The contraction of China’s imports and exports this past summer has some industry observers wondering if it could be a sign of things to come for the air freight community.
     Although exports to the U.S. were steady over the two-month period compared to 2014, there were alarming declines of goods moving out of the ‘world’s factory’ both to developed and emerging markets. Moreover, some analysts said the August decline in assembly parts imports—used to produce consumer and other exports—was even more worrying in terms of long-term demand, especially given that other exporting countries such as Korea and Taiwan have also seen exports in value terms plummet over the last two months.
      Certainly, the trade figures for August, when China’s imports and exports fell 13.8 percent and 5.5 percent year-on-year, fit into a worrying pattern that has been evident in air freight markets in Asia and globally in recent months.
      According to Airports Council International, Asia-Pacific airports recorded a decline in cargo of -0.2 percent in June, but volumes over the first six months increased 3 percent. However, much of this 1H expansion was recorded in the first quarter when the U.S. was still afflicted by port congestion, and the figures were also boosted because of the relief effort in earthquake-stricken Nepal which saw, for example, growth of 12 percent at New Delhi, a key staging post in the relief effort.
      IATA said Asia-Pacific, North American, and Latin American carriers had reported year-on-year declines in June of -0.3 percent, -3.3 percent, and -1.6 percent, respectively, while European carriers reported that markets were flat.
      The air freight sector also saw little improvement in July. The Association of Asia Pacific reported a further weakening of air freight markets as both world trade and demand for Asian exports softened and Asia Pacific carriers suffered due to their greater exposure to Chinese markets. 
      Measured in freight ton kilometer (FTK) terms, air cargo demand registered a 2.2 percent decline in July compared to the same month last year, according to AAPA. This prompted Andrew Herdman, AAPA director general, to note that weak cargo markets highlighted some wider concerns about downside risks to the global macroeconomic outlook, not least the effects of slower growth in China, exaggerated currency movements, and stock market volatility that “could affect both business confidence and consumer demand going forward.”
      South Korea’s Ministry of Land, Transport, and Maritime Affairs reported a -3.2 decrease in cargo volumes at the country’s airports in July, with traffic to and from China contracting -6.3 percent, while China Airlines said it had seen a -2.5 percent decline in cargo traffic in July measured in freight ton kilometers, and yield fell -12.5 percent.
      The world’s largest freight hub, Hong Kong International Airport (HKIA), saw a 1.9 percent year-on-year drop to 363,000 tons in July as cargo throughput to/from Mainland China, Taiwan, and Europe underperformed other key regions. HKIA’s home carrier Cathay Pacific booked a 0.5 percent year-on-year increase in cargo in July, but Mark Sutch, general manager Cargo Sales & Marketing, said this was “below expectations” after a similarly flat Q2. “The growth in tonnage lagged the growth in capacity by a sizeable margin, which dragged down the month’s load factor. Yield remained under pressure due to overcapacity in a number of markets,” he added.
      The malaise in Asia also spread around the world. Amsterdam Airport Schiphol handled 784,567 tons in the first six months of 2015, down 2.1 percent on 2014, a decline largely attributed to Asia traffic, which fell 3.8 percent to 293,293 tons over the period.
      On a more positive note, Drewry’s East-West Air Freight Price Index recovered 2.0 points in July to a reading of 90.3. But while this lifted it away from its lowest ever level since the index was first launched in May 2012, in U.S. dollar terms this still left the benchmark well below the $3 per kg threshold first breached in May. “By comparison with the same month last year, the price index was 12 percent adrift, indicative of the remaining underlying weakness in the market,” added Drewry.
      “Drewry expects air freight pricing to remain weak over the coming months. Last month’s recovery represented no more than a minor market correction to record low freight rates. The combination of stagnant cargo growth and rising capacity, driven by buoyant passenger demand, will limit scope for any noticeable recovery in pricing.”
      In response to the poor cargo outlook, Tony Tyler, the departing director general and CEO of IATA, called on further intergovernmental stimulus to boost trade. "Overall it has been a disappointing first half of 2015, especially considering the strong finish to 2014,” he added. “The remainder of the year holds mixed signals. The general expectation is for an acceleration of economic growth, but business confidence and export orders look weak.
      “Air cargo and the global economy will all benefit if governments can successfully focus on stabilizing growth and stimulating trade by removing barriers.”  
Sky King

