(Shanghai Exclusive)—FlyingTypers is in Shanghai for this year’s annual conference, marking the 25th such conference for this group formerly known as the IULDUG (Interline ULD User Group).
     The formal sessions, starting Tuesday morning local time, were preceded by a special meeting focused on the Chinese airlines and takes advantage of the opportunity to introduce and involve these carriers in the workings of the IULDUG group, renamed ULD CARE.
     So straight out of the gate, a concerned industry group has ditched a tongue twisting moniker, preferring to brand an already complex mission with a comprehensible name:
ULD CARE.
     Angel Cheung, General Manager of DAS Nordisk Limited, which is Hong Kong based, welcomed and addressed the Chinese audience of 30-plus that represented a cross-section of the Chinese aviation industry (Kuehne & Nagel, Shanghai; Yangtze River Express Airlines, Shanghai; CATA, Beijing among others) with excerpts from the full presentation scheduled for the conference. She highlighted the networking aspect and learning platform ULD CARE provides.
     She went over the vital role ULDs play in ensuring luggage and cargo are loaded and transported safely throughout the air cargo chain of participants and how to manage and minimize risk, whether economical, commercial, or regulatory, and from a flight safety perspective. Improving ULD management is a shared objective and the new acronym CARE—which stands for “compliance, airworthiness, regulations, and education”—fittingly represents the objectives of the new group members.
     In turn, ULD CARE chairman Dick O'Marra (UPS) extended his welcome to the participants and invited them to stay on for the full conference.
     Angel provided a brief overview of how the group has evolved since its inception in 1971 by IATA, and set up for tracking interlined ULDs.
     The management tool of ULD CARE is a global, neutral, multilateral ULD control system that is a proprietary—a web-based solution for tracking the movements of ULDs that includes the creation of the relevant ULD movement messages; for example, LUC from UCR data, converting LUC to MUC, sending MUC to ULD CARE (online or automatically), and centralizing the data.
     ULD CARE is unique in that it brings together airlines and non-airlines alike, including airports, cargo terminal operators, civil aviation authorities, ground handlers, and so forth. Additionally, the members benefit from shared best practices and learn about industry trends, training in and awareness of ULD management matters, and the ability to invoice for demurrage and provide visibility for late or unreturned units.
     Following the presentation, a lively Q&A session ensued involving the Chinese guests, which was translated.
     For attendees, the action demonstrated that there is much interest in the workings and benefits of ULD CARE, a sign the board took as encouraging future membership.
     A sampling of commonly expressed concerns was: “How much does it cost to participate in ULD CARE?”; “What are the message transaction costs [currently 1.50 USD]” mostly formulated by Li Ruilin (left) of CATA (China Air Transport Association), a long time industry veteran and former CAAC representative; “What is the formula for calculating demurrage?” [The type of ULD/purchase cost divided by 180 (first 5 days, no charge)]; “How are invoices issued?” [Using the system in Montreal].
     Urs Wiesendanger, (right) ULD CARE vice chair, explained the option for each airline to bill another airline or not—an exception to billing one another would be a bilateral courtesy move, as the ULD CARE system does not issue invoices and settlement is not automatic through the IATA Clearing House (ICH). IATA in its largesse wanted $15,000 USD for providing access to the ICH, and ULD CARE members elected to invoice each other directly.
     “What is the difference between leasing ULDs and going through ULD CARE?” Urs clarified that the group as such does not own any assets, but rather acts as the middleman to facilitate ULD management.
     Furthermore, membership assumes compliance with IATA regulations, especially when it comes to the handling of ULDs, something ULD CARE promotes and encourages everyone to abide, in support of IATA.
     A new web-based app has potential in assisting members to look up what constitutes airworthiness and to determine the serviceability of a ULD.
     “How about the repatriation of ULDs?” – a perennial concern, which prompted Urs to respond that group members actively support each other whenever possible, without bumping revenue cargo, to carry empty units.
