cargovision-0107

cargovisionQUARTERLY MAGAZINE AIR FRANCE CARGO-KLM CARGO VOLUME 22 ˆ NUMBER 28 ˆ MARCH 2007

Passion Powers PanalpinaCEE How it GrowsMoving FastShip

GULFSTREAM

4 GULF STREAMHigh oil revenues in the Middle East have lifted the region's airlines and airports to the top of IATA's growthcharts. How will air cargo activities in this dynamic region be affected by plans to create a common marketin 2007 and a single currency by 2010?

14 PASSION POWERS PANALPINAPanalpina's stock price almost doubled over the past year. The Swiss-based company is known for its reli-ability and passion for innovative solutions. "Owning assets leads to inflexibility. You tend to focus on utiliz-ing them, rather than serving your customer." says Panalpina CEO Monika Ribar.

16 OPEN SOURCESodexi lets forwarders and carriers provide door-to-door express services that match those of the integra-tors. But the company also wants to promote sustainable air trade and a higher standard of living forimpoverished nations.

19 PEOPLE MAKE A DIFFERENCECatherine Avez has seen many changes in her 20 years with Air France. But they have been coming fastand furious since the integration with KLM Cargo. "The Unique-Voice Portal is the starting point for a futureon a different scale."

20 CEE HOW IT GROWSThe logistics market in Central and Eastern Europe is now worth € 800 million, but if investment continuesat its present rate, demand for logistics services could double by 2010. Andy Weston takes a look adevelopments in the region.

25 MOVING FASTSHIPHalf the cost of airfreight, twice the speed of sea freight! For the past eight years, Roland Bullard has beenrepeating that mantra to shippers, bankers, and governments. The four-day transatlantic container serviceseems to be moving closer to launch, but there's still no ship in the water.

08 news & datelines22 Alain Chaille26 country file: Bangladesh28 market monitor30 postscript31 information and colophon

COVER IMAGE

Building of the new F1 track in Bahrain© Chris Steele-Perking/HH

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Ice skating is great fun. Especially outdoors - gliding over inland waterways to places that are mostlyinaccessible. Good skating, like most outdoor activities, depends on good weather. And in this casethat means cold weather. To get perfect conditions, you need a more-or-less stable environment. Yet,it turns out that the environment is not so stable, and that is a growing concern. Aviation, like everyhuman activity, has an impact on the world around us. Our industry’s record of accomplishment inlowering noise and emissions has been remarkably good and will continue to improve as quickly astechnology allows. The AF-KL Group is fully committed to all available measures that can protect ourenvironment. This topic has been debated at length in recent times, and this is reflected in our sec-tion on news and opinion.

Of course, you bring up the environment and you are suddenly talking about oil. High prices havecreated a windfall for countries in the Middle East. They are building excellent transportation andcommunications infrastructures at a fantastic pace. Six of the Arab states have formed the GulfCooperation Council to create a single market and a single currency. Just as creation of the EUbrought changes to air transport, so will this new organization in the Middle East. Our lead featurelooks into the progress of this initiative and some of the consequences anticipated by executives inthe region. This issue’s Market Monitor also offers you some timely insights into the broader global effects that current oil prices are having on trade and transportation.

Developments in this broader context are also the topic of three other articles in this issue. Firstly,FastShip is working on a four-day transatlantic container service that is now being pitched to air-freight carriers, shippers and intermediaries. But even at half the cost of airfreight and twice thespeed of sea freight, there are doubts as to whether this new concept will ever sail. Secondly, thelogistics market in Central and Eastern Europe is coming into its own and is worth EUR 800 millionthese days. If investment continues at its present rate, demand for logistics services could double by2010 and have a pronounced effect on traditional traffic patterns. Thirdly, all of the AF-KL Cargo’sEquation and Mail services through Paris flow through Sodexi’s warehouse. This express operationlets forwarders and carriers provide door-to-door services matching those of the integrators. Lookingahead, Sodexi aims to promote sustainable air trade and a higher standard of living for impoverishednations. And that brings us back to the environment. Which we should cherish, whether it be on theice or in the sky.

Sincerely,

AREND R. DE JONGSenior Vice President - Marketing & NetworkAir France Cargo-KLM Cargo

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Catherine Avez, page 19

Princeton Univerity, page 30

Formula 1 Grand Prix, page 4

Growing Network, page 20

GREAT OUTDOORS

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■ The six members of the Gulf Cooperation Council- Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and theUnited Arab Emirates - had planned to form a com-mon market in 2007. The concept would be along thelines of the European Union, with a single currency tobe adopted in 2010.Both target dates now look overly ambitious. However,most air cargo executives in the region believe thesedevelopments will come to pass eventually, bringingsignificant benefit for their international logistics busi-nesses. “Creation of a GCC common market will liberalize themovement of air cargo between member states andstabilize the integration of multimodal platforms here,”says Saud Arab, general manager of cargo and airmailsales and services system for Saudi Arabian Airlines.“We will see more logistics companies established inall of the GCC states as a result of the economic and

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High oil revenues in the Middle East have lifted the region’s airlines andairports to the top of IATA’s growth charts. How will air cargo activities inthis dynamic region be affected by the plan of the Cooperation Council

for the Arab States of the Gulf (GCC) to create a common market in2007 and a single currency by 2010?

BY PHILLIP HASTINGS

GULF STREAMcommercial agreements that level the playing field forall.”But when exactly will the GCC single market becomea reality? “Clearly, the borders are still there for theforeseeable future,” says Charbel Abou-Jaoude, man-aging director of global integrated logistics for Agility,the Kuwaiti firm formerly known as PWC Logistics.“We’ve seen progress towards a single market, suchas in the area of customs harmonization, but there isstill much to do before the region is knit together asclosely as nations in the EU.”

COME TOGETHER

Ram Menen, divisional SVP of cargo for Emirates,says that a single GCC market will definitely materializein the next few years, but not before logistics cus-

tomers encounter confusion and ambiguity. “In otherwords, a single GCC market will develop no different-ly than it did in the EU. Anything new has got to bedin. It is not just a question of having common docu-mentation or processes. A lot depends on how bor-der officials interpret them. Until they all get used tonew procedures, we will face challenges.”Christian Berquier, the AF-KL Cargo director for theGulf, Iran, Pakistan, Sri Lanka and Bangladesh,agrees: “Customs clearance for goods entering theGCC can now be done at the first point of entry, butsome border officials still need to learn this. CertainGCC states are more flexible than others in openingtheir markets. While some have not disclosed theirpositions, the purposeful march towards a singleGCC market appears irreversible.”Logistics organizations and air cargo companiesoperating in the Gulf are already positioning them-selves to draw advantage from the single market bypreparing for expansion of their regional truckingactivity.“A single GCC market will tremendously simplify themovement of goods by road,” explains Jean PierreDe Pauw, SVP of Dnata Cargo in Dubai. “Roads hereare generally excellent. It is just a matter of puttingproper rules and procedures in place.”Road feeder services will increase tremendouslyonce the Gulf becomes a single market, adds DesVertannes, head of cargo for Gulf Air. “They will bespawned by the carriers serving the region, who willneed more frequent services to support all the newinternational airfreight capacity they are bringing hereand GCC moves to facilitate a more seamless distri-bution infrastructure across its member borders.”

START YOUR ENGINES

Until now, most of the interregional cargo moved bysea or air, says Bill Hill, group vice president of GACLogistics in Dubai. However, recent highwayimprovements and simplified customs procedureshave made road haulage much more viable. “Whenall of the GCC customs processes are implemented,road freight will be the preferred mode of transportfor everything but the overnight air satchel business.”Dnata, GAC and Gulf Air all expanded regional truck-ing operations during the past year. Dnata linked upwith Agility to establish a joint-venture, intra-airportroad transport operation called DPAL (Dnata-PWCAirport Logistics). “Through DPAL, Dnata intends tobe one of the main players in this niche sector, as the

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market opens,” says Mr. De Pauw. At the same time, GAC launched a regional full-truckload and less-than-truckload service calledGAC Xpress, offering customers time-definite depot-to-depot or door-to-door delivery in Bahrain, Kuwait,Saudi Arabia and the UAE. GAC plans further expan-sion and will use its network to distribute bothinbound cargo arriving at Gulf sea and airports andlocal traffic. After Gulf Air withdrew international air service fromAbu Dhabi last year, it established daily truck runsbetween Oman and the UAE. “We’ve had no prob-lems whatsoever with transit times for those servic-es,” says Mr. Vertannes. “Cross-border movementsare becoming easier and more efficient. It is just aquestion of customs officials setting and applyingconsistent rules for this particular line of activity.” One man who does not foresee positive improve-ments in regional trucking over the short-term isEmirates’ Ram Menen. “We already truck cargo fromDubai to Bahrain. We use a couple of trucking firms

for ad hoc purposes, such as moving oversize cargofrom Dubai to Doha or Kuwait. However, to date, wehave generally found it better to fly cargo betweenpoints in the Gulf.”

