QUARTERLY MAGAZINE AIR FRANCE CARGO-KLM CARGO VOLUME 22 ˆ NUMBER 29 ˆ JUNE 2007

cargovision

Waste Not
The Good, the Bad & the Environment
Ocean Spray

HEREDITY
OR ENVIRONMENT?
 cargovision editorial

HEREDITY
OR ENVIRONMENT?
During the past 70 years, commercial aviation has inherited a tangle of trade agreements, traffic
rights and technological limitations while, at the same time, the environment has felt the increasingly
heavy footprint of human activity. These parallel events have no causation, yet they have merged
into a swirl of controversy that our industry must address.
In air cargo, we strive to overcome the limits of our heredity and allow the potential of open trade to
fulfill the dreams of people in different locations: to bring consumers fresh foods, farmers new
markets, manufacturers better resources, and communities more jobs.

In the past, people didn’t ask much about the provenance of goods they bought, whether food was
grown organically or clothing was stitched together by children. Today’s consumers are aware of
these issues and retailers are taking note. We are beginning to hear that more shippers are asking
forwarders to explain their social and environmental policies. For now, most of them are not taking a
strategic approach to environmental issues in the supply chain, a trend that is confirmed by recent
surveys of shippers who continue to choose low rates over social responsibility.
Yet, as an airline, we are held to account for our impact on the environment, an issue that seemingly
gains importance with each passing week. For many years, Air France Cargo-KLM Cargo has led
the industry in openly presenting the facts about aircraft and the environment. Customers who want
to know the details or want to evaluate the effects of our air services will find tools and resources
available on our website. We also touch on various aspects of the environmental debate in several
articles in this issue of Cargovision.
Looking at the news, we would guess that people in aviation are upbeat today because of all the
© Martin Kamstra
activity and planning to develop new aircraft. And in our main feature, we asked two well-known
industry consultants, formerly with Boeing and McDonnell-Douglas, to discuss the outlook for
airfreight and comment on some of the trends in aviation.
The knowledge that our business runs in cycles is never far from our minds. While some people are
planning new freighters, others are seeing cargo traffic slow or change to new routes. But adapting
to change is just part of life, is it not? Sniffing the wind and taking a new path.

So, we should heed the men and women who run ocean-shipping companies. They are introducing
new vessels and technology that could attract many customers who now use air. We note in our
article “Ocean Spray” that sea-air traffic is growing along those routes where it is practical but the
real advances, and the concern for airlines, are the improving services of ocean carriers on
transcontinental lanes.
The proper execution of the job at hand is one of the driving forces that keep our company
successful. We see this already in one of the newest departments in the AF-KL Cargo customer
service department at Charles de Gaulle, called ROC Fret. The philosophy of the man in charge,
Andre Santi is to anticipate service issues and create solutions immediately when they arise.

I hope you will enjoy this edition of Cargovision and find it worthwhile reading.

Sincerely,

CLAUDIA HÖLZEL
Vice President-Network SPL
Air France Cargo-KLM Cargo

2 cargovision | JUNE 07
QUARTERLY MAGAZINE AIR FRANCE CARGO-KLM CARGO VOLUME 22 ˆ NUMBER 29 ˆ JUNE 2007
cargovision contents

cargovision
Ocean Spray, page 24

4 ANALYZE THIS
How would an analyst for Boeing or McDonnell Douglas describe the industry if he no longer worked for an
airframe company? This joint interview with industry consultants David Pierce and Adam Pilarski takes a look
at topical issues and trends in today’s industry.

14 PERPETUAL MOTION
With 30 years' experience managing international airfreight logistics, Chuck Cocci of UPS knows all about the
challenges and changes facing our industry.

16 WASTE NOT
Shippers are beginning to ask their logistics providers about the environmental and social impact of their
operations. Although queries are general now, the appetite for details is growing steadily as more shippers find
the route to their customers passes through the environment. Ian Putzger looks at different links in the chain.

André Santi, page 19

19 PEOPLE MAKE A DIFFERENCE
The philosophy of a new customer service organization at Charles de Gaulle is to anticipate service issues and
create solutions immediately when they arise. André Santi can sum up the wide-ranging role played by his
AF-KL Cargo department when it comes to serving customers in one short sentence: “We are both an air
traffic control tower and a fire department.”

Waste Not
The Good, the Bad20& theTHE GOOD, THE BAD & THE ENVIRONMENT
Environment
Airlines contribute only a small amount of global emissions. Yet, other industries are winning the environmental
Ocean Spray debate, says IATA’s director general, Giovanni Bisignani. As businesses shift gears to make the environmental
issue a core principle, aviation is being left behind, despite continuing success in reducing its environmental
Environment, page 20 impact.

24 OCEAN SPRAY

HEREDITY As rate differences between air and sea freight diverge, more companies look to combine both modes for rela-
tively fast delivery at a lower price. Sea-air will remain a niche market that is available along limited routes
according to a recent study by AF-KL Cargo. The bigger surprise is the outlook for ocean freight.

OR ENVIRONMENT? 08
22
26
28
30
NEWS & DATELINES
JACO MORGAN
COUNTRY FILE: EGYPT
MARKET MONITOR: JUST YOUR AVERAGE YEAR
POSTSCRIPT: TASTES LIKE CHICKEN, ONLY BETTER
31 CARGOVISION INFORMATION

COVER IMAGE
The big red tomatoe
© Picture Press/Hollandse Hoogte
cargovision 3
ANALYZE
THIS
How would an analyst for Boeing or
McDonnell Douglas describe the
industry if he no longer worked for
an airframe company? We held a
joint interview with David Pierce,
former author of the Boeing World
Air Cargo Forecast, and Adam
Pilarski, former author of the
McDonnell-Douglas Airline
Industry Outlook. Both men
work now as industry
consultants, Mr. Pierce
from his office in Ocean
Shores, WA and
Mr. Pilarski as SVP for
Avitas in Washington, DC.
They know each other
well and, amid a lively
banter, discussed the
industry today.
WITH MARK W. LYON

4 cargovision | JUNE 07
 ■
What is most likely to constrain the airfreight
business during the next few years?

David Pierce (DP): Security is the big topic in

airfreight. Not only the cost of providing it but also the
adverse impact it has on throughput time. We used to
talk about a ratio of 6 days on the ground for 1 day in
the air. With additional security now, that 6 days has
become 8 days. It begins to defeat the real service
aspects of using air.

On the other hand, greater security may be an oppor-

tunity. If all the authorities decide to remove freight
from passenger flights, that will be a big boom for
freighter operators. Passenger services provide more
than enough lift for freight today but if that were to
become unavailable, you will need much more
freighter lift. (From the AF-KL Cargo perspective, this is
impossible because many routes cannot be operated
solely with freighters, so freight needs to be carried on
passenger flights. - Ed.) Maybe yields will finally come
up to compensatory point.

Adam Pilarski (AP): Are you freight guys

whining?

DP: Service is a big issue for the freight industry. We

see other modes becoming faster and more efficient in
their processes. The paperwork to move a sea
container is becoming more efficient than to move an
airfreight shipment. Airfreight is faster but sea freight
has already cleared customs when a ship comes into
port and goods can move quickly to their destinations.
On the airside, paperwork is not filed until the airplane
leaves. Then you might have legacy burps, for
example, when a computer in Paris doesn’t speak the
same language as one in Chicago. Add more security
and goods on the aircraft do not move as fast as we
would like. Security does not constrain the movement
of freight while it is with the airline but it does slow the
overall supply chain.

AP: Also, we have the big-picture, macro-economic

© Bas Beentjes/Hollandse Hoogte

issues. All of us in the West assume that globalization

is here to stay. People in the Middle East do not
necessarily share that belief, nor do many workers and
activists around the world, who are trying to disrupt
the process. Other people, while not interfering, do
oppose aspects of globalization that they fear: for
example, they may lose their jobs. But if you find a way
to compensate them, they will accept the principle.

