The greatest aviation historian, Ronald Edward George (REG) Davies, Curator of Air Transport National Air & Space Museum, died on Saturday, July 30, 2011 in Shaftesbury, England.
     He was 90-years-old.
     Ron’s legacy to aviation is captured in 25 books and other social efforts as pioneering and important in scope as many of the subjects he wrote about, including Lindbergh, Earhart, the Berlin Airlift and almost every major airline in the world, past and present.
     Although we were friends and colleagues and even tackled a few projects together during our three decades together, the last talking session we had was inside Ron’s apartment in McLean, Virginia.
     For no particular reason other than my need to capture moments in both words and pictures, I had brought along a small digital camera. I recorded the entire 90-minute conversation, never knowing that this scrap of footage would be the last ever taken of my dear friend.
     Conducted in September 2010, our conversation covers a wide range of topics, including some surprising revelations about the future possibilities of rail transportation around the world.
     His last book, Airlines of the Jet Age (for the Smithsonian Institution Scholarly Press), was published just this past summer.
          Here in Part One of our exclusive video series, Ron explains why the Middle East has emerged as a world hub, led by Emirates Airline.
     He also discusses why he thinks the A380 will rule the international air lanes in the future, and why Boeing’s development of the B787 may be a limiting factor, preventing the company from surpassing aircraft manufacturer Airbus in the future.
     Upcoming in our next installment of this exclusive video series Ron opens up about why, in the last chapter of a life in aviation, the viability and importance of developing global rail services became a clear and persuasive focus for him.
     No doubt, the potential of rail was much on Ron’s mind as he actually delivered a few speeches and wrote an in-depth article on the subject, which will be presented here in a January 2012 issue of FlyingTypers and available after that on www.aircargonews.com.
     We can only imagine the book that would have appeared as an eventuality when Ron made his case for rail, with Ron’s signature hand-drawn maps, penchant for exacting detail, and indexing and reading guides.
     So please join us again and ride the rails with Ron Davies in January 2012.
     In the meantime, here is the grand master aviation historian in 2010, pulling no punches as he describes his view of where the commercial airline and airplane business is headed.
     Hope you enjoy the ride.
Geoffrey

