April 2009 Newsletter
Bangkok’s World Cargo Symposium 2009
Early last month, IATA held its annual World Cargo
Symposium in Bangkok. I had been invited to speak at the
Symposium and was asked to give my thoughts on the
current and future status of air freight.
The Conference Hall was hardly one of unrestrained good
cheer. The almost unimaginable drop in air freight
volume during the past few months weighed heavily on
everyone’s mind and pocketbook.
Attendance reflected this gloomy outlook. Almost no
forwarders were in attendance. Airline attendance was
spotty with some airlines like Air New Zealand not even
showing up while other carriers had six deep in
management attending the Symposium.
Here is a brief digest of my talk, unfiltered and
uncensored.
The great majority of combination carriers are guilty in
not making air cargo a serious component of their
structures. Barring a few airlines, during the past
fifteen years most carrier CEO’s have taken a bludgeon,
not a scalpel to their air cargo divisions. Air freight
is unrecognizable from twenty years ago.
Sales and service personnel have been slashed and in
many instances cargo handling is outsourced to
independent contractors even at large airports like LAX.
"I suppose it’s about getting
what you pay for. We never
will witness air freight
returning to its once periods
of strong growth until and
unless airlines take freight
seriously with an upswing in
investment and a
compensation
rate structure
to match."
I find it indeed ironic that IATA is promoting Cargo
2000 and urging complicated supply chain systems when
many of its forwarder members are returning to the
“stone age” in their operations. It’s back to basics for
most operators today. Forget all those ivory tower
academic theories; it is a matter of survival for most
of us.
On the one hand, we have most of the IATA airline
members who don’t care a fig about cargo while on the
other, forwarders/shippers never have enjoyed such low
rates over long periods of time. I suppose it’s about
getting what you pay for. We never will witness air
freight returning to its once periods of strong growth
until and unless airlines take freight seriously with an
upswing in investment and a compensation rate structure
to match.
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CII Screening Program On Track
Screening is to be done for the 50 per cent of cargo carried on
passenger aircraft and will increase to 100 per cent come August
2010. I am pleased to report our “Operation Screening” program
is on track.
When our screening program takes effect, many of our customers
will be small to mid-sized forwarders. I want to emphasize that
confidentiality will be rigidly adhered to. CII strictly is a
third party in our screening procedures. We look forward to
serve the forwarding community.
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New Entry In The Aussie-U.S. Market; Will It Be Victory Or Defeat?
As Australia is CII’s single biggest market, I always am
interested in major new airline developments there. One of the
most interesting pieces of news emanating from “down under”
recently was the entry of a new carrier serving the Australian-U.S.
market—particularly the Sydney-Los Angeles run. The new carrier
is called V Australian Airlines and is the brainchild of our old
friend, Sir Richard Branson. In reality, V Australian Airlines
is not a new airline but a division of Virgin Blue, the low cost
domestic Australian carrier. It cannot be called Virgin Blue
because of an agreement with Singapore Airlines which owns 49
per cent of Virgin Atlantic Airlines.
Whatever the name, the new airline couldn’t have faced tougher
conditions in moving passengers and freight than today. Even in
more prosperous times, Australian flag carrier Qantas has beaten
off some of the world’s largest airlines attempting to fly the
Sydney-Los Angeles route including American, Continental,
Northwest and its geographic sister, Air New Zealand. Even the
airline’s CEO, Brett Godfrey concedes that starting V Australian
Airlines during the worst global recession since the 1930s “is
an act of madness.”
"Even the airline’s CEO, Brett
Godfrey concedes that starting
V Australian Airlines during
the worst global recession
since the 1930s “is an act of
madness.”
Will the airline succeed? The odds are against it but
Branson is a consummate showman and may yet pull the
proverbial rabbit out of the hat. From my perspective,
I’ll be looking at the airline’s cargo load factors
instead of how many passengers they are boarding.
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Is Everyone Out Of Step Except Cathay Pacifc?
There’s the old story about the soldier marching to his
own beat while everyone else is marching correctly. When
this was pointed out, the soldier replied, “everyone is
out of step but me.” The same can be said for Cathay
Pacific, based in Hong Kong. While fellow Asian carriers
like Singapore Airlines, China and Eva Air are trying to
find suitable places in the desert to park a good deal
of their freighter fleets because of lack of demand,
Cathay Pacific is bucking the trend by expanding its
global freighter network. It recently announced new and
expanded freighter flights to such diverse destinations
as Miami & Houston in the U.S. and to Shanghai, Hi Chi
Minh City, Jakarta and Paris.
Perhaps Cathay Pacific’s crystal ball is predicting the
future with greater accuracy than most. Perhaps Cathay
Pacific is crazy like a fox. Its management must believe
the recession may end sooner than most expect. If the
airline is correct, it will be in a strongly competitive
position with an expanded route structure already in
place. If the airline is wrong, red ink will flow and
heads will roll. Let’s hope they are right.
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Times Are Tough But Some Positive Factors May Emerge
Yes, we’re in tough times but even in the worst decline
in 70 years, a few plants peep out of transportation
soil. If we know where to look for them and have the
discipline to stay on course. Here are a few of these
positive signs:
* Companies are getting back to basics. They are
concentrating on their core businesses and not spending
their time watching the stock market or looking for
acquisitions.
