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8TH WORLD CARGO SYMPOSIUM LOS ANGELES 11-13 MARCH 2014
Opening Plenary
1
8TH WORLD CARGO SYMPOSIUM LOS ANGELES 11-13 MARCH 2014
Housekeeping
↗Please note the emergency exits in the front and rear of the room
↗Please silence your electronic devices
2
Opening Remarks
↗Desmond Vertannes
↗ Global Head of Cargo, IATA
3
Welcome to Los Angeles
↗Eric Garcetti
↗ Mayor of Los Angeles
4
Welcome Address by American Airlines
↗Robert D. Isom, Jr.
↗ COO, American Airlines
5
Complementary Domestic Network
Domestic Network
218 Destinations
682 Routes
Diio 2013 published schedules as of January 25, 2013
Complementary Global Network
Canada
9 Destinations
30 Routes
Asia/Pacific
5 Destinations
8 Routes
Europe / Middle East
21 Destinations
52 Routes
Caribbean
32 Destinations
93 Routes
South America
21 Destinations
34 Routes
Central America
10 Destinations
22 Routes
Mexico
20 Destinations
42 Routes
Diio 2013 published schedules as of January 25, 2013
130 cities served by AA but not by US
62 cities served by US but not by AA,
including 9 Trans-Atlantic
Our Widebody Fleet
Today
A330-200s
12
A330-300s
9
B767-200s
19
B767-300s
58
B777-200s
47
B777-300s
11
2014 & Beyond
A330-200s
3
B777-300s
9
B787-800s
B787-900s
42
A350-900s
22
Comparing Cargo Capacity
B787-800 B767-300
Cargo Positions 28 Cargo Positions 15
Cargo Weight
Capacity 104,460 lbs.
Cargo Weight
Capacity 59,650 lbs.
ULD Capacity
Options
28-LD3s
ULD Capacity
Options
15-LD3s
8-PMCs +
2-LD3s
15 LD8s
4-PMCs +
7-LD3/8s
Trade Patterns and the Future of
International Air Cargo
↗Frederick W. Smith
↗ Chairman and Chief Executive Officer of
FedEx Corporation
12
Asian Tigers and Japan
13
Japan South Korea
Taiwan Hong Kong
Singapore
Boeing 747-100
Export Trends for Top FedEx Markets Exports from some of these countries have been slowing down since CY2010 (YOY% Total Export Value in USD)
Source: IMF, National Authorities
Air Cargo Traffic And Semiconductor Billings
Semiconductors are a vital component of
complex electronics like PCs and cellular
phones – products often carried by air cargo
2012 Avg
Semiconductor
Forecast
Strong correlation between air cargo traffic and semiconductor billings
Oil Prices Over Past 4 Decades
Source: U.S. Department of Labor: Bureau of Labor Statistics
FedEx 777F
All Other, 21, 1% 777F, 86, 5%
767-200s, 70, 4%
767-300s, 107, 7%
747-100s, 51, 3%
747-200s, 171, 11%
747-400s, 249, 16%
747-8F, 47, 3%
A 330-200F, 25, 2%
A 310 Family, 86, 5%
A 300 Family, 262, 17%
DC/MD-10s, 231, 15%
MD-11 Family, 180, 11%
21
Widebody Freighter Aircraft All-Time
Source: Jan ‘14 OAG/BACK database
22
Widebody Freighter Aircraft Active
Source: Jan ‘14 OAG/BACK database
777F, 86, 8%
767-200s, 64, 6%
767-300s, 105, 10%
747-100s, 9, 1%
747-200s, 30, 3%
747-400s, 200, 18%
747-8F, 46, 4%
A 330-200F, 25, 2%
A 310 Family, 39, 4%
A 300 Family, 197, 18%
DC/MD-10s, 132, 12%
MD-11 Family, 153, 14%
Freight Traffic Growth
Source: IATA, ACI
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
2003
M1
2003
M4
2003
M7
2003
M10
2004
M1
2004
M4
2004
M7
2004
M10
2005
M1
2005
M4
2005
M7
2005
M10
2006
M1
2006
M4
2006
M7
2006
M10
2007
M1
2007
M4
2007
M7
2007
M10
2008
M1
2008
