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AMSTERDAM: August 01, 2018. Airfreight analyst WorldACD says its June air cargo data is the first month in two years “without serious growth”. And with Trump threatening a global trade meltdown there are no clear signs as to what will happen for the rest of 2018:

“The worldwide air cargo yield stood at a level of US$1.90 in June, almost equal to our (updated) figure for May 2018 but still 13 percent higher than in June 2017. Measured in € the yield increased by 2.0 percent month-over-month (MoM), whilst the year-over-year (YoY) increase was 9.0 percent.

“It had to happen one day, or rather one month: No year-over-year (YoY) growth to speak of. June 2018 was that month: For the first time in two years, air cargo's worldwide volume growth stagnated as the YoY increase for the month was a mere 0.4 percent. Admittedly, the first half of 2018 brought an overall YoY growth of 3.7 percent, but this year-to-date growth percentage has slowly but surely decreased for a number of months now.

“Judging by the very diverse stories appearing in the trade press over the past weeks, our industry is clearly divided when it comes to the prospects for the second half of 2018. On the one hand, we read optimistic prognoses from some of the big forwarders, based mainly on what they see as a continuing capacity squeeze. On the other hand, people get worried about the (future) negative effects of the trade policies - real or only tweeted - of the unpredictable man in the White House.

"Results for the early summer month of June may not be the best leading indicator for the rest of the year. Nonetheless, it is noteworthy that business from Asia Pacific to the other regions did not improve vis-a-vis June 2017 [at] -0.1 percent YoY.

“Air cargo from the origins Africa, Europe and the Middle East also contracted YoY (MESA by almost 4.0 percent). The Americas, however, again bucked the worldwide trend: the USA enjoys high economic growth, while South America has been in 'catching up' mode for a number of months already. The worldwide yield continued to be much higher than a year ago.

“What to make of these developments in the light of the uncertain times we live in? Should they be seen as a harbinger of times to come? Let us take a look at the June-figures for the markets most 'threatened' by the trade measures announced by Donald Trump.

“Exports by air from China to the USA dipped considerably in June. Although this market had been sub-par for the full first half year of 2018 already (-2.9 percent YoY), the June figure of -5.9 percent YoY could be indicative of a worsening climate between the two economic powerhouses.

"By the way, China to Europe was also negative in June (-2.9 percent YoY), but US to Europe showed growth of 3.7 percent YoY, well above the worldwide average, albeit much lower than in the earlier months of 2018 when it topped 8.0 percent.

"With a YoY growth of 3.0 percent, USA exports by air to China grew more than the overall air cargo ex-USA...

"Who is to tell what results will be reported for July onwards, when the first tariff increases may start to bite? To us, the world of air cargo looks fairly uncertain at the moment. For once, to predict the future it may be just as helpful to read the tea leaves (as well as tweets?) or to gaze into a crystal ball."

June 2018 WorldACD Air Cargo Market Data

LONDON: July 12, 2018. Malcolm Dowden, the UK legal director of international law firm Womble Bond Dickinson, says the “trusted trader concept” that underpins the British government’s latest EU White Paper has to be accepted by all 27 members. Without it, there’s no “frictionless trade” for Britain after March 2019:

"The government's white paper proposes the creation of a 'free trade area for goods', coupled with a ‘facilitated Customs arrangement’ to allow cross-border trade to be as 'frictionless' as possible. Central to those proposals is the concept of ‘trusted traders’.

"For example, it suggests that: ‘where a good reaches the UK border, and the destination can be robustly demonstrated by a trusted trader, it will pay the UK tariff if it is destined for the UK and the EU tariff if it is destined for the EU.’

"The ‘trusted trader’ concept has its roots in the World Customs Organisation (WCO). In Europe, ‘trusted traders’ are referred to as Authorised Economic Operators (AEO). To qualify, businesses must be able to demonstrate that they have both the policies and physical arrangements required to guarantee that goods have been transported securely and are properly accounted for.

“To qualify for the linked status of Authorised Economic Operators (Customs) or ‘AEOC’, businesses must currently be able to show at least three years' experience of meeting Customs obligations. That test cannot be met by the estimated 131,000 businesses that, according to HMRC estimates, will be brought into Customs procedures for the first time. It is possible to buy-in expertise or to use intermediaries such as freight forwarders or distribution companies.

“However, the UK currently has only 630 businesses with AEO status (compared with 6,226 in Germany and 1,563 in the Netherlands). Consequently, third-party AEO status and expertise is likely to be in short supply, potentially increasing the cost of accessing those services.

"Attaining AEO status is not straightforward. The applications forms are relatively short, but they require a significant body of detailed evidence. Applying for (and then maintaining) AEO status therefore represents a significant investment of cash and management time.

“Further, the approval process leads to an assessment carried out by HMRC, which can be a significant bottleneck as HMRC resources are very limited. The AEO application process theoretically takes up to 120 days. However, experience in practice suggests that the process often takes much longer – in some cases extending from 18 months to two years. AEO status cannot be regarded as an easy route, or as a quick fix.