SHIFTING FLOWS

The prospect of a single GCC market brings up thefundamental question of how this might redistributethe flow of transshipments through the existing gate-ways. Predictably, senior executives at each of theGulf region’s major air cargo hubs believe - or at leastargue - that their local airport will be among the mainbeneficiaries.Many, of course, claim Dubai will be the big winner.The prospect of more and faster trucking operationsto and from other GCC states would furtherstrengthen its well-established position as the lead-ing gateway in the Gulf. “The 110 airlines touchingdown regularly in Dubai have created a connectivity

and buzz that is unmatched so far in the region,”claims Mr. De Pauw. “While we cannot ignore Dohaand Abu Dhabi, which are also rapidly expandingtheir potential, the new airport being developed inJebel Ali will only add to the attraction of Dubai.”On the other hand, better road connections couldhelp develop the two Gulf Air hubs in Bahrain andMuscat into distribution centers for other major Gulfmarkets like Saudi Arabia and the UAE, says Mr.Vertannes. And new procedures will remedy a com-mon situation faced by carriers like Gulf Air, when itoperates trucking services from Bahrain to the Saudicenter of Dammam – vehicles are only allowed to gointo a duty-free zone, some 30-40 minutes’ drivefrom airport. “Forwarding agents have an issue withthis because they are based around the airport,” Mr.Vertannes says. “We hope that development of aGCC single market will open the option to truckcross-border, airport-to-airport, or from an airportterminal handling facility in one member state to acargo warehouse in another.”

THE GCC

The Cooperation Council for theArab States of the Gulf, morecommonly known as the GulfCooperation Council (GCC), wasformed in 1981 by the State ofBahrain, the State of Kuwait, theSultanate of Oman, the State ofQatar, the Kingdom of SaudiArabia, and the United ArabEmirates.

Its objectives are to effect coor-dination, integration and inter-connection between memberstates in all fields. One of its sig-nificant developments to datehas been the implementation of acustoms union in 2003, whereinthe members agreed to levy acommon customs tax of 5% onall foreign goods entering theirstates, except for about 200“essential” items that areexempted from duty.

GCC rules say that customsinspectors should impose tariffson goods entering GCC coun-tries at the first entry point in anymember state. More specifically,“The first window or the entrypoint, through which the goodsenter, carries out proceduressuch as inspecting incoming for-eign goods, verifying documents,establishing whether thosegoods are free from any prohibit-ed items and collecting due cus-toms taxes. After this, goodsimported from outside the GCCcustoms union can move freelyin any GCC country.”

As of late last year, GCC politi-cians were still discussing howthe next major step, the creationof a full single market, couldbecome a reality by the end of2007. However, with a range ofissues yet unresolved, thattimetable looks unfeasible.Moreover, their plan to adopt asingle currency by 2010 alsotook a knock when Omanannounced recently that it couldnot meet the objective.

AIR FRANCE CARGO-KLM CARGO IN THE GULF

AF-KL Cargo covers the GCCmarkets extensively from bothCharles de Gaulle and Schipholwith a mix of freighter and pas-senger belly capacity. Flightscurrently serve the United ArabEmirates (Dubai and AbuDhabi), Saudi Arabia (Jeddah,Riyadh, and Dammam), Kuwait(Kuwait city), Bahrain, andQatar (Doha).

“Dubai and Abu Dhabi are themain Gulf region gateways forAF-KL Cargo,” says ChristianBerquier, AF-KL Cargo directorfor Gulf, Iran, Pakistan, SriLanka & Bangladesh. “We operate around 20freighter and 30 passengerflights a week. Other stations inBahrain, which AF now servestwice-weekly with freightersfrom Paris, Doha and Kuwaitare now developing good infrastructures and are startingto become significant transitplatforms for neighboring markets like Africa and theIndian sub-continent.”

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ENVIRONMENT

BrusselsAirlines will pay a € 2.9-billion premium for fuel in 2011 if the proposedEuropean Union Emissions Trading Scheme goes into affect, GiovanniBisgnani said in January. Four days after IATA’s director general deliver hisopinion, the Institute for Public Policy Research in the UK rebutted, sayingthat, by their calculation, airlines stood to make £2.7 billion in profit fromthe scheme.These astronomical differences did not stop authorities in Asia and the USfrom trouncing the proposal, which would have included non-Europeancarriers, with such vigor that the EU quickly backed off, but only just. Theplan, announced on January 20, would impose emissions limits from 2011

on all domestic and international flights between EUairports and from 2012 on flights originating outsideEurope.The EU’s apparent weakening of the spine led theEuropean Low Fares Airline Association to say it wasdisappointed, because limiting the scope of intra-EUflights initially will capture only 20% of EU aviation car-bon emissions, or approximately 0.5% of overall EUemissions.The Association of Asia Pacific Airlines blasted the EUfrom the other side, saying its unilateral actions appearto reject the well-established role of the UNInternational Civil Aviation Organization in setting glob-ally harmonized standards for aviation, including envi-ronmental issues.Next, the Air Transport Association of America jumpedin, citing its disappointed at the EU’s intent to unilater-ally cover the flights of non-European Union carriers inits emissions trading scheme.

LondonThe concept of Food Miles, a measure of how far pro-duce travels from farm to plate, could end up threaten-ing cargo operators even more than carbon trading,although they are related. UK’s supermarket giants -Tesco, Marks & Spencer, Waitrose, and Sainsbury’s -have said they will reduce their carbon footprints. The largest chain, Tesco, plans to fly less than 1% ofits products, compared with the current 3%. Most ofthe retailer’s flown perishables come from Kenya,which sends 23% of the strawberries, green beansand flowers it exports each year to Europe. Marks &

Spencer said in January that it would spend £200 million to become car-bon neutral over the next five years. Among other efforts, it will focus onsourcing food from the UK and Ireland in order to reduce airfreight. Bothretailers will label food brought into the UK by plane as “flown.”Bill Vorley, head of the sustainable markets group of the Institute forEnvironment & Development in the UK, says that while airfreight is prob-lematic, it belongs in the overall context of the environmental footprint ofthe UK food system. “Airfreight of fresh fruits and vegetables from sub-Saharan Africa accounts for less than 0.1% of total UK carbon emissions.Far more emissions result from the domestic transport of food goods with-in the country. The UK must first look to the huge impact of our food sys-tem at home before pulling up the ladder on Africa.”To discourage further purchases of produce flown into the UK, the SoilAssociation added its concerns over the potential damage caused byemissions from flights carrying food around the world. The UK’s largestcertifier of organic produce said that organic foods arriving by air into theUK could eventually lose their organic label. In January, the organizationlaunched a yearlong study of options ranging from carbon offsetting, label-ing produce to specify the “food miles” traveled, and an outright ban on theair freighting of organic food.The Soil Association acknowledges that little organic produce arrives by air,but adds that the organic farming movement must lead the way to helpcurb climate change. Besides, just-in-time food distribution is vulnerable todisruption, whereas regional and local food network are more resilient torising energy costs and reduced oil availability.Organic farming may consume 15% less energy to produce the sameamount of food as non-organic farming, mostly because it does not useenergy-intensive fertilizers.


cargovision news around the worldcargovision news around the world

Our quarterly review ofindustry news keeps youabeast of developments in key sectors around the world.

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INTERMEDIARIES

DhahranSaudi Aramco hired DHL Exel Supply Chain in Januaryto develop a national logistics infrastructure. The 10-year deal includes provisioning, managing and operat-ing four distribution centers in Damman, Riyadh,Jeddah and Yanbu, and 14 material service centerselsewhere in the Kingdom. At the same time,SNAS/DHL, the DHL Middle East affiliate headquar-tered in Bahrain, said it would invest US$34 million tocreate new facilities in the Kingdom in order to accom-modate the 10-15% annual growth in weight.