     We sat down with Patrick Murray, Head of Calogi, one of the fastest growing, air cargo solutions portals in the world, to find out what a look back on 2011 informs Calogi about, when looking forward to 2012.
     The key word here is ‘growth.’
     “2011 has been a challenging and exciting year for us. In anticipation of our expansion, we have grown our team to over 100 people, which includes IT, business support, help desk, e-commerce and sales and marketing.
     “Meanwhile the number of users, companies and transactions has grown by 20 percent versus the beginning of the year. Not bad considering the downturn experienced in recent times.
     “I have always had the belief that smart business people will continue to invest in cost-effective solutions during times of hardship to give themselves the edge during and after a slump,” said Mr. Murray.
     “During the year we ran a successful pilot in Dakar, Bangladesh, and are now live at that airport. We met with industry leaders in several countries to gain their insights into how we can successfully implement Calogi in their respective communities and have addressed their feedback.
     “We have also expanded our presence at Dubai World Central-Al Maktoum International Airport (DWC), Sharjah and Abu Dhabi.”
     Calogi made certain to create a system that is affordable across a spectrum of users, while also constantly evolving to meet and address the needs of the cargo community.
     “We continue to develop and offer low cost, functionally rich solutions and took the decision to price our solution so that it is well within the reach of the smallest stakeholder.
     “Our software developments are based on industry and stakeholder requirements. We continue to deliver many of these features as part of the Calogi offering and at no extra charge to benefit the industry.
     “One such instance is the ability to police the format of the shipper and consignee post code, by country, to ensure that the electronic data is in an acceptable format to Customs authorities.
     “We have an excellent and unique product which simplifies the air cargo supply chain, increases efficiency and can both generate income and reduce costs.
     “Our model here in Dubai stands testament to that claim and I still invite industry leaders who are serious about reducing their costs or growing their business to visit us and speak to some of our customers,” said Mr. Murray.
     We are not at all surprised by the confidence assumed by Mr. Murray; after all, he has been knee-deep in IT matters for some time now—just ask IATA, British Airways or Mercator. But with all things pioneering, problems are certain to arise that were never even assumed to have existed before; such is the nature of inventing in a void. According to Mr. Murray, these issues can be easily addressed through connectivity and cooperation.
     “We have electronic messaging agreements in place with 26 airlines and are currently running campaigns to sign up more as the momentum to replace the paper air waybill document with e-AWB grows.
     “One of the major hurdles to implementing e-AWB is the paper-based process, which relies on the airline issuing pre-printed stock and the agent executing the same on a typewriter.
     “Ideally there needs to be a push from IATA to eradicate this outdated process. Meanwhile, we continue to fully support the e-AWB and e-freight initiatives,” said Mr. Murray.
     “Another challenge is that much of what we do is a first for the industry and is changing widely accepted practices.
     “For instance our unique ad-hoc air waybill release feature has enabled each airline/GSA to do business with over 400 forwarders in Dubai without the need for the traditional stock release and associated payment delays and credit risks.
     “The airline makes a pool of air waybill stock available to the community and each forwarder has the option to assign an air waybill, from that pool, to a particular job. Upon execution of the air waybill, the monies are deducted from the forwarders Calogi c-Trade (credit) account with a guaranteed payment to the relevant airline every month end.
     “The airline charges a fee (currently set at 50 percent of the local awb fee) for this type of flexible release, which is a source of income that did not exist prior to the Calogi implementation,” said Mr. Murray.
     It’s not difficult to imagine a completely paperless system; what is inherently more difficult is getting it to operate efficiently and convincing the air cargo community that this isn’t just about a hippie-green movement—it’s about creating a timely, cost-saving virtual environment for doing business.
     “There is no doubt that replicating the Dubai business model at other airports will bring the most benefits.
     “Imagine a world where air cargo supply chain stakeholders can implement 100 percent e-freight penetration and remove all paper forms, not just those that travel with the freight, such as Airline/ Ground Handling Invoices, Statement of Accounts, Airlines Sales Reports, Agents Sales Reports, Stock Reports, Shippers Letter of Instruction, Charges Correction Advices, the Air Waybill and the House Air waybill.
     “However, implementing this vision is going to be one of the biggest challenges as we will no doubt need to address several hurdles to be successful,” said Mr. Murray.
     We have to wonder if there has been any impact felt from the recent consolidation of IT servers such as TRAXON and CHAMP, and if the merge will make life more or less difficult for Calogi.
     “TRAXON and CHAMP have been there since our inception. There is no doubt that the venture will increase the customer base and allow them to consolidate the many services they offer under one umbrella.
     “Since there is a very slight overlap in what we jointly offer, we see ourselves as complementary to this relationship rather than a competitor.
     “Our unique product, which you could liken to Global Distribution Service for the air cargo supply chain industry, does mean that we have no real competitors, although we do compete on some of the verticals. “Even those that we consider traditional competitors can benefit by joining forces with us,” said Mr. Murray.
     With an eye on the fastly-approaching New Year, we, along with the rest of the cargo community, are exciting to hear about what is on the horizon for Calogi.
     “The popularity of Calogi’s credit accounting solution (product name c-Trade) continues to grow and we are now settling 10M USD in airline dues at the end of every month.
     “C-Trade allows any seller of services on the Portal to open up an account with a potential buyer or defer collection of payment to Calogi, and the ability for 90+ airlines to do risk-free business with nearly 400 freight forwarders and vice versa.
     “This year we introduced c-Club, the first loyalty program dedicated to the air cargo supply chain business. I believe it offers even more benefits to our customers conducting their business on the portal.
     “The Calogi c-Club loyalty solution allows any seller of services on the portal to run his own flexible loyalty scheme with any buyers on the portal. By running their own loyalty program, Calogi subscribers will be able to solidify existing relationships, initiate new relationships and convert one-time customers into repeat business.
     “We already have one major airline running a c-Club loyalty program and several more who are working with us to fine-tune the details.
     “We have built an express and mail product, which will enable forwarders to ship courier products (even under Courier Baggage Voucher) with the same rating and stock control features as general cargo. Once again we will also act as a clearing house for such courier transactions.
     “In addition, we have developed and implemented a third party logistics module which allows 3PL servicer providers to sell services, such as packing, dangerous goods management and storage to any user on the Calogi portal.
     “Calogi will of course deduct the money from the purchasers’ account and pay the seller of the service. 3PL service providers will also be able to make use of the Calogi loyalty program. We already have a number of pilot customers for this module.
     “We also developed the ability for the shipper, origin forwarder, airline and destination forwarder to view (and also print, if they can’t resist the temptation), the A4 air waybill. This presents airlines, flying domestic routes, with an excellent opportunity to remove neutral and manual stock from their domestic market and also pave the way for full e-freight compliance.
     “Finally we have developed the ability for an airline or forwarder to ‘brand’ Calogi as their own web site. Users logging onto for instance http://www.smeaircargo.com will be directed to the airline’s or forwarder’s branded version of Calogi. After logging in, the customers will only be able to access the products and services offered by the owner of the brand, yet still benefit from the extensive range of functionality the portal has on offer.
     “For 2012/2013 I believe that shippers and consignees will start to demand more transparency in terms of measuring the progress of shipments against milestones (again, an integral part of the Calogi dashboard) and that many shippers will only do business with forwarders and airlines who can offer this transparency.
     “I have no doubt that next year, Calogi will continue to raise the bar and offer a cost effective solution to the SMEs, allowing them to compete with the large multinationals.
     “I anticipate more focus on Cargo Security and believe that we have a large part to play in this. Imagine a solution whereby an x-ray image of the shipment can be made available, through Calogi, for inspection by Customs at the destination prior to aircraft loading. The Customs inspection at the destination can then choose to allow the shipment to be accepted for import or not. We will also be investing time and effort in developing an online e-Security declaration.
     “In the coming years we will be starting community-based user groups and most, if not all, of our major developments will be driven by the feedback from these groups,” said Mr. Murray.
     That’s quite a mouthful—and we look forward to all of it in the year(s) to come.
Flossie Arend

