developments in air cargo: some data on the transport...

1

CCA Pharmaceuticals in the Cool Chain Milan September 17th, 2014

Gerard de Wit

Managing Director WorldACD Market Data

The Netherlands

Developments in air cargo: some data on the transport of pharmaceuticals

2

Demand for pharmaceuticals continues to grow due to changes in healthcare spend and demographics (1)

Healthcare spend per capita (US$ 2012)

Asia Pacific

5,085

2,676

North America

Europe

1,224

509

518

157 Africa

Central & South America

Middle East & South Asia

Source: WorldACD analysis of Worldbank and United Na:ons data

9.8%

7.6%

7.1%

7.0%

8.7%

6.4%

2.5%

1.3%

1.0%

0.7%

0.9%

0.1%

Change in population

CAGR 2010 to 2020

Forecast UN

Change in spend per capita

CAGR 2000 to 2012

3

Healthcare spend as % of total GDP (2000)

Source: Worldbank

5.2%

7.3%

6.3%

4.8%

4.5%

9.2%

Asia Pacific

Africa


Europe


North America

Healthcare spend as % of total GDP (2012)

8.5%

11.7%

6.3%

5.0%

7.0%

5.4%

Demand for pharmaceuticals continues to grow due to changes in healthcare spend and demographics (2)

4

Pharmaceutical sales are expected to increase with high single digit growth rate

Value Global Pharmaceuticals Market (US$ billion)

Source: IMS Health and PWC (2020 figure only)

1,571

1,1701,145

856

680

365

0

200

400

600

800

1,000

1,200

1,400

1,6006.7%

5.3%

4.7%

2001 2000 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002

13.3%

2020 … … 2017 2016 … … 2013

forecast

5

Demand for pharmaceutical products is expected to shift further

0

500

1,000

1,500

36%

2000

19% 11%

26%

44%

Japan

Rest of World

Europe

USA

2020

42%

9%

20%

29%

2010

23%

12%

29%

Global Consumption of Pharmaceuticals (US$ billion)

Source: VFA Germany, IMS Health, PWC (2020 figure only), EYE for Pharma (China figure) and (Demrich for India)

Other

China India

4%

17%

21%

2020

42%

Some production developments - In China pharma patent applications increased almost 10 fold (2000 to 2009) - In China the foreign company production output for pharma more than tripled from 2005 to 2010 (US$ 47 b) - Pharma FDI in India is expected to reach US$25 b between 2013 and 2020

6

Top pharma commodities travelling by air

Top-20 commodities by volume air share between Europe and USA (2010-2013)

Source: WorldACD analysis of Eurostat

share of pharma by air

97%

96%

80%

69%

66%

65%

64%

62%

59%

47%

46%

45%

45%

44%

40%

20%

31%

34%

35%

36%

38%

41%

53%

54%

55%

55%

56%

60%

4%

3%

Medicaments containing hormones Medicaments containing penicillins

Human blood

Reagents for blood groups

Vaccines for veterinary medicine

Sterile surgical materials

Waste pharmaceuTcals

Medicaments containing insulin Medicaments containing alkaloids (in measured dose)

Dental fillings

Vaccines for human medicine

Medicaments containing alkaloids (not in measured dose)

Air Sea

Medicaments containing anTbioTcs (in measured doses)

Medicaments for therapeuTcs purposes

Medicaments containing anTbioTcs (not in measured doses)

0.1%

5.1%

1.4%

0.8%

1.6%

0.1%

2.6%

0.2%

0.3%

1.0%

3.9%

4.0%

2.4%

52.8%

4.8%

7

Growth of bio-pharma and generics will influence demand for pharma air freight in size & traffic flows

228

174

111

57

0

50

100

150

200

250

2017 … 2012 … 2007 … 2002

Source: IMS Health

forecast

CAGR

+14%

+9%

+6%

Worldwide Bio-Pharmaceutical Sales (US$ billion)

61%52%

27%36%

12% 12%100%

Branded

Generics

Other

2017 2012

forecast

Breakdown of Pharma sales per product type

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Logistics industry response to pharma

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What is included in WorldACD’s PIL/TEMP category?