"The usefulness of any AEO scheme depends on mutual recognition. Any end-to-end process for the import or export of goods works only if it works at both ends. The government's white paper cannot guarantee that AEO status granted in the UK would be recognised by the EU27.

“Consequently, it merely expresses the hope that the UK will be able to ‘agree mutual recognition of Authorised Economic Operators (AEOs)’. Without mutual recognition, AEO status would be of little value – and mutual recognition can only be achieved through a full political agreement with the EU.

“In the event of a ‘no deal’ Brexit, or of a deal that did not include mutual recognition, the ‘trusted trader’ concept that underpins the white paper suggestions would not provide ‘frictionless" trade.’”

Womble Bond Dickinson was established in 2017 when UK-based Bond Dickinson LLP and US-based Womble Carlyle Sandridge & Rice, LLP combined to create a new transatlantic business with 26 offices in the UK and US.

AMSTERDAM: July 02, 2018. Air cargo market analyst WorldACD wonders whether ‘the party is over’ as worldwide air cargo yield dropped three percent in May year-on-year (YoY) to US$1.88. However, it notes, the yield is still 14 percent higher than in May 2017 and measured in €, it increased one percent month-over-month, and seven percent YoY:

“Lots of people have taken up the pen lately, writing about the end of the boom, the end of the party. Are they all doomsday prophets, naysayers and other assorted pessimists? Maybe, but sometimes people turn out to be plain right in their predictions, making them realists.

“Put differently, do we experience just a small dip in growth, or do we witness an 'inevitable' slide into a more modest performance of a world economy which looked so robust only a few months ago?

“The development in air cargo in the month of May 2018 confirms a downward growth trend noticed since the start of this year. But growth it is nonetheless, although less than in 2017. Year-over-year, air cargo volume increased by 2.6 percent worldwide, yield measured in € by 7.1 percent and measured in US$ by 14.4 percent. For January through May, the growth was 4.3 percent.

“Originating traffic from Chile (+58 percent), Japan (+18 percent), Canada (+17 percent), and the USA (+5.8 percent) easily outperformed many other countries. But the growth from the Americas came at a price: YoY US$ yield improvements in the Americas were well below 10 percent, much lower than elsewhere in the world.

“Traffic from India, Russia and Western Europe all showed negative YoY growth in May. As in previous months, long- haul traffic increased more than short-haul: 3.0 percent growth in Direct Ton Kilometers (DTK) versus 2.6 percent in weight, while specific cargo categories again outpaced general cargo (5.5 percent versus 1.5 percent growth).

“Yet, the fear of growing protectionism is real, and that fear may well play a role in a shift away from consumption. Will the whole world suffer? To what extent will some regions feel the heat of the trade war (mongering) more than others? Impossible to tell, so let us stick to what we know and see how a number of large economies performed lately.

“For a number of countries, we looked at GDP-developments, as reported by The Economist in its latest issue, relative to air cargo growth. Until 2009, the conventional wisdom was that air cargo roughly grew at twice the rate of GDP growth. Since the crisis this ratio first dropped from 2:1 to 1:1 and then climbed again gradually.

“Where does it stand today?

“It is no longer possible to use a general ratio between GDP-growth and air cargo growth.

“Neither is it possible to assume that growth in any geographical area will automatically benefit the carriers based in that area. Actually, the contrary appeared to be the case when reviewing growth over the past two years!

“The African carrier group was the only one improving its (small) market share in all regions. So did carriers from Asia Pacific, except in their home area.

“Carriers from the Americas increased their market share in three regions, but lost share in both North and South America. The group of Middle Eastern carriers lost share in three regions, including their home area, and gained in Europe and Latin America.

"Lastly, European carriers gained share everywhere, except in their home market Europe.

“In other words the growth in traffic from all areas except Africa benefitted the group of 'non-home carriers' more than the group of 'home carriers'.”

WorldACD Market Data
www.worldacd.com/yields

 

LONDON: June 26, 2018. What constitutes a threat to national security? Russian cyber attacks? ISIS? Central American immigrants on the Texas border? Canada? Boris Johnson?

Donald Trump has popularized the phrase to justify his behaviour. The good news, if that’s possible, is the term has now been broadened to encompass more than the threat to human life by foreign extremists.

Now, thanks to Trump, just about anything can be described as a ‘national security’ threat – so why not domestic economic policies that threaten the lives of many millions?

A conglomerate of American, Japanese, Indian and Canadian business groups have called on the UK government for “legal certainty” to avoid a ‘No Deal’ Brexit - suggesting wealth-generating companies in North America and Asia have become more than worried.

BMW UK says no access to the EU Customs Union after March 2019 will lead to its own Brexit and the loss of 8,000 jobs; Airbus has suggested a similar outcome – as has Siemens.

Now the American Chamber of Commerce to the EU, representing investments of over €2 trillion last year and supporting more than 4.7 million jobs, has become the latest business group to warn Britain about its xenophobic self-destruction.

But the Conservative government only wants to read its own press releases. Cabinet ministers Boris Johnson, Liam Fox, Dave Davis, Michael Gove and Jeremy Hunt, plus their propaganda puppeteer William Rees-Mogg, appear impervious, if not imperious, to the uncertainty that has caused Britain’s economy to lose £440 million a week.

