Latest demand figures out of Asia again illustrate Q2 pessimists were a long way off the mark, although the excess of bellyhold capacity remains a drag on pricing.
     But could air volumes receive a boost in July due to labor unrest at U.S. West Coast ports?
     Read On . . .
     May traffic figures from the Association of Asia Pacific Airlines (AAPA) showed healthy growth, with international air cargo demand up by 4.7 percent year-on-year as export shipments by air to the U.S. and Europe gained momentum. This followed the 6.9 percent rise in freight liftings in March and the 4.7 percent gains registered by Asian carriers in April.
     Mark Sutch, Cathay Pacific General Manager Cargo Sales & Marketing, said cargo carried on Cathay and Dragonair last month had been boosted by strong demand from Hong Kong and Mainland China markets, despite incorrect rumors that a number of new products would be launched.
     The two airlines carried 138,448 tons of cargo and mail in May, an increase of 13.9 percent y-o-y.
     “Demand on the transpacific lanes remained robust, boosted by the beginning of the fruit season out of the U.S.,” he added.

Airports Proof Positive

     Figures from major airport hubs were also positive.
     Korea’s Incheon International saw a marginal year-on-year increase of just under 1 percent in May, when over 200,000 tons were handled.
     Singapore’s Changi airport handled 157,500 tons of airfreight in May, up 3.5 percent compared to a year earlier.
     China's Shanghai Pudong Airport saw cargo volumes surge 8.5 percent to 263,400 tons, driven by a 7.7 percent increase in international traffic and a 21.7 percent rise in regional cargo flows. And last month Hong Kong International Airport reported freight throughput of 367,000 tons, up 8.3 percent compared to a year earlier.
     However, not all is rosy in air freight markets.
     Cathay has trimmed back its freighter schedule to Europe, and Sutch warned momentum to the continent continued to be weak.
     “Intra-Asia demand was generally in line with expectations, though exports out of Dhaka continued to be affected by the unrest in Bangladesh,” he said.
     Andrew Herdman, AAPA Director General, said growth in passenger and freight markets reflected “generally positive economic sentiment in global markets,” but added that pricing across all segments was competitive and oil prices jumping to over the US$110 mark was another cause for concern.
     His take on pricing was also reflected in Drewry’s latest East-West Air Freight Price Index, a weighted average of air freight rates across 21 East-West trades. After two months of gains, this declined 4.5 points in May to 99.3 points, although rates are still higher than a year ago.
     Analysis in the Drewry Sea & Air Shipper Insight report said ongoing freighter capacity rationalizations had helped to stabilize the market, but rising cargo capacity from passenger aircraft remained a challenge for airlines and forwarders and would keep freight rates in check in the coming months.

July Ports Slowdown Could Boost Cargo

      In the next few weeks the air freight market could, however, receive an unexpected modal boost, at least on lanes into the U.S. The current labor contract between the International Longshore and Warehouse Union and the Pacific Maritime Association will expire at the end of this month, and many are concerned that if a new agreement is not struck then labor disputes could result in disruption to shipping schedules at ports.
     This was a topic picked up on by Wolfe Research, which surveyed 50 shippers about how the port labor negotiations might impact Q3 volumes across all modes.
     Wolfe said most shippers expect a resolution, with isolated slowdowns rather than strikes or lockouts deemed the most likely actions taken by the ILWU if negotiations drag on. Many shippers also accelerated imports into the West Coast ahead of July 1 but still expect a strong third quarter.
     But Wolfe added the rider that should the ILWU/PMA negotiations take a turn for the worse, on a modal basis there will only be one winner.
     “A work stoppage at the West Coast ports would be a material near-term positive for airfreight,” concluded the analyst.
Sky King