     It may not be the biggest conference on the global agenda, but last week in Basel the “Pharmaceuticals in the Cool Chain” Conference from the Cool Chain Association included some thoughtful discussion.
     The two-day event ran October 1 and 2 and featured an on-site visit to the Swissport pharma operation at Basel as well as an exhibition area in which participants could browse and network.
      Chairman of the CCA & CEO of Jan de Rijk Logistics Sebastian Scholte welcomed delegates at the opening of this third event in the series.
      One of the more interesting sessions included Global Director Sales of Finnair Cargo Pasi Nopanen who spoke of Temperature Sensitive Pharmaceuticals in Air Cargo.
      The case study here was even more interesting as it was delivered by the industry’s first airline to receive the IATA Center of Excellence for Independent Validators (CEIV Pharma) in Pharmaceutical Logistics.
      “The CEIV helps organizations and the entire air cargo supply chain to get on the right track to achieve pharmaceutical handling excellence,” Pasi said.
      In another development, FT learned that Mr. Nopanen is leaving his post at AY toward the end of October 2015.

Winds of Change

     Mr. Andreas Gmuer of Camelot Management Consultants AG spoke of trends in the Pharmaceutical business.
      Earlier, the Fifth Camelot Management Consultants Pharma Management Radar Survey brought forth these points:
      “A wind of change is in the air when it comes to logistics in the pharmaceutical industry.
      “Although most companies are still quite optimistic with regard to the current business climate, there seems to be a rising awareness of the important role logistics might play in current and future challenges such as price pressure.
      “And new service offerings ‘beyond the pill’ could also affect logistics substantially: The majority of industry players are currently executing focus initiatives in various fields of logistics, including organization, process, and network setup.
      “At the same time, however, there is still some room for optimization with regard to various strategic changes in logistics to further increase competitiveness.”

Door 2 Door

     Mr. Bernhard C. Bärtschi, head of Sales at Sky Cell, a provider of temperature-controlled container solutions, tackled the subject of “How to Establish a ‘Door-2-Door’ Solution by Air from Basel to Emerging Markets.”
      Although that topic might cover movement of perishables to and from any destination, Bernhard made it interesting.
      Speaking of gatherings of this type, Mr. Bärtschi pointed to content as the main driver rather than event size:
      “Mostly, temperature deviations and non-quality costs are the result of human error, reloading at airports with no or only limited availability of cold chambers on site, long clearance waiting times due to discrepancies in clearance paperwork, or the last mile of transportation,” he said.
      “These are some of the challenges our customers face every day and which I was aware of from my own personal experiences.
      “In light of the major challenges that the pharma industry is already facing, and will continue to face, in the development of the emerging markets, I felt it was important to bring to the table my own knowledge and experience of emerging markets as my way of contributing to the growth of the pharmaceutical markets,” Mr. Bärtschi said.
     More: http://coolchain.org/
Geoffrey

     On October 25 the Lufthansa Cargo and ANA Cargo joint venture starts with daily direct flights from BRU to TYO, beginning with an All Nippon Airways (ANA) Boeing 787-8 Dreamliner.
     “An 8:50 pm takeoff from BUR arrives at Narita at 4:10 pm the following day,” Lufthansa said.
     “The return departs 11:15 am from Narita, landing in Brussels the same day at 3.15 pm (all local times).
     “Flights can be booked 14 days in advance.”
     In total, customers in Germany, France, Austria, Great Britain, and Belgium will be able to select from over 90 weekly direct flights between Europe and Japan, connecting eleven airports such as Frankfurt, Munich, Dusseldorf, London Heathrow, Paris Charles de Gaulle, Vienna, and Brussels, as well as Tokyo Narita, Tokyo Haneda, Nagoya, and Osaka.
Geoffrey

     The Punjabi diaspora numbering around 10 million—with the highest numbers in Britain, North America, Southeast Asia and the Middle East—have been demanding direct air links with Amritsar, the only city with an international airport in the state of Punjab.
Amritsar is not only the spiritual and cultural center for the Sikh religion, it is also the main gateway for the state.