OsakaHankyu Express International Co. and Hanshin AirCargo Co. are discussing plans to cooperate in cargocollection and delivery and to realign their overseasoffices before they merge in 2009. The two air cargocompanies are part of the Hankyu Hanshin railway.Hankyu Express International has widespread interna-tional operations. Hanshin Air Cargo specializes infreight to and from Europe and Asia. Together, theyhad 8% of Japan’s import market last year, rightbehind Yusen Air & Sea Service Co. with 10%.


INFRASTRUCTURE

SingaporeSingapore is looking over its shoulder. The islandnation’s cargo traffic growth slowed from 10% in 2004to 3% in 2005. Pudong airport in Shanghai surpassedChangi in 2005 to become the ninth largest cargo ter-minal. Beijing and Guangzhou airports are gainingstature rapidly. To boost its competitiveness,Singapore launched an airport logistics park in 2003,inside a free trade zone, the first of its kind, and isinvesting in the Chinese airports that threaten itsfuture. Changi Airports International is starting to mar-ket its vibrant aviation tradition by initiating projects toimprove airports in China, India, the Middle East, andRussia.

Hawlêr CityThe Kurdistan Regional Government in northern Iraq isspending US$300 million to upgrade Arbil (Erbil)

The country’s domestic airlines say they are earning10% of their revenue from package and documentshipments. International carriers have seen their freighttraffic almost triple from 5 million tons in 2001 to 14million in 2005. Still, many exporters are facing difficul-ties.Although air transport is faster than ocean shipping,Indian perishable exporters are choosing the sea routemore often. Shipping lines have become more attrac-tive with lower costs and greater efficiency. Grapes andMangos that traveled exclusively by air until recently arenow moving in refrigerated ocean containers.Meat exports also traveled in volume as airfreight.However, new rules forbid sending meat carcasses byair, forcing exporters to use ships. They can exportboneless meat by air, but only after applying stringentpacking standards.India’s flower exporters face a 50-60% cost disadvan-tage compared to their competitors in Africa.Floricultural trade groups are petitioning the govern-ment to raise their airfreight subsidy from the current23% of freight onboard.

BrusselsThe EU changed security regulations for air waybills onJanuary 1. To avoid extra cost and delay, forwardersare advised to use the following designations: (1)“SPX” instead of “SECURED,” meaning secure forpassenger and cargo aircraft only; (2) “SCO” instead of“SECURED FREIGHTER ONLY,” meaning secure forcargo aircraft only; and (3) “X” (Export) must be thestatus on the air waybill for “Free Goods” (“C-STA-TUS”), meaning cargo headed to a final destinationoutside the EU.

HyderabadFollowing authorization last summer to deploy theA330 freighter, Intrepid Aviation Group of New Yorksigned a Letter of Intent for the purchase of 20 A330-200 freighters on January 15. India’s FlyingtonFreighters became the first cargo airline to sign with

Airbus, placing an order for six aircraft on January 16.The next day, MNG Airlines, the Turkish cargo operatorbased in Istanbul, became a launch customer by sign-ing a Memorandum of Understanding for two A330-200F’s plus one option. Then, on January 18,Guggenheim Aviation Partners of Chicago became the first customer to sign a contract for the freighter,by converting a Letter of Intent for six aircraft it hadsigned last October.The A330-200F is the latest entrant in the over-60-tonne niche. It has a non-stop range of 4,000 nm(7,400 km) carrying 64 tonnes, and 3,200 nm (5,930 km) carrying 69 tonnes.

SingaporeFedEx hired Singapore Technologies Engineering Ltd.to convert 87 B757-200 passenger aircraft to cargoplanes. The Mobile Aerospace Engineering unit willbegin converting the aircraft this year under a US$ 470million contract that will run for seven years.

ToulouseA380F. R.I.P.

International Airport, which lies 60 miles from the Turkish-Iranianborder. Kurdistan has no established postal system and expects tosee growing demand for cargo services and facilities. A number ofcargo planes use the airport now, including Il-76’s and C-17’s. Thegovernment’s expansion program includes plans to further developcargo facilities at the airport.

Hong KongThe Airport Authority Hong Kong said in December that construc-tion of a third air cargo terminal would proceed by way of open ten-der. Secretary for Economic Development and Labor, Stephen Ip,said that the authority forecasts that Hong Kong will need 8 milliontonnes of cargo capacity by 2025, exceeding the capacity of itspresent facilities.

MunichBy March, the 2,500-m2 perishable facility is expected to open inMunich, helping Germany catch up with France, the Netherlandsand the UK in perishable traffic. By the end of the year, the airportplans to open a 35,000-m2 logistics center, its second of this kind.

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and 5,930km carrying 69 tonnesINDUSTRY

WashingtonUS railroads were ordered in January to overhaul their methods of settingfuel surcharges. The government’s Surface Transportation Board said in astatement that the new rule will remove the possibility that railroads viewfuel surcharges as a profit center. US railroads have set surcharges as apercentage of base shipping rates. Their customers objected because thefees didn’t always correlate to actual changes in fuel costs. Some railroadshave adopted mileage-based fuel surcharges on some shipments. Thearguments in this case sounded very much like those of airlines and theircustomers. The ruling might have precedents for the airfreight industry.

New DelhiIndia’s Ministry of Civil Aviation wants to equip its domestic airport infra-structure to handle international cargo more effectively. Air cargo is anunderdeveloped segment of India’s aviation industry. Officials from theministries of civil aviation, finance and commerce formed a group inJanuary to attract funding from private industry and foreign directinvestors to correct this. The policy makers are thinking of establishing a center for perishable car-go that would expedite cargo movements at airports. They plan to opencold storage facilities at major airports and other warehouses to handletextiles and other durable freight. They also propose to build an electronicdata clearance system to manage the flow of goods.

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ONLINE

GenevaIATA and Cargo 2000 have seen the light. The twoorganizations will join forces to build a common stan-dard to unify electronic messaging. IATA’s e-freight initiative is an effort to simplify documentation. Cargo2000 is an effort to improve quality standards. In practice, this union means that IATA’s messageimprovement program will become an extra qualitymeasurement within Cargo 2000. E-freight will alsoalign its messages with Cargo 2000 practices. Both programs are working towards the same goal:shipment tracing at the piece level, in combination with document tracking.

WaterlooDescartes Systems Group has become an e-freightpreferred partner in IATA’s Strategic Partner Program.The Canadian firm connects 2,300 forwarder and aircarrier locations through its network. IATA is conduct-ing e-freight pilot programs this year linking Canada,Hong Kong, the Netherlands, Singapore, and the UK.

MoscowIn January, Airbridge Cargo became the most recent airline to join Cargo 2000.

MOVING ON World

Loyola de PalacioThe former European transport commissionerdied in December after a five-month battle withcancer. She was 56. Those who heard herspeak will miss this extraordinary woman, whowas both engaging and determined at thesame time.

Chris FoyleThe chairman and founder of Air Foyle becamethe newest member of the TIACA Hall of Famein January. Mr. Foyle, a Fellow of the RoyalAeronautical Society, is best known in the air-freight community for parlaying a second-handPiper Aztec acquired in 1978 into a fleet ofchartered and leased AN 124’s in 1989.

David AbneyMr. Abney, 51, is the new chief operating officefor UPS and president of UPS airlines. Hestarted with the company in 1974 as a shopfloor loader and served most recently as presi-dent of UPS International since 2002. In hisnew position, Mr. Abney will oversee interna-tional operations, US package operations,global transportation, and labor and freightactivities.

Tay YoshitaniThe new director of the Port of Seattle is aWest Point graduate and a Harvard MBA. Heled ports in Oakland and Baltimore beforeworking as deputy executive director for thePort of Los Angeles.

cargovision datelinescargovision news around the world

CARRIERS World

ShanghaiAir China said in January that it would form a 50:50cargo venture with Cathay Pacific by midyear. The newcompany would be the largest cargo carrier on China’smainland. Air China had been talking about a cargoventure with China Eastern, but those plans went awryafter China Eastern cargo executives were questionedabout kickbacks. Meanwhile, at its Beijing headquar-ters, Air China signed a codesharing agreement withAsiana of Korea, covering the 11 key routes betweenthe two countries.

Also, in January, Great Wall Airlines resumed cargoflights between Shanghai Pudong and AmsterdamSchiphol. The Sino-Singapore cargo airline fromShanghai had to suspend operations in Septemberafter the US Treasury Department imposed sanctionson its parent, Great Wall Industry Corp., for allegedlysupplying missile parts to Iran. Back in business now,the airline plans to connect manufacturing hubs inChina with overseas markets, moving next into theIndian cities of Mumbai and Chennai.