So when does political behaviour become a national security issue?

Trump has demonstrated scant interest in the rule of law with his version of chaos theory. On the other side of the Atlantic the cabal in control of the Conservative government demands similar obeisance – despite dire warnings from just about every economist, think tank and moderate political leader worldwide.

Now the British Parliament has voted to spend £14 billion on a third runway at Heathrow as the country's GDP contracts. How long will it be before rising costs and the declining economy make the added capacity irrelevant?

The suggestion by UK-based manufacturers that their supply chains are threatened by a lack of common sense suggests a new form of public action is required - inspired not by the Labour Party but the logistics industry.

With up to 14 days before Britain’s food, hospital supplies and gasoline begin to run out if there is no agreement on continued access to the Customs Union, the government’s response to make the M20 motorway in the South East of England a parking lot for trucks isn’t going to resolve the issue of just-in-time delivery.

For those old enough to remember bankrupt Britain’s three-day working week in the 1970s, the only way Margaret Thatcher’s government could reduce the subsequent public debt was to privatise state assets.

With just nine months to go before another economic and social blackout, this time the country has little left to sell to foreign investors.

Maybe it’s time the Tory government listened to them.

Simon Keeble is editorial director of HU Digital Media, owner of http://www.freightweek.org

 

 WASHINGTON, DC: May 03, 2018. As China cancels nearly 63,000 tons of US soya bean exports after Donald Trump's imposition of trade tariffs against the country, over 1,000 economists have written an open letter to Trump and Congress warning against new protectionist policies.

This letter, which includes signatories from 15 Nobel laureates and former economic advisers to the Reagan, Clinton, Bush and Obama Administrations, is published on the anniversary of a similar letter in 1930 warning against the Smoot-Hawley Act that was meant to protect American jobs, but actually prolonged and worsened the Great Depression:

“In 1930, 1,028 economists urged Congress to reject the protectionist Smoot-Hawley Tariff Act. Today, Americans face a host of new protectionist activity, including threats to withdraw from trade agreements, misguided calls for new tariffs in response to trade imbalances, and the imposition of tariffs on washing machines, solar components, and even steel and aluminum used by U.S. manufacturers.

“Congress did not take economists’ advice in 1930, and Americans across the country paid the price. The undersigned economists and teachers of economics strongly urge you not to repeat that mistake. Much has changed since 1930 -- for example, trade is now significantly more important to our economy -- but the fundamental economic principles as explained at the time have not:

“We are convinced that increased protective duties would be a mistake. They would operate, in general, to increase the prices that domestic consumers would have to pay. A higher level of protection would raise the cost of living and injure the great majority of our citizens.

“Few people could hope to gain from such a change. Construction, transportation and public utility workers, professional people and those employed in banks, hotels, newspaper offices, in the wholesale and retail trades, and scores of other occupations would clearly lose, since they produce no products which could be protected by tariff barriers.

“The vast majority of farmers, also, would lose through increased duties, and in a double fashion. First, as consumers they would have to pay still higher prices for the products, made of textiles, chemicals, iron, and steel, which they buy. Second, as producers, their ability to sell their products would be further restricted by barriers placed in the way of foreigners who wished to sell goods to us.

“Our export trade, in general, would suffer. Countries cannot permanently buy from us unless they are permitted to sell to us, and the more we restrict the importation of goods from them by means of ever-higher tariffs the more we reduce the possibility of our exporting to them. Such action would inevitably provoke other countries to pay us back in kind by levying retaliatory duties against our goods.

“Finally, we would urge our Government to consider the bitterness which a policy of higher tariffs would inevitably inject into our international relations. A tariff war does not furnish good soil for the growth of world peace.”

The Washington, DC-based non-profit National Taxpayers Union organised the letter. Director of its Free Trade Initiative Bryan Riley commented: “Very few policy areas generate as much consensus among professional economists like free trade does. Protectionism is flat-earther economics.”

 

SYDNEY: June 01, 2018. IATA has published a Q&A session with M. İlker Aycı, Turkish Airlines chairman of the Board and its Executive Committee, at the Association’s 74th annual AGM June 03-05:

Turkish Airlines continues to grow. A new hub airport in Istanbul, new aircraft, and a booming cargo business all point to a bright future for the expanding company.

Are you happy with the performance of the airline so far in 2018 and do you expect to meet your targets?

In 2018, we are breaking the records we broke in 2017. We are continuing to benefit from the steps we took in 2017 and the strict fiscal discipline that we have been pursuing.

We are targeting to reach 74 million passengers this year, increase our capacity 5.0-6.0 percent to reach 183 billion Available Seat Kilometers (ASKs) and load factor is expected to be close to 80 percent. Our cargo target is 1.3 million tonnes. So, we are already experiencing the excitement of taking a major step forward in 2018, to further our success in 2017.

Our transition to the new Istanbul Airport in 2018 (due to open in October) will be another important milestone for both Turkey and Turkish Airlines. I am pleased with our performance so far and I believe we can achieve a performance above our 2018 targets in the light of these indicators.

What is the strategy for the next couple of years?