cargovision 5
cargovision analyze this
David F. Pierce
Mr. Pierce recently retired from
Emirates as manager of cargo
marketing and business develop-
ment. He had previously retired
from Boeing Commercial
Airplane Group after 27 years.
In his last position as regional
director marketing-cargo, he was
responsible for Boeing’s World
Air Cargo Forecast and for
Boeing customer consultations
in cargo sales, marketing and
operations.
Mr. Pierce was also the chairman
of the Air Industry’s Cargo
Analysis Technology Symposium
(CATs), director of the
International Air Cargo
Association (TIACA) and member
of the Dubai American Business
council. He retains an active
board position on the Cool Chain
Association (CCA).
davidfpierce@hotmail.com
6 cargovision | JUNE 07
Then you have the radicals who want to destroy
material goods. This creates a security cost that
affects the entire industry. If it becomes too expen-
sive to avoid airports that restrict passengers’ carry-
on bags or create additional headaches for airfreight
shippers, then people will not use those services.
Other constraints include air traffic control in the US
and Europe, which is a big problem, and the Green
Movement in Europe. They are no longer a fringe
group. Those of us in aviation never realized that we
are agents of the devil, but when the Bishop of
London, the third highest member in the Anglican
Church, says flying is sinful, it is serious.
Or, think about the French approach of charging
money to help AIDS victims in Africa. They deserve
compassion and help, but why should aviation pay
for it – an industry that earned a profit of over 5% in
only three years of its entire history? The implication
Pilarsky: “Those products look beautiful, the big red strawberries and
tomatoes, but they have no taste. On the other hand, who needs it
when you can have chocolate?”
is that aviation is taxed with a sin tax, like tobacco or
alcohol. These are serious constraints in Europe.
Which countries will spend the most on
airfreight in the next few years?
DP: The consignee is the one who pays. It will be the
importers: the US, Germany, the UK and France. The
suppliers will be China, for manufacturing, and Africa
and Latin America for produce. And one thing about
produce coming from Africa: they can pick crops
green, put them in a sea container with fancy gasses
that place them in a form of stasis and, after arrival,
introduce other gasses that cause the product to
ripen naturally. Perishable handlers are doing this on
the seaborne side and can provide a better direct
service than we can by air.
AP: Those products look beautiful, the big red strawber-
ries and tomatoes, but they have no taste. On the other
hand, who needs it when you can have chocolate?
DP: My point is that when we compete with ocean
product and talk with suppliers, we realize that tech-
nology on the airside has come to a stop. Yet,
companies are expending a lot of effort to improve
ocean transit. Some people are at work on the
airside, but it is a rough road. Shippers have a built-in
bias: everyone knows that air is too expense. What-
ever you do will make it more expensive, so why try?
More generally, what is your short-term
outlook for the airline industry?
AP: During the last two years, airlines have placed a
phenomenal number of orders for new aircraft. Used
aircraft values are rising and US airlines are beginning
to show profits. I don’t believe we are at the peak of
this up cycle yet.
DP: I can’t believe you’re so optimistic.
AP: Yes. We have another three years in the cycle.
DP: Leasing companies are selling out and consoli-
dating. Don’t you think that is because they must get
bigger so they can afford larger fleets?
AP: No. I don’t see consolidation, just changes in
ownership. Equipment values went down after
September 11, 2001, but lots of hedge-fund money
came into the industry looking for under-priced
assets. Those investors made money during the two
years when prices were low. Now, the assets are
appreciating more slowly and the funds are moving
to industries that give them a higher return. It is
proper risk management, but not a sign that the
upward cycle has peaked for the airline industry. US
airlines have restructured and are beginning to make
money.
DP: Steven Udvar-Hazy (chairman of the lessor ILFC)
said recently that both Airbus and Boeing have new
strong competitors just around the corner in Asia.
The 787 wing is an example of this development.
Boeing assigned the design to someone else for the
first time, which is significant because the wing
defines the aircraft.
AP: Said in another way, if you let other people
design things, they will eventually make it themselves
and take away all of the jobs.
DP: You’re probably right.
AP: Globalization goes two ways.
Speaking of that, what do you think of the
Chinese intention to build large aircraft?
DP: Watch what they do in cars and that will give you
a clue.
AP: The difference between cars and aircraft is the
regulatory constraints. Anyone can build cars.
DP: Yes, but not sell them.
AP: Well, people will buy a cheap car if they can. But
you will not be allowed to fly an airplane in the US or
Europe unless you have FAA and CAA approval.
Neither the Chinese nor the Russians have the capa-
bility to do this. You must show that the airplane is
safe and that you will produce it economically. Even
so, parts of the market are not rational. Some airlines
will not buy aircraft unless the original equipment
manufacturer has installed all of the parts. Some
jurisdictions will not accept non-OEM parts.
Recall that the Russians decided to market the TU-
204 in the West. They went to Honeywell and Rolls
Royce to supply western avionics and engines so
they could offer it at one-third of the price of a 757.
But they didn’t sell many of them. People have to
believe in the aircraft. If it is stuck in Shannon and
needs a pump, you must know it will arrive in a few
hours. It took Airbus a long time and a lot of money
to overcome this obstacle. China is trying. They
produced the MD80 and I spent a lot of time there
during the process. We had FAA people in Shanghai
certifying every step, but they were just putting
together the kits that McDonnell-Douglas sent them.
DP: The point is that they are trying to develop that
experience and evolve that industry in the long term.
It will take a long time, but eventually they will
produce large aircraft.
AP: They have been producing them for a long time.
DP: I mean ones that compete in the world market.
AP: Eventually they will.
Besides the Chinese, do you foresee others
making aircraft, say an alliance between
Germany and Russia?
AP: No, Germany would have a hard time with that
because of its involvement with France in Airbus.
With so much state involvement, no one wants to
rock the boat. However, the bold attempt of the
Russians to buy EADS is more interesting.
DP: That would involve a technology transfer.
AP: The Europeans are afraid of that. Mr. Putin is
pushing the envelope and they are saying wait a
second. He says, “If you believe in a free market, why
can I not buy a bigger share? Then I should have a
seat on the board.” That is where EADS says, “No,
you are not really a European.” But if EADS accepts
his money, why can’t a Russian in a free market have
a seat on the board? Then, if he has a voice, the
natural solution is to do more work in Russia, where
the hourly wages for top engineers are less than in
France or Germany. He can say to the board, “I have
a way to save you a lot of money.”
DP: The Aeroflot announcement to buy the A350
and abandon the B787 is a clear sign that Russia will
go with the Europeans and the aircraft will be
produced there.
Stay tuned…
“The difference
between cars and
aircraft is the regula-
tory constraints,
anyone can build
cars”
Adam M. Pilarski
Dr. Pilarski joined Avitas in 1997,
after 17 years as an economist
with Douglas Aircraft Company,
to oversee Avitas’ valuation and
consulting services. He is also
responsible for supporting cus-
tomers with studies including
traffic forecasts, economic fore-
casts, statistical analyses, strate-
gic planning and airline industry
issues.
As Douglas Aircraft Company’s
chief economist and director of
strategic planning he was
responsible for all economic
analyses performed for the
company.
Dr. Pilarski has published almost
100 articles in academic and
professional journals and is the
author of the forthcoming book
“Why Can’t We Make Money In
Aviation” to be published in July
by Ashgate.
Adam.Pilarski@AVITAS.com
cargovision 7
 cargovision news around the world
Our quarterly review of
industry news keeps you
abreast of developments
in key sectors around
the world.
AIRCRAFT
Moscow
Volga-Dnepr flew the first of its revamped IL-76 freighters into the US
during February. Earlier versions were banned in 2000 from Western
Europe, North America, Australia and Japan because of ICAO noise
restrictions. However, the new models comply with ICAO Stage 4 stan-
dards. The Russian carrier has also ordered two new AN-124-100Ms from
Air Cargo Apparatus, a partnership between the Volga-Dnepr Group and
Motor Sich. The first of the US$130 million AN-124s, with modified engines
and control systems, is expected to leave the Ulianovsk plant for service
with V-D in 2010.
In March, V-D agreed to purchase five B747-8 freighters and hold an
option for five more of the same type. The first delivery will come in 2010 to
its subsidiary, AirBridge Cargo Airlines. AirBridge plans to use the aircraft to
help develop a hub system between Moscow, Krasnoyarsk, St. Petersburg
and Khobarovsk. V-D struck a second agreement on the same day with
Boeing to provide AN-124s to provide contingency airlift services for the
B787 throughout its lifecycle.
With airlines placing record orders for new aircraft, it’s no surprise that
everyone wants a piece of the market. Russia’s United Aircraft Corporation
(UAC) will work with EADS in Dresden to convert A320 passenger jets into
freighters in both Dresden and the city of Lukhovitsy near Moscow. This
agreement is one of several signed by Russian and European aerospace
officials soon after Aeroflot cancelled an order for 22 Boeing B787s in late
February. Other agreements will enable UAC to take 5% of the airframe
program for the Airbus A350WXB and Aeroflot to order 22 Airbus A350s
for delivery beginning in 2014 and lease 10 A300-200s for delivery begin-
ning in 2008.
8 cargovision | JUNE 07
Last fall, Russia acquired a 5% stake in EADS through
its state-owned bank OAO Vneshtorgbank. The well-
timed investment of about US$1 billion was made after
EADS reported production delays for the Airbus A380
and its share price dropped by one-third. In a second
and simultaneous bid to become part of an interna-
tional aircraft manufacturing consortium, Moscow
turned east and offered to develop a large aircraft with
China in both passenger and cargo versions.
Phoenix
Attendees at the meeting of the International Society
of Transport Aircraft Trading in April noted that while
aircraft prices continue to fluctuate, the value of your
average cargo plane exceeds that of a comparable
passenger version. For one thing, the growth in global
trade means that airlines will want about 3,000 more
cargo aircraft during the next 15 years. Although
demand for cargo space is growing, equipment is in
short supply. Three quarters of the cargo fleet was
converted from passenger jets, which airlines are now
retaining longer in order to strengthen their balance
sheets. Moreover, the interior layouts of cargo planes
are more alike than those in passenger jets, making
them more marketable because many carriers can
easily integrate them into their fleets.
China
We don’t know what part of the Russian offer the
Chinese accepted but within days, Chinese officials
 cargovision news around the world
said they would develop and build very large freighter and passenger
planes at factories in Shanghai and Xian, the capital of northwest China’s
Shaanxi Province. Workers in Xian are expected to perform 50% of the
manufacturing workload for passenger planes and 60% for freighters.
Experts think that by 2030 China will become the second largest civil avia-
tion market after the US and will need 1,600 new planes within 15 years.
Many of them believe China will succeed in developing a very large aircraft
for the domestic market but they are less confident about its international
prospects. About 2,000 readers of Flight International responded to an
online survey in March and 34% of them said China would provide a
competitor to Airbus or Boeing within 15 years. The other 64% said it
would take longer (please see the article “Analyze This” on p. 4 for a
discussion of the challenges in selling Chinese aircraft. - Ed.)
Bacau
If you need something smaller, say a jet freighter of 10 to 12 tons, you’re in
luck. The Romanian company Aerostar has begun conversion of the BAe
146QT freighter under a program that BAE Systems announced in
January. The first aircraft in the project flew to Bacau in March and is
expected off the line in mid-2008. The finished freighter should fit nicely
Routine maintenance at Beijings international airport
between the largest turboprops at 8 tons and the
B737 freighter conversions at 15 tons. It is also
capable of meeting ICAO Stage 4 noise requirements.
The program is aimed at older and less valuable BAe
146s in the 200 and 300 series, a fleet of about 150
aircraft.
Aerostar will be responsible for maintenance, the 3.32-
m by 1.93-m (131-in by 76-in) freight door assembly
and the manufacture and installation of the E-class
cargo interior kit. The design also involves a freight
handling system, a 9-g forward restraint and a load
master seat. Aerostar will subcontract the manufac-
ture of the freight door and delivery of the finished
aircraft to another Romanian firm, Avione Craiova S.A.
Albuquerque
Maybe your needs are even more specialized and
require an aircraft that could carry the same payload
but travel 50% farther and take off on a 20% shorter
runway than the BAe 146. Utilicraft Aerospace Indus-
© Eyevine/Hollandse Hoogte
cargovision 9
 cargovision news around the world
tries expects to fly a prototype by year-end of its FF-1080-300ER, a high-
wing turboprop that will carry 10 LD3s or five 88-in by 125-in pallets. It
has both side and rear doors. A company representative said Utilicraft
has an MOU to fund the prototype.
São José dos Campos
Embraer said in April that it is studying whether to build a 19-ton freighter
for the military based on its Embraer 190 commercial jet. With a 2.74 m
by 3.35 m (9 ft by 11 ft) fuselage, the aircraft could find a place eventually
in civilian service, although the company is marketing it now to Lockheed
Martin C-130 customers. The US$50-million price includes a rear cargo
ramp and in-flight refueling (for those long intercontinental sectors).
Bellevue
For a more comprehensive industry outlook, the Air Cargo Management
Group published its second annual freighter forecast in April. The 45-
page study looks at the freighter market by model, analyzing in detail the
18 types it believes will be important in the future. You order online from
www.cargofacts.com.
10 cargovision | JUNE 07
Industry
Brussels
The Association of European Airlines (AEA) reported in
March that traffic growth was slowing between Europe
and Asia. Carriers have reduced passenger services to
improve load factors and shippers lost belly freight
capacity in the process.
Other developments along this route are complicating
business for carriers who have come to rely on the
income from its consistent cargo traffic. Namely,
average cargo rates are dropping because ocean
container shipping has become more competitive
(please see “Ocean Spray” on p. 24. - Ed.)
London
Consumer demand in Eastern Europe is also diverting
traffic from Asia to Europe, says the Far Eastern
Freight Conference. The emerging economies of the
Baltic States and the Black Sea are becoming a major
growth area for ocean carriers. Moreover, the Mediter-
ranean gateways to Eastern Europe are less
congested than those in Western Europe.
Dubai
The Middle East’s liberal trade policies and improving
infrastructures are also helping the Gulf region displace
Europe as the main transit for Asian and African
freight, says Pierre Wesner, Cargolux VP for Europe,
Middle East and Africa. Mr. Wesner told the World Air
Cargo Event here in March that Europe’s growing
capacity and operating restrictions would cause more
airlines to use the Gulf to transfer westbound traffic
from Asia to Africa and Central Asia and eastbound
traffic from Africa to Asia.
Mexico City
Cargo carriers must also worry about the concentra-
tion of traffic growth in Asia, Giovanni Bisignani, IATA’s
 cargovision news around the world