     The AGM agenda is loaded with both, group internal structural details as well as industry updates from the various bodies that affect the ULD business—IATA, SAE, FAA, CAA (UK) and CAAC, just to name a few. Of interest to all (as mentioned) will be the topic of demurrage, which affects all the carriers, and can make or break well-planned budgets when the interchange of ULDs is not managed and monitored properly.
Day Two features a panel moderated by Bob Rogers of Nordisk, a well-known and respected business veteran, focusing on the impact of the new IATA ULD operational guidelines and regulations and how IULDUG could contribute to fostering industry wide compliance and maintain high operational standards for ULDs while reducing associated risks. The panel has a broad representation of global experts from airlines, airports, ground handlers, freight forwarders, and regulators. Additionally, ULD leasing companies, equipment manufacturers, maintenance and repair firms, and pooling and management companies are expected to jump in the fray to round off the discussion and share their perspectives.
     Two afternoon panels consisting of a similarly broad cross-industry representation aim to address the need for change, opportunities and challenges, and how to ensure progress.
     Day Three starts on a technical note, looking at innovative applications to asset management for ULDs, while the afternoon is devoted to the education and sustainability angles, and resources and objective means to measure progress.
     It is a workmanlike conference with a good portion of the participants already scheduled to exhibit at the upcoming Air Cargo Forum in Atlanta in early October to drive the point home to the industry at large that ULDs matter.
Ted Braun

     If the going was good in 2010 for global cargo airlines just coming out of a downturn, the downward journey in 2011-12 has been equally bad. While on one hand, demand seems to be petering off, on the other fuel prices have gone up, forcing carriers to cut down on flights.
     One of the carriers affected was Hong Kong’s flag carrier Cathay Pacific. The cargo division’s revenues went down 7.6 percent, year-on-year, in the first half of 2012. Freight capacity and yield also faced similar pressures in the first six months of 2012: 4.3 percent and 0.4 percent year-on-year respectively. Matching capacity with demand, Cathay’s load factor suffered: going down 4.1 percent year-on-year to 64.3 percent.
      In a press release, Cathay pointed out that the cargo demand in Hong Kong and Mainland China was “well below expectations” during the first half of the year, except for a brief hike in March. Despite these pressures, Cathay launched freighter services to Zhengzhou, China, in late March. A twice-weekly cargo service to Hyderabad will start in December.
      The launching of the services when others have been trying to cut capacity only emphasized Cathay’s commitment “to maintain Hong Kong’s position as the logistics hub of choice in Asia,” as Nick Rhodes, (left) Cathay Pacific’s Director Cargo put it. The avid golfer that he is, Rhodes gave his view of the global air cargo market without pulling any punches: “The global air cargo market has been very soft for most of this year especially in the second and third quarters.”
     As for Cathay Pacific’s major markets—the export markets from Hong Kong and China—“these are the markets that have been the hardest hit in 2012, especially from China to Europe. There has also been a significant increase in capacity into most cities in China which has exacerbated the problem of supply and demand disequilibrium,” he said.
     The downturn in the market notwithstanding, Cathay Pacific has decided to expand its services to India and even decided to start services to Hyderabad.
     “Our strategy is to maintain Hong Kong’s position as the logistics hub of choice in Asia and the premier gateway to and from China,” emphasized Rhodes. He simplified it further: “This means that, despite the downturn, we wish to continue to build our network (both passenger and freighter) over Hong Kong to increase the power of the hub. Every new destination that we add, such as Hyderabad, immediately generates dozens of new city pairs over Hong Kong.” Indeed, he was surprised at “how many cities in our network suddenly started selling HYD (Hyderbad) once it came on line,” said Rhodes.
     As for India, Cathay believes that “India is an extremely important market, both import and export…it has enormous future potential as an emerging economic power,” the cargo chief said. Hence the plan is to continue to develop both passenger and freighter flights to India, both in terms of frequency and new destinations.