March 5-8IATA World Cargo Symposium 2007Mexico City, MexicoCentro Banamex www.iata.org/cargosymposium

March 19-22China Aviation Week 2007Beijing, ChinaContact: Vincent Pan T: +86 21 5160 8888F: +86 21 6236 3719E: [email protected] www.aviationweekchina.com

March 27-30TransRussia 2007Olympiyskiy SC, MoscowT: +7 495 935 7350E: [email protected]

March 28-30Logistics World 2007 Suzhou International Expo CenterExpo Plaza, Xiandai Avenue, SuzhouIndustrial Park Suzhou Jiang Su 215021, China T: +86 512 62804420 F: +86 512 62804355

April 15-17TIACA Executive Conference and AnnualGeneral MeetingCologne Bonn AirportT: +1 786 265 7011F: +1 786 265 7012www.tiaca.org

April 18-20Fourth China Air Cargo Summit 2007Hyatt Regency, Hangzhou, ChinaContact: Fowler Wang T: +86 21 5237 9998F: +86 21 5237 5557E: [email protected] www.aircargosummit.org

April 29-May 1CNS Partnership Conference 2007Rancho Bernardo Inn, San DiegoContact: Fran HarrisT: +1 515 747 3312E: [email protected]

May 28-30Airport Show Dubai.www.theairportshow.com

June 12-15 Air Cargo Europe / Transport Logistic 2007New Munich Trade Fair CentreContact: Ms. Caroline Fehrenbach T: +49 89 949 113 68F: +49 89 949 113 69E: [email protected] www.transportlogistic.de

June 18-2446th International Paris Air ShowLe Bourget, Paris. E: [email protected] www.paris-air-show.com

September 3-6Asian AerospaceAsiaWorld-Expo Complex, Hong Kong www.asianaerospace.com

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Chinese women dancing with red fans on the bund in Shanghai for

excercise every morning

Since January 2006, Panalpina’s stock pricehas rocketed, almost doubling the company’svalue. What’s going on?

In general, the entire logistics sector has traded wellrecently due to its convincing performance. Our com-petitor Kuehne + Nagel has also seen its stock pricerise, for example. But specifically for Panalpina, I amvery pleased that the capital market has regained trustin our company, following some financial disruption in2005. Traders seem to have honored both our impres-sive commercial and financial performances in 2006and our success in filling top management positionswith young and ambitious staff. We also exchangeviews frequently with analysts and investors, fosteringa frank and trustworthy atmosphere. You could saythat no single incident has driven up our share price,but rather a full basket of factors.

Does a high share value protect you fromtakeover? Or do you plan to embark on ashopping tour of the logistics market, as other companies have?

That is a highly strategic question. Deutsche Poststarted its shopping spree because its monopoly fortransporting letters ended in December. But whatdoes a high share price do for us in the airfreightbusiness? Well, cargo carriers will concede only alimited rebate on your tonnage. Why? Because at the


end of the day, they want to make money, too. The chairman of Deutsche Post, Mr. Zumwinkel,once said in an interview that they wanted to buyPanalpina. He said we possess critical mass as oneof the world’s leading air and ocean serviceproviders. But I don’t believe in giant setups. Thedinosaurs vanished from our planet even though theywere huge. Our strategy does not support the ideaof a mega-merger. Over the years, companies in ourfield have burnt a lot of money trying to make themwork. Instead, we are looking for further opportuni-ties to strengthen our network and market presenceby acquiring companies that fit our portfolio. By sub-contracting those activities that we don’t considerpart of our core business, like flying, trucking ware-housing etcetera, we are free to concentrate onorganic growth.

Does this mean that, unlike DHL and TNT, youwill not invest in freighters?

We definitely will not. We do not know how to run acargo airline. Nor is it necessary since we rely on usingpreferred partner airlines. Within this concept, we workclosely with the first-class cargo carriers. One of them,of course, is Air France Cargo-KLM Cargo.

Why should a shipper choose Panalpina overits competitors?

Anyone can offer port-to-port or airport-to-airportservice. We take a different approach, and becausewe don’t spend millions on advertising, people maynot know of our methods. Firstly, we are passionateabout developing innovative solutions. However, wecan formulate them only by approaching customersdirectly and maintaining constant dialogue abouttheir specific needs. Having been with the companyfor over 15 years, I am fully convinced that nobodytops our passion for this work.

Secondly, we do not invest in warehouses, fleets orheavy equipment, unless the required infrastructureis not available. Owning assets leads to inflexibility.You tend to focus on utilizing them, rather than serv-ing your customer. If a customer decides to pack upand move to another city, we must be able to follow.That would be difficult if we were tied to expensiveassets. For contract logistics and supply chain man-agement services, we prefer to rent space or collab-orate with firms that own their premises.

Various shippers and carriers often citereliability as a cornerstone of their relationswith Panalpina.

Yes. In working with business partners, we believe inmaintaining consistency in the long term. Thisincludes all partners along the supply chain, espe-

cially airlines. We don’t jump to a different one justbecause they lift a kilogram for a couple of centsless. Our costs must be competitive, of course, butwe don’t automatically jump at the lowest offer. Thewhole package is much more important, includingservice, communication, and a coherent understand-ing of our mutual needs.

We were wondering: are you the Frau Merkelof Panalpina? Like Germany’s head of state,you seem to be a team player that consultswith leading management.

(Laughing) Nobody has compared me with FrauMerkel yet. But generally speaking, I like people andhave to rely on their expertise. The business is toocomplicated to understand every facet. It wouldn’tbe very wise for a manager not to listen to herexperts. This is a collaborative philosophy, which I tryto convey to our employees. However, when the timecomes to choose a solution, the decision is mine.Our staff, our business partners and our clientsexpect this resolve from Panalpina’s CEO.

PASSION POWERS PANALPINA

BY HEINER SIEGMUND

Monika Ribar becamePanalpina’s chief executiveofficer in October 2006. She joined the transport andlogistics firm in 1991, holdingseveral positions in finance, IT, and global project management. She was chiefinformation officer and a member of the Executive Board from 2000 until 2005,when she was appointed chief financial officer.

Panalpina’s stock price almost doubled over the past year. The Swiss-based companyis known for its reliability and passion for innovative solutions, says Monika Ribar, whohas been the company’s CEO since October 2006. Heiner Siegmund tried to unravel thesecret of Panalpina’s success. “Owning assets leads to inflexibility. You tend to focuson utilizing them, rather than serving your customer.”

COMPANY PROFILE

■

Panalpina is a global leader in for-warding and logistics services,specializing in intercontinental airand ocean freight and associatedsupply chain management solutions.■

The company has a network ofaround 500 offices in more than80 countries, and cooperatesclosely with selected partners in a further 60 countries.■

With a workforce of around14,000 worldwide, the PanalpinaGroup generated revenue to thesum of CHF8,293 million in 2005.■

For further information, visit www.panalpina.com.

© Barnabas Bosschart/Corbis5

Sodexi lets forwarders and carriers provide door-to-door express services that match the speed, scopeand sophistication of the integrators. However, the company’s vision goes well beyond that: it wants topromote sustainable air trade and a higher standard of living for impoverished nations.

BY MARK W. LYON

■ What’s next? For two decades, this question has hauntedJean-François Bouilhaguet, a man of sensible neckties anddaring ideas. During the 1980’s, when the integrators started expanding inearnest, some airlines tried to stem the exodus of high-yieldtraffic by creating their own rapid delivery systems. None ofthem has proven as original and enduring as the Société pourle Développement de l’Express International, founded in 1988by Air France. Mr. Bouilhaguet was one of company’s firstemployees. Today he is Sodexi’s director general.It began as an effort to adapt commercial passenger stationsto service express customers, Mr. Bouilhaguet says. “Airlinesbuild and operate airport-to-airport services. They don’torganize airport-to-door package delivery. We set up a struc-ture to do this independently of the airline. It gives anyone,including forwarders who cannot invest in their own deliverynetworks, a worldwide system that competes with the integra-tors. It also gives airlines express capacity to sell over andabove their airfreight capacity.”The concept thrives because, firstly, Sodexi remains a neutralparticipant in a world of proprietary express systems. The LaPoste subsidiary, GeoPost, and privately held TAT ExpressS.A. each own 20% of Sodexi while Air France-KLM holds60%. Another 20 airlines are business partners. Secondly, itoffers related services: door-to-door delivery in 200 countries,global tracking, ground handling, automation, customs clear-ance, systems engineering, and e-commerce. And thirdly, Mr.Bouilhaguet is a shrewd innovator.