director general told the annual IATA Cargo Sympo-

sium in March. China represents 30% of the growth in
freight traffic but its limited gateways are causing
bottlenecks and its overwhelming export volumes
mean planes leave full but arrive half empty. Some
analysts say that if you remove the Chinese airfreight
tonnage from the yearly statistics, there has been no
growth in airfreight traffic for several years.

Hong Kong
Aviation’s traditional leaders, Europe and America are
no longer up to the task of providing industry leader-
ship, Mr. Bisignani told an Oriental Aviation conference
later in March. “Europe and the US have lost their
vision. Europe is focused on what it cannot do and the
US has become too political and opportunistic to lead.
We need Asia to step in.”

© Corbis
Infrastructure

Paris
Aeroports de Paris is to sell its 7% equity in Beijing
Capital International Airport Co Ltd. (BCIA) in order to
concentrate on developing airports in Paris. The sale
could fetch four times AdP’s investment since
purchasing the shares in 2000. The Chinese airport’s
profit for 2006 rose 20% to RMB 1.09 billion and
turnover grew 2% to RMB 3.15 billion.
Krasnoyarsk
Aspirations of becoming a transportation hub for
Central Russia have led the local government and a
group of private investors to sink US$550 million into
rebuilding Krasnoyarsk airport. Located smack in the
middle of Russia, the nation’s fourteenth largest city
has a varied population including many Chinese.
Russia wants to develop an internal aviation infrastruc-
ture and create hub airports along underdeveloped air
routes. It wants Krasnoyarsk to serve the cross-polar
routes between San Francisco and Delhi or New York
and Singapore.
Sialcot
Pakistan will open a new airport in the industrial area
between Islamabad and Lahore by the end of the year.
The area needs an efficient cargo hub to handle its exports of
surgical instruments, leather goods, musical instruments, textiles
and sports equipment. Officials expect the airport to handle 24,000
tons when it is opened and 53,000 tons within five years.
Osaka
Round-the-clock flight operations will start at Kansai Airport when
the second runway begins operating in August, a boon to
forwarders. Japanese companies are expanding rapidly into China,
increasing the flow of goods between the two nations. Much of this
traffic is moving through Kansai, which already boasts more cargo
flights to more Chinese cities than Japan’s other airports.
Amsterdam
In April, Dutch authorities approved the sale of Schiphol-based
handling company Aero Groundservices BV, to Aviapartner Cargo
of Brussels. The acquisition will increase the annual tonnage
handled by Aviapartner by 43% to 1,392,000 tons and turnover by
71% to €120 million. Schiphol will become the largest cargo
station of the 38 in Aviapartner’s European network.
Shenzhen
The city of Shenzhen is offering subsidies to cargo airlines that
come to Baoan airport provided they started service after July 1,
2005 and operate at least 50 frequencies per year.

cargovision 11
 cargovision news around the world

Online MOVING ON World

Frankfurt Bruno Sidler

Traxon Europe has joined IATA’s e-Freight project. Mr. Sidler is one of the industry’s brightest and most
Most members of the e-Freight Industry Action Group knowledgeable leaders, according to most people
are already Traxon customers and Traxon already who know him and especially to Jim Crane, the
supports most messages the group is planning to Chairman & CEO of Eagle Global Logistics who
implement. However, the show of solidarity helps the appointed Mr. Sidler President of EGL’s Europe,
progress of the e-Freight initiative. Wipro Technologies Middle East and Africa region in February.
also joined e-Freight in March.
Wolfgang Michler
Mr. Michler joined Traxon Europe in February as head
Geneva of projects where he will take over planning, imple-
Swissport became the first air cargo ground handling menting and controlling the company’s major strategic
company to receive Cargo 2000 certification in
February. It received the award at headquarters level
and said it would adapt the rules and procedures to all Swissport Cargo
stations in its network during the next few months.
Including GHAs in Cargo 2000 is an important mile-
stone. They were excluded during the early develop-
ment before everyone realized their significance, not
only to smooth cargo movements, but also to timely
data entry.