M4
2008
M7
2008
M10
2009
M1
2009
M4
2009
M7
2009
M10
2010
M01
2010
M04
2010
M07
2010
M10
2011
M01
2011
M04
2011
M07
2011
M10
2012
M01
2012
M04
2012
M07
2012
M10
2013
M01
2013
M04
2013
M07
2013
M10
Worldwide Airfreight Capacity Growth
vs. Freight Tonnage Growth (YOY)
Tonnage growth exceeds capacity growth
Capacity growth exceeds tonnage growth
Current Freighter Capacity Growth
Exceeds Demand
Source: IATA
Focus of analysis
World International Air Express, Air Freight, and Ocean Freight Revenue Mix
10%
31%
59%
12%
25%
63%
1994 2004 2012
International
Air Express
Dry
Cargo
Ocean
International
Air Freight
6%
38%
55%
CAGR 14%
CAGR 6%
CAGR 9%
CAGR 6%
CAGR 1%
CAGR 6%
% revenue mix of international air express and ocean cargo has been increasing in the period CY 1994–2012
International air freight revenue mix has been declining in this period
Source: Boeing Air Cargo Forecast, Global Insight, TSA estimates, ACMG & FedEx Analysis
($ Billions)
23% Protectionism
is up
since 2009
World Trade Volume vs. Global Real GDP
• During the globalization of manufacturing, trade grew 2-3 times faster than GDP
• In 2012 and 2013, trade volumes failed to grow at their historical rate
• Since the “Great Recession,” trade has been steadily improving but not at the prior pace
Source: CPB Netherlands Bureau for Economic Policy and Analysis, Economic Intelligence Unit, FedEx Corporate Economics
90
100
110
120
130
9
10
11
12
13
14
15
inde
x of
wor
ld tr
ade,
200
5=10
0
Bill
ion
FT
Ks
World Trade in Goods vs. Air FTKs (Seasonally Adjusted)
World Trade Index (Index 2005=100) International FTKs SA
Source: Netherlands CPB and IATA
Industry Context
Modestly Improving Volumes…
0.8
1.1
1.4
1.7
US
$ p
er
kilo
Air Freight Yields (US$ per kilo)
…and Weak Rates
The Year in Review:
Did we deliver on promises made?
↗Desmond Vertannes
↗ Global Head of Cargo, IATA
30
Join the celebration, join the conversation!
www.flying100years.com
Game Changing Innovation
32
Change is needed
↗ Static volumes 2010
to 2013
↗ Revenue decrease
from $67 billion to
$60 billion
33
Our Challenges
↗ Efficiency
↗ Security
↗ Sustainability
34
The path to paperless
We missed our e-AWB target
We wanted 20%....we reached 12%
However, some progress was made
35
Our Achievements
↗ Multilateral e-AWB Agreement
↗ ACC3 – CEIV
↗ e-CSD
↗ Lithium Battery Guidelines
↗ ULD Regulations
36
Environment
↗ Carbon Calculation Methodology
adopted by the Cargo Services Conference
37
Value Enhancing in 2014
↗ Quality ↗ Facilities Matrix
↗ Industry Master Operating Plan (MOP)
↗ 22% e-AWB target
38
Industry Collaboration
↗ Modernization of the Cargo Agency Program
↗ GACAG
↗ Security
↗ e-Commerce
↗ Trade facilitation
↗ Sustainability
39
Call for Action ↗ Using the tools at our disposal
↗ Applying efficient processes
Let’s reduce the average end-to-end time up to 48 hours
by 2020
40
“What was impossible yesterday is an
accomplishment of today, while
tomorrow heralds the unbelievable.”
Percy Fansler
41
THANK YOU
42
Coffee Break Sponsor
No Roads? There’s a Drone for that
↗Andreas Raptopoulos
↗ CEO, MATTERNET
44
Weak World Trade and On-shoring:
Permanent or temporary?
↗Brian Pearce
↗ Chief Economist, IATA
45
46
Why the divergence?
