So Who Will Survive?
For yet another month, various industry periodicals, web sites, and magazines continued detailing the negative effect the global economic downturn has had on the air transportation industry (not that we're alone).
Airlines and airports continue to post percentage declines over previous periods. Major integrators such as FedEx and UPS, posting heretofore unheard of declines, are cutting back on previously announced investments, such as FedEx delaying delivery of numerous Boeing 777 freighters.
Even the "darling" of freight growth in 2007 and 2008, the Middle East sector, is reporting a sharp decline in recent months.
It cannot be denied that our transportation industry is changing. The Journal of Commerce weekly magazine reported on February 9, 2009, "Senator Lines to Shut Down;" this steamship line owned in majority by Hanjin Shipping Co. will halt operations. Numerous newly constructed mega TEU vessels are still not in service and won't be for the foreseeable future. The same JOC magazine reported that "more than 300 ships and a record 800,000 TEU's are now in lay-up as carriers consolidate services on major routes…"
Considering how a recent Time Magazine pointed out the top 25 people responsible for the current recession, one might suspect people would begin to point fingers and play the "blame game."
Interestingly enough, at a time when air cargo is experiencing such drastic downturns in volume and revenue, with companies collectively and individually seeking to survive, Hermann Ude, DHL Global Forwarding CEO, woke the industry up with his comments in a Financial Times interview. The severity and vitriolic response from the air cargo industry have been amazing.
Here are some excerpts:
"I now see a big attempt by many companies to prolong their pay terms. For us, if a customer does go bust and we still have to pay the carrier, we would survive. But a smaller company would not," Hermann Ude
"Many [smaller companies] rely on one or two trade lanes. If the strategies of their customers change very quickly, as they are now, they cannot adapt." Hermann Ude
The article continues and paraphrases Mr. Ude comments:
Mr Ude forecast that exporters, besides facing payment delays, would ditch smaller competitors that did not have a sufficient network to divert their goods shipments to the Middle East and other more buoyant consumer markets than the US and Europe.
Air Cargo News, covering the story in the Financial Times, added:
"Ude believes the collapse of small companies will allow DHL Global Forwarding to gain market share and 'at least hold our profitability next year.'"
You can just imagine the outcry from many "small forwarders." The Air Cargo News article continues:
"So far, one of the strongest responses has come from Julian Keeling, chief executive officer of Consolidators International. He accused Ude of being 'full of his own self importance to the point of arrogance in many of his statements'. Keeling added that he felt the oddest part of the 'diatribe' was Ude's claims that smaller forwarders cannot adapt to changes in trade lanes. 'One of the greatest tools in the small forwarders arsenal is the ability to quickly respond to changes and tailor their business to meet the customers' new requirements."
The public consternation continues in the February 20, 2009 issue of Air Cargo News, which had coincidently added a new feature in 2009 titled "Forwarder in Focus."
"One of the most vociferous rebuttals was made by Steve Valentine, president, Cargo Alliance - a forwarder based in Ontario, Canada. 'Having been in the business of freight forwarding for some 45 years, half in the UK and half in Canada, you can probably guess that I have heard the above statements a few times in my history.'
'Obviously once again an overpaid and over opinionated industry employee has started the same thought process by opening his mouth, without thinking, and clearly demonstrated his ignorance of past attempts to cut out the creative and capable heart of the forwarding industry.'"
As equally strong words came from numerous executives falling into the "small forwarder" definition, it seemed an odd coincidence that Mr. Ude would utter such nonsense when the largest convention of over 2,600 independent forwarders, representing over 600 cities worldwide, were about to assemble in Bangkok, Thailand, under the WCA Family umbrella.
It also seems odd that a representative of DHL would tell the market that their pockets were deep enough to absorb the losses of customers who couldn't pay their bills and extend their credit terms, after having to tuck-and-run from the United States, going to UPS (of all companies) to handle their freight, and losing over $1 million a day.
The small and midsized forwarders offer a tremendous alternative to shippers. When the mega-forwarders are mired in out-of-control costs, it is the small and midsized forwarders who can nimbly maneuver through the market, meeting demand, providing competitive priced alternatives, and satisfying customer needs on a daily basis.
It almost seems fitting that on the last day of February, the following article appeared in Air Cargo World Online:
Deutsche Post Lost $4B
2/26/2009
Deutsche Post, parent of DHL and Europe's biggest mail carrier, lost $4 billion in the fourth quarter due to declines in volume, which may persist through 2009.
As volume fell in the fourth quarter, revenue dropped 3.3 percent to $17.9 billion. Even worse, the German company was hit by the cost of closing the U.S. domestic component of its DHL Express unit.
Looking forward, Deutsche Post found it too difficult to predict further impacts from the global recession and refrained from giving a firm outlook for the year. "2009 will be a year of hardship for the entire logistics industry," said CEO Frank Appel in a statement. "Just as we successfully tackled the main legacy issues last year, our focus now will be on costs and cash generation to help us through the difficult times ahead."
Sharp reductions in demand, though, are expected. "We expect that this level of volume decline will continue throughout the first half of the year if not longer," Appel said.
What is ASPIRE?
Airservices Australia, Airways New Zealand and the Federal Aviation Administration joined forces to create the Asia & South Pacific Initiative to Reduce Emissions (ASPIRE).
The joint venture is designed to lessen the environmental impact of aviation across Asia and the South Pacific with each partner to focus on developing ideas that contribute to improved environmental standards and operational procedures in aviation.
With aviation activity increasing all the time, ASPIRE is about raising the industry's environmental performance in reducing fuel burn and carbon dioxide emissions.