GROUND SWELL

Inspiration for Société came to Mr. Bouilhaguet in [1988??Check please!]. A computer engineer, he had just completedtwo years running his own IT business in Beijing. He knewnothing about airfreight and saw how slowly cargo operationsembraced automation. He also saw that Parisians could sendpackages to China on the same day using an Integrator, buthad to wait three days for service from Air France. “Yet, I knewthe fleet and schedule were growing and that we could soonsell an all-inclusive airport-to-door system in many places. Butto manage it, we would need a high level of track and trace.”

Sodexi created its automation and bought dedicated trans-mission lines. “Now we have IT,” Mr. Bouilhaguet continues. If we manage it correctly and give good service, forwardersshould bring us their business. Plus, the integrators can useour system to serve places where they cannot profitably opentheir own offices.”The Mach Plus network soon included state-of-the-art sorting,high-tech surveillance, custom-built aircraft loaders, andstreamlined acceptance processes. To enhance service,

Sodexi decided to move its top customers into a hub atCharles de Gaulle. The Express Supermarket opened in 1996,with warehouse and office space for each customer. Over 350people from these companies now work on site. Many ofSodexi’s own staff of 400 members also work for customerswho timeshare their wages. “We have 10 people working for Sodexi and for us,” says ElieSlim, Director of Aramex, France. “Since we created our hubhere in the Sodexi warehouse four years ago, we have grownfrom 17 people to 45. Being in the warehouse saves time,which is our biggest problem in France. Being here alsoenables us to go to big companies and say that we are agentof Sodexi. It’s a good reference.”“There is an advantage to having our office close to the hub,”adds Alain Cohen, CEO of Universal Express - SDV. “But weuse Sodexi mainly because of its excellent network in Africa.”Sodexi delivers in 20 countries for FedEx and in 15 for TNT. Itspartnerships with 20 other airlines cover those places notserved by Air France-KLM. Where local air express servicesare unavailable, it uses the integrators, FedEx, for example, tohandle deliveries in the US and Canada.Last year Sodexi’s volume increased 25% over 2005. All of theAF-KL Cargo Equation and Mail services through Paris flowthrough its warehouse. “Half of our business is transit traffic,” Mr. Bouilhaguet explains. “Three quarters is sold outside ofFrance.”

PARTNER AND PROSPER

Mr. Bouilhaguet has set up an engineering department andsells his system to agents, shippers, and airlines. It works forany station that uses manifesting and IATA standard mes-sages, and is available in Arabic and Chinese versions. In2005, Royal Air Maroc Cargo and Casablanca airport acquiredthe Sodexi application to control cargo handling.


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PEOPLE MAKE A DIFFERENCE CATHERINE AVEZ

Catherine Avez has been with Air France for almost 20 years, spending the last seven as a sales assistant in Lyon. She has seen changes over the years, but since the integrationwith KLM Cargo they have been coming fast and furious.

BY IAN PUTZGER


■ Lyon is one of 10 stations in Europe that beganusing AF-KL Cargo’s Unique-Voice Portal in Novem-ber. This application lets customer service represen-tatives view the combined Air France and KLM net-works for the first time. It displays all the informationthey need to offer customers the best route, sched-ule and price from both systems. It is a huge steptowards a joint reservation system for AF-KL Cargo.“The UVP is crucial for our integration,” Ms. Avezsays. The KLM and Air France Cargo sales groups inLyon have been under one roof since last October.On April 1, they will become a single integrated team.The UVP will facilitate that union.

Ms. Avez says the new application was easy to learn,even quicker than the Visual booking system AirFrance introduced last year in preparation for theintegration. She also sees how the UVP bringschanges that are fundamental to her work and far-reaching for customers. “It changes our way of think-ing. It is a revolution.”Until now, the Air France sales team has dealt withapplications only in French. But the UVP is in Englishand it will not only change the organization, but thecharacter of the stations as well.“The UVP is the starting point for a future on a differ-ent scale,” Ms. Avez reflects. “We lose a bit of ourFrench identity, the way we have always worked, andnow we will change our way of thinking. I am proudto be one of those blazing a trail in this company.”

The Lyon sales team first got to grips with the UVPamidst the hustle-bustle of the Beaujolais Nouveauseason. They have yet to fully concentrate on its fea-tures and possibilities, due to the workload inNovember and the yearend holidays. Still, Ms. Avezhas already found it valuable for her customers, whomostly truck cargo from Lyon to Paris, and she islooking forward to new features. “Soon it will auto-matically give me a truck number as well as a flightnumber, “ she muses.

Last fall, Softair AG, the vendor of Cargospot, called Mr.Bouilhaguet from Zurich and invited Sodexi to participate indeveloping a unified global express system. The French com-pany would create the administrative systems and contributeits expertise in bar coding and express handling. The venturewould expose Sodexi’s products to a much broader market;the US, Middle East for example, where Softair has largeclients. Mr. Bouilhaguet expects to announce an agreementwith Softair in March.The company is also considering automated acceptance forairports. “Imagine that a customer arrives with his parcel,” Mr.Bouilhaguet says. “He puts it on a conveyor. The system readshis access card and the air waybill, then checks the documen-tation and weighs the parcel automatically. He chooses pay-ment options, approves the transaction and it’s done. Ofcourse, for restricted items and animals you need people, butfor basic traffic, this gives you a very profitable system withoutthem.”While Sodexi might outdo the integrators for services originat-ing in Europe and Africa, its director says, “I can’t say thesame for traffic from South America and the US.” However, Mr.Bouilhaguet is striving to establish hubs that will improveSodexi’s services in Latin America and Asia. Copa Airlinesstarts flying to Paris in 2008. Its flights to 30 cities in the regionmake Panama City a good choice. Thailand is SoutheastAsia’s most industrialized nation and has a new airport inBangkok, making it a suitable candidate in the Far East.

BUY AND BYE

Mr. Bouilhaguet believes there is still time to organize small for-warders and keep 20% of the world’s express traffic on pas-senger flights. Sodexi can provide them with delivery to anyaddress and with competitive technology that gives multina-

tional shippers the same ability as the integrators to track andmanage shipments. Any additional high-revenue traffic wouldhelp fill belly space and indirectly improve cargo load factor.Cargo space flies one-third empty for most passenger andcargo flights “We are very far from optimizing this free capacity.Increasing load factors should be the first method of loweringcosts.” Otherwise, Sodexi has done all of the basics: improv-ing connectivity and quality of service. “We cannot inventsomething new - change aircraft or container size,” Mr. Bouilhaguet says. “The problem now is organization.Innovation will involve door-to-door e-commerce, where youtransport, deliver and sell. In e-business, we are not just trans-ferring freight. That is not where the money is. Our networkcan pick up and deliver anywhere in the world, and we investwith local people so we can collect from small factories andthey can sell products worldwide.”

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Mr. Bouilhaguet: “Our networkcan pick up and deliver anywherein the world

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■ The Central and Eastern European (CEE) coun-tries have educated populations and their civil institu-tions and infrastructures are improving. Many inter-national organizations have relocated manufacturing,and outsourced business processes and researchinto the CEE countries to take advantage of lowcosts and a well-educated workforce. With thismigration of international companies has come aninflux of supply-chain providers, according to theCentral and Eastern Europe Logistics Report 2007,published last fall by Transport Intelligence Ltd. There are few homegrown international corporationsin Central and Eastern Europe, nor any indigenouslogistics providers who operate supply chain man-agement systems on a global scale. Most of the CEEnations have one local logistics presence serving theneeds of local businesses and several multinationalforwarders serving the international newcomers.Many of these multinational logistics firms operate inother CEE countries and offer comprehensive servic-es across the region. Over time, a few of the localfirms will probably group together and emerge assignificant providers for Europe; others will remainsmall and serve local businesses or becomeproviders to the international logistics companies.

