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   Vol. 14  No. 53
Monday June 29, 2015

US Ports & Modal Shift

     The union-employer dispute at U.S. West Coast ports, which left ships waiting in port and cargo and equipment stranded across the nation for much of the last year, finally ended in May when a new 5-year labor agreement was signed between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA).
     The long-running saga offered a much-needed boost to global, and specifically transpacific, air cargo markets. But with West Coast port operations now returning to normal, will any of that modal shift be retained by the air cargo sector?
     As a new report by analysts Drewry confirms, the U.S. port delays of the last year did indeed result in a tangible shift of cargo from ocean to air, reversing the long-term trend that has seen cargoes previously flown increasingly shipped by container shipping lines. Although the volume shift to the skies as a percentage of total trade was small, its value to the air cargo community was immense.
     “The U.S. port delays were forcing a number of shippers to resort to paying for much more expensive air freight in order to replenish stocks in the run-in to Christmas,” said Drewry.
     This saw Drewry’s East-West Air Freight Price Index, a weighted average of all-in air freight "buy rates" paid by forwarders to airlines for standard deferred airport-to-airport air freight services on 21 major East-West routes for cargoes above 1,000 kgs, soar to $3.92 per kg in November 2014.
     However, said Drewry, despite the faster growth rate of air cargo volumes during the port labor impasse, air cargo only increased its share of the U.S. import containerizable trade to around 2.8 percent, up from 2.4 percent at the start of 2014.
     “In normal circumstances there is very little overlap in the goods that ocean and air cargo move, but the small bubble they do fight over in the middle includes items and parts from the hi-tech, fashion, and automotive industries among a small select group that require expedited transportation,” said Drewry.
     “U.S. Census Bureau data shows that air cargo has been increasing its market share in these areas.”
     Census Bureau figures suggest that high-tech commodities registered the biggest modal shift over the last year, although other sectors were also boosted and some continue to benefit. “Fashionable clothing has been switching to air in recent months in readiness for the summer season,” said Drewry. “The need to get more mundane everyday clothing, such as men’s vests and T-shirts, is less pressing, but even here there has been a small move towards air cargo.”
     But what next? Drewry takes the view that as port operations improve on the U.S. West Coast, the reversal in the long-term shift towards ocean will resume, resulting in air cargo again seeing its share of U.S. import trade fall.
Sou Ping Chee     But there could be a short-term upside. “The prospects of missed sailings in the peak season as ocean carriers look to redress the supply-demand imbalance could potentially prolong the blip for a small number of high-value goods,” added the report.
     A long-term reversal of the last year’s shift to air is also the industry consensus. “Now that the port situation in the U.S. has normalized, we have stopped seeing organized ocean to air freight conversion on the transpacific trade lane,” said Sou Ping Chee, (right) Regional Head of Airfreight Asia Pacific for Panalpina.
     “Under normal circumstances we do not expect to see massive ocean to air conversion in view of the usually slower demand during the summer months.”
     Paul Tsui, (left) the immediate past chairman of the Hong Kong Association of Freight Forwarding Agents and the Federation of Asia Pacific Aircargo Associations, said operations at the port of LA had now returned to normal and there were no longer delays. However, the overall market outlook across modes was currently weak on the Transpacific. “In fact, air freight has slowed for the last couple of weeks, but ocean freight is even worse,” he added. “But overall volumes should improve by the third week of August.”
SkyKing



ICAO DGP Advances Lithium Question

The Working Group of the ICAO Dangerous Goods Panel (DGP), which convened in Montreal, Canada, earlier this year, bears some closer examination, as the agenda included working papers and recommendations due for implementation into the 2017-2018 version of ICAOs “Technical Instructions for the Safe Transport of Dangerous Goods by Air.”
     When implemented, this document will be the internationally binding legal basis for the air transport of dangerous goods.