IATA Economics www.iata.org/economics 47
Source: ICAO (history), IATA
(forecast)
25
35
45
55
65
75
85
150
200
250
300
350
400
450
500
550
600
650
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
US
$ bi
llion
US
$ bi
llion
Airline revenues from passengers and cargo
Passenger revenue
Cargo revenue
It’s partly yield…more on this later
IATA Economics www.iata.org/economics 48
24
28
32
36
40
70
75
80
85
90
95
100
105
110
115
120
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
US
cen
ts/R
even
ue to
nne
kilo
met
er
US
cen
ts/R
even
ue to
nne
kilo
met
er
Passenger and cargo yields
Passenger yield
Cargo yield
Source: ICAO (history), IATA
(forecast)
3 year demand divergence exceptional
IATA Economics www.iata.org/economics 49
Source: IATA
6
8
10
12
14
16
18
20
22
150
200
250
300
350
400
450
500
550
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
FTK
bill
ion
RP
K b
illio
nPassenger and freight volumes
RPKs
FTKs
9-11SARS
Financial crisis
Modal shift?
IATA Economics www.iata.org/economics 50
0.85
0.90
0.95
1.00
1.05
1.10
1.15
1.20
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Air freight share of world trade (FTK/WT ratio)
Trend FTK growth ~2% p.a. < world trade growth
Low point of world industrial output cycle
High point of world industrial output cycle
Source: IATA, Datastream
On-shoring?
IATA Economics www.iata.org/economics 51
0.8
1.0
1.2
1.4
1.6
1.8
2.0
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
International trade volumes relative to domestic industrial output (WT/IP)
Globalization / off-shoring
On-shoring / protectionism?
Source: IATA, Datastream
Trade growth now 1x not 2x domestic output
IATA Economics www.iata.org/economics 52
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
% ch
ange
yea
r-on-
year
World trade and industrial production growth
World trade growth (avg. 5.6% pa)
Industrial production growth(avg. 2.8% pa)
Source: Datastream
Resist protectionism/ implement Bali
Almost 500 protectionist measures taken in 2012
IATA Economics www.iata.org/economics 53
Source: Global Trade Alert
Number of
measures
But some on-shoring permanent
IATA Economics www.iata.org/economics 54
2
3
4
5
6
7
8
9
10
11
12
0
50
100
150
200
250
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Hen
ry h
ub g
as p
rices
, US
$/m
mbt
u
Uni
t lab
our c
ost,
2000
=100
China's labour costs and US gas prices
China's unit labour costs
US gas prices
Source: Haver
Squeezed from top and bottom
IATA Economics www.iata.org/economics 55
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013
Rat
io o
f FTK
s to
WT
Maj
or in
tegr
ator
s' s
hare
of i
nter
natio
nal F
TKs
Major integrators' share of FTKs and FTKs share of international trade
Major integrators' share of international FTKs
Air FTKs share of international trade
Source: IATA, Datastream
Not all markets are weak
IATA Economics www.iata.org/economics 56
Source: Datastream, IATA
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
2008 2009 2010 2011 2012 2013
% c
hang
e ov
er y
ear
Growth of international trade and e-commerce
E-commerce growth
International trade growth
Jet fuel price still within range
IATA Economics www.iata.org/economics 57
0
20
40
60
80
100
120
140
160
180
200
2008 2009 2010 2011 2012 2013 2014
Jet kerosene and crude oil price, $/barrel
$140/b
$110/b
Jet kerosene price
Brent crude oil price
Source: RBS, Platts, IATA
CNG climate deal implementation critical
IATA Economics www.iata.org/economics 58
450
550
650
750
850
950
1050
1150
20 000
25 000
30 000
35 000
40 000
45 000
50 000
55 000
60 000
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
Avia
tion
CO2,
mill
ion
tonn
es
Glob
al C
O2 fr
om fu
el b
urn,
mill
ion
tonn
esGlobal vs aviation CO2 emissions
Aviation CO2
Without CNG +2.5% p.a.