The upcoming period can be considered a period of renewal. We would like to be the best by further enhancing our efficiency, performance and productivity in all areas that we are able to touch.

When the third runway goes into service, our growth will increase, and our costs will be minimized by improving the parameters derived from capacity limitation.

And with the recent orders for new generation aircraft, that we announced last March— a total of 30 B787-9 aircraft, of which 25 firm and 5 optional, will be purchased from Boeing, and a total of 30 A350-900 aircraft, of which 25 firm and 5 optional will be purchased from Airbus—we will focus on the markets we have not been able to enter before.

We will continue to grow not only the number of destinations, but also the frequencies and connection quality. We will have reached 120 million passengers and 500-plus aircraft in our fleet by 2023. Reaching the top 10 in terms of ASKs by 2023 is another target.

Of course, we will continue to grow in cargo. The new airport will allow us to move two million tonnes by 2023 and it is one of our strategic goals to be one of top five air cargo companies in the years ahead.

How important is the new Istanbul Airport to your overall strategy?

An airline needs infrastructure that supports its fleet size and service quality. For that reason, Istanbul New Airport will be one of the most important factors in Turkish Airlines reaching its targets.

The existing airport has been a bottleneck in runway and slot availability for us. The new airport will be able to provide, in the first phase, capacity for 90 million passengers and 10 percent more slots per hour compared with the existing facility. When the third runway is put into service, we can increase market share in markets where that has not been possible before.

The Istanbul New Airport also aims to improve cargo. In the first phase, cargo capacity will be 2.5 million tonnes. On full completion, Istanbul will have 1.4 million sq.mt. of cargo space handling 5.5 million tonnes of cargo capacity.

Additionally, Istanbul New Airport will be the largest maintenance and repair center in the world with a 700,000 sq.mt. maintenance and repair space. Turkish Technic, a prominent subsidiary of Turkish Airlines, is one of the best maintenance and repair centers in the world at present. However, it will have the ability to increase the capacity and improve the quality with the Istanbul New Airport project.

In short, the airport will add an utterly different dimension to Turkish Airlines.

Will you alter your marketing or partnerships?

We will further our brand positioning through innovation of our marketing mix. To bring our customer satisfaction and product quality to a higher level, we plan to increase and standardize the quality of products/services offered. To this end, we are prioritizing cabin quality and airport operations.

Business partnerships and joint ventures agreements will continue at full speed, as we will partner with companies in North America, Central, and South America, and especially in the Far East. Our new hub will provide an effective competitive advantage in establishing new agreements. Also, in an era where low-cost carriers have been increasing market share every year, we will develop our AnadoluJet strategy. We plan to rebrand our subsidiary in every aspect, including its destinations.

How important is cargo to your financial performance?

In the last 10 years, we have increased cargo carried more than fivefold whereas passenger numbers tripled. In 2017, cargo revenue grew 32.2 percent to US$1.3 billion. Thus, the share of cargo revenue to total revenue—which was 6.0 percent in 2008—increased to 12 percent in 2017.

Cargo’s importance will grow in 2018. We are increasing our investment in new cargo aircraft. Our first B777F freighter aircraft joined the fleet in 2017. There will be five B777Fs in our fleet at the end of 2018. The long range and high tonnage capacity of the aircraft has increased our operational capability. We will strengthen our cargo network and we will be stronger in transit cargo.

Additionally, we are going to improve belly cargo capacity with the recently-ordered widebody passenger aircraft that will start to join our fleet in 2019.

Is aviation still an attractive career and can you recruit enough staff to sustain your growth plans?

We plan to employ a sufficient number of pilots, cabin crew, technicians and other staff in line with our 2023 strategic goals. For pilots, we meet half of our annual need with Turkish Airlines Flight Training and Airport Operations Co., which was established two years ago and has become a fully-owned subsidiary of Turkish Airlines.

This year, we will increase pilot training capacity by 30 percent. Additionally, we are further increasing our capacity through agreements with various flight schools in Turkey.

We work with several universities on projects that will provide prospective employment for technicians. Both universities and students are increasingly interested in the aviation sector.

How do you plan, given geopolitical uncertainty in some key markets?

Turkish Airlines has the fourth largest destination network in the world. It is first in many regions when the number of origin and destination pairs is taken into account. In 2017, the ratio of transit passengers to total international passengers carried was about 60 percent.

In addition, 40 percent of world international traffic and more than 60 capitals are located in our narrowbody aircrafts' range. We are currently serving more than 165 international destinations with narrowbodies from Istanbul.

Our crisis management experience allows us to produce agile solutions in such situations. We work on various capacity analyses and different strategies to set and direct our plans in the markets that face geopolitical uncertainty.

This extensive flight network, coupled with geographical location advantages provide us with dynamic capacity management strategies to optimize the network in every possible case.

What does it mean for Turkey to have a strong national airline that is now a global brand?

The power of countries comes from the power of their companies. Turkish Airlines offers unique value to Turkey as the power of the airline strengthens the power of our country day by day. Moreover, Turkish Airlines directly serves Turkey’s open door policies. About 70 percent of inbound tourists travel by air and a large part of that is carried out by Turkish Airlines. We make a huge contribution to Turkey’s tourism potential and continue to promote the country through high-end commercial films. And we also perform successfully in the business market, too. So, we are essential to Turkey’s global representation and promotion.