     The carrier has had the biggest loss since 2003 and Cathay Chairman Christopher Pratt has gone on record to say that the carrier’s business was “significantly affected by weak air cargo demand,” among other factors. With Europe and America not doing too well, was it time to concentrate on intra-Asia growth?
     Speaking about the losses, Nick Rhodes said that the primary reason was the high price of fuel and “the inability of the airline to pass on such an escalation in costs to the passengers and shippers.” The weak cargo market, he emphasized, was a significant factor but, he emphasized, “there are no plans to change our strategy. We will continue to grow both as a long-haul and as a short-haul cargo operator out of Hong Kong.” Even so, he also said that “we do see intra-Asia as an area with considerable potential. Much of the growth in capacity will, however, be served by passenger bellies and an increase in freighter frequencies will be unnecessary to most markets.”
     Elaborating further, Rhodes said that there has definitely been a correction in the directional imbalance of trade to and from China. “Imports have picked up significantly in recent years, although this is yet to be reflected in significantly improved yields ex-Europe and North America.”
     Cathay’s focus has always been on other markets in Asia, “not just China.” Pointing out that in the good years and on the peak days of the week, when demand outstripped supply, “we prioritize space on long-haul flights for the higher yielding cargo markets, which have traditionally been Hong Kong and China.” When space becomes available, the carrier accepts more cargo, and this is from other markets—across India, Sri Lanka, Bangladesh and S E Asia, albeit it at a lower yield. “This is not so much a shift in focus but prudent yield management!” he said.
     He was, however, quick to point out that “there has been an increase in capacity in both Hong Kong and China this year, which has had an adverse impact on yields,” referring to the freighter services by Cathay’s competitors in Mainland China. The effect on yields was felt on routes between Asia and Europe, which are now served by an increasing number of airlines from China, Europe (including Russia), and the Middle East.
     “In very simple terms, the current high price of fuel and low cargo yields make it very difficult for a commercial freighter operator to cover the cost of its assets.” In his opinion, “such a situation is unsustainable in the long term.” Rhodes predicted that some airlines will be forced to park (or scrap) older, fuel inefficient freighters and many will find it very difficult to justify any investment in new and expensive freighters, despite their improved operating economics.
     In such a situation, would he venture to look into his crystal ball and predict when cargo would see a rise? “We expect some pick-up in the next three months, especially to North America, but my crystal ball for 2013 is very cloudy!”
Tirthankar Ghosh

     As recently as May of this year, we heard one view that the volatility in crude oil has been considered the main culprit that triggered the 2008 financial crisis. Closer to the present, it was said that supplies are decreasing historically and a potential crisis may erupt if either consumption isn’t curbed or the threshold of USD 4.75 per gallon is reached, which is deemed to trigger “global demand destruction.” The report referenced was available in its entirety on the World Bank website at the time of the 2012 CNS partnership conference and the data was presented by Charles Schlumberger.
     There is a difference between crude and refined oil availability and pricing and it is frequently lamented that in the US especially, no new refinery has been built in years. The implication here is that the bottleneck is refined petroleum. According to the US Energy Information Administration, there are “complex” and “simple” refineries; the last complex type first started operation in 1977 in Louisiana, and of the simple type there are only 8, the last of which was built in 2008 in Wyoming. What distinguishes simple and complex is the model to calculate emissions from motor gasoline and the stricter standards for the gasoline they produce. When introduced, the Energy Information Administration stated that it “…is not expected to result in an increase in the price of premium for reformulated gasoline or constrain supplies.” The year was 1998 and the full details can be found here: www.eia.gov/forecasts/steo/special/pdf/rfg1.pdf
     As reported earlier this year in FlyingTypers, Delta Air Lines went as far as acquiring its own refinery in its quest to combat oil price volatility.
