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W E E K L Y   A R C H I V E S

WEEK OF OCTOBER 14, 2002

THE NAKED TRUTH
by Geoffrey Arend

     "There is not too much out there," laments Sanjay Singh, an out of a job, air cago worker.
     "But I have been through this before. I thought when the Pan American World Airways Alert Security Company hired me in 1980, I was set for life.
     Then came Lockerbie and less than three years later Pan Am was gone.”
     Somebody writing about New York said that there are eight million stories in the ‘Naked City.’
     If memory serves, they even made a TV show once about every day people in extraordinary situations and called it that.
     But if you look around air cargo right now, even at places that seem to be doing better than everywhere else, the naked truth is that nobody anywhere is racking up the kind numbers like they used to.
     Think about it.
     We hear that the Pacific area is doing O.K. But the big story last week was DHL scooping up 30% of Cathay Pacific Cargo for $300 million.
     Speaking of that, can anyone doubt that both FedEx and UPS are in for the run of their life from DHL and Co.?
     Backed by superior international position and experience, DHL/Deutsche Post/ Danzas etal are for real and all over the place, including in growing numbers and market share, the U.S.
     Maybe UPS next acquisition will finally be FedEx?
     While we are on the subject of great air cargo enterprise, there has been almost nothing heard from a staple news generator, Singapore Airlines Cargo.
     No advertising media almost anywhere either from SQ Cargo, which during the go-go 1990’s, was running lots of artsy to abstract single and two pages spreads in almost every cargo publication.
     We know about this because we liked looking at the ads. The message to the market said that the airline was doing well, was confident and wanted better.
     About the only thing we heard SQ Cargo’s Hwang Teng Aun say at the very vocal and ‘team driven’ upbeat launch/ lunch earlier this year in Frankfurt for an alliance called WOW, was:
      "Failure is not an option.”
     This in answer to the question—
     “What if WOW doesn’t work?”
     We are still wondering if the esteemed Mr. Hwang sounded authoritarian or hopeful.
     In any case since earlier this year there has been almost no further word from WOW.
     Speaking of which, other than a recent first year anniversary press release, not much else from another ‘great expectations’ alliance, Sky Scream Cargo either.
     Tony Charaf, who heads up Delta Logistics and Sky Team did show up at a JFK International cargo luncheon a couple weeks ago and gave a down to earth positive report about where Sky Team is headed.
     As the urbane Mr. Charaf spoke, we thought that maybe some people in the audience had stock in Sky Team.
     By the time the speech and the ice cream ended, we sure wished we did.
     But down is not out.
     Despite acquisitions that have not panned out, look for SQ and other cash-rich Singapore enterprises to continue their quest for partnerships and new holdings especially in the cargo business.
     Little doubt Singapore figures its future outside the tiny nation. Last week Singapore reported its second quarter GDP contracted 10.3% during the third quarter ended September 30, after hitting a record 13.2% GDP growth during the second quarter.
     Elsewhere, the recent air cargo trade show in Hong Kong touted as the biggest in history, was an encore gathering of the ‘usual suspects.’
     Bless them all.
     But aside from the baptized it is hard to find out much else than “it worked for me,” from people we talked to that attended Hong Kong September.
     Even the organization (TIACA.com) web site has no headline from the event or recap, or nary a mention, post show (10/ 14/02).
     Here in America, where everything including security is extra tight, most air cargo people have little time or budget for aisle strolling and booth kitsch anywhere.
     One story out of Hong Kong last week was of record unemployment .
     Anybody who thinks that Shanghai and other destinations including Taipei, are not a major part of future air trade with China ought to have their head examined.
     Hong Kong has had it. And ‘it’ is what ended when the British Crown Colony ended and HK became ‘another’ Mainland China city.
     Even that West Coast dock strike seems to have had little positive impact upon air cargo although we hear current rates to rent a B747 from Asia to the U.S. have moved up from around $250,000 to $350,000.
     But right now everything ex-Asia is flying chock ‘o block because of the season. So jacked up charter rates are to be expected?
     Charter however is not the largest part of Atlas Air Holdings, the company with the biggest fleet of all-cargo aircraft to offer.
     In the short term we suppose anything that gets freighters up and earning even temporarily, cannot be bad news.
     Reports are that despite some backlogs right now, quite a few ships as the dock strike loomed, simply aimed their bow at an East Coast port.
     Places like Boston and Portland (Maine) and Baltimore all are reporting a surge in sea-borne traffic.
     Ford Motor Company noted that it was shipping some wheel rims for its hot selling SUVs and other cars by air from New Zealand so that assembly lines producing those vehicles would not be slowed or stopped.
     Despite the 80-day cooling off, ‘return to work’ for West Coast longshoremen mandated by the Taft-Hartley Act, order of President Bush, dock personnel may stick to the rules and slow down rather than move quickly to get goods off some 200 ships. Air cargo could get a bump from manufacturers in Asia and retailers in America, eager to not miss holiday sales.
     Docks in Hong Kong and other Asian ports are piled high with goods, which could spur a move to air.
     For the record the 11-day work stoppage cost $ 200 billion to the U.S. economy and disturbed the natural easy flow of goods, affecting the delicate rhythm of international trade everywhere.
     It’s amazing, when you think about it that a country the size of China, with a billion people, and the United States with 275 million can have their economies thrown into disarray by 10,000 longshoremen.
     Speaking of fragile, everyone fears the impact upon business if a solution is not reached with Iraq.

LATE NEWS

Japan Airlines announces orders for two B747-400 all-cargo aircraft in front of an expected order of up to eight of the type by China Airlines Cargo next month. Does the news mean that business is finally picking up? Well it is certainly better than the poke in the eye results experienced by the manufacturer up until now. And while all of this needs to be firmed up, the orders do indicate a return of B747 aircraft sales with air cargo leading the way. The JAL order is for standard aircraft, not the longer range, better performance B747-400 freighter, three of which Air France Cargo will take delivery of October 16, October 28 and November 12. Right now (counting JAL), Boeing has sold exactly four B747Fs in 2002. Price? While the sticker says $200 million you can bet some aggressive discounts were involved . . . IATA launches its new six time yearly publication “Open Sky,” first issue October/November 2002, with a short coverage from various world regions. Interesting short stories here. One story titled ‘Afghanistan Rebuilding’ notes that the country needs about everything. No surprise there. Nice graphics in Open Sky even a short profile of Air Canada, but absolutely no cargo coverage. We notice, that IATA, as an organization, is often referred to by its initials. In turn, Open Sky likes to describe things by their initials. At times, we think that all the initials gets in the way of what Open Sky is trying to say. OK we know that IATA is International Air Transport Association and GPS is Global Positioning System. We know that, because we have been around for a long time, and we have OnStar in our Chevrolet. But elsewhere in the text, across 12 pages of Open Sky there must be fifty initialed descriptions in a half dozen articles. Sometimes the initializing starts to make your head swim as in one sentence of an article about SLA’s (Service Level Agreements). “From IATA’s view, SLA’s can be developed under the auspices of a competent regulator or directly between air navigation service providers (ANSPs) and their users, provided that, in the end, they review, Copenhagen, certain airports in Australia and Zurich and some ANSPs: e.g. UK NATS (under the NERL license), Dutch LVNL and others.” Not to be out done elsewhere in Open Sky , a headline on page eight declares: “IATA RNAV (GNSS) Initiatives.” The longer we looked at that one, we began to wonder how did a regular word manage to creep in? We like IATA, think the organization in business since 1944, does a great job. But as they toil to better our world, for crying out loud can’t they do something about the initials?