Demand Utilization

     The Amritsar Vikas Manch (literally the organization for Amritsar’s development) has pointed out that the Guru Ramdas Airport Amritsar, as the international airport is known, was not being utilized to its fullest extent. Some time ago Dr. Charanjit Singh Gumtala from the Manch shot off a letter to Prime Minister Narendra Modi to put pressure on the federal government to ensure that the international airport gets business.

Seek Hub Status

     The Manch requested the Prime Minister make Amritsar into a hub like Delhi so that direct flights to London, Birmingham, Toronto, Vancouver, and New York could be introduced.
      “The traffic profile demands it and the Punjabi diaspora needs it,” the letter said.
The immediate demand was the restoration of the Amritsar-Birmingham and the Amritsar-London flights.
      According to Gumtala, Air India had seven flights a week from Amritsar to London and seven to Birmingham, but all were through Delhi.
      Since these flights were not direct, they were unsuitable for perishable cargo.
      As a result, vegetables, flowers, and fruits that can be exported from Punjab and neighboring state of Himachal Pradesh were being sent by road to Delhi.

The Back & Forth

     The AVM also wrote a letter to Air India to find out if direct flights could be restored. The reply from Air India said:
      “Air India currently offers the following services ex-Amritsar to UK-Amritsar-Delhi-London: 7 flights/week and Amritsar-Delhi-Birmingham: 7 flights/week.
      “The routing of the Amritsar-London and Amritsar-Birmingham flights via Delhi enables AI to get traffic to/from Delhi and the feeder traffic from other Indian cities as well as international cities in the South East Asian, SAARC, and other regions since Delhi is AI’s hub for domestic as well as international services.
      “The major share of passengers on Amritsar/Delhi/Birmingham and Amritsar/Delhi/London flights is contributed by Delhi.
      “In addition to the above, Air India is also able to offer seamless connectivity for Amritsar passengers via Delhi to other international destinations,” the AI letter concluded.
      AVM countered that both Air India flights had incurred losses in the last fiscal year, which ended on March 31, 2014.
      The Amritsar-Delhi-London had a loss of $35 million (Rs 226 crore) with a load factor of 78.21 percent, while the second flight to Birmingham saw a loss of $24 million (Rs 154 crore) with a load factor of 72.02 percent.

Road To Profits?

     According to Dr. Gumtala, “Both the flights could be profitable if they were rerouted and made direct flights and instead of using two aircrafts, one would suffice since it would take an hour less to fly to London from Amritsar.
      “As for perishable exports, the airport would be able to earn $1.5 million annually through direct flights,” he said.
      Indeed, the airport at Amritsar is strategically located.
      Nearly two and a half million people from the districts surrounding the airport are in Great Britain, Canada, and the United States. According to residents, Amritsar was capable of generating cargo as well as 300-odd passengers for each of the cities of Birmingham, Toronto, Vancouver, and London.
      Citing the example of the airports of the south that have regular flights to the Middle East, Amritsar too could have flights to Britain and Canada.
      Towards the end of 2011, a senior AAI official had gone on record to mention that “keeping in view the enormous potential of cargo in the region, especially taking into consideration that this being the richest NRI (Non Resident Indian) belt coupled with the ever-increasing tourist attraction of the region,” Amritsar airport was “provisioning a commensurate air cargo complex to handle activities such as bonded cargo trucking, air cargo community system, courier/express cargo handling, etc.”  
      According to Amritsar airport’s Director V. Venkateswara Rao, the airport was handling around 55 tons for export and five tons of imports every month.
      Domestic cargo totaled 25 tons a month. Incidentally, the airport’s cargo setup has been enhanced over the years by airport operator Airports Authority of India.
      In fact, in a recent initiative, AAI launched plans to boost domestic cargo tonnages by refurbishing unused passenger terminals at regional airports after minor modifications to create common-user domestic cargo and courier terminals, anf Amritsar was among the locations identified.
      Stay tuned…. . .
Tirthankar Ghosh