Mercator, the information technology division of

Emirates group also joined Cargo 2000 in March. So
did Australian Air Express International. Cargo
Network Services Corp., IATA’s US cargo subsidiary, is
studying how to support Cargo 2000’s back-office
functions. TNT Freight Management was certified by
Cargo 2000 for air cargo at six sites in Europe, Scan-
dinavia and the US.

12 cargovision | JUNE 07
 cargovision datelines

September 3-6 October 21-24

Asian Aerospace 2007 CSCMP Annual Conference
projects. In his previous position with AsiaWorld-Expo Complex, Pennsylvania Convention Center,
Lufthansa Cargo, Mr. Michler worked on Hong Kong, China. Philadelphia
implementing the carrier’s time-definite serv- T: +(86)-(10)-851890707 E: membership@cscmp.org
ices and Cargo 2000. F: +(86)-(10)-8518 9060 http://www.cscmp.org/
www.asianaerospace.como
Leo van Wijk
KLM’s former President & CEO will perma- November 7-9
nently chair the SkyTeam alliance, managing September 9-11 IX Air Cargo Americas
the expansion of its current cooperation agree- Freighters World Conference World Trade Center,
ments. He will also stay with Air France-KLM Grand Hotel Kempenski, Miami
as deputy to Jean-Cyrill Spinetta and will be Geneva T: +1 305 871 7910
responsible for strategy and alliances. Peter www.aircargonews.net/fwc.asp F: +1 305 871 7904
Hartman, has succeeded Mr. van Wijk as E: info@worldtrade.org
KLM’s chief executive. www.aircargoamericas.com
September 12-14
Philip Chen World Air Cargo Event
The first Chinese to head Cathay Pacific, Mr. Marriott Wardman Park, December 4-7
Chen oversaw the takeover and ongoing inte- Washington, DC Vietnam Aviation Conference & Expo 2007
gration of Dragonair through the end of June T: +44 1784 255000 Vietxo Cultural Palace, Hanoi
and then took over as the leader of Swire www.aircargonews.net/wace.asp. Contact: China Promotion Ltd
Group’s expanding Mainland China investment (CP Exhibition)
strategy. Tony Tyler, Cathay’s COO, has Hong Kong, China.
assumed the airline’s top job. September 12-16 T: +(85)-(2)-25117427
Thailand Logistics Fair F: +(85)-(2)-2511969
Charles Graham Queen Sirkit National Convention Center,
Mr. Graham has become the new CEO for Bangkok
aviation at DHL Express and joins the Organizer: Ministry of Commerce
company’s global express management T: +(66)-(2)-5116020 to 30
board. Mr. Graham will supervise all aspects of F: +(66)-(2)-5116008 to 10
DHL’s aviation activities, including the develop- www.thaitradefair.com
ment of its global network.

Des Vertannes September 23-25

Mr. Vertannes joins Etihad Crystal Cargo as 13th World Route Development Forum
EVP cargo. Previously, Mr. Vertannes had been Stockholmsmässan,
head of cargo for Gulf Air and chief executive Stockholm
at Menzies International and managing director Contact: Michele Lewis
of Menzies Cargo World in the UK. T: +44 (0) 1625 502545
M: +44 (0) 7729 501 369
Rudolf Hug M: +971 (0) 50 5501 427
Mr. Hug has succeeded Gerhard Fischer as michele.lewis@routesonline.com
chairman of Panalpina’s board of directors. Mr.
Hug joined the board in 2005 when the
company went public. Mr. Fischer retired after September 25-27
42 years with Panalpina. Global Automotive Logistics
Prague Exhibition Grounds, Prague
Organizer: Automotive Industry Association
Praha, Czech Republic.
T: +(420)-(2)-21602983
F: +(420)-(2)-24239690
www.biztradeshows.com/organizers/au
tomotive-industry.html

cargovision 13
PERPETUAL MOTION
Chuck Cocci is VP of Global Air Freight Services for UPS Supply Chain Solutions. An American, Mr. Cocci has more
than 30 years of experience in managing international airfreight logistics. Prior to joining UPS SCS in 1995, he held
various management positions at LEP International (now Agility Logistics).

BY PHILLIP HASTINGS

What is your role with UPS SCS
and how is it changing?
The organization’s main functions are to procure
airfreight capacity, pricing and freight forwarding
solutions for our network. We work directly with
airlines to develop our global network capacity
agreements and with our large customers to satisfy
their airfreight requirements.
We also try to funnel most of our lift to our preferred
carriers. By the way, rates are not the first selection
criterion to be a preferred carrier. There must be a
match between our networks: they must operate on
the routes where we move freight. Next, we look at
other factors such as the ease of doing business
with them and, if they are a combination carrier,
whether they take cargo seriously.

Among our customers, we are encountering new

COMPANY PROFILE
■ UPS Supply Chain Solutions
is a unit of Atlanta-based UPS,
the package delivery operator
and provider of supply chain
management services.
Founded in 1907, UPS serves
more than 200 countries and
territories, has almost 428,000
employees and generated
revenue of US$47.5 billion in
2006. US$8 billion of that
revenue came from UPS SCS,
which has 936 facilities in 120
countries, and UPS Freight,
which provides less-than-truck-
load services in the US.
individuals within their organizations. In the past, we
dealt only with the logistics staff. Now, we see
procurement people playing a greater role in rate and
business negotiations. We believe this is because
large international companies are taking a broader
view of their strategic sourcing. They are starting to
see individual commodities, such as transportation,
as elements of an overall procurement strategy.
How does that trend affect
your dealings with airlines?
Well, today we concentrate more on securing long-
term agreements. Our own network must satisfy our
customers’ requirements to be both competitive and
sustainable; so our carrier capacity must be secure
all year-round to accommodate any spikes in their
business. In important markets with major traffic
imbalances, like Asia, we negotiate block space
agreements. In taking a network view, we help
carriers that provide us with capacity on strong trade
lanes by giving them traffic on weak routes, say into
Asia from the US or Europe.

14 cargovision | JUNE 07
What are your main airfreight
sector challenges?
A key one is carrier performance. Our customers
want price and service predictability. Therefore, our
preferred carriers must provide reliable, on-time
performance. For us, reliable means that shipments
are flown-as-booked, along with other metrics like
airport recovery time for imports.
We have systems that measure how airlines perform
and we share the information with our preferred
carriers so they know how they all compare. Gener-
ally, airlines have improved their performance over
the last few years but they still need more effort to
provide the higher standards that our customers
expect of us.
What are the main challenges for the
international airfreight industry as a whole?
Security will continue to concern everyone involved
with global supply-chain operations. There is still a
long way to go in developing tighter security
systems. It is impossible for airlines to inspect every
package that goes on board, particularly into a
passenger belly. Collectively, our industry must find a
new solution and everyone will play a role: shippers,
forwarders and carriers.
Which other issues are important for UPS SCS SERVICES
the industry and for your company? INCLUDE:
I would highlight IT and staff training. From IT, today’s ■ Transportation and freight.
customers not only demand real-time track and trace Through leveraging of the UPS
but also the ability to link transportation with their global transportation network
other logistics, distribution and fulfillment processes. ■ Logistics. Single-source
UPS systems, for example, enables customers to solutions, from global distribu-
link original purchase orders with suppliers and then tion to post-sales service parts
follow shipments through the supply chain, using the logistics
information to facilitate events such as customs ■ International trade manage-
clearance. ment. Customs brokerage,
compliance consulting and
Training is important to help people improve their managed services.
performance and, through that, their service to ■ Consulting services.
customers. Earlier this year, we started a new Strategic direction and counsel
training program for our freight managers around the to help companies align supply
world. Continuous training also encourages people chain operations with business
to see UPS as a career with a good future. This is strategies;
important because recruiting and retaining the right ■ Industry solutions. Develop-
people has become a major challenge for the inter- ment of industry-specific solu-
national forwarding and logistics industry. tions.
cargovision 15
 WASTE
Shippers are beginning to ask their logistics providers about the
environmental and social impact of their operations. Although queries are
general now, the appetite for details is growing steadily as more shippers
find the route to their customers passes through the environment.

BY IAN PUTZGER

16 cargovision | JUNE 07
NOT ■ When transportation companies begin new contract nego-
tiations these days, they are starting to see more customers
ask about their environmental impact. Shippers are often
raising the question even sooner, when they send initial
requests for quotes or information.

Panalpina bid for a logistics contract with Tesco recently and

the UK grocer asked what the logistics firm did to lower its
environmental impact, what programs it had in place and
whether the company had environmental management certifi-
cation. “We’re seeing a huge demand,” says Lynsey MacIver,
Panalpina’s head of corporate health, safety and environment.
“Shippers’ interest in this issue is growing very fast.” Panalpina
already prefers using airlines with modern aircraft that reduce
costs, noise and emissions.