(Exclusive)—Looking at a challenge from all angles, Cathay Pacific outlines the flipside of China production migration.
     Cathay Pacific Airways’ cargo volumes continue to tumble year-on-year, but despite “weak” demand from Europe and the U.S., some regional lanes are performing strongly, with the demands of shippers in China rapidly evolving as production migrates inland and imports surge.
     The carrier, the world’s largest international carrier in freight tonne kilometers last year, has seen cargo and mail volumes post a succession of year-on-year declines on key routes this year. In August, combined uplift figures for Cathay Pacific and Dragonair fell 11.8 percent to 131,448 tonnes of cargo and mail compared to a year earlier, while in the year through August, total tonnage uplifted was 6 percent lower than in 2010, despite capacity growth of 11.2 percent.
     But amid the economic gloom emanating from Europe and the U.S., one little noticed trend for carriers with significant capacity in China (such as Cathay), is the double-edged sword affect of production capacity migrating away from the coast in search of lower costs.
     A Cathay spokesperson told ACNFT that services from the busy interior Chinese cities of Chengdu and Chongqing were seeing exports boom as more multinationals moved their production facilities westward. But the flipside, she said, was that some companies were now moving factories out of China altogether.      “Production for a number of industries has moved to cheaper labor sources such as Vietnam, Bangladesh, Sri Lanka and India.”
     Cathay launched a new scheduled freighter service to Chengdu on October 12 with flights every Wednesday and Friday as it moved to commit more capacity to this thriving market. The new service operates from Chengdu to Shanghai before returning to Cathay’s hub in Hong Kong. Cathay also serves Chongqing with a twice-weekly freighter service launched in August.
     “A gradual shift in manufacturing towards Central and Western China has been evident, with key players in the consumer electronics field recently setting up in Chongqing and Chengdu,” said Cathay Pacific Director Cargo, Nick Rhodes. “It is estimated that by the end of 2011, one out of five of the world’s computers will be made in Chengdu.”
     Another sign of the evolving trading environment in China is its rising imports by air. “In general, imports of luxury goods, auto parts and machine tools in particular into China remain strong,” said the spokesperson.      “With the strengthening Renminbi and still growing Chinese economy, such imports are likely to remain strong.”
     Cathay recently shifted freighter capacity into Australia as imports increased on the back of the strong Australian dollar and Cathay also reports that intra-Asia business is thriving. “Intra Asia is the strongest of Cathay Pacific’s three global businesses – Intra-Asia, Asia-Europe and Transpacific,” she added.
     Despite the cargo turndown this year after the major restocking witnessed in 2010, Cathay’s cargo revenue was up by 7.7 percent year-on-year to HK$11,628 million in the first half of 2011, although the carrier reported demand weakening significantly from April onwards.
     How badly the sustained downturn since April has affected the carrier will no doubt only be revealed once its next quarterlies are released. But with the first three of ten 747-8F freighters on order due for delivery this year, and a further eight Boeing 777-200 Freighters to be delivered between 2013 and 2016, the carrier is hopeful for a sustained pick-up in freight demand. Although the new planes will also be used to phase out the older B747-400BCF Converted Freighters and the carrier also recently dry leased three B747-400BCFs to Air Hong Kong (AHK), the fleet additions represent a significant capacity boost.
    “Cathay Pacific is hoping for an improvement in the fourth quarter with the launch of a number of new products, and some conversion of sea freight to air as demand improves,” added the spokesperson.
SkyKing