     In light of these authoritative facts it was rather surprising to read in the July 21-27, 2012, edition of The Economist that “…the capacity glut is causing casualties on both sides of the Atlantic. Petroplus, a Swiss refiner, collapsed in January.” The article cites several cases of refineries being closed in the US as well and projects that more closures are likely. Apparently, U.S. refineries were dependent on “light and sweet” crude, which is more expensive than the cheaper, heavier grades [e.g. Brent crude], such as those found in the North Sea. The real interesting fact stated is that overall “demand for petrol is falling on both sides of the Atlantic.”
     At the same time, the article reaffirms the position expressed earlier by the World Bank in as much as it lists oil production falling between 2-6 percent a year, while global demand grows by 1-2 percent annually.      Yet there is a “capacity glut?” Is it temporary? Is it cyclical?
     Economists talk about market forces and supply and demand while the U.S. government chided and threatened to pursue speculators accused of causing high gasoline prices earlier this year, yet it seems demand can’t be the culprit, nor is it the refining capacity.
     Under this set of seemingly conflicting circumstances, as a consumer one can’t help but feel duped by all sides and taken for a ride when it comes to paying for gas, whether for automotive or jet. If everyone’s facts were right—the World Bank, the U.S. government, and economists—we couldn’t possibly experience what is going on with oil. Certainly currency fluctuations have something to do with all this, but are they sufficient to cause this constant seesaw? Is it just another case of giant manipulation on a global scale? India and China are building ever more and larger refineries and refined fuel is transported around the world much as crude used to be. Now you see it; now you don’t.
Ted Braun

     Was driving to work today and saw one of those bright green tennis balls bounce out of the park and into the street.
     If you work at the airport or live or travel through Queens, New York, you cannot ignore the recently completed US Open that saw Andy Murray of Great Britain clinch the men’s singles championship on Monday, September 10, defeating reigning US Open Champion Novak Djokovic of Serbia.
     In addition to being a hell of a sporting event, The US Open is also a rite of passage between summer and early fall in the greatest city in the world, where it’s also back to school season and the Jewish high holy days of Rosh Hashanah are widely celebrated.
     Before moving our airport publication into air cargo, we previously covered (as Airport News) sporting events like the US Open, back when the event was held at Forest Hills Stadium and hosted by The West Side Tennis Club.
     We also recall covering these matches for The Hollywood Reporter.
     In those days (prior to the Stadium Finals), we would walk around with drinks in hand (drinks in real glasses, no less) watching a dozen or more ongoing matches between the most famous players in the world.
     We knew Billie Jean, Chris Evert, Jimmy Connors, Poncho Gonzalez Lew Hoad, and Tony Trabert, and would talk to them all between sets.
     It was a relaxed and very social atmosphere, but dead serious when it came to the game.
     For years we bumped into Alan King, the comedian at every match.
     Alan was a very funny man with a lightning quick wit who would always be smoking a big cigar and often would pad around in these dark satin slippers with the letters A & K embroidered on the right and left shoe.
     Later The US Tennis Center (where the US Open is now played) opened near LaGuardia Airport in Flushing Meadow Park; the sport went cosmic, and they named the place after the pioneering woman tennis icon, Billie Jean King.
     Today, the US Open brings three quarters of a billion in revenue into NYC each year; I think they will build a new, bigger domed stadium soon.
     But once upon a time, Chris was 16 and standing there, talking quietly, seemingly unaffected by it all—she changed tennis forever after defeating Ms. King—waiting with her Mom while her Dad fetched the car, parked on the street outside the tennis stadium at Forest Hills.
     We send our appreciation to our colleague SkyKing over in Bali, who brought all of this back to mind when he wrote that he went to bed early Sunday so he could awake at 0400 and see if an Englishman would claim the top rung in men’s tennis this US Open.
     Well Sky, it happened, and at least out on the street, where tennis balls and hand balls and basketballs form the heartbeat of this city, no one referred to Murray as Scottish!
Geoffrey

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