Large retailers are starting to incorporate environmental and

social concerns into their corporate culture, adds Martin
Spohn, Panalpina’s head of media relations. “This includes the
effects of their physical operations, their ethical behavior and
their treatment of labor around the world. It is becoming a part
of doing business, like the ISO quality certifications were 15
years ago.”

Shippers’ inerest in the environmental side of the supply chain

is not confined to large retailers, with a brand to protect, or
companies in Europe that deal with environmental issues more
frequently than those in North America. Consider that a small
electronics firm, a machinery maker and a producer of belts
for paper making machines all recently asked Associated
Global Systems about its environmental policies, says Bob
Imbriani, VP of international operations for the New York
forwarder.
Still, forwarders say that shippers have yet to take a strategic
approach to environmental issues in their supply chains.
“Questions about environmental policies tend to be general
rather than specific,” says. Ms. MacIver of Panalpina. “Except
for the oil and gas industry, which is particularly interested in
this subject. They want to know about CO2 emissions. They
ask what programs we have in place and which ISO 14001
Environmental Management System certifications we have.”
© Frans Lemmens/Corbis

Companies usually implement ISO 14001 regionally, however.

Panalpina intends to certify Africa, India, the Middle East,
Russia, Ukraine and Central Asia this year and then expand
into several parts of Europe. “We’re discussing whether or not
to go global,” Ms. MacIver says.

cargovision 17
cargovision waste not
Novozymes, the Danish company that sold € 900 million in
enzymes and microorganisms last year, is not asking for ISO
14001 certification today from its logistics providers but may
want it in the future, says transportation manager Peter
Hansen. “Certification would be good because you get things
sorted out in a structured way and you can measure improve-
ment.”
A lack of objective standards hinders shippers that try to
assess the environmental impact of their supply chains.
Without guidelines from someone, the EU or the UN, compa-
nies must evaluate by themselves, Mr. Hansen says.
Novozymes joined a Scandinavian Airline System working
group to help measure the emissions from airfreight. That
effort led SAS to post an Internet-based calculator on its
website for shippers and forwarders to see the emissions their
cargo would create when traveling by air or by truck.
We don’t have the emission calculator yet. Let’s keep this for
the next issue.
Yet, only a few airlines offer this capability, which Mr. Hansen
would like to change. If more carriers would report data in a
consistent format, shippers could compare them. “One carrier
told us they didn’t have the time or the resources to set this up.
We offered to show them our model. We’re willing to share it.”
CLEAN DANES
On the highway, Denmark has a system developed via pilot
program undertaken by a Danish shipper organization and
some forwarder groups about 10 years ago. Using the emis-
sions measured from trucks with different engines along 16
European routes, the organization created a method for
Danish shippers to calculate the impact of moving 1 ton over 1
km. And it’s free.
Novozymes has included environmental issues in its tender
process for three years now. Trucking operators must use
vehicles that meet Euro Norm 3 standards and reports their
emissions every six months.
The Danish firm ranked first in its business group on the Dow
Jones sustainability index for five consecutive years. Although
it operates in Denmark, China, the US and Brazil and ships to
over 150 countries, Novozymes measures the impact of its
logistics only in the Europe-Middle East-Africa region. It
expects to begin measuring them in Asia-Pacific and The
Americas during 2007.
“A lack of objective standards hinders shippers
that try to assess the environmental impact of
their supply chains”
18 cargovision | JUNE 07
The company is currently not using environmental impact
figures to select forwarders or carriers. However, it is collecting
data, Mr. Hansen says. Its criteria for picking logistics
providers remain on-time performance, quality and price.
“Environmental and social responsibility is only a determining
factor when all other things are equal,” adds Mr. Imbriani of
Associated Global, expressing another reality.
THIS SPACE OCCUPIED
Shippers’ emphasis on these traditional price-performance
issues undermines serious efforts to reduce emissions, says
Ram Menen, senior vice president of Emirates Cargo. “Ship-
pers want airlines and forwarders to do more on environmental
issues, but they’re not prepared to subsidize the effort. I
haven’t seen a single customer who says, ‘Yes, we’ll pay more
for that.’”
Producers are concentrating on lowering the impact of their
own operations, adds Marcel Fuijke, vice president of busi-
ness development and product management of Kuehne +
Nagel. “Their logistics departments are under pressure to cut
costs. This forces providers to compete on price, to the detri-
ment of any environmentally friendly solutions. We have plans
in the drawer, but there is no point in offering them today.”
In addressing another point of resistance, Mr. Hansen of
Novozymes says: “Environmentally friendly logistics do not
equal higher costs. These are not conflicting arguments.” He
points to the lower operating cost of fuel-efficient trucks.
“Lowering your environmental impact lowers your cost when
you do it right.”
In dealing with forwarders, Mr. Hansen favors a cooperative
approach that enables Novozymes and its logistics providers
to discuss how to reduce their environmental impact together.
His strategy is to target small, attainable achievements that will
most likely produce specific results. “In the SAS group, where
we measured cargo’s emissions, we kept things simple. Other
groups use different approaches and try to include everything.
That avenue takes a long time before you get all the informa-
tion. Better to begin with something simple than to do
nothing.”
Novozymes’ forwarders seem to welcome this attitude. “The
feedback we get from our logistics providers is, ‘It’s nice to get
kicked and get moving,’” After all, we both have the same
interests.”
cargovision people make a difference

ANDRÉ SANTI

FIRE CHIEF
■ André Santi can sum up the wide-ranging role
played by his AF-KL Cargo department when it
comes to serving customers in one short sentence:
“We are both an air traffic control tower and a fire
department.” While that brief description conveys the
The philosophy of a new customer service department at importance of his operation, it does little to explain
Charles de Gaulle is to anticipate service issues and come precisely how Mr. Santi and his 55 colleagues actu-
up with solutions immediately. ally make a real difference to the service experience
of customers.
BY PHILLIP HASTINGS Mr. Santi is in charge of a new organization at AF-KL
Cargo’s Paris CDG hub called ROC (Rappel Opéra-
tionnel Client) Fret, an operational customer service
unit that provides three services:
■ Specific product assistance (SPA) - focuses on
serving customers that ship high-tech, pharma-
ceutical and other commodities using one of AF-
KL Cargo’s products and services such as Cohe-
sion or Variation;
■ Key accounts monitoring - follows the progress of
all shipments from key account customers;
■ Discrepancies - handles any disruption or irregu-
larity relating to export, import and transit cargo at
the Paris CDG hub.

These activities share two common themes, explains

Mr. Santi. They are intended to anticipate problems
(the “air traffic control” aspect) and are in close
contact with customers to achieve a solution (the
“fire department”).
“We are a proactive department,” Mr. Santi
continues. “All of the shipments we oversee are
closely monitored so we can anticipate our actions in
the event of a service interruption. We devise a solu-
tion, put a proposal to the customer and, with their
agreement, implement it.”
For example, what happens to a temperature-sensi-
tive pharmaceutical shipment booked on a flight that
has been cancelled? “The products are typically
shipped in special containers that are kept refriger-
ated by dry ice and batteries,” Mr. Santi says. “If
there’s a delay, the SPA team will make sure the
containers are re-iced and the batteries changed, if
necessary, to ensure continuous power supply.”

Mr. Santi joined Air France in 1997. He spent his first

two years overseeing air and truck freight moving
over short and medium distances and the next five
years in a similar role for long-haul imports. For the
last three years, he led a customer services organiza-
tion that became SPA before it was recently
expanded into ROC Fret. “Our department is on duty
24-7,” he concludes. “There is always something
which needs our attention.”
© Martin Kamstra

cargovision 19
 Airlines contribute only a small amount of global emissions. Yet, other industries are winning the environmental
debate, says IATA’s director general, Giovanni Bisignani. As businesses shift gears to make the environmental issue
a core principle, aviation is being left behind, despite continuing success in reducing its environmental impact.