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RE:  SITA In Financial Squeeze

Dear Mr. Arend

     As per my email yesterday, please find a statement covering our position on the above article.
     The allegations against SITA are malicious and based on a defective analysis.
     SITA confirms that it received an anonymous document in late September, which is described as having been produced by a group of former SITA executives. The document contains allegations about SITA’s financial health and management governance. SITA rejects these malicious allegations, which are based on a defective analysis.
     SITA, which is audited every year by internationally certified and recognized audit firms, is, relative to the industry, in good financial health, contrary to the assumptions made in the document.
     SITA’s finances are solid, even after the challenging period for the air transport industry in 2008 and 2009. As at the end of this financial year, SITA is projected to have a cash balance of $100m, with bank borrowings of only $22million, and annual revenues in excess of $1.5billion. These are not the indicators of a company ‘on the brink of bankruptcy’.
     Even though the allegations are anonymous, misleading, and fail to take account of SITA’s agreed strategy, the Audit and Risk Management Committee of the SITA Board, in full agreement with management, has commissioned a completely independent review of the matter. The analysis has been carried out by world leading firms, experts in the field of financial analysis and strategic development.
The review looked at the sustainability of SITA’s strategy, the financial health of SITA and its constituent companies, as well as compliance by management with SITA’s governance model. The findings of this review will be presented to the SITA Board on December 7th.
     SITA would welcome a discussion with the anonymous authors of the document to discuss the concerns they have raised.
     SITA management strongly believe that the company is in good financial health, its management practices are sound, and that it has a sustainable strategy for the future.regards

Arthur Calderwood
SVP Marketing

Dear Mr. Calderwood,

     Thanks for writing.
     There are a few intriguing "coincidences", especially the $22 million borrowed, which indicates the "former executives" have access to real figures which makes it (the document) hard to discount in totum.
Another point is that in your statement the anonymous writers of the document are characterized as "malicious" when it can be just as easily interpreted as sounding the alarm bells and their motive as a last ditch attempt to save SITA. Your letter touts the 1.5 billion annual revenues whereas the document clearly focuses on cash flow, a rather different budget aspect. Furthermore, the allegation that TypeB messaging is the cash cow of SITA we are told is not new nor is it a secret; it's been around the industry for a long time and it is one that your statement neither denies nor addresses. If it is substantiated that it allowed SITA to push other products at costs lower than competitors, even at break even or at a loss, in our view it merits a direct response that we would welcome. For our readers, obviously CHAMP in this context is of particular interest in as much as the document claims it to be one of those that "have failed to deliver any form of growth as envisaged in their business plans".
     In any case, we want to make sure the report of the "completely independent" review to be presented to the board December 7 will be provided for publication in the interest of transparency. The affiliations of the Audit and Risk Management Committee of the SITA Board (Matthew Billings [head of IT services, Virgin Atlantic Airways]; Laurent Jossart [executive VP of finance, Luxair]; Bill Miller [vice chairman Continental Airlines]; Edward Nicol [director IT, Cathay Pacific]; Edouard Odier [executive VP IT, Air France/KLM]) are instructive in light of the claim that it is "made up of clients and competitors of SITA"; the same holds true for the names of the various "expert auditors - world leading firms, experts in the field of financial analysis and strategic development " mentioned.
     We hope to continue this dialogue in the interest of informative, fair and balanced reporting.

Good wishes,
Geoffrey

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