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Evolution of worldwide pharma trade shows a dominant role for Europe so far

Source: Tradecom and WorldACD (PIL/TEMP only)

0

50

100

150

200

250

300

2012 2010 2008 2006 2004 2002 2000

Commodity Value (US$ billion) Export Import

*Next 11 (Goldman Sachs) = Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey & Vietnam

2012 2010 2008 2006 2004 2002 2000

North America

Europe

Rest of World

BRIC N11*

Japan

North America

Europe

Rest of World BRIC

N11* Japan

CAGR (Jan 2011 through Jul 2014) PIL/TEMP volume

12% 18%

12%

7%

14%

17%

18%

23%

10%

6%

13% 18%

CAGR (Jan 2011 through Jul 2014) PIL/TEMP volume

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EU pharmaceutical market: evolution of export and import

Source: Eurostat

EU Pharma total trade (volumes ton)

0

300,000

600,000

900,000 4.6%

Export

Import

2013

73%

27%

2012

74%

26%

2011

70%

30%

Export: air vs. sea

pharma

all commodiTes 0.2%

Sea

27%

73%

2012

28%

72%

2011

30%

70%

6.7%

2013

Air

all commodiTes

pharma

6.6%

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“PIL/TEMP” shows similar pattern as “all pharma by air”, but higher growth

708090

100

110120130140

F J J M A M F J D N O S A J J M A M

Air Volume Index Europe Outbound

Jan 2013 = 100

708090

100

110120130140 Air Volume Index Europe Inbound

Source: Eurostat & WorldACD

PIL/TEMP (WorldACD) Pharma Air Trade (Eurostat)

2013 2014

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In all origin regions PIL/TEMP growth outpaces growth of General Cargo....

Europe

North America


Africa

4% 15%

All Other Cargo PIL/TEMP

1%

14%

4% 13%

7% 18%

0% 7%

CAGR (Jan 2011 through Jul 2014)

Source: WorldACD


Asia Pacific

1% 10%

3% 14%

Worldwide

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...with half of the top-10 growth markets originating in Western Europe

CAGR (Jan 2011 through Jul 2014)

South America -‐ Europe

USA -‐ Asia Pacific

South Asia -‐ Asia Pacific

Western Europe -‐ Africa

South Asia -‐ Europe

Western Europe -‐ North America

South Asia -‐ North America

Western Europe -‐ Central & South America

Western Europe -‐ Middle East & South Asia

Western Europe -‐ Asia Pacific

Source: WorldACD

213%

39%

209%

12%

13%

5%

22%

18%

20%

16%

1%

-‐1%

9%

1%

5%

0%

2%

-‐5%

1%

3%

PIL/ TEMP Absolute Volume Growth (from 2011)

PIL/TEMP All Other Cargo

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Only Europe and MESA are net exporters of PIL/TEMP

22%

73%

57%

38%

95%

86%

78%

27%

43%

62%

14%


Europe

North America

Africa 5%


Asia Pacific

PIL/TEMP Imbalance (% of volume)

Source: WorldACD

Worldwide more than half of PIL/TEMP volumes originate in Europe….

% inbound % outbound

16%

78%

56%

36%

95%

88%

22%

44%

64%

84%

12%

5%

2011 Last 12 months Jul 2014

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Position of Top-20 Forwarders in the Cool Chain

55%32%

55%34%

45%68%

45%66%

PIL/TEMP General Cargo PIL/TEMP General Cargo

Volume shares of Global Top-20 Forwarders

Last 12 months Jul 2014 2011

24% 28% 28%55% 65% 67%

34%

76% 72% 72%45% 35% 33%

66%

Worldwide Africa Middle East &

South Asia

Asia Pacific

North America


Europe

PIL/TEMP -‐ Last 12 months Jul 2014

All other Agents Top-‐20 Forwarders

Source: WorldACD

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Yield distribution of PIL/TEMP vs. PER & General Cargo

0.0

20%

10%

15%

5%

Yield distribution H1 2014 Europe to North America

Perishables

PIL/TEMP

General Cargo

Yield

% of volume

Source: WorldACD

0.0

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Yield distribution of PIL/TEMP vs. PER & General Cargo

20%

10%

15%

5%

Yield distribution H1 2014 North America to Europe

Perishables

PIL/TEMP

General Cargo

Yield

% of volume

Source: WorldACD

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Yield premium of PIL/TEMP has increased since 2011 and now stands at 56% on average worldwide.....

Yield premium (%) PIL/TEMP vs. General Cargo

0 20 40 60 80 100

51%

20%

45% 20%

28%

Western Europe -‐ North America

South Asia -‐ North America

Western Europe -‐ Central & South America

Western Europe -‐ Middle East & South Asia

Western Europe -‐ Asia Pacific

57% 43%

60%

81% 51%

Source: WorldACD

YtD Jul 2011 YtD Jul 2014

NOTE: Percentages shown are averages, based on individual airline AWB-‐records reported to WorldACD and categorized under PIL/TEMP

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…but does pharma premium cover the additional cost?