BY MARK W. LYON

THE GOOD,
THE BAD
& THE ENVIRONMENT

THE GOOD
The United Nations says just 2% of all carbon emis-
sions come from aviation. Other industries create
much more: car manufacturing, 18%; electricity and
heating, 35%; and cattle production, 9%. So why
does air transport get so much grief? Perhaps the
industry’s critics don’t know that current aircraft
require only 3.5L of kerosene to move a passenger
100 km, or 0.05L for a kilo of freight. The new A380
and B787 will use only 3L, or 0.04L for the kilo of
cargo. Not only is efficiency improving, it is already
better than any hybrid car on the market, says
Giovanni Bisignani, IATA’s director general.
During last year, streamlining navigation on 350 air
routes reduced carbon emissions by six million tons
and saved over US$1 billion in fuel expenses for
IATA-member airlines.
Every minute shaved from a flight’s duration saves
62L of fuel and 160 kg of carbon emissions. If the
various national aviation authorities could agree to
manage all of the world’s air traffic together, it could
save US$13.5 billion in fuel costs and 73 million tons

20 cargovision | JUNE 07
of carbon emissions. Oh, and for those intent on
giving flowers, the Natural Resources Department at
Cranfield University in the UK reports that carbon
emissions for imported Kenyan roses, including
airfreight, are almost six times lower than for roses
imported from the Netherlands.
THE BAD
Airlines already pay US$42 billion a year for airport and
air traffic management, Mr. Bisignani said. “More taxes
only rob them of cash to invest in new technology and
the opportunity to further improve their performance.”
Yet, an array of voices, many of them in the UK, is
howling over aviation’s impact on the environment and
some of them demand compensation.
■ Politicians. The recent open-skies agreement with
the US will add 25 million passengers and many
additional air cargo flights during the next 5 years.
This could generate 3.5 million tons of extra CO2
emissions annually; approximately the same
amount the industry is expected to save when it
joins the EU emissions trading scheme in 2011.
Meanwhile, UK Chancellor Gordon Brown doubled
the country’s air passenger duty. “The UK treasury
collects £1 billion in new revenue, but I have yet to
hear how many trees Mr. Brown is planting with
the cash,” Mr. Bisignani said.
■ Activists. The World Development Movement esti-
mates that the UK government will subsidize avia-
tion €15 billion in 2007, €11 billion from taxing
kerosene less than petrol and €7 billion from not
paying VAT, minus the €3 billion to be collected in
new air passenger duties.
■ Food Groups. In January, the Soil Association in
the UK proposed a ban on flying produce into
Britain. Imports comprise 91% of the fruit and 38%
of vegetables consumed in the UK. Tesco said it
would reduce airfreight produce on its shelves
© Jorn Pilon/Foto Natura
from 3% to 1% of the total. Other UK retailers such
as J Sainsbury and Marks and Spencer have
similar agendas. British shoppers spend almost
€1.4 million a day on imported fruit and vegeta-
bles from Africa and the livelihoods of more than a
million farmers and their families depend on this
trade. About €10 million a day from goods sold in
supermarkets goes to developing countries, twice
as much as the UK gave in debt relief last year.
■ The Sick and Dying. The London School of
Hygiene and Tropical Medicine audited a clinical
trial and found it created 126 tons per year of CO2
equivalents. It attributed 35 tons (28% of the total)
to airfreight used to transport treatment packs and
documents to hospitals.
THE ENVIRONMENT
By a margin of 3:2 (in a poll of 610 Flight International
readers), people in aviation do not believe the
industry has strong counter arguments for environ-
mental critics. Boeing said it would test a small
aircraft later this year using fuel cells to fly during
cruise and lithium-ion batteries to supplement power
during takeoff. The technology is years away from
powering a commercial jet and a skeptic would call it
a very modest proposal.
Giovanni
Familiar names in logistics, Wal-Mart, FedEx and
UPS, say they have lowered emissions using diesels- Bisignani:
electric hybrids and hydrogen fuel cells for vehicle “Not only is
propulsion. Unfortunately, these popular solutions
cannot be used in aviation: ethanol doesn’t produce
efficiency
enough energy to replace kerosene and biodiesel improving, it is
could clog jet engines.
Airlines will spend US$117 billion on kerosene this
already better
year giving oil companies US$4 billion in profit on the than any hybrid
refinery margins alone, Mr. Bisignani said. “Clearly
they have sufficient resources to support major
car on the
research into providing alternative fuels.” market”
cargovision 21
 cargovision a week in the life of
Jaco Morgan moved the European headquarters of South African-based Morgan Air to the United
Kingdom eight years ago to be closer to his customers, mainly perishable shippers. This week he is
back in Africa, looking for new sources of traffic.
BY PETER CONWAY
JACO MORGAN
SUNDAY - CAIRO
I leave home at 07:30 to take an 11:00 flight from London
Heathrow to Cairo. The trip is to investigate possible new
perishable exporters there. We believe that Egypt will be
increasingly important as a source for the UK market due to its
proximity, capacity and the availability of produce in the right
seasons. This business is very customer driven, competitive
and fast moving and it is important for us to keep one step
ahead of emerging trends. A friend meets me at Cairo airport
and takes me to my hotel.
MONDAY - CAIRO
I have a 07:00 breakfast with an exporter, a current customer,
and spend the rest of the day meeting with other exporters
and some of the airlines. One thing that emerges from these
meetings is how many exporters are starting to look at sea
freight, or even ferries and trucks, to transport perishables to
Europe. If this trend continues, we will have to move with the
market. Our fundamental motivation is to lower costs for our
customers in whatever way we can.
TUESDAY - CAIRO
Another day spent non-stop in meetings with exporters and
airlines in Cairo. Our strength at Morgan Air is that we offer a
door-to-door solution using our own distribution network in
the UK, the Netherlands, Spain and France. Our customers
tend to be the big importers that work for the retail chains.
However, we also maintain close connections with the
exporters at the start of the supply chain. Though we focus
mainly on moving high volumes of perishables, we also bring
car components up from South Africa using the same prin-
ciple: fast, reliable service and door-to-door delivery.
WEDNESDAY - NAIROBI
I arrive in Nairobi at 04:30 after an overnight flight. It is not
ideal timing, but the only flight available. I arrive in my hotel at
05:30 and at our Nairobi office at 10:00. Kenya is a very
important market for us because we have a large customer
base here. In talking to exporters, I find that the top issue is the
weather, which was very wet during the last quarter of 2006
and very hot and dry during the first quarter of 2007. The
22 cargovision | JUNE 07
climate was unusual for the main growing season and means
that the stable Kenyan crop of the past will be much less
predictable this year. Consequently, packing houses reject
more produce because it is not up to standard, and less of it
will fly to Europe. This makes it harder for us to plan our traffic
with the airlines.
THURSDAY - NAIROBI
After an early night, I am fully refreshed and ready for another
round of meetings. One of our big importers from the UK joins
me and we go to see various exporters to talk about plans and
how we might develop the market further. Despite the unusual
weather this year, we are confident of an increase in business
from Kenya. They are expert growers and have ideal growing
conditions for legumes, such as green beans and mangetout
(snow peas). We see the demand for these products
increasing in the UK and other European markets.
FRIDAY - NAIROBI
Another hectic day spent in Nairobi, with meetings at break-
fast, lunch, dinner and every time in between. This city is the
center for the Kenyan perishables business. The key players
and their packing houses have based their operations here
and there are always so many people to squeeze in during a
short visit. I also make time to meet with the Air France Cargo-
KLM Cargo representatives, with whom I have a very close
relationship. At midnight, I catch an overnight flight back to
the UK.
SATURDAY - SURREY, ENGLAND
I arrive back at 05:30 and go straight home to spend the
weekend with my family. Because of travel and work, I barely
get to spend any time with my wife and daughter during the
week, so I do my best to always keep weekends free. I have a
weekend rule: never check e-mail or take work phone calls. I
always get into work early on Monday, so I can deal with
anything at that time. We live in the country, in a small village to
the south-west of London. We go hiking, cycling and spend as
much time as possible outdoors - when the English weather
permits, of course. Luckily, this particular Saturday is a
wonderful day: gloriously sunny and warm.
© Corbis UK
 OCEAN
SPRAY
As rate differences between air and sea freight diverge, more companies
look to combine both modes for relatively fast delivery at a lower price.
Sea-air will remain a niche market that is available along limited routes
according to a recent study by Air France Cargo-KLM Cargo. The bigger
surprise is the outlook for ocean freight.
BY HEINER SIEGMUND
■ Cargo capacity is growing more rapidly on the
ocean than it is in the sky; 11% versus 4% annually
since 2000. After China joined the Word Trade Orga-
nization in 2002, rates began to deviate even faster,
leaving airline cargo executives astonished to see
more of their consignments traveling by ship. “Nearly
30% of our cargo has moved to sea freight during
the last three months,” said Jan Krems in late 2001.
He was KLM Cargo’s VP for the Middle East, India
and Southeast Asia at that time. This trend is unlikely
to change. Rate differences continue to increase;
with fuel surcharges driving airfreight costs higher
and new, larger vessels driving ocean container
Mr. van den Berg: prices down. By 2010, ocean carriers will have
“Rate differences added 50% more capacity, continuing the prospect
continue to increase” of the 11% annual growth in seagoing shipments.
Meanwhile, air cargo transportation is struggling with
significantly lower growth,” says Dick van den Berg,
AF-KL Cargo senior market analyst.
OIL SHOCK
“Goods with longer lead times, such as garments,
leather and electronic components are shifting from
air to sea transport,” Mr. van den Berg says in his
study published in February. “A quadrupling of oil
24 cargovision | JUNE 07
and kerosene prices since late 2000, forced many
firms to seek cheaper alternatives to airfreight.”
Companies also cite other reasons for switching.
It is easier to plan a supply chain with slower moving
consignments. Or, it looks greener. The mail order
company Otto Versand, says it can fly one T-shirt
from Hong Kong to Germany and create 3.5 kg of
CO2 or ship it by sea and create 0.3 kg.
Shipping by sea is cheaper than by air, but also
much slower. While an airfreight consignment
spends an average of 6 days in transit, an ocean
container can take 30 days to move from Hong Kong
to Europe, door-to-door. “That is too long for many
products,” says Mr. van den Berg.
On some routes, agents can close the price-
performance gap by combining sea and air, thus
realizing half the cost of airfreight and half the time of
sea freight. However, the concept requires transfer-
ring goods from vessel to plane somewhere between
origin and destination, limiting its advantage to
certain international routes. Between Asia and
Europe, for example, Dubai is the prime transfer site.
Agents can count on goods boarding aircraft at
Dubai International within four hours of a ship arrival
in Port Rashid and six hours in Jebel Ali.