HOW IT MOVES

The expansion of the EU in 2004 brought 23% moreland, 24% highways and 31% more railways.Although the rail gauge is different in the BalticStates, those networks increased the amount of railtransportation in the EU by 49% in 2005. Surfacetransport fulfills much of the demand for logisticsservices, however air and express play roles as well.Security is a concern because borders lack controls,legal systems are less strict on theft, unemploymentin some areas is high, and criminals are organized.Because the biggest threat is during ground transit,air is a safer option.Bringing CEE countries into the EU is forcing thesenations to improve their air cargo facilities. Manyexisting airports have added runways and carriershave scheduled more flights. A number of Western

express operators and equity companies havefocused on improving small regional airports,because of their growth potential. Airlines throughoutthe region are upgrading their fleets to conform to EU safety, noise and emission standards. This willeventually increase the efficiency of airfreight, offeringforwarders greater payload and speed.

SOME LIKE IT HOT

There are companies that want products fast andothers that want them cheap. European firms thatneed to reach markets quickly, those in the garmentindustry for instance, have located production facili-ties in Central and Eastern Europe and theMediterranean. Fast-fashion retailers like Zara sourcesome product lines nearby so they can manufactureand deliver in weeks, rather than the three monthstypically needed to bring goods from China. While labor costs in CEE countries are half of those inWestern Europe, they are still not as cheap as inIndia, where they are only a quarter as much. As theCEE economies integrate more with the West, laborcosts will rise making those nations even less com-petitive for making goods where overall cost is para-mount. The CEE nations that adopt the euro willeliminate currency fluctuations and mitigate traderisks. This is important for the automotive industryand may lead to more production facilities appearingin those countries. The growing importance of the CEE states in theproduction of automobiles has been an importantdevelopment. During the past 10 years, Poland, theCzech Republic, Slovakia, Hungary and Romaniahave seen over 10 new plants opened or acquired byWestern manufacturers. In the triangle of Slovakia,Czech Republic and Poland, 450 automotive suppli-ers have settled within a radius of 200 kilometers.The differences between freight forwarders andexpress providers have not solidified in the CEEregion as they have in Western Europe. This willchange as shippers demand specialized servicesand prices consistent with those they receive in the West.

The logistics market in Central and Eastern Europe is now worth €800 million, mainly because the consumer markets are small and the region is rather fragmented. If investment continues at its present rate, demand for logistics services could double by 2010. A 280-page report from Transport Intelligence looks at the CEE’s logistics trends and the companies that make them.

BY ANDY WESTON


HOW IT GROWSCEE

TRANS EUROPEAN NETWORK (TEN)

After the fall of the Soviet Union,as the newly independent CEEcountries began to increasetrade with the EU countries,they encountered a neglectedtransportation infrastructure. The countries designated 10transport corridors to developas priorities with national andEU financial assistance. Work is ongoing and as TransEurope Network (TEN) is com-pleted it will connect WesternEurope with the CEE countries,in addition to providing traderoutes from Russia, otherEastern European countries andports in Southeastern Europe. ©

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SUNDAY - PARISI have a very normal Sunday. I get up, have a coffee, and readthe newspaper. I like to cook, so sometimes I make dinner. Butin the afternoon or evening, I also make time to check myemails. Saturday is a big operational day for us at CDG and Ineed to review what happened in order to start Monday with aclear idea of the week’s priorities.

MONDAY - PARISEvery weekday morning, our Global Operations ControlCenter records messages updating the status of the previousnight’s operations at CDG as well as our other hubs inFrankfurt, Cologne, Stansted, and Dubai. I listen to them in mycar on the way to work, and once I arrive, talk to all the man-agers that report directly to me. Later, we have a conferencecall to agree on any corrective actions.In the afternoon, I visit one of our stations, where I meet man-agers and staff, and listen to their concerns. I also talk to thecouriers when they get back from their pick-ups at 7:00 p.m. I do one of these visits every week, and this week it is inGennevilliers, close to Paris. But it might just as easily be inSpain, Italy, or anywhere in the region

TUESDAY - PARISIn the morning, we meet to discuss various projects we havelined up for 2007. Express is growing by 10-15% a year, so wealways have to add stations or expand operations. The keychallenge is to do this while meeting and improving on ourservice parameters. We measure our service levels daily andthen try and improve them. For example, we look at howquickly the drivers upload proof of delivery data to the system,allowing customers to access it. Are we meeting our targets inthis area? How could we do better?

In the late afternoon, I take a group on a tour of the CDG hub. I do this once or twice a week, often for customers, but in thiscase for an association of people who live around the airport. I explain how we have reduced noise over the past few yearsby flying quieter aircraft, such as the A300 and MD-11, andhow we are an important local employer.

WEDNESDAY - MILANI fly to Milan to do a business review with the full team in Italy.All departments are present, from finance to sales to opera-tions. I also visit two stations close to Milan as well as our staffat Malpensa airport. In the evening, I fly back to Paris.

THURSDAY - PARISI am back in Gennevilliers and spend two hours listening to ourcall center staff interacting with customers. We encourage allmanagers and managing directors to do this occasionally, toget a better idea of what customers want. Afterwards, wehave a debriefing and agree on corrective actions. Whatemerges from these sessions is always interesting, often smallchanges can be made to improve the customers’ experience.Once a quarter, I go out with the couriers to pick up packagesand talk to customers directly.In the afternoon, I meet with Air France, La Poste, Aeroportsde Paris, and handler WFS to discuss the CAREX project inwhich high speed trains are used to move express shipmentswithin Europe. We aim to have dedicated trains by 2010 or2012, fitted with roller beds that can carry aircraft containersfrom CDG to London, Liege, Cologne and Brussels. Due togovernment noise caps, we can’t add night flights at CDG, so it is vital that we explore new ways to expand our opera-tions. There is also the environmental angle, of course: I amsure that in a few years there will be emission limits, on flightswithin the European Union. There is still much work to do and the meeting is encouraging.

FRIDAY - BRUSSELSI make a day trip to Brussels to meet with our president forEurope, Middle East and Africa, as well as other departmentsat our European headquarters. We discuss various projects,most of them confidential.

SATURDAY - PARISI check my emails on Saturday morning, but I do my best notto work weekends. Being responsible for CDG hub opera-tions, I often have to work well into the evening during theweek, and I also travel a lot. So on Saturday I relax with myfamily. I do a lot of reading, particularly about politics, butalso fiction.

ALAIN CHAILLEAlain Chaille has a dual role at the heart of FedEx’s European operations. As vice president southernEurope, he is responsible for France, Switzerland, Italy, Spain, and Portugal. But he is also in charge of the integrator’s main European hub at Charles de Gaulle airport in Paris.

WITH PETER CONWAY

cargovision a week in the life of


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■ The FastShip project has, however, moved a stepcloser to launch, with a call for tenders. The four-daytransatlantic container service is now being targetedsquarely at airfreight carriers, shippers, and intermedi-aries. A belief in this so-called “middle market” drivesBullard on. Various studies back him up - there areindeed high-value, time-sensitive products for whichairfreight is too expensive and ocean too slow.“Nobody has said to my face, that this is a stupididea,” says Bullard. And so the long search for invest-ment continues.The latest plan is for three JetShips to provide a twice-weekly service between Philadelphia and Cherbourg.The journey would take 91 hours, thanks to a semi-planing monohull design. A V-shaped hull in the bowwidens to a very broad stern that is concave underwater. This creates a high-pressure zone, lifting thestern and overcoming the pressure drag that restrictsconventional container ships from exceeding about 25 knots. Powerful water jets, driven by large marinegas turbines, can then drive the ship to a top speed of 40 knots. The design has been fully verified by Det NorskeVeritas, the Norwegian ship classification authority.

But no one has yet built a semi-planing monohull thatis even half the size of the design for JetShips. Theywill be 265 meters long, with a payload of 10,000tonnes (1,400 TEUs). Bullard says the constructioncosts are confidential. According to a reliable source,however, it could cost US$1 billion for the first three.

The FastShip project was born in Philadelphia, a portand shipbuilding center that was in need of a boost.Some US$55 million was raised in seed capital, mainlyfrom individual investors. The original plan was to buildfour ships there, with loan guarantees from a US fed-eral government agency covering 88% of the cost.After that prospect faded, FastShip turned to the gov-ernment-owned IZAR shipyard in Spain, which wouldhave financed half of the vessels’ cost. This plan hasalso foundered. FastShip has now selected a Germanshipyard owned by Norway’s Aker Group.Some development risk was removed from the projectby opting to use higher rated versions of the existingRolls-Royce MT30 marine gas turbine, rather thancreating a new design. Rolls would also supply thewater jets and maintain the propulsion system undercontract. Lockheed Martin, another industrial heavy-

weight, would provide overall project managementand systems integration. JP Morgan is the financialadvisor.Finance for both of the terminals has been securedfrom government and regional authorities in the USand France. Handling must be quick and efficient, notonly to turn the ships around in six hours, but also tomake good on FastShip’s promise of a time-definite,door-to-door transit in seven days. TTS Technology ofNorway has designed a new system using automatedvehicles with rubber tires to carry double-stackedocean containers on and off the vessels. It replacestheir earlier, more expensive railcar design.