In terms of contribution to Turkey's economy, we are a unique service exporter for our country. That is, we provide a significant currency input to our country.

Increasing the number of destinations and frequencies also brings about the development of commercial relations between our country and other countries. Mutual import and export increases are observed at the destinations in Turkish Airlines’ network.

For example, seat manufacturing and galley manufacturing is done by our local manufacturing and exporting companies, TSI (Turkish Seat Industries), and TCI (Turkish Cabin Interiors). And as the largest buyer of products, we consistently support other business fields in Turkey.

Do you think ICAO’s Carbon Offset Reduction Scheme for International Aviation (CORSIA) will play an important role in managing aviation’s climate change impact?

As the aviation sector grows, its environmental impact is increasing accordingly. Besides significant technological advances, infrastructure and operational improvements, alternative fuel developments are having an impact. Even though today's aircraft consume about 80 percent less fuel per passenger kilometer compared with the 1960s, we absolutely need a large-scale solution for aviation today and in the future.

CORSIA will encourage airline operators to reduce their emissions by purchasing environmentally-friendly aircraft, seeking sustainable alternative fuels, and using fuel-saving applications. What is the best way to improve security?

Research indicates that passengers require simple, fast and less intrusive security screening. I believe the way to enhance the security level and improve the customer experience is to improve the use of technology.

Security must be seen as a whole. There should be improvements from the entrance of the airport to the end of the journey. For security reasons, we should focus on well-supported, reliable and reasonable solutions rather than restrictions and prohibitions. Promoting the use of automated systems, effective use of big data, biometric passports, new generation x-ray machines, and new generation security checkpoints will all be useful.

Airlines and other shareholders in the airline industry, through their customer-focused point of view, can lead the technology companies and the authorities in developing more efficient and customer-focused security systems. What other challenges do you see ahead for the industry?

The world is constantly changing and as time progresses, the speed of change increases. That being the case, effective management of customer expectations and technological developments are becoming even more important.

The spread of new business and new transportation models are issues to be considered in the aviation sector. I also want to mention information security. Personal data and its protection, which remain high on the agenda, will become even more crucial in the future.

Energy policies and progress in politics and geopolitics will be other issues that directly affect the aviation industry.

Fuel, for example, will be one of the major costs of airlines in the future as it was in the past. Fuel prices and fuel economy will maintain their current significance from the airlines’ perspective.

AMSTERDAM: May 01, 2018. Industry analyst WorldACD reports worldwide air cargo yield dropped to US$1.89 in March, one percent lower than the previous month but still 16.3 percent higher year-on-year. However it notes the US$ was much weaker than 12 months ago against major currencies:

“With March-figures in, at last we can write the real story of the year-over-year (YoY) air cargo performance in early 2018.

“We had to wait until the full effects of Chinese New Year (CNY) were known, since CNY-effects resonate in the air cargo community worldwide. As mentioned last month, this year the effects were visible well into March (see chart).

“In March 2018, we saw worldwide air cargo volumes increase by a mere 0.9 percent YoY. Combined with the very strong market in January and the more modest growth in February, this brings up a volume growth in Q1 of 4.8 percent YoY.

“In air cargo exports, the Southern hemisphere did best and worst: Central & South America grew by 12 percent, whilst Africa lost 3.3 percent. [For import] volumes, the European market grew by 7.0 percent while the Middle East & South Asia had to content itself with a very modest growth of 0.6 percent.

WorldACDApril2018“Of the top-30 origins in the world, the best performers in Q1 - chalking up double-digit growth figures - were Turkey (+20.6 percent), Japan (+17.8 percent) YoY and Ecuador (+12.2 percent).

“Among the world's largest ‘country pairs’, the markets from Japan to China East (+24 percent) YoY, from Germany to India (+19.2 percent) and from Chile to USA South Atlantic (+17.6 percent) stood out for the right reasons.

“Hong Kong to Germany (-9.9 percent) and Japan to Taiwan (-6.8 percent) topped a list of large country pairs losing some of their lustre.

“But let's turn to the increase in yield including charges (price/kg), which makes for an important part of the real story of this year's first months.

“We read all the time how yields are ‘soaring’. So far, the actual picture is more nuanced than that. We need only point to the fact that the YoY yield increase in Q1 worldwide was 18.6 percent when measured in US$, but only 2.7 percent when expressing it in €. [And] a similar pattern is seen when comparing yields in USD with yields in almost any other major currency.

“In other words, the large yield increase in US$ can only be understood against the background of the loss the US$ suffered against many other currencies when comparing Q1 2018 with Q1 2017. The ‘greenback’ lost 13 percent against the €, 11.00 percent against the British Pound, 8.0 percent against the Chinese Yuan and 5.0 percent against the Japanese Yen - to name some of the currencies of importance to many large air cargo companies.

“Take the case of European vs. American carriers on the North Atlantic, one of the largest intercontinental markets in the world. With a weak US$ and a strong €, one would expect incoming business in Europe and outgoing business from North America to grow fastest.