The agreement will showcase the region's leadership in global aviation emissions reductions by exploring improvements to operational procedures in all aspects of flight to improve on current best practices and existing technologies.
It is expected that ASPIRE will provide the means to measure the environmental performance of current air transport systems in the region and guide the development of long term actions to minimize the aviation industry's impact on the South Pacific.
The ASPIRE agreement was signed in Singapore on February 18, 2008 by the Chief Executive Officers of Airservices Australia and Airways New Zealand, Greg Russell and Ashley Smout, and the Acting Administrator of the Federal Aviation Administration, Robert Sturgell.
Book Review: The American Future - A History
by Simon Schama
How does a book named The American Future - A History become a feature in an eNewsletter reporting on the transportation and logistics industry? Air Cargo World, a monthly industry trade publication often cited in this publication, recently featured President Lincoln on its cover with a quote from his Second Inaugural Address, March 4, 1865:
"... to do all which may achieve and cherish a just and lasting peace among ourselves and with all nations."
In an excellent article in the Region Focus: North America section, titled "Quo Vadis: Will America Renew its Nobility of Purpose", the author references the Simon Schama book in this way:
"Historian Simon Schama, in his just published book "The American Future - A History" , suggests the current [economic] crisis echoes ordeals of the Revolutionary War, the Civil War, the New Deal and WW2 when Americans were called upon to sacrifice much for the common good.
On each occasion, he says, the country emerged with its essential characteristics of freedom, ingenuity and justice "alerted but intact"."
http://www.aircargoworld.com/features/0209_1.htm
The Sunday Times (September 28, 2008) describes the book in part as follows:
"Simon Schama's book is a brilliant antidote to anti-Americanism. Written, perhaps recklessly, in the hope that America might transform its world image by electing Barack Obama, it is a searchlight sweeping the horizon of American history. It picks out incidents, movements, ideas and, above all, people, warts and all. If, like much of Schama's work, its ending seems uncertain, so is America's. Here is an unashamed paean of praise for the world's most successful nation."
http://entertainment.timesonline.co.uk/tol/arts_and_entertainment/books/
book_reviews/article4809756.ece
Lufthansa Cargo Continues its Environmental Commitment
Lufthansa Cargo has been certified at its Frankfurt base to the international environmental standard ISO 14001, verifying that its comprehensive environmental management system satisfies the requirements of the ISO norm.
Certification is granted to companies which exercise responsibility in their business operations by actively assessing and taking systematic steps to reduce the environmental impact of their processes, products and services.
Alongside yearly internal and external audits, Lufthansa Cargo's entire environmental care system will now be monitored by external auditors every three years.
"Lufthansa Cargo is aware of its responsibility and the need to strike a balance between profitability and environmental protection. To that end, we invest in research and new technologies; we spur innovation and optimize our processes. One of our environmental targets is to reduce our specific CO2 emissions in the transport of air cargo by 25 percent by 2020," said Lufthansa Cargo Board Member Operations Karl-Heinz Köpfle.
In its program of environmental activities, Lufthansa Cargo is hosting an environmental conference in Frankfurt on February 26, 2009. At the event, international experts will be discussing the environmental relevance or effects of airfreight traffic as well as technical developments in the industry, furthering the cause of environmental and climate protection.
During the Frankfurt conference, the Cargo Climate Care Award 2009 will be presented to customers and staff of Lufthansa Cargo as well as students and young researchers, who have developed innovative solutions designed to improve the climate balance of air cargo traffic.
Lufthansa Cargo ranks among the world's leading cargo carriers. In the 2007 financial year, the airline transported more than 1.81 million tonnes of freight and mail, and clocked up 8.5 billion tonne-kilometres. The company currently employs about 4,600 people worldwide. Lufthansa Cargo focuses on the airport-to-airport business.
The cargo carrier serves some 300 destinations with its own fleet of freighters and also uses the belly capacities of Lufthansa's passenger aircraft and road feeder services. The bulk of the freight transported by Lufthansa Cargo is trans-shipped through Frankfurt, Europe's largest cargo airport. Lufthansa Cargo is a wholly owned Lufthansa subsidiary. In the 2007 financial year, it posted revenues totaling 2.74 billion euros.
United Pacific Flight Showcases Fuel-Saving Technology
In November, United Airlines was the first U.S. carrier to participate in the Asia and South Pacific Initiative to Reduce Emissions (ASPIRE), saving 1,564 gallons of fuel and 32,656 pounds of carbon emissions on a single flight, showcasing real savings gained from next-generation technology. United flight 870 from Sydney, Australia, to San Francisco demonstrated 11 fuel saving initiatives from gate to gate. Prior to the flight's arrival, California Gov. Arnold Schwarzenegger joined United Boeing 777 Capt. Rick Shay in the cockpit of a United Boeing 777 to receive a tutorial on Tailored Arrivals, a special arrival procedure that generates additional fuel savings with a smooth, continuous descent rather than the traditional step-down approach.
United and partner Boeing have expanded the program this year with a substantial increase in the number of flights permitted to conduct Tailored Arrivals, each of which saves around 60 gallons of fuel. ASPIRE United reduced fuel burn and emissions by using up-to-the-minute fuel data, priority takeoff clearance, normally restricted airspace around Sydney's airport, and new arrival procedures -- all of which are possible with new technology. ASPIRE is a multilateral partnership of the Federal Aviation Administration, Airservices Australia, and Airways New Zealand. Data from the flight will be analyzed by the FAA in its ongoing effort to accelerate the development and implementation of operational procedures to reduce the environmental footprint for all phases of flight. For more information, visit www.united.com.
If you have any questions or comments regarding the Air eNewsletter,
please contact Joseph Hoban from the AIT Air Department. |
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