After spending several years selling the concept toocean carriers and their big shippers without success,FastShip has decided that the airfreight market is abetter bet. Last September, it asked TriangleManagement Services of the UK to manage a tenderfor capacity, for a service to start in December 2009.Triangle says that rising fuel cost is pricing airfreightout of the market, and has been trying to persuade airlines to take space on FastShip as a defensive strategy. To the integrators, Triangle’s message is that

they can create a new tier of time-definite service with-out diluting their existing air express volumes.Forwarders are being invited to switch their airfreightconsolidation business.FastShip needs to show potential equity investors thatit can command a revenue stream that will service thedebt. But 20,000 tonnes each way, every week is a lotof capacity to sell in advance. And US$1 billion is a lotof debt. Despite paying nearly US$2 per gallon forfuel, the airlines still sell transatlantic capacity for US$1per kilo - at a loss, perhaps. Can FastShip really offerUS$0.50 per kilo? The vessel’s cost per gallon of fuel is not much cheap-er. Some observers believe that FastShip should starton the transpacific instead, where demand is greatest.It would take only seven days from Shanghai toSeattle via Kobe. But as Bullard notes, that market ismore imbalanced. And, it seems, the current FastShipdesign is sized for shorter transatlantic voyages. Whenasked why the FastShip concept has not yet gainedtraction, Bullard explains: “We’re a start-up companywith a new technology for a new market space.” Heknows it’s a tough sell. “But somebody is going tomake this happen, and I want to be a part of it.”

Half the cost of airfreight, twice the speed of sea freight! For the past eight years, Roland Bullard has been repeatingthat mantra to shippers, bankers, and governments. The president and CEO of FastShip, Inc. certainly gets full marksfor persistence. But there’s still no ship in the water.

BY CHRIS POCOCK Roland Bullard:

“We’re a start-up

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■ Agriculture is the staple of the Bangladesh econo-my and perishables comprise almost half of its airexports. Garments, leather goods and handicraftsmake up nearly all of the rest.In the early 1990s, Bangladesh launched wide-rang-ing trade reforms that reduced and simplified tariffs,removed quantitative restrictions, and freed exchangerates. Although the nation’s trade integration rosefrom 18% in 1990 to 32% in 2004, tariff protectionscontinue to be among the region’s highest. And whilethe boom in garment trade created rapid airfreightdevelopment, infrastructure deficiencies still detereconomic growth. Nearly 95% of the country’s air cargo moves throughits largest airport, Dhaka Zia International Airport, withonly a small portion going through ChittagongInternational Airport. Scheduled cargo capacity isaround 112,900 tonnes annually. Today, 14 air carri-ers offer cargo service to Zia and 16 fly passengers.Slightly more than half of the country’s internationalflights (180 per week) operate through Zia. Biman, thenational carrier offers about 30% of the cargo capaci-ty on its 26 weekly flights.

The cargo complex at Dhaka has facilities for both dryand perishable cargo. The import and export ware-house currently offers sufficient storage, but will needexpansion to meet future requirements. In fact, airportfacilities are far from the ideal needed to handle thecountry’s double-digit growth in airfreight.

WHAT THEY SAY

POSITIVE OUTLOOKEconomic Review of Bangladesh,International Monetary Fund (IMF)

“The Bangladesh economy has continued to exhibitrobust growth. The authorities’ stewardship of fiscaland monetary policies has been broadly appropriate,as reflected in the falling overall deficit as well as thesize of the current account deficit. The country hasweathered the phasing out of the Multi-FiberAgreement exceptionally well, as can be judged from the robust increase in garment exports.”

AIRFREIGHT BOOMMahbubul AnamManaging Director of the Expolanka Group,Bangladesh

“The boom in the airfreight industry in the early 90’sbrought local entrepreneurs and international groupsto the airfreight scene, resulting in the market becom-ing very competitive, with very high service expecta-tions. The airfreight market has stabilized since theintroduction of the World Trade Organization. Although perishables are still seasonal, the garmenttrade has equalized over the entire year. Chittagongairport has the potential to take a substantial share ofthe air cargo export market from Bangladesh becauseit has a large number of garments factories nearby.Ready-made garments constitute the majority of com-modities air freighted out of Bangladesh. The volume

of garment exports varies with the season and with thevarious designs requested by US and European buy-ers. Most consignments go to retailers in the UnitedStates, followed by European customers in London,Amsterdam, Paris, Frankfurt, and Milan.

FREIGHTER SERVICEChristian Berquier, Regional Cargo Manager for AF-KL Cargo in DXB

“The Air France-KLM Group has operated as an off-line carrier in Bangladesh for many years. But lastNovember we launched weekly B747 cargo servicebetween Charles de Gaulle and Dhaka. We offer cus-tomers in Bangladesh 100 tonnes of export capacityand, after two months of activity, we can say the operation is a success.”

BANGLADESHBY KAREN E. THUERMER

NEED TO KNOW

■ Government: multi-partyparliamentary democracy ■ Head of State and Govern-ment: Prime Minister KhaledaZia (since Oct. 10, 2001) ■ Population: 147,365,352(July 2006 estimate.) ■ Language: Bangla (alsoknown as Bengali), but Eng-lish is also spoken. ■ GDP: 6.4% (2005 est.) ■ Economy: A poor, over-populated and inefficiently governed nation. Half of GDPis earned via the service sector, yet two-thirds ofBangladeshis work in agriculture. ■ Trade: Free-trade agree-ment negotiations underwaywith SAARC, BIMST-EC,India, Pakistan and Sri-Lanka,as is a Trade and InvestmentFramework Agreement withthe U.S. Bangladesh has FTA status with Morocco. ■ Exports: Garments,knitwear, hosiery, frozenfoods, jute goods, leather,chemical products, raw jute.

Source: Bangladesh Governmentwebsite; CIA World Factbook-Bangladesh

TRAVEL TIPS■ Bangladesh is a hierarchi-cal society that respects ageand position. ■ Business etiquette is rea-sonably formal. ■ Foreign men should nod toa Bangladeshi woman, unlessshe extends her hand. ■ Business cards areexchanged after the initialintroduction. Present with theright hand and respect cardsgiven to you. Study them,comment on them, and ideallyplace them in a business cardholder.■ Meetings are where deci-sions are disseminated ratherthan made.■ Many people eat with theirhands, but it is not impolite toask for utensils.■ Guests are served first,then the eldest, continuing indescending order of seniority.Do not start eating until theeldest person begins.■ When dining, the left handis considered unclean. Eat,pass dishes and drink with theright hand.

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IT’S THE OIL PRICE, STUPID!

■ The airfreight industry recorded only average growth in 2006,with rates below 5%. Coming on the heels of low growth in 2005,this disappointed many in the industry. It now seems that theexpansion in 2004 was a once-in-a-lifetime exception, created bythe opening of China. IATA has concluded that high oil prices areone constraint on airfreight growth: many shippers prefer seafreight because of the fuel surcharges on airfreight.

■ 2005 and 2006 were also remarkable because the industry’shighest growth was not recorded in Asia-Pacific, as it was duringmost of the past 20 years. Growth rates in Africa and the MiddleEast were higher than in Asia, and were driven by three factors.Firstly, rising imports in countries with sudden wealth from their bur-geoning exports of oil and minerals. Secondly, a growing flow ofperishables from Africa to Europe. Thirdly, acceptance of the Mid-dle East as an air traffic hub between Europe and Asia meant that alarge part of the region’s exports originated in Asia.

■ Heightened economic activity in China, India and other emerg-ing nations has caused a steep rise in demand for oil and metals.As prices went up, so did the income of the countries that producethem. While many of these resources are located in Africa and theMiddle East, we should not overlook countries like Russia andCanada. Increased income in all these nations resulted not only inhigher consumption, but also in greater liquidity and cheaper capi-tal, spurring the growth of cities along the Gulf coast, for example.Although these commodity prices are now below peak values, theywill continue to remain higher than in the past due to continuedgrowth in Asia.