Global CO2
Current policies+1.4% pa
New policies+0.7% pa
450ppm scenario-1.7% pa
Source: International Energy Agency
Capacity still growing
IATA Economics www.iata.org/economics 59
2500
2700
2900
3100
3300
3500
3700
Num
ber o
f airc
raft
Cargo fleet composition
End of month totalsEnd of year totals
Wide-body passenger aircraft
Freighters
Source: Ascend
Asset utilization bottoming out
IATA Economics www.iata.org/economics 60
Source: IATA, Boeing, all data seasonally adjusted by IATA
7.50
8.00
8.50
9.00
9.50
10.00
10.50
37%
39%
41%
43%
45%
47%
49%
51%
53%
2008 2009 2010 2011 2012 2013 2014
Frei
ghte
r airc
raft
utili
zatio
n, a
vera
ge d
aily
hou
rs
Wei
ght l
oad
fact
or, %
AFT
KAir cargo asset utilization
Freight load factor
Freighter aircraft utilization
But no sign of yields bottoming out yet
IATA Economics www.iata.org/economics 61
Source: IATA CASS
1.80
1.90
2.00
2.10
2.20
2.30
2.40
2.50
2.60
2010 2011 2012 2013 2014
US
$ pe
r kilo
Global average cargo yield, including surcharges
seasonally adjusted
Pressure on cargo yields may not be over
IATA Economics www.iata.org/economics 62
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Tonnes of new cargo capacity from aircraft deliveries
Pax fleet new belly capacity
Freighter fleet new capacity
Source: IATA, Ascend
But the cycle is turning up
IATA Economics www.iata.org/economics 63
30
35
40
45
50
55
60
65
70
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
PM
I ind
ex le
vel,
50=n
o ch
ange
% c
hang
e ov
er y
ear
Global industrial production, trade and business confidence
International trade
Businessconfidence
Industrial output
Source: Datastream
And it doesn’t look like another ‘false dawn’
IATA Economics www.iata.org/economics 64
11
12
13
14
15
16
17
18
30
35
40
45
50
55
60
2008 2009 2010 2011 2012 2013 2014
FTK
s bi
llion
Bus
ines
s co
nfid
ence
inde
xFTKs and business confidence
Source: Datastream, IATA
Business confidence
FTKs
Even Asia is now seeing some growth
IATA Economics www.iata.org/economics 65
80
90
100
110
120
130
140
150
160
2010 2011 2012 2013 2014
Inde
xed
to 1
00 in
May
201
0FTKs by region of airline registration
Middle East(+45%)
Africa
Latin AmericaEurope
North America
Asia-Pacific(-12%)
Cycle peak for market total
Source: IATA
To conclude
Modal shift is happening
But weak world trade is the new problem
Must reverse protectionism and implement Bali
Even so long-term growth is likely to be lower
Fuel costs stuck in a range
But need to see CNG implemented to avert threats
Pressure on yields may not be over
But the demand cycle is turning up
And it looks more durable and widespread this time
IATA Economics www.iata.org/economics 66
Modal Choice:
What drives the decision process?
↗Gert-Jan Jansen
↗ Executive Director, Seabury Group
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
Panel discussion on Modal Choice Moderator
↗ Enno Osinga, SVP Cargo, Amsterdam Schiphol Airport
Panelists
↗ Christo van der Meer, Senior Consultant Supply Chain Development
Operations Manager Flowers &Sea, FloraHolland
↗ Maria Dorazio, Head of Cold Chain Logistics, Novartis
↗ Michael Blaufuss, SVP Airfreight, Agility Logistics
↗ James Woodrow, Director Cargo, Cathay Pacific
86
Networking Lunch Sponsor
Air Cargo Security:
Are we ready for ACC3?
↗Mike Woodall
↗ Head, Independent Validation and Regulatory
Engagement, IATA Cargo
88
89
90
91
92
93
94
95
96
Panel discussion on ACC3
Moderator
↗ Chris Notter, Consultant
Panelists
↗ Martin Jones, Head of Aviation Security, UK Department for Transport
↗ Tleli Makhetha, General Manager, South African Airways Cargo
↗ Kester Meijer, Director Operational Integrity, KLM Cargo
97
Air Cargo and the Environment:
Are we doing enough? Moderator
↗ Nigel Tomkins, Managing Director & Editor Air Cargo Media Ltd
Panelists
↗ Cindie Blackmer, Sr. Mgr., Global Logistics Sourcing and Supplier Mgmt, Intel.
↗ Robbie Anderson, President United Cargo
↗ Mitch Nichols, President, UPS Airlines
98
99
100
101
102
103
Conclusions and the Week at Glance
↗Desmond Vertannes
↗ Global Head of Cargo, IATA
104
Coffee Break in Exhibition