Exclusive in Atlanta—It is 2014, and a step change is taking place in the airline business worldwide.
     Right now the passenger airlines with the advent of “secret freighter” aircraft, (planes that can carry loads rivaling freighters), are in a position to move on up and, in some cases, dominate the air cargo market.
     Delta Air Lines sees opportunity in its air cargo enterprise, so now business as usual will be unusual.
     As Tony Charaf, Delta senior vice president and chief cargo officer retired, so did his job function at the airline.
     Delta Cargo has aligned the command structure for air cargo even closer to the passenger side of the airline.
     The change also brought some raised eyebrows and headlines, proclaiming everything from the end of the world to the beginning of a grand new scheme for air cargo.
     FlyingTypers moves up close and personal at the center of the action in Atlanta, as we sat down last week with Ray Curtis, vice president cargo sales, the top cargo executive at Delta Air Lines, who exclaimed:
     “Not only are we all right, in every way, my belief is that Delta Cargo has a clear path to being bigger and better than ever!
     “The scope of my work has expanded, in addition to global sales, I have been now given responsibility for revenue management, alliances and network,” Ray Curtis said.
     Ray is now reporting directly to Steve Sear, senior vice president Global Sales, in a move that consolidates all commercial activities at the airline “to ensure continued consistency of execution and to have reliable and predictable results in cargo.”
     Steve reports to Ed Bastian, the President of Delta Air Lines, thus “the hierarchy has been reduced rather than increased and cargo actually gets a direct, more important role at the airline,” Ray Curtis said.
     “The lines and therefore the communications about air cargo get shortened in real time, and become more supple and agile.
     “Cargo is further recognized and enhanced within the airline system.
     “It is an exciting time to be here,” Ray Curtis said.
     “Delta is an iconic brand and this is all about brand consistency—we are an incredibly focused organization around the Delta brand,” Ray added.
     But beyond the words, the headlines, and the perception in the marketplace, after a lifetime in the air cargo business, in late June 2014 Ray Curtis is at the top of his form—exhilarated, pumped up, and excited about the opportunities the recent alignment of services brings to Delta Air Lines’ cargo customers.

One Airline Indivisable

     “Take the Atlanta hub operations,” Ray Curtis smiles, “there is no longer any passing of the baton as was previously the case, the forklift driver taking the pallet off the truck works in the same division [airport customer services] as the person putting that pallet into the door of our airplane.”

Customer Reaction

      When asked about customer reactions, Ray mentions a recent conversation he had in Europe: that “a real good decision on Delta’s part… is what we hear.”
     “Not a single customer anywhere has said our new alignment is a bad thing!
     “Our customer base has seen the great advances we made in our air cargo product, top to bottom,” Ray said.
     “Everyone wants to know what to expect, and wants the promise of a better Delta Cargo, from a Delta Cargo that has continued to advance in service delivery, IT connections, and all manner of services and product offerings. We greet them with a positive outlook and a desire to do even better,” Ray said.

The Legacy of Tony

      Talking about Tony Charaf’s retirement Ray said, “Tony’s legacy will endure,” Ray said.
     “Tony really brought home that there is no ‘I’ in team and that attitude became a watchword and attitude at Delta Cargo.
     “We have learned much from his leadership, especially becoming sensitized to how we express ourselves as a team.”

Cargo Gets Dual Senior VPs

      When you think about it, Delta now has two Senior Vice Presidents to support cargo, with Steve Sear and Bill Lentsch, senior vice president Airport Customer Service, globally, to whom Scott Barkley reports.
     Ray and Scott have been working closely together for quite some time. “Nothing is changing, leaders’ expectations are that partners cooperate.
     “It is our mutual interest that is driving innovation to take things to the next level,” Ray emphasized.
     “Our offering is also a compelling proposition to the community that will bring value to our customers and employees alike.
     “We will demonstrate that Delta Cargo is every bit the leader and that we take pride in our abilities to carry ourselves forward naturally to produce a future in line with our great abilities.”

Best Surprise Is No Surprise

     This move toward something different and less traditional beginning right now at Delta Cargo might be long overdue in air cargo, but it is not all that surprising.
     Richard Anderson, the Delta CEO, likes to reference Robert Frost’s poem “The Road Not Taken,” particularly these verses:
     “Two roads diverged in a wood, and I, I took the one less traveled by, and that has made all the difference.” It’s an apt philosophy for the airline.
     In the grand scheme of things, Delta Air Lines own an oil refinery.
     No big deal, you say?
     Maybe, but the refinery makes a profit, which sends the message that expansive innovative thinking is alive and well at the Atlanta-based airline.
     Elsewhere, unique formulas at Delta will include upcoming fleet changes; once revealed, they will best reflect how well the interests of the respective businesses are handled.
     “Delta Cargo turns a page that may very well be beyond expectation and imagination.
     “But we are confident that we are moving in line with having what it takes to grow our air cargo enterprise for our customers in the months and years ahead.
     “We are rock solid," said Ray Curtis.
Ted Braun/Flossie

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