Risks of Lithium

     The heart of the action is a working paper submitted by the International Coordination Council for Aerospace Industry Association (ICCAIA), endorsed and supported by the International Federation of Air Line Pilots Associations (IFALPA) addressing the risks of transporting lithium ion batteries as cargo.
Both ICCAIA and IFALPA feel that the transport of Lithium batteries, at least in large quantities, cannot be undertaken by aircraft in a safe manner, at least not with todays technology with respect to aircraft fire fighting capabilities and current packaging technologies utilized for lithium batteries.
     ICCAIA and IFALPA base their suggestions on the tests undertaken by the FAA’s William J. Hughes Test Center in 2013 and consolidated in their much-discussed January 2014 report.
     The revelations of the tests undertaken by the FAA were such that aircraft manufacturers and pilots alike were represented through their associations’ commodities.


Their Own Words

     The ICAO DGP report states that “it was noted that the intent of Section II was to allow for the average person to ship very small quantities of lithium batteries without being subject to full regulation, but that the unforeseen consequence was that some shippers had been taking advantage of the Section II provisions to facilitate the shipment of such items in bulk.”
     ICCAIA reiterated “the fire protection capabilities and certification of original equipment manufacturers’ (OEMs) airframes and systems were developed considering the carriage of general cargo and not the unique hazards associated with the carriage of dangerous goods, including lithium batteries. Test data was cited which identified that existing cargo compartment fire protection systems certified to European and American regulations were unable to suppress or extinguish a fire involving significant quantities of lithium batteries, resulting in reduced time for safe flight and landing of an aircraft to a diversion airport.”
     Based on the safety risk model provided in the ICAO Safety Management Manual (SMM) (Doc 9859), ICCAIA and IFALPA “determine that immediate action to mitigate the unacceptable risks posed by lithium batteries was necessary.”
     On this basis, their joint recommendation as brought forward by the working paper presented to the ICAO DGP was:
          a)   That appropriate packaging and shipping requirements be established to more safely ship lithium ion batteries as cargo on passenger aircraft;
          b)   That high density packages of lithium ion batteries and cells (UN 3480) not be transported as cargo on passenger aircraft until such time as safer methods of transport were established and followed; and
          c)   That appropriate packaging and shipping requirements be established to more safely ship lithium metal and lithium ion batteries as cargo on freighter aircraft.
     Furthermore, a separate paper presented by IFALPA recommended extending the restrictions proposed for the carriage of “high density packages” of Lithium–Ion batteries to all-cargo aircraft. It was stated “while lithium ion batteries were carried as cargo on both passenger and cargo aircraft, the majority of large shipments were transported on cargo aircraft. This, combined with the fact that cargo aircraft were not required to be outfitted with cargo compartments having an active fire suppression system makes the risk to cargo aircraft even greater than to passenger aircraft.”
     IFALPA also recommended that since the principles in the Safety Management Manual do not distinguish between passenger and cargo aircraft, the current prohibition on UN 3090—Lithium metal batteries from transport on passenger aircraft—be extended to all-cargo aircraft.


