FlyingTypers’ “voxpop” of Asia’s leading air freight forwarding executives finds optimism for 2017 across the industry…
      Leading air freight forwarders predict a strong start to next year after an encouraging end to 2016. But much depends on continuing strong growth on Asian lanes.
      Lucas Kuehner, global head of Air Freight at Panalpina, said all the air freight forwarding lanes that had seen the most growth last year were Asia-related.
      “We have had significant growth from Asia to Europe, Asia to the Middle East, Asia to Latin America, and also within Asia,” he told FlyingTypers. “We expect this to continue in December, albeit at a slower pace and with more movement in comparison on the Europe to Asia trade lane.”
      He also said 2016’s peak season had been significantly stronger than in 2015. “In fact, it was the strongest we have seen since the financial crisis,” he added. “We saw the traditional Thanksgiving and Christmas rush in full swing. After a little dip a couple of weeks ago, demand has picked up again, especially on the Asia to Europe trade lane.
      “There were several root causes for this peak season, from a year-end rush to last-minute ocean freight conversions and new cargo flows from e-commerce.
      “The peak ex-Asia lane has been extremely strong from China and Hong Kong, but also from the traditional airline hubs Korea and Taiwan as well as Vietnam, and to a lesser extent from elsewhere in Asia.”
      Michael Yip, CEVA Logistics’ SVP Freight Management for South East Asia, also reported that the 2016 peak season in Asia had been stronger than in previous years, mainly due to cuts in carrier capacity, but also because of market factors including “new product launches from the technology sector, heavy movement of fashion goods, and to some extent mode shift from Ocean to Air as a result of Hanjin Shipping’s bankruptcy.”
      Li Wenjun, SVP, Air Freight, Asia Pacific and Head of Air Freight, China, DHL Global Forwarding, told FlyingTypers that high-tech products and ecommerce shipments drove demand in Q4, especially on Europe-Asia and Asia-Europe lanes. While electronic shipments were expected to slow in the second half of December, there was “huge demand for e-commerce shipments, which will continue to grow.”
      He added: “Different types of shipments drive our trade from Europe to Asia while high tech and Fashion & Apparel shipments are the key drivers for our trade from Asia to Europe.”
      In contrast to previous peak seasons, imports to Asia have also been a key growth market. “We witnessed a new peak season developing from Europe to Asia,” said Kuehner. “There was significantly higher demand on this route in December than earlier in the year.”
      Looking ahead, Wenjun said the early Chinese New Year would see higher levels of demand continue in January, but would not result in a major overall boost to Q1. “We do anticipate the demand to continue till Chinese New Year, so the volume in January should be higher than usual,” he explained. “However, with February being a shorter month in addition to the Chinese New Year, there will be a lower production volume, especially out of Greater China. In addition, we expect the airfreight market baseline rates ex-Asia Pacific to increase in 2017, compared to 2016.”
      Yip argued that although the gains of late-2016 were largely seasonal, the demand pick-up could be prolonged due to the early Chinese New Year holidays in 2017, which fall late this month. This would likely prompt a surge in January demand ahead of factory closures. “Thereafter we expect the usual drop, following a pattern similar to post-CNY this year,” he added.
      Kuehner said low inventory levels that had to be replenished drove the Q4 cargo surge, amplified by a stronger than expected holiday peak season driven by consumer goods. “Electronic launches played a role, but maybe not as much as in previous years,” he added.
      “January and February are traditionally slow months. It’s too early to say if the current peak will extend into the first quarter.
      “However, we are optimistic and expect better market growth in the first half of 2017 versus 2016.”
SkyKing