LUCK AND PLANNING
Dubai dominates this sea-air lane because: first, it is
located halfway between producers in Asia and
consumers in Europe. Second, it has ample capacity
from the many carriers operating through Dubai and
neighboring Sharjah. The Emirates have huge import
demand and airlines are eager to fill the backhaul on
westbound flights. Third, Dubai can offer competitive
handling charges thanks to its abundance of low-
cost expatriate laborers from Asia.
The Dubai government’s plan to become a sea-air
hub enabled the Asia-Europe service to prosper.
However, sea-air offers practical advantages in any
of the markets where it is available: Asia-Seattle or
Vancouver-Europe, Asia-Los Angeles-Brazil or Asia-
Seoul-Europe. Shippers can achieve better supply
chain planning and, for each commodity, can use the
appropriate mode; sea, sea-air or air.
SEA DRAGON
These factors helped sea-air traffic to double during
the last decade to 400,000 tons annually. Still, that
represents only 0.04% of the world’s air shipments,
which are themselves only 2% of global traffic.
“Sea-air will remain a niche in the airfreight business,”
© Nature Picture Library
Mr. van den Berg says. “Although it will continue to
gain market share.” Even in locations where sea-air is
practical, there are constraints: The transfer from sea
to air is often congested. Rates are sensitive to small
fluctuations in the individual sea and air rates. Ship-
ments must fill at least one ocean container in order
to move swiftly and economically during transfer.
Capacity is not always available and sailing sched- “Shipping by
ules are not always optimal. But these deficiencies
are offset partly by more flexible planning options,
sea is cheaper
lower costs, faster ships and improved transfers than by air,
between seaports and airports. but also much
No, the bigger threat to airfreight is ocean freight, slower”
Mr. van den Berg concludes. As ships become
larger, faster and make fewer stops, the rate differen-
tial between sea and air may increase. Forwarders
may encourage customers to use ocean in order to
manage their logistics more effectively. Shippers may
become more concerned with environmental issues.
Seaborne packaging and cooling techniques are
improving. All of these changes may appeal to
customers that traditionally move electronics, car
parts, perishables and pharmaceuticals by air. It may
lure them down to the sea in ships.
cargovision 25
 cargovision country file

EGYPT
BY KAREN E. THUERMER

NEED TO KNOW
■ Government: Republic
■ Head of State and Govern-
ment: President
Mohammed Hosni Mubarak
■ Population: 78,887,007
(July 2006 estimate)
■ Language: Arabic, Egyptian
dialect
■ GDP: 6.7% (2007 estimate)
real growth rate
■ Economy: Most varied in
the Middle East. Tourism,
agriculture, industry and
service contribute equally
to GDP. Despite economic
investments, living stan-
dards are low.
■ Trade: Agreements include
a Pan-Arab Free Trade Area
with the Arab League and a
Common Market for
Eastern and Southern
Africa. A free trade agree-
ment with the US is
pending approval of Egypt’s
Qualifying Industrial Zones
with Israel. A Euro-Mediter-
ranean free trade agree-
ment is to be set by 2010.
■ Exports: Fruits, vegetables,
flowers and textiles.
Source: CIA World Fact Book,
Egyptian government web-
site. European Commission,
International Monetary Fund
© ArabianEye
■ WHAT THEY SAY
ECONOMIC MOMENTUM
Economic Review of Egypt
International Monetary Fund (IMF)
Economic growth has gathered additional momentum
and investment has picked up. The foreign exchange
position has remained healthy and the financial sector
reforms are proceeding at a steady pace. A number
of important privatization projects were concluded
and flows of foreign direct investment have exceeded
expectations in recent months. Confidence in the
depth and breadth of structural reforms underway in
Egypt underpins these developments.
Macroeconomic stability will contribute to an invest-
ment-friendly environment, and the recent tax and
customs reforms will enhance incentives to invest.
But ease of entry and exit, clear rules and regulations,
the absence of red tape and bureaucratic constraints
Luxor Westbank
and strong supervisory and legal frameworks are also
essential. Continued reforms in these areas will
complement the efficiency gains arising from the
ongoing financial sector reforms and privatization.
PROCEDURES IN TRANSITION
Gilles Pierson
Director AF-KL Cargo for Egypt, Lebanon, Syria,
Jordan and Sudan
Airfreight continues to develop in Egypt, with
increases over the past three years at approximately
5%. Development is more significant for imports than
exports because Egypt decided to progressively
lower its import taxes on certain commodities.
Cairo, Egypt’s hub for airfreight, needs improvement
in relation to its support structure for carriers,
forwarders and administrative authorities. The Cairo
Airport Authority is studying whether to develop facili-
ties for forwarders and security fencing around the
cargo zone. Forwarders do not have a bonded ware-
house area at present.

26 cargovision | JUNE 07
 © Laif/Hollandse Hoogte
Library in Alexandria

TRAVEL TIPS
■ Meetings are formal. Busi-
nessmen wear suits and
ties. There is no “casual
Friday.” Wear polished
shoes.
■ Initial meetings begin with
coffee and small talk, even
when time is limited. Have a
© Kelly-Mooney/Corbis
translator who can explain
your business when the
subject of your meeting
Shippers need to know that customs formalities are still machinery, transport equipment, and clothing and eventually comes up.
heavy here, although some processes are becoming footwear for air transport from Cairo. ■ Do not discuss politics and
more streamlined. Big accounts, like those in petro- religion. Do not ask
leum and telecommunications, have been able to get a Air cargo traffic is growing very fast from Egypt, personal questions
green line procedure to clear shipments in one day. 250,000 tons during 2006. With the sea-air concept, regarding family, particu-
we are aiming for 1,000,000 tons in year 2020. Egypt larly female members.
IATA tools like CASS, E-Booking and Cargo2000 Air is expanding and redesigning its cargo terminal ■ Sit with both feet on the
have begun elevating the airfreight market in Egypt and Air France Cargo - KLM Cargo, has completed floor. Showing the bottom
from a traditional to a more professional level. plans to develop its facilities there. of your shoes is considered
an insult. Don’t use hand
AIRPORT DEVELOPMENT Work is underway to build a new 50,000-m2-cargo gestures.
Magdy El Ghandour terminal. Construction will begin in 2008 and the first ■ Eye contact conveys
Head of Air Cargo, Cairo Airport Company phase will be operational in mid-2009. The plans call honesty when speaking
for adding space to the cargo warehouses at a later with Egyptian men, but inti-
Cairo Airport Company intends to develop Cairo Inter- date and facilitating customs processes by creating macy with women.
national Airport into a sea-air cargo hub that will an IT system that can link all the respective parties. ■ Small inexpensive gifts in
target cargo currently moving through the Suez Canal The new terminal will be a bonded area that should business meetings are an
on vessels from Asia to Europe. We have identified increase transit traffic and make CAI a strong and established custom.
high-value containerized cargo such as electrical competitive hub.

cargovision 27
 cargovision market monitor

JUST YOUR AVERAGE YEAR

Major Scheduled Airlines - Global Freight Traffic Growth
20% ■ The current year began with below average airfreight growth.
Growth - Quarter vs Quarter previous Year
Average Growth of Last 3 Years = 4,7% Although Europe and Asia are recording high economic growth,
Growth - Month vs Month Previous Year
the figures show up in airline passenger transport but not airfreight
15%
transport. Additionally, China’s import and export growth continues
to expand, but not its airfreight traffic. A shift to sea freight could be
10% one explanation. Overall, 2006 was an average year for airfreight
with growth above average in the first half and below average in the
second half. FTKs flown for the year grew 4.5%.
Annual Growth

5%

0%

-5%
Jan ‘04 Apr ‘04 Jul ‘04 Oct ‘04 Jan ‘05 Apr ‘05 Jul ‘05 Oct ‘05 Jan ‘06 Apr ‘06 Jul ‘06 Oct ‘06 Jan ‘07

Airline Growth in diffirent regions Far Eastern airlines

US Airlines
Annual International FTK growth rates per month European Airlines
30% IATA world ■ Remarkably, Far Eastern airlines underwent less growth than US
airlines during 2006. Middle East airlines showed the highest
20% growth, but US carriers had a good year in international airfreight,
mainly because they increased capacity on international routes and
10%
reduced domestic fleets. The similar growth rates of airlines on
different continents suggest that airfreight is a global industry and
subjects all players to the same business cycle. The large traffic
0%
fluctuations caused by the high-tech crash and China’s entry into
the WTO seem to have calmed now, leaving the industry with 3%
-10%
to 5% annual growth.