What’s Next

     Because of the serious ramifications for the battery industry, the manufacturers, and distributors of electronic and electrical devices as well as the consumers, the proposals brought forward by ICCAIA and IFALPA were as controversial as discussions can be at such a stage.
     The validity of the paper’s findings was challenged, although the contributors pointed out that the likelihood of a cargo fire involving lithium batteries was classified “occasional” not solely on a lithium battery causing a fire; it was based on the potential for a lithium battery to be involved in a fire.
     Another point made against the paper was that “a ban on lithium batteries would have the unintended consequence of more undeclared shipments of lithium batteries and therefore result in an increased risk.” After some disagreement was expressed “with the notion that a large number of people or organizations would break the law and continue to ship batteries if they were banned;” such disagreement based on “data from their States indicating that the percentage of deliberate noncompliance was low,” the Secretary had to resort to a rather unusual measure to remind the working group of the need for data, emphasizing that “the Air Navigation Commission (ANC) and the (ICAO) Council had become increasingly concerned when arguments were made without data to substantiate them.”
     The working group was unified in their opinion that undeclared and misdeclared batteries were a considerable risk, but divided in their opinion about the risks associated with the carriage of compliant batteries and cells.
     One part of the working group supported a call for immediate action, saying that allowing unrestricted quantities of even compliant lithium batteries in cargo compartments while knowing that a fire could exceed the capabilities of the fire protection system is an unacceptable risk. It was emphasized that the goal was not to ban the transport of lithium batteries altogether on a permanent basis, but rather to find a way to transport them safely.
     Although the working group as a whole disagreed on the level of risk posed by fully-compliant shipments of lithium batteries, the problem statement developed by the Multidisciplinary Meeting affirming that a fire involving significant quantities of lithium batteries (UN 3090 and UN 3480) could exceed the fire suppression capability of the aircraft and could lead to a catastrophic failure of the air frame was accepted in an uniform manner.
     When the working group was asked by the Secretary to indicate whether they supported or rejected the paper put forward by ICCAIA and IFALPA, a considerable number expressed general agreement but noted that they were unable to support it on the basis that it had not been identified as a formal proposal in accordance with standard DGP procedures, and that subsequently there had been insufficient time to conduct the necessary consultation with relevant experts within their States.
     Those who opposed the paper reiterated the argument that a prohibition would only increase the number of undeclared shipments and centered on the absence of a clear definition for the term “high density packages,” although the IFALPA/ICCAIA representatives repeated that “it was impossible to determine a quantitative limit for high density that would apply to every situation because of the number of variables involved, exacerbated by the fact that there was no way to control the number of packages of Section II batteries loaded on the aircraft.”
     IFALPA and ICCAIA thus announced that will come forward with a formal proposal meeting DGP standard procedures for the 25th meeting of the ICAO DGP, which will take place in Autumn 2015, while a working group tasked with performance-based packaging standards for the safe transport of lithium batteries by air will develop suitable standards to mitigate the risks associated with transported Lithium batteries of the various types, involving the participation of the ICAO FLTOPSP (Flight Operations Panel) and AIRP (Airworthiness Panel).
     A paper brought forward by PRBA proposing exempting small lithium metal button when installed in “life-saving medical devices” was rejected.
Jens

Chuckles For May 21, 2014

Pooja Sees Red

     For Pooja Ahluwalia, business manager, Red Express & Logistics, her office is the place she feels completely at home. That is where all the action resides and that is, incidentally, where she feels “very comfortable in this male-dominated cargo industry.”
     After all, Ahluwalia has spent more than a decade dabbling with consignments. The initial years—she was candid enough to accept (and admit)—were tough. In fact, when she joined the industry, she had formed a mental picture. “Cargo,” she said, “is perceived as a laborious and manual job, and thus not appropriate for women.”
     Later, she thought to herself: “More than half of our agricultural sector is dominated by women. So why this gender divide?” Such pre-conceived ideas are changing very quickly. Indian women, said Ahluwalia, are hard working, committed, and capable of any job whether it asks for physical, intellectual, or emotional strength. That is why she feels at home in “this male-dominated industry.”
     As for regular interactions with male colleagues, Ahluwalia termed it as a “mixed bag,” but encouraging, though over the years “I have seen a huge change in acceptance of women as leaders.”      Today, she is confident about the growth of her female colleagues and is certain that they will be able to stand their ground with men around them. That is because there is a “growing recognition for diversity in this industry” and that calls for exciting times. She has a message for employers: “Integrating women into this industry would only help to utilize the great volume of female talent available,” she said.
     Her advice to aspiring women who want to take the cargo industry as a career option? “Feel confident and powerful about yourself and be outstanding in what you do.”
     For the lady who has spent more than a decade in the industry, “the journey has been extremely challenging and daunting.” Yes, she has had some battles, but “my belief that hard work and aptitude are the two key qualities to survive, grow, and succeed in any field has helped me to do well,” she said.
     Every time Ahluwalia sees consignments headed out to some corner of the world, she feels excited. She confided, “Even after so many years, the unexpected nature of this business, new possibilities, and the opportunity to learn something new every day excites me,” she said with a smile.
Tirthankar Ghosh