“That is precisely the case, even though for both airline groupings the larger part of their total North Atlantic business (56 percent to be precise) still goes in the Westerly direction.

“From Europe to North America, the YoY increase was 33.8 percent in US$, but a much smaller 15.9 percent in €. In the other direction, yields increased by 8.0 percent in US$, but decreased by 6.5 percent in €.

“The CFO of an US airline, thinking and accounting in US$, will be clearly pleased, but his European counterpart, thinking and accounting in €, much less so. Add to this that jet fuel prices have almost doubled over the past two years, and we understand that the recent large yield increase as measured in US$, may take on a different meaning for different parties."

WorldACD Air Cargo Market Data March 2018

AMSTERDAM: June 01, 2018. Coincident with improved IATA air cargo data for April, WorldACD reports worldwide air cargo yield rose 2.0 percent between March and April to reach US$1.93 - 16 percent higher than the same month last year. The industry analyst cites high-tech and pharma traffic as the principal cause:

“As we said last month, the first three months of 2018 should be viewed together rather than individually, given the 'monthly distortion' effect of the timing of Chinese New Year. Therefore, a month-over-month comparison between April and March 2018 makes little sense. The YoY growth of 4.0 percent in April should rather be seen against the backdrop of the 4.8 percent growth in Q1 and the strong growth we saw last year in general.

“Seen in that light, the 4.0 percent increase in April, though lower than in Q1, still points to serious business growth in air cargo.

“Of the Top 20 markets in the world, eight performed better than the worldwide average of 4.0 percent, 12 remained below the 4.0 percent growth. But the spread was large:

“The origin Africa contracted again (-2.1 percent YoY), albeit less than in Q1; but the origins North America (+8.6 percent YoY) and Central & South America (+10.5 percent) continued to dominate the growth tables. Argentina deserves special mention this month with outgoing business 26.5 percent growth YoY, largely thanks to more than doubling its business to Europe, while incoming business [grew] 30.9 percent due to a large increase in volumes from North America.

“So far, 2018 tells us the following:

"Average distance is still growing but at a lower pace and DTK (Direct Ton Kilometers) increased 5.6 percent against an increase of 4.6 percent in kilograms. This means the average distance per shipment flown continues to grow (but by a smaller percentage than a year ago).

"Pharmaceutical products & high-tech remain growth engines for specialised cargo with pharma transport increasing 17 percent YoY and high-tech up 11 percent. Perishables, the largest volume in this category, grew less than average (4.0 percent).

"Different regions show (very) different growth patterns: Asia Pacific, the largest origin area, grows less than average YoY (3.7 percent vs. 4.6 percent), with larger business growth to Europe +4.8 percent) and much less growth to North America (2.1 percent).

“The same goes for Europe, the No. 2 origin area (3.5 percent YoY), but there the growth is mainly to North America (4.6 percent), and much less to Asia Pacific (+1.4 percent).

“North America, the third largest origin area, shows a large YoY growth of 8.0 percent, mainly thanks to a similar percentage growth to both Asia Pacific and Europe.

“Among these areas, Europe showed the largest growth in incoming business (+6.8 percent), whilst imports into Asia Pacific and North America remained below the worldwide average at 4.6 percent.

“With the exception of growing transatlantic business from Europe, could it be that all these trends are nicely in line with economic theory? After all, the US$ has been relatively cheap in this period and the Euro relatively expensive. One would thus expect North America to export more, and Europe to import more. With the surge of the US$ since early May, we may well be able to already ‘test’ this position in one month's time, when the May-results will be in.”

WorldACD Air Cargo Market Data April 2018

 

LONDON: April 12, 2018. As the two largest gig-economy express delivery companies fail to deliver, David Jinks from ParcelHero asks what happened to the demand for on-demand deliveries?

“Back in 2015 express same-day deliveries from local retailers looked to be the next big revolution is shopping. Uber was valued at US$50bn as it launched its UberRush merchant delivery service, and the express local delivery company Shyp rocketed to a $250 million valuation.

“But demand has failed to match the hype and both companies have reached the end of the road this year. Both UberRush and Shyp were based on the brave new world of the gig economy that now seems to be faltering.

“In a world of increasing instant gratification, Shyp seemed a great idea as a one size fits all delivery company; delivering, for just US$5, anything from a computer to a bike. And ‘an Uber for things’, as Uber’s General Manager described UberRush at its launch, made even more sense given its vast network of cab drivers waiting for pick-ups, who could also be used for deliveries.

“Both UberRush and Shyp were part of a wave of start-ups based on the idea that many consumers were happy to pay an ‘impatience premium’ to get items fast: hence the success of Amazon Prime Now. But this assumption seems to have been false. The demand for instant local deliveries of purchases is there, but it’s not yet large or consistent enough to be a viable business model.

UberRush“Looking first at Shyp, its one-size-fits-all delivery eventually ended up being its Achilles heel. Moving a large PC for the same cost as an egg cup makes no sense, so its US$5 flat fee was doomed. By 2017 it was adding fees on returns and charging up to US$25 for extra-large packages. But with its entire business model radically altered the sinking Shyp eventually foundered in January.