     Will President-elect Donald Trump’s new trade policies affect air cargo if enacted? I believe the answer is YES. But the real question is whether the effect will be positive or negative. With any major change, the outcome can be mixed.
     This article is not intended to analyze world trade. I leave that to the experts and the individual carriers, but a few numbers are needed to set the stage for my thinking. In 1950, the U.S. represented over 20 percent of world trade, with all the countries of Europe at about 35 percent and the total Asian countries at less than 15 percent. In 2014, the U.S. dropped to under 14 percent, with the total for Europe up a little, to about the 37 percent, and Asia doubling to over 30 percent with China replacing the U.S. as the number one country in world trade. Now, we can argue all day about which agency provides the most actuated numbers, but what is most important is the trend. Based on this trend, it appears that President-elect Trump’s policies are aimed at evening the flow and restoring the U.S. to its former levels.
     In my view, the effect today on world air cargo is a tossup. The one thing that appears likely is that the TRUMP EFFECT, as I call it, will either reduce the volume of world trade as the industries are incentivized to produce more products in the U.S. that are sold in the U.S., or it will simulate efficiencies and lower costs of production in the U.S. and make those products more competitive in a global market. Personally, I’m betting on both, which will restore the U.S. percentage of world trade back to the 20 percent level. Will there be strong resistance from its trading partners, especially Asia? Most certainly, but the question is whether this new administration will stick to their doctrine.
     So will the TRUMP EFFECT expand air cargo or reduce it? If it hurts the U.S. trading partners’ economies to have more products sold in the U.S. be produced in the U.S., it will surely reduce air cargo at least in the short term. If the U.S. corporate tax is reduced to 15 percent from about 45 percent and the U.S. puts higher duties on imported manufactured items, air cargo will drop. But if more people in the U.S. become employed with good salaries and therefore buy more products and the economy doubles, as some people are predicting, while U.S. manufactured goods benefit from “economy of scale” and improved efficiencies, that could make U.S. manufactured goods more competitive globally, which will increase air cargo. But, that will take longer to occur.
     The TRUMP EFFECT, if it does significantly improve the U.S. economy, will benefit the large U.S. combination carriers. However, short term it could hurt the U.S. Charter Cargo Airlines, which will reduce the U.S. non-integrator air cargo fleet. These carriers will no doubt try to operate more aircraft for the integrators by lowering their prices and looking closely at ways to operate in markets where short term air cargo could increase, like between Europe and Asia. This may lead to the new incoming administration looking closely at its present open skies policy and could easily cause them to focus on the fairness of giving non-U.S. carriers free access to most U.S. cities in return for merely the same access in the non-U.S. carrier’s country. So, will the TRUMP EFFECT change the present view of open skies and look at its fairness similarly to the way they say they will look at renegotiating many of the U.S. trade agreements? Will they demand U.S. carriers get more out of the deal, like 5th and 6th freedom rights in other parts of the world in return for access to the many U.S. markets? I know that many of you are starting to shake your heads at this point, but the second and third order effects of policies this new administration has promised deserve careful analysis.
     Finally, what will the TRUMP EFFECT have on CRAF (Civil Reserve Air Fleet)? The U.S. government is most likely the largest air cargo shipper in the world and grants U.S. carriers access to their business based on their commitment to let the government have access to the carriers’ aircraft in various times of need. A vital component of the CRAF program is the non-schedule U.S. air cargo fleet. As stated above, the legacy carriers should benefit from the TRUMP EFFECT, but will the non-schedule air cargo fleet? These carriers will face a server challenge if the volume of trade (air cargo and integrator business) to and from the U.S. goes down, even short term. And this will have an effect on CRAF.
     In closing, there is concern about consumer prices in the U.S. skyrocketing and the effect on the U.S. dollar, which will benefit countries like China and Russia. But a valid argument can be made that the U.S. economy will strengthen because of more jobs, due to the lowering of the corporate tax rate and its planned effect on the expansion of manufacturing in the U.S. This could put U.S. manufactured goods on par with imported products. This coupled with a strong government effort in backing product development, quality improvements, and innovation can prove to be a winning formula. But if all this strengthens the U.S. economy and the U.S. dollar increases in value, will this make U.S. products too expensive globally?
     There are many more second and third order effects that can be discussed, like the effect on Europe if more of their budget must go to defense with Present-elect Trump’s stance on NATO, a possible continued reduction in oil prices with fracking and coal more usable in the U.S., the effect of renegotiated trade agreement on countries’ economies, etc. These can all influence air cargo volumes. But, in the end, this incoming U.S. administration appears committed to restoring a fair balance of trade for the U.S., and those who predict the outcome correctly will greatly benefit.
Bill Boesch

Ribbon Cutting: On June 8, 1989 Donald Trump is flanked on the left by Trump Shuttle CEO Bruce Nobles, and on the right by the late Morris Sloane, Port Authority Director of Aviation, Planning and Operations, and David Plavin, Director of Aviation, The Port Authority of New York and New Jersey, and we were there.

      These days, it seems everybody has a Donald Trump story.
      Here is mine.
      U.S. President-Elect Donald Trump grew up a few blocks from our home in Queens, New York. I recall holding the door at the nearby Key Food Supermarket for his mother a few times.
      When the Trump Shuttle opened after The Donald paid $365 million to take over Eastern Airlines Shuttle in 1989, Trump’s people asked me to cover the opening at the old Eastern-now-Trump Shuttle, which was located on the other side of the airport from the Marine Air Terminal (MAT) at LaGuardia Airport in New York City.
      Prior to 911, our offices were located at the MAT. Our publication Air Cargo News FlyingTypers resided there for 25 years after we saved the building from obscurity and demolition.
      I told them I was not interested but then relented, assuming they needed the press numbers.
      I boarded the B727 after shaking hands with Mr. Trump. Trump Shuttle had spent $1 million per airplane on refurbishment efforts, which included thick maroon carpeting, maple-veneer paneling, beige leather seats, and even faux marble sinks and gold-colored fixtures in the lav.
      I immediately went to the back of the aircraft where the lav was located to see the Trump silver & gold and faux marble toilets.
      Hearing footsteps behind me, I turned. Lo and behold, it was Donald Trump, who said he also wanted to determine if the “marble counter tops in the lavs were for real.”
      That evening, the local NBC News station in New York carried a clip of my brief encounter with Donald Trump. It pictured the two of us with our heads in a dirty old B727 lav. There was no toilet paper, let alone marble!
      For some years later, I would peer out the window of our offices in the MAT, that served HQ for Pan Am and later the Delta Shuttle, and see Trump’s B727 and later B757 parked nearby on a part of the hardstand called “Five Towers.”
      Later, when The Donald called LaGuardia a “third world airport,” I could only imagine that he must have been referring to some other airport of which I had no knowledge. How he could denigrate the lovely and exquisite Marine Air Terminal—arguably one of the most beautiful airport buildings on earth—was beyond my comprehension.
      No one could look at or walk through the MAT and not appreciate its grand beauty. But then again, I’d never deign to stick gold fixtures in an airplane lav. There’s no accounting for taste, as they say.
Geoffrey

Vol. 16 No. 6
United Bellies To Top Of The World
Chuckles for January 16, 2016
Old Is New For Ethiopian
The Importance Of Jan Meurer
My President Was Black