008.
     The turnover climbed slightly to €3.4 billion Euros.
     The airline confirmed plans to sell the airfreight subsidiary leisure Cargo.
     This is supposed to happen at the end of April, the airline announced.
Heiner Siegmund

     With the theme of exploring China’s competitive air cargo market and the rising of new freight carriers, the 6th China Air Cargo Summit 2009 was held on March 24 and 25 at South China’s Guangzhou New Baiyun Airport.
     For the second time since the first session in 2004, this two-day conference is in Guangzhou, organized by Guangdong Airport Management Corporation (GAMC) and China Southern Airlines.
     Over 200 officials and executives attended the event, discussing the way to face the current recession in the air cargo market and improve the profitability.
     Mr. Liu Zijing, (left) President of GAMC addressed the opening of the summit:
     “China’s RMB4 trillion fiscal spending is underway. Plans for revitalization of ten key industries are being implemented step by step, all these measures bring us confidence on the development of airport economy and air cargo business in China.
     “Moreover, a second round of economic growth in the Pear River Delta region is foreseen, as part of the Development Plan (2008-2020) for the region released by the central government in the end of 2008.
     “New Baiyun Airport and cargo business here would be the first to get through this economic winter.”
     Mr. Zhang Kejian, General Executive of Baiyun Airport introduced the four factors that will promote the building of Baiyun Airport into a cargo hub: new logistic parks, new air cargo infrastructure (including the third runway), new aircraft maintenance program and the running of Asia-Pac FedEx Hub.
     As to speakers from carriers, Luo Laijun, (right) General Executive of Cargo Department of China Southern, spoke of taking the company through the current difficulty:
     “Support from the government and industry association, plus improvement of corporate governance, that’s the way of helping domestic cargo carriers get out of the plight more effectively.”
     Also attending were executives from Jade Cargo International, Shanghai Pudong Airport, Sichuan Airport, Boeing, Airport Macau, etc.

India's GATI Dumps Freighters

     Not too long ago, GATI was part of of India’s top few logistics majors.
     Now while the company is still a respected major force here, as the global downturn also affects the Indian economy, GATI has started shedding weight.
     In what could be termed as a dramatic turn of events, GATI recently said in a rather cut-and-dry memo that it had terminated its wet lease of five Boeing 737-200 cargo freighters from Air India.
     Consequently, those same freighters leased by Air India have also been withdrawn with immediate effect.
     “Our strategic alliance with Air India is being continued as usual without affecting air cargo movement business,” GATI said in a statement.
     For background, GATI had signed a joint venture pact with Air India Cargo to take on domestic aviation cargo major Blue Dart Express, owned by DHL India, a unit of the German postal services giant Deutsche Post.
     The GATI-Air India first flight took off on November 14, 2007 on the Delhi-Mumbai-Bangalore-Delhi sector. The agreement with Air India barely lasted for a year.
     Industry experts told Air Cargo News FlyingTypers that GATI had been finding it very tough to maintain loads.
     GATI’s last financial results, released in December 2008, showed that its air freighter business was bleeding the company.
     In the half year that ended in December 2008 results showed that the logistics major had lost Rs 16 crore on the air freighter business.
     “It was all due to the load factor coupled with the recessionary trend,” a source said.
     “The company sought to take preventive action by shifting surface cargo to air.
     “That, however, did not contribute to the organic growth of the air cargo business.
     “At that time, the management had said that it was taking “remedial action”—in other words, they were getting out of the business.”
Industry pundits maintain that GATI’s decision to enter the air cargo business was ill-timed.
     “The first signs of the downturn were apparent and GATI should have seen the writing on the wall then.
     “It is strange that it did not.”
     In fact, on October 22, 2008, GATI Chairman K L Chugh, speaking at the 13th Annual General Meeting of the company had mentioned to his shareholders that “whereas the (logistics) industry has over the past few years predicted growth to over $125 billion from the current $90 billion, the next 2-3 years could see sluggish growth.”
     But he held out a ray of hope:
     “On account of the current problems, even more companies will outsource their logistics portfolio to specialist logistics operators and concentrate on doing what they can do best.”
     “GATI’s airfreight saga, had it worked would have brought about a revolutionary change in the express cargo segment by providing end-to-end connectivity,” an industry observer noted.
     “In fact, Mahendra Agarwal, GATI’s Managing Director, Chief Executive Officer and Director had mentioned to this correspondent at that time that the business model had been created to cater to the upcoming global cargo hub at Nagpur.
     He had mentioned that the partnership with Air India was expected to take
     GATI’s business from the then $115 million to more than $250 million within two years.
     GATI had also planned to invest $100 million in the next three years —that is till June 2009—to set up Express Distribution Centres (EDC) and in re-engineering of technology and network.
     But for now at least all of that is over.
     Where then does that leave Air India Cargo?
     The carrier moves around 2,000 tons of cargo daily on international and domestic routes and that includes belly cargo as well as dedicated freighters.
     The termination of the agreement with GATI, according to Air India, will not upset those plans of expansion in the cargo sector.
Air India has converted two of its Airbus 310s to freighters as well as three of its seven B737s.
     By 2015, Air India says that it expects to field 40 freighters.
Tirthankar Ghosh