“Uber’s recent announcement that UberRush is also closing, on June 30th, reveals similar problems and begs some questions about Uber’s future financing. (See ParcelHero’s report The Uberfication of Deliveries).

(Pictured: A trial UberCargo service delivery in Hong Kong. ParcelHero says Uber has never realized its full on-demand delivery potential.)

“Uber needs to break into wider markets such as the logistics industry to meet its investors’ expectations. Uber may have been valued at $69bn by 2017 - but our report revealed many analysts believe the entire global taxicab market is worth just US$22 billion. So where was Uber’s extra income potential to come from?'

“Logistics seemed to be the solution. It’s an industry that accounts for 12 percent of global GDP, so it’s potentially a lot more lucrative than cabbing. Small wonder Uber rushed into launching UberRush

“It took a long time for the truth to hit that creating a reliable delivery network is expensive and needs considerable scale to be cost effective. Just as Shyp found, a network based on delivering small express items for local merchants - such as flowers and dry cleaning - isn’t hugely profitable: and larger items such as furniture and fridges won’t fit on a cycle or in a Prius.

“The final straw was when Uber introduced UberEats in 2016– which stole many of UberRush’s most lucrative food delivery contracts. So why did UberEats eat Uber’s own lunch? Because with UberRush, Uber only received delivery fees but with Eats, orders go through Uber's App, so it earns more on every order.

“When Uber told its restaurant and catering business contracts to switch from UberRush to UberEats last year, UberRush effectively reached the end of the road.

“As our report reveals, there are still some logistics options open to Uber, such as further developing its UberFreight business, matching loads to truck drivers. But for now, it seems the lack of real demand for on-demand deliveries will leave Uber looking elsewhere for new revenues.”

LONDON: May 10, 2018. According to DP World UK general manager Logistics Nichola Silveira, the biggest challenge to the proposed £10 billion merger between UK supermarket Sainsbury’s and Walmart’s UK subsidiary Asda will be logistics, not regulator approval:

Last week was a good one for Jeff Bezos. Amazon’s founder owns 78.83 million shares in the tech giant, which gained him US$5 billion after its latest earnings beat expectations.

With big bricks and mortar rival Walmart under growing pressure, its proposed tie-up in the U.K. with Sainsbury’s, the second largest supermarket, has been seen by some as a retrenchment to enable it to focus on home turf.

While Amazon’s US$13.7 billion acquisition of Whole Foods came out of the blue last year, the tie-up between Sainsbury’s and Asda, Britain’s second and third-largest food retailers respectively, is less of a surprise. The country’s embattled High Street - and in particular, its low margin food retail sector - has struggled amid stiff competition and rising costs.

The proposed combined business will employ around 330,000 people across a network of 2,800 Asda, Argos and Sainsbury’s stores to create one of the UK’s leading food, general merchandise and clothing retailers.

Real estate is by far the biggest assets these companies have. The potential, however, lies in the store locations, where Sainsbury’s convenience store network would be crucial for the new company to find a proper footing in online retail – much like with its acquisition of Argos which saw an almost overnight revival in fortunes thanks to its network.

While the merger announcement said there were no plans for store closures, the large sites in inner city areas can undoubtedly become profitable logistics hubs, serving huge amounts of urban customers.

While regulators and competitors may question the deal - which would combine the 16 percent market shares of both Asda and Sainsbury’s to surpass Tesco’s 28 percent - grocery demand continues to soar.

Silveira DP World General ManagerAccording to grocery industry research non-profit IGD, Europe’s retail market will grow by a compound annual rate of 3.7 percent between 2017 to 2022, adding €377.6 billion to the global market. It will be worth a staggering €2,289 billion by 2022 – fuelled largely by growth in Eastern Europe. The U.K. will grow from €216 billion to €250 billion.

However while disposing of surplus real estate will be relatively easy, integrating the Asda and Sainsbury’s logistics platforms will be harder to do.

In a world where connectivity is a major driver of business efficiency, the post-merger company will need to create a single omnichannel offering, providing a seamless shopping experience where its online and physical operations are fed by the same data. Right now, no supermarket combines the two, making customer profiles almost useless.

By aligning data systems, customer demand data can be used to manage inventory in order to better predict product demand cycles and make best use of physical space across bricks-and-mortar stores.

Putting customer demand data at the centre of an operation gives unparalleled insight into many areas of consumer life – areas that marketeers have laboured over for decades. The value to be captured here cannot be underestimated.

While customer offering is integral to the success of any retailer, a company cannot become a stalwart without a lean and robust logistics network. For retailers in the age of omnichannel, the supply chain is where efficiencies are gained and value created. Both Sainsbury’s and Asda have grown up through a string of mergers before the Internet. Their real estate holdings, and the supply chains that cater for them, are inefficient but are still a vital part of their profit and structure.

Re-aligning how they move goods around from A to B will take bravery but will ultimately give the two companies a competitive advantage. The new management team will have to scrutinise every aspect of their supply chain legacy, identifying where inefficiencies can be squeezed out and where new gains can be made.

