Third In A Series
     Here we continue our exclusive wider view of the world we operate in and what that means to air cargo.
    In case you missed the first installment of the series—just click here. For the second installment, just click here.
    Gordon Feller, who’s been watching and worrying about Asian cargo in particular and industry developments in general for more than 25 years, has created this MegaTrends series exclusively for Air Cargo News FlyingTypers.
    Gordon did his formal academic training at Columbia University in New York City, where he was a Wallach Fellow and a Lehman Fellow, and completed graduate work in international affairs.
    But as he likes to say—his real-world training has come from the "school of hard knocks. "
    Gordon Feller has written analysis and commentary for the FT of London, Reuters, Thomson, Informa, Journal of Commerce, McGraw Hill—and many others.
    We welcome your comments and suggestions.
Geoffrey

Overhaul And Globalization Of The Regulatory Environment

     The global financial crisis has proven beyond a doubt the need for more robust, globally consistent regulation. Out-dated banking regulation, overlapping regulatory agencies in the US, and limited international regulatory coordination were already causes for concern. Combined with insufficient (or non-existent) regulation of significant financial markets (the credit default swap market was worth US$60 trillion at its peak, and hedge funds managed US$2.25 trillion — before leverage) these created an environment ripe for a crisis. An overhaul of the existing regulatory setup appears an inevitable response.
     Finding the right model will be a significant challenge: regulation needs to block irresponsible or fraudulent behavior and excessive risk without also blocking growth. It needs to be global enough to provide a consistent framework, while also meeting local and national requirements. It needs to be clear and transparent, and able to act as an early warning system. It also needs to be nimble enough to make provision for the fast-evolving financial landscape and its complex products and transactions.
     More than anything else, the crisis has demonstrated to the world how interdependent companies, capital markets and nations are now and how insufficient national regulatory frameworks are to deal with this new world. While there appears to be a short-term trend toward nationalistic government responses and protectionism, markets and financial institutions are fundamentally too global and interlinked to unravel and localize. A global problem needs a global solution.
     Regulators around the world were already reconsidering their regulatory frameworks (with the change in administration likely to act as another — pro-regulatory — catalyst for reform in the US). They were developing closer ties with one another as evidenced by a number of cooperation initiatives across the regulatory landscape: the International Organization of Securities Commissions (IOSCO) stepping up its efforts to harmonize securities regulation globally; the OECD Forum for Tax Administration (FTA) sharing cross-border information to counter tax non-compliance; the International Forum of Independent Audit Regulators (IFIAR) promoting collaboration in audit regulatory activity; and the International Competition Network (ICN) aiming to facilitate antitrust enforcement convergence. International coordination is likely to increase. The role of the IMF and the World Bank is being challenged — and likely strengthened — in the aftermath of the crisis. In addition, regulators are focusing on reducing systemic risks, putting in place a stronger early-warning system and creating new regulation around companies and instruments that are not currently regulated, such as derivatives, hedge funds, mortgage brokers and credit rating.
     The continuing convergence of regulatory frameworks and standards is likely to be an important aspect of the regulatory overhaul. It holds the promise of increased comparability and transparency of financial information and greater investor confidence, as well as reduced compliance costs for global companies. While broadly there is a global commitment to regulatory convergence in the financial world, challenges exist as pressures to protect national interests come in to play. This was recently illustrated by the political interference in fair value accounting and pressure on the international and national accounting standard-setting process. Some countries may not be able to resist the temptation to tailor the standards to their national needs, undermining their consistency and value. Other countries may seek to create regulatory arbitrage opportunities in order to attract capital and create competitive advantage.
     Accounting standards are at the forefront of global convergence: over 100 countries require, permit or base their standards on IFRS and many more have set a date for adoption (e.g., Korea, India, Mexico, Brazil and Canada). There has also been progress toward IFRS in the US, although this may lose some momentum in the short term as the regulatory community focuses on the aftermath of the financial crisis. Auditing standards convergence is slowly building pace. More aligned rules for the financial services sector are surely on their way.
     This pro-regulatory environment is spreading beyond the world of finance. As governments around the world take stakes in companies to safeguard them and lend directly to businesses to address the liquidity crunch, questions around governance (including executive pay) are likely to be asked in every sector.
     State ownership of financial institutions raises particularly big questions: despite their hands-off intentions, governments will face pressure to intervene to ensure these companies lend widely, stall on debt collection and foreclosures, and retain jobs.
     Businesses are seeing financial institutions (meant to be the most astute at managing risk) fail and are becoming increasingly concerned about the risk issues that might arise in their own industry. Risk management is coming back as a top concern of most audit committees around the world. Some expect that regulation around internal controls will expand from financial reporting controls to cover the controls of key business processes linked to significant business drivers and strategic risks.
Gordon Feller

Thirty Five Degrees Drives Perishables At LAX

      Joe Cyzyk, Mercury CEO was jubilant:
      “New volumes of flowers and other perishables will come from Bogotá, Colombia and Quito, Ecuador and elsewhere non-stop to LAX instead of entering the U.S. at Miami International Airport.
      “This new shift in the flower supply chain will save considerable time, making flowers and other fresh shipments available to consumers on a faster, fresher and less-expensive basis.”
      Mercury Air Cargo, the big third party cargo handler based at LAX, opened a new 12,700-square-foot refrigeration unit that sets a record as the largest cool chain facility of its kind at any airport on the U.S. West Coast.
      LAX Mercury is the second-largest air cargo handler overall, based on 2007 tonnage.
      Mercury operates out of three leaseholds at LAX, the largest being a 200,000-square-foot facility on Avion Boulevard where the new reefer lives.
      Built to accommodate a projected 8,500 tons of perishables annually,among others, Mercury handles growing numbers of LAN Cargo air freighters from South America.
      LAN Cargo is expected to grow frequencies and also size of freighters with B777Fs on order.
Los Angeles Mayor Antonio Villaraigosa pictured (center) with Mr. Czyzyk (left) and Gina Marie Lindsey, Executive Director of Los Angeles World Airports (right) noted that the new reefer operation will “build both jobs and trade for Southern California”.
Gina Marie agreed calling the facility a new landmark for air shippers.
Geoffrey

Traxon Grows Product Line

     Traxon Europe brings the latest version of its established product Traxon Line to market and so far the word has been positive.
     “Traxon Line has provided us with measurable improvements in our logistics processes,” says Adil Turk, (left) the man from Mars, a freight company located in Bahrain.
     “Along with an array of features enabling easy and efficient cargo management, we are impressed by its outstanding customer service and remarkable cost savings.”
     The current version of Traxon Line, the company says “adds an advantage for small forwarders’ ability to utilize the application with ease, because no sizable technical investment is required and because the product is available as both a single and a multi-user application”.
     A closer look reveals Traxon Line offers functions including Flight Schedule and Availability Inquiry, e-Booking, and the transmission of e-Air Waybills and e-Consolidation Lists.
     TL also provides detailed Tracking & Tracing functions and extensive data archiving.
     “Traxon Line allows for reduction of costs and increased efficiency with no hard-to-meet requirements, because Traxon Line is a ready to go application,” Karin Siegmund, Traxon senior marketing manager told Air Cargo News FlyingTypers.
     “Implementation is fast and smooth, no direct technical investments are needed, and Traxon Line is Windows as well as IATA e-freight compatible.”
More: karin.siegmund@traxon.com