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Overheard at Cargo Facts Asia

David HarrisbyDavid Harris
May 18, 2017
in Archive, Carriers, Freighter Aircraft
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A record crowd for Cargo Facts Asia 2017 in Shanghai.

SHANGHAI – A record crowd of senior executives from all links in the air cargo supply chain gathered at the Grand Hyatt in Shanghai late last month for Cargo Facts Asia 2017 – the sixth annual presentation of what is now undeniably the region’s premier industry event. After five years in Hong Kong, record attendance was confirmation that Shanghai was undeniably well-suited to host the Asia-Pacific region’s must-attend cargo event. Once again, the crowd enjoyed tremendous networking opportunities with peers from around the globe, and presentations and discussions by some of air cargo’s best and brightest.

YTO Express Airlines Chairman David SU sits down for a fireside chat with Cargo Facts publisher JJ Hornblass.

The event kicked off with a warm welcome from Jing Yiming, the president of the Shanghai Airport Authority, our Host Partner for the event, and then got immediately underway with a round-table discussion around the future of air freight in Asia, followed by a fireside chat between Cargo Facts’ publisher JJ Hornblass and David Su, Chairman of YTO Express Airlines.

If there was one recurring theme promulgated by speakers, and by delegates mingling during the breaks and networking periods, it was the industry’s mastery of volatility and uncertainty. The classic example is that few shippers ever plan to use the airfreight mode as anything more than a contingency option for when fast shipments are necessary, and thus the industry is always on its toes, and ready to react to shifting customer requirements.

Of course, one of the joys of Cargo Facts Asia (and of the annual Cargo Facts Symposium in the fall) is listening closely, not just to what is said on the stage, but also during the coffee breaks, at the cocktail receptions, and in the hallways. We like to summarize it every year under the title: “Overheard At Cargo Facts Asia.” And here is some of what we overheard in Shanghai:

AirBridgeCargo’s Asia boss, Joanna Li, had much to say about the impact of the One Belt, One Road initiative.

Rail freight will not have much impact on China-Europe air cargo volumes. According to speakers from leading freight forwarders and specialist cargo carriers on a “One Belt, One Road” panel, the growing volume of rail freight between China and Europe does not pose much of a threat to the air mode. Wolfgang Meir, SVP, Silk Way Group, doubted rapidly developing rail freight options between China and Europe would have much of an impact on the enormous China-Europe air freight flows. Central Asia is a different story however, which has Silk Way working to reduce transit times in places such as Turkmenistan and Georgia.
Joanna Li, VP Asia Pacific at AirBrdigeCargo Airlines, concurred that rail was not an immediate threat, but that airlines still needed to be more proactive to capture market opportunities. Li noted how in AirBridge’s main Moscow hub, the Russian Post had installed sorting centers right at the airport which gives it an edge in processing e-commerce volumes.
Customs and security clearance are still the greatest inhibitors preventing quicker transit times. In China, it can take a full day to clear customs and security – US airports are not much better, with some goods taking 12 hours on arrival to clear, according to Jochen Krug, SVP, air freight North Asia region, K+N.

When will 737NG freighter-conversion redeliveries take off? During a session on the future of the freighter-conversion business, Bob Convey, SVP Sales & Marketing, AEI said 737NG feedstock prices will begin to come down beginning around 2020, but Jim Haas, Director, Product Marketing at Boeing Commercial Airplanes, said he expects feedstock prices to drop before then, once the 737 Max variants hit the market. Additionally, Haas said that the increased performance economics of the 737NGs may convince operators to accept their higher acquisition cost. And as to the timing of the first redeliveries, Bedek Aviation Group expects to hand the first 737-700BDSF to launch customer Alaska Airlines within in the next few months, and Boeing expects to deliver its first 737-800BCF by the end of 2017.

China Southern’s Zhang Dezhi and Volga-Dnepr’s Robert van de Weg debate the future of air freight.

China’s increasingly tepid GDP growth won’t be an inhibitor to air freight. While it may sound counterintuitive, Zhang Dezhi, VP Cargo, China Southern Airlines, argued during an air freight trends panel that it’s an oversimplification to say China’s economy is slowing. Rather, single-digit growth rates, which are becoming “the new normal,” represent China’s shift from an industrial developing economy, to a more consumption-driven, developed economy. As Zhang pointed out, e-commerce and perishables imports drive more demand for air freight than does government spending on dams or industrial infrastructure.

Rhetoric and reality have no connection when it comes to protectionism. Despite Brexit and the election of an anti-globalist president in the United States, panelists on an air cargo trends panel at Cargo Facts Asia agreed that the threat of protectionism was significantly overblown. Michael Steen, EVP and CCO, Atlas Air Worldwide Holdings said, “globalization is stronger than ever, and picking up speed.” Steen continued, “Although no major free trade agreements have been signed, there have been no new barriers to trade.”
China Southern’s Zhang Dezhi said that free trade agreements have had a significant impact on the carrier’s cargo business. Three years ago, before China had an FTA with Australia, China Southern operated 20 flights per week between China and Australia, with cargo load factors of 25%. Today, Zhang’s airline operates more than 60 flights per week between the two countries, with cargo load factors of 85%.

Airlines are responsible for the problems in ground handling. “Handlers have simply been squeezed too much by the airlines,” said Robert van de Weg, Group SVP Vice, Sales & Marketing, Volga-Dnepr Group, during one of the sessions. Often cited as the weakest link in the supply chain, van de Weg said ground handling operations are now one of the best opportunities for service improvements in the air freight industry. Part of the problem is the vicious cycle of low-wages, poor benefits, and worker retention. In a weak economy, handlers can find people to work for minimum wage, not so much the case when an economy nears full employment. John Ackerman, EVP, Global Strategy & Development, DFW Airport said that although it does not directly employ ground handlers (which are often just tenants of tenants), the airport has been able to reduce the time it takes to help new-hires obtain security clearance. The expedited badging process in turn, helps airport stakeholders compete with non-airport tenants when trying to attract workers.

 

Tags: 737NGAEIAirBridgeCargo (ABC)AsiaAsia PacificBoeingChina Southern Airlinesfreighter conversionsIAIKuehne+Nagel (K+N)Silk Way AirlinesVolga-Dnepr GroupYTO Cargo Airlines
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