As the demand for groceries continues to soar, and customers demand a greater number of goods delivered to every corner of the globe, retailers will need logistics partners with port operations that can shave hours, minutes and seconds off their supply chain.

Intermodal port capabilities, much like those that the DP World network possesses, can help retailers get their fresh produce off ships, onto rail and then onto shelves in a much shorter time than many legacy networks. This, combined with demand planning capabilities and yard transparency, gives retailers extra capacity in the areas they need it and the actionable expertise to create a competitive edge within the market.

As the Sainsbury’s and Asda deal progresses, an opportunity to reimagine the customer offering by food retailers, and the supply chain that makes it possible, will present itself. The winners will be the ones that scrutinise their legacy networks, compress their operations, embrace cutting edge technology and choose the right logistics partners.

With grocery demand only going one way, it’s all to play for.

Ms. Silveira is the former CEO of DP World’s port facility at Yarimca, Turkey. Prior to the appointment, she was APL's Regional Operations manager for the Middle East, UAE and Africa.

HANGZHOU: April 11, 2018. In an open letter to the U.S. political community and by inference Donald Trump, Alibaba executive chairman Jack Ma says a trade war with China kills jobs, opportunity and hope:

“As a businessman, I have been encouraged by the U.S. administration’s pro-business policies, like lowering corporate taxes. Now, like many in the business community, I am struggling to understand why a trade war with China would be good for the U.S. economy.

“The U.S. has a structural trade deficit with China because of the market forces of comparative advantage: Economies produce what they are best at making and import other things. Dollars earned from trade surpluses in China have been recycled to finance American borrowing, keeping U.S. interest rates low with favorable economic conditions. American unemployment stood at 4.1 percent in March, a 17-year low. All these economic indicators suggest that the U.S. economy is doing well, regardless of the trade deficit.

“American economic policy for the past 30 years encouraged U.S. companies to outsource labor-intensive manufacturing to China and other Asian countries while retaining the most valuable parts of American ingenuity: innovation, technology and brand.

“China embraced this American-led globalization because it was also the best path for China’s development as an emerging economy. To raise living standards for 1.3 billion people, the Chinese government promoted foreign investment and built the economy on the strength of its large and increasingly skilled labor force. As a result, China became the world’s largest exporter, with a significant trade surplus. American consumers benefited from low prices and American corporations made giant profits.

“There’s no better example of a beneficiary of this symbiotic relationship than Apple. The company designs the iPhone and develops proprietary chips and software in California. It makes the units through contractors that hire millions of workers in China, assembling components manufactured in South Korea. Through smart marketing, Apple products capture consumers’ hearts, making its brand more valuable.

“While countries like South Korea and China collect revenue from selling components and assembling the final product, Americans make almost all of the profits. Apple’s $48 billion of profits in its 2017 fiscal year will not make it into the balance-of-trade calculation.

“Under a symbiotic U.S.-China relationship, America became a preeminent technology leader, and its brands are today the envy of the world. China improved the standard of living of its citizens with a tenfold increase in per capita gross domestic product over the past 20 years.

“But U.S.-China trade relations in the next 20 years will look very different from the past two decades. The benefits of globalization since joining the World Trade Organization in 2001 have opened China’s mind to the idea of open markets.

“China is shifting its economy from the world’s largest exporter to the world’s largest consumer. Chinese citizens now have the wealth and income to pursue discretionary spending. They want to buy high-quality imported food, cosmetics, fashions and health and wellness products for themselves and their children.

“With average urban income growing at almost double digits and an emerging middle class of 300 million, Chinese consumers are already driving massive demand for imports from all over the world. Last year, president Xi Jinping said at the World Economic Forum that over the coming five years, China would import US$8 trillion of goods.

“It is therefore ironic that the U.S. administration is waging a trade war at a time when the largest potential consumer market in the world is open for business. Is America going to forfeit this opportunity?

“Instigating a trade war is the wrong solution because it will only provoke retaliation. The Chinese government responded to U.S. tariff threats with its own tariffs on American agricultural products, such as soybeans. China is the largest export market for American soybeans, worth US$14 billion annually and accounting for 65 percent of all U.S. soybean exports.

“The U.S. has been a consistent defender of free and open markets, but this time it is resorting to protectionism that will not improve American competitiveness. Any country seeking to increase exports would do better to focus on developing good products and channels to access foreign markets rather than putting up trade barriers.

“At the heart of Alibaba’s mission—to make it easy to do business anywhere—is our support for small businesses. A vibrant small-business sector is good for any economy, because small businesses create jobs.

“This trade war will hurt millions of American small businesses and farmers. I feel for these men and women, because I met many of them when I toured the U.S. last year to host our “Gateway” trade showcase in Detroit.

“Small-business owners and farmers traveled from all over the country to learn how Alibaba could connect them to the massive Chinese consumer market. Those attending Gateway saw what the future could hold for their business. I saw the entrepreneurial gleam in their eyes.

“Through our digital-commerce platforms, where more than 500 million Chinese consumers shop, Alibaba will continue to help American small businesses and farmers access the China market.

“If we encounter trade barriers, we will have to work harder. While we may face setbacks in the current protectionist environment, I remain confident and look forward to the next 20 years.”

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