■ Oil and gas products have the greatest impact on the globaleconomy. Higher prices have created severe trade imbalances inthe USA, but massive additional cash flow for Russia, Norway,Canada, and many Middle Eastern and African nations. The largestcash increase went to Saudi Arabia, which now receives US$70 bil-lion more per year than it did in 2000. It will be interesting to seehow the country chooses to invest this money. Every country hasits own agenda for spending its income from oil and natural gas.The United Arab Emirates is probably best known for the creativity itdisplays in launching new investment projects. In Dubai, however,oil is not the major source of income: trade and tourism are pro-pelling its growth.

■ Both Africa and the Middle East export commodities mainly toAsia and Europe. Bulk minerals travel by sea, and airfreight plays norole in the imbalanced flow of that traffic. Besides oil, Africa and theMiddle East export natural gas (Qatar), copper (Zambia), and goldand diamonds (South Africa). Imports that arrive by air are mainlyconsumer and investment products with higher per-kilo values. Thistraffic is the source of the ongoing boom in airfreight bound forAfrica and the Middle East.


cargovision market monitorOverall, the airfreight industry recorded only average growth in 2006, with rates below 5%. But Africa and the Middle East were booming, with growth rates exceeding those for Asia-Pacific. Dick van den Berg weighs the underlying factors.

BY DICK VAN DEN BERG

■ The developments we have discussed would suggest thatAfrican and Middle Eastern carriers would show significant gains inairfreight traffic. This is true for Emirates Airlines and Qatar Airways.Emirates freight traffic alone makes up more than half of the tworegions’ growth and Etihad Airways may soon join their double-digitclub. However, the other airlines in these two important regionshave not shown spectacular growth. Indeed, European airlineshave profited more from these developments than most of theirAfrican and the Middle Eastern counterparts.

Major Scheduled Airlines - Global Freight Traffic Growth

-5%

0%

5%

10%

15%

20%

Oct ë06Oct ‘03 Jan ‘04 Apr ‘04 Jul ‘04 Oct ‘04 Jan ‘05 Apr ‘05 Jul ‘05 Oct ‘05 Jan ‘06 Apr ‘06 Jul ‘06

Ann

ual G

row

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Growth - Quarter vs Quarter previous Year

Average Growth of Last 3 Years = 6.5%

Growth - Month vs Month Previous Year

IATA FTK Growth per Region

-5%

2005

2006 until Nov.

0%

5%

10%

15%

20%

Africa Middle East Europe Asia Pacific NorthAmerica

LatinAmerica

World

6,9%6,1%

14,6%

16,1%

4,2%4,8%

1,1%1,7%

0,4%

6,6%

0,5%

-1,2%

3,2%

4,8%

Price Development Energy and MetalsIndexed with January ‘97 = 100

100

150

200

250

300

350

50

metalsenergy

jan ‘97 jan ‘98 jan ‘99 jan ‘00 jan ‘01 jan ‘02 jan ‘03 jan ‘04 jan ‘05 jan ‘06 jan ‘07

exports to

imports fromAfrica and Middle East Exports and Imports (2005)

350

0North America Europe Asia

50

100

150

200

250

300

bln

US

$

Africa & Middle East - Major Freight Airlines (IATA)

0 500 1000 1500 2000 2500 3000 3500 4000 4500

FTK (millions)

Emirates

Air France - KLM

Saudi Arabian

El Al

Qatar Airways

South African

British Airways

Lufthansa

Gulf Air

Cargolux

2000

2005

-

50.000

100.000

150.000

SaudiArabia

UAE Algeria Nigeria Iran Kuwait Libya Iraq Qatar Angola Oman

Oil and Gas Exports of Major African and Middle Eastern Countries

2000

2005

mill

ions

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US

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Cargovision is the management magazine of AF-KL Cargo. Its function is to disseminate information on transport, distribution, logistics, information services, and general business developments. The editorial opinions expressed in the magazine are not necessarily those of AF-KLM.Reproduction in whole or in part without written permission is prohibited.

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GAMERA LIVES

■ Some of the latest designs for a cargo aircraft come straight out of aGodzilla flick. A combination of blimp, plane and hovercraft, they look likethe giant turtle of sci-fi fame. Such lighter-than-air craft are practical forcolder regions, keeping a cadre of designers busy in Russia and the US,exploring odd-looking contraptions that float just beneath the threshold ofour consciousness. Occasionally, they surface. Two US firms showed their airships to business leaders, students andacademics at a gathering held at the University of Alaska in Anchoragelast fall. Worldwide Aeros Corp. of California and Hybrid Aircraft Corp. ofNew Mexico presented modern designs featuring ridged, helium-filledbladders for lift and aircraft engines for thrust. Hybrid’s SkyCat is expected to carry 1,000 tons over 4,500 nmi at 100knots. It will not need a long runway or a special hangar. Hybrid is devel-oping its airships in partnership with Lockheed Martin. The company hasbuilt one ship and has orders for others.Aeros is currently building a test craft and has designs for several configu-rations. One can lift 100 tons vertically and carry it 2,000 miles at 100mph. Another will haul 500 tons. Airships use less fuel than helicopters and airplanes, but are expensive tobuild and cost more to operate than boats and trucks. Hybrid hopes tohave them available commercially by 2010, for use in project work and inthe oil and timber industries. ■

LIGHTER AND CLEANER

■ Would you be interested in a hydrogen-poweredlawnmower? Seriously. Some bright researchers atPrinceton University developed a mechanical powercontrol for a hydrogen fuel cell. It is like stepping on thegas pedal to make your car accelerate. Designers normally adjust a fuel cell’s power with elec-tronic controls, which need complex systems to man-age humidity and recover fuel, and recycling systemsto make the whole thing efficient. The new processfeeds hydrogen into the fuel cell as needed and alsocreates a closed system that uses waste water to reg-ulate the size of the reaction chamber where oxygenand hydrogen combine to form heat and water. Thedesign uses 100% of the fuel and needs no recyclingsystem. Fuel for the current model comes in returnabletanks, like those used for outdoor gas grills. The researchers next step is to scale a design to com-pete with fuel cells being tested for the auto industry.But what about aircraft? I recently saw photos of aGerman motorcycle powered by 24 chainsaw motors.Surely a hydrogen-powered cargo plane can’t be toofar off? ■

GEEKS BEARING GIFTS

■ Boeing’s Large Cargo Freighter made its appear-ance in January, to begin flying fuselage sections ofthe company’s B787 Dreamliner between manufactur-ing facilities. The LCF holds 65,000 ft3, about threetimes that of a typical B747. Maine has not registered high on the list of aerospacedestinations in the past, but now we learn that it is aleader in the field of composites and may find itself inline for a visit from the LCF. Curious. What other unfa-miliar sites and cities will benefit from Boeing’s 787construction project and perhaps alter air-shippingpatterns? ■

PURLOINED IN PENANG

■ Last November, 20 armed men robbed theMASKargo complex in Batu Maung. It took them lessthan one hour to fill two sea containers with 585 car-tons and 18 pallets of microchips and motherboardsmade by a multinational in Bayan Lepas. Supposedly,Malaysia’s largest heist, the estimated value of the haulwas US$13 million. The robbers also swiped footageof the robbery from the closed-circuit TV cameras. In December, after thieves fled with more thanUS$600,000 worth of goods from a another ware-house in Bukit Tengah, the state deputy police chiefdisclosed that 24 lorry hijacks and factory robberieswere reported statewide last year.As of press time, police arrested two transport compa-ny drivers in connection with the theft of themicrochips. They had detained 18 people after theincident but released them after investigations showedthey were not involved with the November heist. ■

by Mark W. Lyon, editor-in-chief

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cargovision

Published by AF-KL Cargo Communication, P.O. Box 7700, 1117 ZL Schiphol, The Netherlands. Christelle Dufour Theuws, [email protected] Hemmer, [email protected]

Concept & Realization: vdBJ Communicatie Groep, Bloemendaal, The Netherlandswww.vdbj.nl, [email protected] in Chief: Mark W. Lyon, [email protected] Manager: Urtha Ririhatuela, [email protected] Direction: Sok Visueel Management, Amsterdam, The NetherlandsEditorial Office: Vijverweg 18, 2016 GX Bloemendaal, The Netherlands, T +31(0) 23 541 1701Circulation Manager: Herman Brijssinck, T +32 2752 90 51, [email protected]

AF-KL Cargo © MAR 2007 Volume 22 Number 28

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Passion Powers PanalpinaCEE How it GrowsMoving FastShip

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