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June 1st Conditions:
Ocean Imports from Asia
May was quite a challenging month for importers moving cargo from Asia, particularly from Central and North China ports. For the most part, the carriers were successful with their implementation of general rate increases (GRIs). Additionally, ocean lines were moving cargo with priority of historical and regular import business.
As the June 1st and 15th Peak Season approaches, a backlog of 3-4 weeks booking for repeat account business has been observed. The majority of ocean carriers have also advised clients to forecast 3-4 weeks if possible in order to secure partial equipment and space availability.
While several carriers have reported additional capacity entering the trade, it will likely only increase in line with the historical peak volumes in the next 30 days - not enough to offset demand and "clear the docks" of the cargo that is sitting in Asian ports.
The areas most impacted at this time include Central and North China ports such as Shanghai, Tianjin / Xingang, and Ningbo. South China is nearly as backlogged and relay ports such as Busan, Korea have reported lengthy delays on direct and transshipment cargo that is routed from Asia ports via Busan to ports in North America. Carriers also report that the volume "crunch" will remain through Peak Season; or at least until November when the holiday rush subsides.
As mentioned in previous editions of the AIT eNewsletter, existing and new customers can minimize "rolled" cargo by specifying the container size and type of their shipments.
Customers should speak with their AIT representative to best assess their shipment forecasting needs and ensure cargo gets loaded to the scheduled ship in order to make a required ETA. Several importers have had to pay (or have even offered to pay) additional fees well over market levels in order to book their cargo for a sailing earlier than 3 to 4 weeks, which remains the trend as June 1 approaches.
As one final reminder, rate and service conditions are always subject to change. Please speak with your AIT representative to evaluate current market situations that may impact your ocean cargo movement.
Up, Up and Away - Airline Updates
Air France - KLM reported a loss of $1.95 billion for the financial year to March 31.
Cargo's operating loss was $545 million. The group CEO, Pierre-Henri Gourgeon, said the cargo division "suffered terribly" in the recession. KLM is now focusing on filling the bellyhold and combi capacity. Meanwhile, Air France has sold two new B777 freighters and have leased out two B747's. The group aims to improve its financial performance this year by limiting capacity group to 1% for passenger and no increase in cargo capacity is slated.
(Air Cargo World 5/26/2010)
American Airlines has increased flights from Dublin to Chicago from 4/weekly to daily for its summer schedule. Cargo capacity will be increased to 12,000 per flight beginning on June 10 when AA services will be upgraded from B757 to B767-300 aircrafts.
(Cargo News Asia 5/3/2010)
The ACCC (Australian Competition and Consumer Commission) is continuing its pursuit of a cargo cartel involved in price-fixing related to fuel surcharges. This time it is against Air New Zealand. The airline became the 15th carrier to face ACCC proceedings that have netted over $40 million in fines and penalties to date. Other airlines that faced the ACCC include Japan Airlines, Singapore Airlines, Cathay Pacific, Emirates, Garuda, Thai Airways, Korean Air Lines and Malaysia Airlines. In December 2008, Qantas was fined $17.7 million and British Airways fined 44.4 million. February, 2009 Air France, KLM, Martainair and Cargolux paid penalties of between $2.6 million and $4.4 million.
(Air Cargo World 5/26/2010)
Continental Airlines and United Airlines - On May 3, Continental announced that they have agreed to merge as equals with United. Completion of the merger will make it the biggest airline in the world. The plan is to keep the United Airlines name and headquarters will remain in Chicago.
Due to China's governmental decree, the country's three main airlines - Air China, China Eastern and China Southern - must merge their cargo operations. This government move has been made in an attempt to challenge foreign carrier's dominance of the market. Presently, 70% of international air cargo in China is carried by foreign airlines. A task force comprised of the airline and state officials has been formed to work on the structure of the proposed joint venture and it is believed the headquarters will be based on Shanghai. If the plan goes ahead as would seem likely with Chinese government's backing, the joint venture between Cathay Pacific and Air China, which was aiming to service China's Yangtze River Delta region, is put at risk. A Cathay spokesperson, however, has said that their target to have a joint venture in operation by summer remains unchanged.
(Air Cargo News 5/26/2010)
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