* Fuel prices have fallen. While they will bounce around
during the next year or so, no one is predicting a
return to $150 a barrel. No more heart attacks at
airlines, shipping companies or truck firms because of
the price of fuel.
* The recession has jump started investments in the
transportation infrastructure. New and improved
highways, upgrading of existing bridges and tunnels and
an updated air traffic control system. All these
developments are positive news for the transport
industry.
* Cargo congestion has eased at airports. This is of
real benefit to shippers and forwarders as freight now
moves smoothly and with little delays.
* Lower transport costs, although resisted by ocean, air
and surface carriers will help shippers ride out the
current economic storms. Aided by lower shipping costs,
companies will remain in business to generate future
freight when times inevitably get better.
* Bad economic times reveal who your friends are and who
are not. When good times return, you will do business
with people who helped you. You will forget about those
who were inflexible when dealing with your company.
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Tuna Fish, America’s Favorite Sandwich & CII’s New Market
The tuna sandwich is the
single most popular sandwich in the U.S. and the tuna
industry is becoming one of the most important new
markets for CII. Most tuna fishing now is done in the
South Pacific with hundreds of thousands of tuna caught
each year to be made into sandwiches that fill school
kids’ lunchboxes.
CII is tapping into supplying parts and equipment of all
kinds for the tuna industry. The hundreds of tuna
fishing boats setting out from South Sea ports like Pago
Pago, The Marshall Islands or the Federal States of
Micronesia require a fishing without interruption. These
include stores of every kind, electrical huge number of
supplies to keep them equipment, nets and other
paraphernalia. Onshore, the tuna processing and canning
plants also require a steady flow of parts and equipment
to keep them busy filling all those little cans. From
zero business a year ago, CII’s tuna business including
activity now accounts for 15 per cent of all business
out of our Los Angeles office.
Hard times mean never ceasing to search for new
business. Companies who allow their current business to
shrink without making every effort to find new customers
are waiting for a disaster to happen. CII’s new business
efforts is a non-stop affair and we already are seeing
results. CII is winning 100 per cent support from the
dominant players in the tuna industry. Our much expanded
tuna operation shows how tenacity, ingenuity and the
basic will to survive pays off in business as well as in
life.
Up to date information on CII’s tuna operations can be
found on our new web site,
www.tunasupport.com
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JFK, Sad Story In Air Freight
JFK, once the air gatway to the world, has fallen on
hard times. Many who have watched the decline in air
freight of this once booming and vibrant center for air
cargo blame the recession almost wholly for its demise.
They are mistaken. Yes, the recession has hit freight
activity at JFK, but reasons for its decline go far
deeper. It is a sad tale of arrogance by the
quasi-government agency who controls the airport, the
selfishness of labor unions whose members work at the
airport and general indifference among the airlines who
operate out of JFK.
"Many
smaller and mid-sized
forwarders, the heart of JFK’s
cargo operations, are tired of
fighting all of the negative
factors at the airport. They
are merging, being acquired
or just shutting their doors."
Of all the major airports in the U.S., JFK ‘s cargo
decline has been the greatest. Many smaller and
mid-sized forwarders, the heart of JFK’s cargo
operations, are tired of fighting all of the negative
factors at the airport. They are merging, being acquired
or just shutting their doors.. Traveling around the
airport grounds, it is not hard to see signs of decay
everywhere. The hangar and parking lot at JAL, once
humming with activity, now resembles a ghost town. Its
sister Japanese airline, ANA, has pulled out of JFK
completely. Cargo equipment lie around unattended.
The Port of New York/New Jersey operates the airport
like a medieval fiefdom, barely listening to the
complaints of its tenants even in these tough times.
Why should airlines land their cargo at JFK when a
package to be delivered to a town in New Jersey less
than thirty miles distant cost $70 in tolls alond?
Little wonder the international airlines are landing
their cargo in Chicago and trucking their freight
eastwards. It’s much cheaper and often faster.
Can JFK regain its title as the air gateway to the
world? Only with a new spirit of cooperation between the
Port, airlines and forwarders will this occur.
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The Secret Is Out; 3PLs And 4PLs Generate Hefty Fees
There’s nothing like a
good, old fashioned business downturn when money is
tight, for shippers to put on their green eyeshades and
look at every expense through a financial microscope. I
believe shippers finally will wake up to the fact that”
old fashioned” forwarders can move their freight faster,
more efficiently and above all, cheaper. As that noted
sage, Ben Franklin once observed, “a penny saved is a
penny earned.” No truer words ever were spoken in this
environment.
Occasionally, an executive will let slip a damaging
statistic without fully realizing what he is saying.
Such was the case at a recent trade show when a 3PL
executive told his audience that fees for 3PL and 4PL
companies now are absorbing 35 and 40 per cent of total
transportation costs.
How ironic that in the midst of a severe recession,
shippers are paying through the nose for often
unnecessary and needlessly complicated distribution
systems. While 3PL executives continue to boast they are
saving customers money with their “advanced” technology
and supply chain systems, they never mention the huge
fees charged to unlucky clients.
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Julian
Keeling
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