-20%

-30%
36892 37073 37257 37438 37622 37803 37987 38169 38353 38534 37718 38899 39083

GDP - Trade - Airfreight

Annual growth rates
15%
IATA FTK ■ International airfreight displays a strong correlation with the
World GDP
Manufacturing Trade manufacturing trade and both grew more during 2006 than during
10%
2005. Still, it is surprising that the manufacturing trade grew far
more than airfreight traffic in 2006. You can see that the GDP curve
is more gradual, mainly because it reflects gains in services, which
5%
fluctuate less than manufacturing. The negative figures in 2001 for
trade and for IATA traffic came from the crunch of the computer
0% and telecom markets, followed by the crash of the stock markets.
The outlook for the near future envisions lower trade growth
because of a slower US economy.
-5%

-10%
2000 2001 2002 2003 2004 2005 2006

28 cargovision | JUNE 07
Europe and Asia are recording high economic growth, but airfreight traffic has remained fairly stable overall.
Why no growth? Dick van den Berg crunches the numbers in search of answers.

BY DICK VAN DEN BERG

Major goods exporting nations in 2006 and growth

120
■ Major exporting countries are usually major airfreight countries.
This assumption is correct except in the oil producing nations
100 Germany whose exports travel mostly by ship or pipeline. The rising oil
income in these countries has enabled them to increase consump-
80
USA
tion and investment, creating a demand for imports that airfreight
China fulfills in part. This makes airfreight important to oil exporting coun-
60 Japan
tries, but more for imports than exports. The graph shows that
Germany, the US and China are the world’s largest exporters.
Export in 2006 (bln US$)

40 Italy
Netherlands China expects to take over second place this year and first place
France
UK
within three years. Canada and Mexico export mainly to the US
Canada Belgium
Korea
and their airfreight performance is less than their export perform-
20 Russia
Mexico ance. The same holds true for most European countries that export
most goods to other European nations.
0
0% 5% 10% 15% 20% 25% 30%

Growth vs 2005

10 Airlines with largest FTK increase in 2006 Increase in 2006

Increase in 2005

Emirates ■ In airfreight, as in other sectors, 20% of the players generate

Skycargo
80% of the growth. This graph shows the 10 airlines with the
Korean Air
largest traffic increases. They consist of Emirates Skycargo;
FedEx Europe’s two largest airlines, Air France-KLM and Lufthansa; two
integrators, FedEx and UPS; and five airlines from Asia. Note espe-
Asiana
cially the large increases at the two Korean airlines, Korean Air and
Cathay Pacific Asiana. Most of these carriers would rank in the top-10 for size,
Lufthansa except for Asiana, Air China and UPS. Of these three companies,
Air France - UPS has the largest capacity plans and is a prospect for a future
KLM top-10 position.
Singapore
Airlines

UPS

Air China

(400.000) (200.000) (.) (200.000) (400.000) (600.000) (800.000)

Increase in FTK (000)

Airports: Top 15 in International Freight

4
■ Airports grow by the 80:20 rule as well. This graph shows that
5,2% total 2005 traffic grew most during 2006 at Shanghai-Pudong, Dubai, Seoul-
increase 2006
Incheon, Frankfurt and Hong Kong. Surprisingly, growth at most
3 US airports was rather low while Tokyo-Narita and Taipei had no
growth at all. The latter is a consequence of industry moving to
8,9%
0,1%

8,8%
China and the former of a cooling US economy during 2006.
4,2%
2 5,0% 13,6%
-0,4%
London Heathrow showed the largest decrease among the top-15
5,5% 4,8%
13,4%
-2,8%
airports, mainly because of operational problems. We believe that
Tonnes in millions

2,0%
3,9%
6,3%
higher growth at the upper end of this top-15 grouping implies that
1
concentration is increasing in the airport sector.
© Olé ontwerpers

-
HKG ICN NRT FRA SIN CDG PVG TPE MIA AMS DXB LHR JFK BKK ORD

cargovision 29
 cargovision postscript
■ LIQUID FUEL, GOOD
An enterprising chemist named Frederic Goettmann,
who works at the Max Planck Institute for Colloids and
Interfaces in Potsdam, has devised a method of split-
ting carbon dioxide (CO2) molecules from the atmos-
phere into carbon and oxygen atoms. Plants do this by
photosynthesis. They use the energy from sunlight to
bond nitrogen with CO2, creating a less stable
compound and allowing the carbon to be separated
and used in sugars and proteins. Mr. Goettmann and
his colleagues have created carbon monoxide (CO), a
first step in using CO2 from the atmosphere as
a source of chemical synthesis. Liquid fuel was
commonly made from CO derived from coal both in
Germany during WWII and in South Africa in the
1980s. Mr. Goettmann’s process has so far produced
a yield of only 20% but he is optimistic: “The catalyst
can be made cheaply and it works at a relatively low
temperature.” ■
© Ovjan F.Ellinguag/Corbis
30 cargovision | JUNE 07
■ LIQUID BEER, BETTER
A company from New Zealand said it had hit up the co-founder of Sun
Microsystems for US$5 million in April to produce ethanol from carbon
monoxide (CO). LanzaTech, based in Auckland, has developed a fermen-
tation process using bacteria to consume CO and produce ethanol.
People have used yeast to turn sugar into alcohol for generations. But
LanzaTech found a way to use organisms to make ethanol from carbon
monoxide gas rather than the sugars that come from carbohydrates in
corn, the main ethanol producing crop in the US, or from sugar cane, the
main crop in Brazil. Because corn represents 60% of the cost of a gallon
of ethanol, LanzaTech searched for and found a cheaper solution. The
company is now developing a process that industrial facilities can retrofit
for generating ethanol from the carbon monoxide in waste flue gases. ■
■ 65% OF CARGO CRIME IS AN INSIDE JOB
The theft of international freight costs industry US$50 billion a year, says
Thorsten Neumann, chairman of the 180-member Technology Asset
Protection Association. Security experts are increasingly scrutinizing
airport ground handling agents because of their access to freight
containers. The places where your cargo is most exposed are London
Heathrow, Birmingham, Paris, Venlo and Milan, Mr. Neumann says. ■
■ YEAH, BUT IS IT CARGO 2000 CERTIFIED?
Two researchers at MIT’s Space Logistics Project, astronautics engineer
Olivier de Weck and colleague David Simchi-Levi, have created a software
package to help manage interplanetary supply chains for future astro-
nauts. The program, called SpaceNet, takes advantage of the algorithms
used by the Integrators to help manage the flow of supplies to bases on
the surface of planets, in orbit around them and at Lagrange points -
where the gravity between different bodies cancels out. Many an agent
would have liked a Lagrange point to explain a delayed shipment. ■
■ THAT’S NO TERRORIST; THAT’S MY WIFE.
Remember the guy who shipped himself in a FedEx package between
two US cities a while back? He lived to tell the tale but went straight to jail.
Now we learn that two FedEx employees rode in the freight hold of an
ATR-72 from Paris to Vienna in March. They were found uninjured and
claiming to have been shut in the hold of the aircraft. Their story is holding
up. However, authorities like to say they intercept only 10% of smuggled
goods. Maybe that’s why the TSA decided that all-cargo airlines, including
FedEx, couldn’t carry dependents as passengers on freighters. Fred Smith
is not smiling. ■
■ SLOW SHIPS, BLAME BUSH
Chris Pocock covered FastShips in our last issue. In addition to the many
reasons he cited for the 10-year delay in getting FastShips off the drawing
board and into the water, company spokesman, Pete Peterson subse-
 cargovision information

quently told IFW that the long gestation period was

due mainly to the arrival of the Bush administration,
cargovision
which changed some of the company’s funding Cargovision is the management magazine of AF-KL Cargo.
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■ TASTES LIKE CHICKEN, ONLY duction in whole or in part without written permission
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When warehouse workers at Penang’s Bayan Lepas
International Airport heard hissing noises from a stack
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authorities, in this case a more courageous bunch,
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by Mark W. Lyon, editor-in-chief
Waste Not
The Good, the Bad & the Environment
Ocean Spray

HEREDITY
OR ENVIRONMENT?
© Herbert Kehrer/Zefa/Corbis

Published by AF-KL Cargo Communication, P.O. Box 7700, 1117 ZL

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AF-KL Cargo © JUNE 2007 Volume 22 Number 29

cargovision 31