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Issue 6 2012

///NEWS: AIRFREIGHT FOCUS Is there a peak season, asks Panalpina?

Sluggish air freight markets involving Europe are hurting Swiss global forwarder Panalpina’s overall business. But behind the current downturn more promising long term trends can be seen, writes Neil Madden.

Panalpina’s profitability in the third quarter was hit by disappointingly weak air freight volumes (down 8% year-on-year) and a higher cost base. In September, the group recorded particularly low air freight. “Aſter a weak July and an

improvement in August, we expected our air freight volumes to grow sequentially in September. However, compared to August they came in much weaker than seasonally normal, especially on Europe-related trade lanes,” said Panalpina’s CEO Monika Ribar,

announcing the results. The company’s substantial

exposure to air freight, and its most important market Europe, leſt its mark on the company’s figures. Preliminary results indicated that Q3 EBITDA (earnings before interest, taxes, depreciation, and amortisation) would come in at SwFr15-20 million (£10.3-13.7m), already incorporating a one-off extraordinary charge of SwFr12m, less than half the EBITDA for the third quarter 2011. Panalpina saw significant volume decreases on most

European trade lanes, import and export. The air freight division accounts for almost 50% of the company’s net forwarding revenue and around two thirds of its air freight volumes come from trade lanes involving Europe. Compared with the same

period in 2011, volumes shipped by customers in key industries such as high-tech, telecoms and chemicals, decreased substantially in the third quarter. These three industries alone account for roughly 40% of Panalpina’s air freight volumes.

On the upside, Panalpina shipped significantly more cargo by air in the healthcare and oil & gas sectors, as well as manufacturing. Speaking

to FBJ, Sven

Hömmken, Panalpina’s global head of marketing & sales, said part of the problem is that more

shippers have

Q3. Although tonnage dropped by 8%, the number of individual air freight shipments handled during the quarter remained practically unchanged year-on-year.

crisis years – say 2007 – we would see a build-up in shipments in September ahead of the Christmas season. Now, one might ask whether there will be a peak season this year aſter all.” While this generally flat environment

business looked

to reduce logistics costs by switching consignments to ocean freight. “At the same time,” added Hömmken, “volumes per shipment are oſten lower than in the recent past. This indicates that shippers are looking to be in a position to respond quickly to any slight upturn in a market, but at the same time avoiding high inventories.” This trend towards

smaller shipments was accentuated in

The distribution centre at the end of the runway

DHL Supply Chain has opened a 14,000sq m, €14m ‘end of runway’ logistics hub at its main European air hub at Leipzig airport, aimed at customers who want to centralise stocks of high value or urgently required parts. It will offer customers later cut off times and earlier deliveries. Discussions are already going on

with a number of potential clients for the multi-user facility, chief executive officer of DHL Supply Chain in Europe, Graham Inglis, told FBJ. Most, though not all of these would be in the medical, high

tech and automotive sectors, and customers could also run a range of repair, configuration, kitting and merge in transit operations - either carried out by their own staff, or DHL itself could also hire personnel

with the necessary

skills. The facility – which is actually on

an industrial estate a few minutes from DHL’s hub at Leipzig airport – currently has high-bay racking and areas are available for added value operations. DHL also has “similar capability”, though not designated EOR facilities, in Asia, said Mr Inglis. There are though no plans to

develop EOR facilities away from DHL’s main hubs, as the late cut-off and early delivery concept requires direct access to trunk flights. Robert Kirubi, vice-president for

technology business development, said the facility could be used by customers for new product launches, aſter-sales work, merge in transit operations and repairs, pointing out that many repair companies are based nearby in eastern Europe. Dr Michael Terhoeven, vice

president of business development and strategy for DHL customer solutions and innovation, said

that tougher requirements in the medical sector including a greater proportion of products requiring cold chain services was also pushing customers into multi-user sites. The EOR terminal is not

intended to replace the service parts centres that DHL operates for customers in many business clusters around the world as only these can deliver within the very short time windows required– as little as two hours. The EOR service would provide a next business day service but could be used to restock service centres.

eFreight needs action, not excuses says new Delta cargo chief

Complaining that eFreight is ‘too hard’ just will not wash any more, Delta Cargo’s new chief Tony Charaf told FBJ in an interview at the Air Cargo Forum in early October. Mr Charaf, who succeeded Neel Shah as chief cargo officer at Delta - one of the leading US scheduled air carriers - said: “I don’t agree that eFreight is going to be ‘too hard’. There will always be people who say they don’t like change.”

He acknowledged that

creating a complete electronic supply chain was more difficult in the freight than in the passenger environment, but insisted that the issues must nevertheless be addressed head-on. “In passenger, electronic booking was led by each and every airline. In freight, it has to be much more of an industry solution, and because of that it may take a bit longer.” But he warned: “If we are to be

competitive, we can’t continue to use pencils and paper.” He added that Delta Cargo

would be willing to help forwarders to become “eFreight capable”. Mr Charaf added that he

intended to use his knowledge of technical and operations matters – he retains his post as president of techops in addition to his new role – to improve the cargo department’s internal processes.

Tony Charaf is Sven Hömmken The current state of the market

leads Hömmken to question whether there will actually be a peak season in the run-up to Christmas this year. “In the pre-

obviously affecting the group’s overall performance, it is still witnessing a few bright spots in certain markets. And crucially the structure of Panalpina’s air freight operations enables it to ramp capacity up or down according to need. Although the group still ships most of its air cargo using passenger belly space, it also has its ‘own controlled network’ (OCN), an

asset that Panalpina says

differentiates it from all other large freight forwarders.

No prosecutions in NZ dangerous goods case

The New Zealand Civil Aviation Authority has decided not to prosecute the country’s air force despite an investigation which found that RNZAF personnel allowed potentially dangerous chemical oxygen generators to be loaded onto Air New Zealand flight to Vancouver in August 2009. The generators were of a similar type to those that caused the Valujet crash in Florida in 1996 – an incident which sparked the changes which led to today’s dangerous goods regulations and IATA forwarder training.

However, the NZCAA’s director

of civil aviation, Graeme Harris, said in an interim report that he did not plan to prosecute but would instead try to improve processes and procedures to reduce the risk of this type of incident occurring again. The passage of time was also a factor in the decision not to prosecute, he added. However, the CAA would write

to freight forwarders to remind them of their responsibility to disclose information on dangerous goods to airlines and the correct procedures for their carriage.

Get picked up for nothing at Heathrow

IAG Cargo, the British Airways World Cargo-Iberia Cargo merged business, is offering a free pick-up and delivery service for


forwarders in the Heathrow area for consignments under 300 kilos. Cargo Connector will also save forwarders the administrative burden of arranging their own transport or having drivers tied up queuing at the freight terminal, IAG adds, and it can also arrange for freight screening. The concept has already been

successfully tested in New York, Los Angeles and Chicago. Two vehicles are currently operating in New York and Chicago to facilitate the service and one in Los Angeles, each making around 20 stops each

day. Following the UK roll-out, IAG Cargo will review additional locations for the service. Aſter a customer has used the

service, they will be automatically added to the pick-up vehicle’s daily route. In addition, customers can book shipments on-site when the driver arrives at their premises. The drivers will be able to book quickly on the behalf of customers, via mobile, and feedback flight details on the spot, giving the customer instant access to any of IAG Cargo’s more than 350 worldwide destinations. The vehicle is IAG Cargo branded and specialist drivers have been recruited with the necessary sales experience to handle on-site bookings.

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