Visakhapatnam International

     Visakhapatnam International Airport, (IATA: VTZ – ICAO: VOVZ) located in the port city of the same name on the eastern coast of India and managed by the government-controlled Airports Authority of India (AAI), is getting some notice lately.
     Better known than, say, Rajahmundry Airport.and Bhubaneshwar Airport, which are located some hundreds of kilometers nearby, lately a number of international flights are touching down at the field while reportedly some freight forwarders and air cargo stakeholders are getting ready to start operations.
     The city has a number of pharma, seafood, cashew nut, apparel, and jewelry processing and manufacturing centers, with export potential driving that interest.
     Today the airport sees a modest 50-plus flights—both domestic and international—every day.
     But with domestic cargo movement from the airport underway, it is felt by some here that it is a matter of time before international cargo operations will start.
     According to the airport director’s office, the process to start the international cargo terminal started when the airport’s old cargo terminal was refurbished and turned into an integrated air cargo terminal to handle both domestic and international cargo.
     The airport handled around 1,800 tons of domestic air cargo in 2013-14, up from the 1,100 tons in 2012-13; the figure went down in 2014-2015 to 1,240 tons largely because of the effects of cyclone Hudhud.
     A large percentage of the domestic cargo from the airport flies to Chennai, Bengaluru, or Hyderabad and is made up of processed seafood. According to a study done some time ago by local university students, the airport can handle around 10,000 tons of cargo per year.
     Three international carriers—Malindo Air, Silk Air, and Air Asia—have regular flights connecting the city with Kuala Lumpur and Singapore.
     Air India has proposed a flight to Chicago from the city.
     With the booming pharma and seafood industries in the city, it is not hard to imagine that there will be a time when more flights will be needed to cater to the growing volumes of air cargo.
     For the moment, most of the cargo that cannot be accommodated on the few international flights here are being routed via Chennai or Hyderabad for onward international flights.
Tirthankar Ghosh

 

Vital ViewsVital Views 1975-2015  

    The year 2015 marks our 40th year in the world of air cargo news reporting—first as Air Cargo News and now as FlyingTypers.
   In 2015 we are fortunate to present the writings of the nearly 102-year-old Richard Malkin, who remains the first air cargo reporter in history (circa 1942) and now serves as FlyingTypers' Senior Editor.
     Here Richard recalls the views of executives over the four decades.
   
1986

Edward Moritz, British Airways’ cargo marketing manager in New York, focused on the slide in air freight rates. “The debate of the root cause of the pricing decline goes on endlessly. The list of alleged culprits includes overcapacity, deregulation, survival pricing, buyers foregoing service standards, and bottom-line economics. But all of us share in the responsibility for the final industry price level.”

2006

Christopher CoppersmithChristopher Coppersmith, president and CEO, Target Logistic Service, had this to recommend: “We must acquire new thinking, generate new ideas and concepts that will provide fresh strength to this once fastest growing sector of the transport industry. We also must relearn geography. China is not the only country on the air cargo map. In our zeal to satisfy shipper needs between the U.S. and the one billion Chinese with their dynamic economy, we are in danger of forgetting the other five billion occupants on this planet.”

2008
Scott DolanScott Dolan, president – air cargo, United Airlines, commenting on the forces of surface competition: “let’s face it, in an era of rising fuel costs and more stringent security requirements, shippers are looking towards alternative modes of transportation. Because of these factors, ocean, rail, and ground are costing the air cargo industry millions of dollars in lost revenue, and this pressure will only increase in the future. Our continued success depends on executing flawlessly and finding ways to create added value for our customers.
“We must understand not only our customers, but be proactive in providing solutions for our customers’ customers. And, we must reduce controllable costs to be as competitive with other modes.”

 

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