1,700

Other cost 1,164

Cool chain container cost 1,236

Total revenue incl. charges 4,100

Cool Chain Pharma Revenue Premium 2,400

General Cargo revenue 1,700

Pharma Revenue -‐/-‐ addiTonal cost

Cool chain shipment example (in US$) Shipment from US West Coast to Switzerland

?

?

Note Source

Chargeable weight: 950 kg

WorldACD

Envirotainer website

Rent of RKN t2 for 9 days = $1,236 Express ULD, build-‐up & breakdown, export charges, training, admin, container return etc.

Lower?

Lower?

4,100

Higher?

?

Efficiency effects?

WorldACD assumpTons

0

21

Modal shift: USA to EU28

Source: WorldACD analysis of Eurostat data

9092949698

100

Sea

Air 0.70%

0.65% 0.71% 0.87%

0.98%

Air tons as % of Air+Sea tons All commodity groups

Selected commodity groups (min. air share of 10%*)

* Represents 61% of air volume in 2013

CAGR 2010 to 2013

-‐3.9%

+10.6%

5060708090

100

Sea

Air 21.2% 22.2% 22.0% 22.8% 23.4% -‐2.9%

-‐0.7%

+5.3%

Pharma

20406080

100

Sea

Air

H1 2014

30.6%

2013

33.5%

2012

36.2%

2011

42.8%

2010

37.9% -‐1.3%

5060708090

100

29.5% 28.4% 30.0% 31.3%

Sea

Air 29.6%

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Modal shift: EU28 to USA


9092949698

100

Sea

Air 1.36%

1.41% 1.43% 1.64% 1.52%




CAGR 2010 to 2013

-‐1.4%

+1.1%

+1.9%

+4.8%

+7.5%

Pharma

20406080

100Air 33.0%

H1 2014

42.4%

2011

35.0%

2013 2010

38.3%

Sea

36.0%

2012

+2.4%

5060708090

100

Sea

Air 24.5% 25.1% 24.5% 25.5% 26.2%

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Modal shift: EU28 <> USA (both directions together)


9092949698

100

Sea

Air 0.97%

0.94% 0.99% 1.18% 1.22%




CAGR 2010 to 2013

-‐2.5%

+6.6%

-‐0.8%

+1.2%

+6.6%

Pharma

20406080

100

Sea

Air

H1 2014

32.1%

2013

34.4%

2012

36.0%

2011

42.6%

2010

38.2% +1.0%

6%

4%

13%

18%

35%

1%

4%

2%

16% 24

Modal shift: USA to EU28 Air tons as % of Air+Sea tons

16.7%

Industrial Machinery

Other 25.4% 25.8%

23.9%

TexTles and Fashion 34.3% 35.3% 34.6%

Pharma 30.6% 33.5% 36.2%

Perishables and Food 9.5%

17.3%

15.4% 16.2% 16.1%

High tech 38.6% 38.7% 38.6%

Electrical Equipment 26.1% 25.3% 25.6%

Base material 10.2% 10.3% 11.9%

Aerospace 67.2%

64.5% 64.1%

H1 2014

2012 2013

As % of Air tons 2012


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Modal shift: EU28 to USA

Other 21.2% 21.7% 23.8%

TexTles and Fashion 35.2% 36.6% 36.4%

Pharma 33.0% 35.0% 36.0%

Perishables and Food 44.4%

36.6% 36.8%

Industrial Machinery 13.7% 15.0%

13.1%

High tech 50.3% 49.9% 51.5%

Electrical Equipment 20.4% 21.5%

19.2%

Base material 17.7%

14.5% 13.9%

Aerospace 54.9%

61.4% 49.5%

2013 2012

H1 2014

Air tons as % of Air+Sea tons As % of Air tons 2012

3%

0%

29%

18%

3%

22%

9%

11%

6% Source: WorldACD analysis of Eurostat data

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Modal shift: EU28 <> USA (both directions together)

Other

TexTles and Fashion

Pharma

Perishables and Food

Industrial Machinery

High tech

Electrical Equipment 22.1% 22.7%

21.1%

Base material 10.6% 10.6% 12.0%

Aerospace 62.7% 63.5%

59.3%

15.2%

33.7% 33.7%

38.3%

36.0% 34.4%

32.1%

36.0% 36.3% 35.0%

23.9% 24.7% 24.2%

43.6% 43.2% 43.1%

15.9% 16.1%

H1 2014 2013 2012

Air tons as % of Air+Sea tons As % of Air tons 2012

4%

2%

20%

18%

20%

11%

7%

6%

11% Source: WorldACD analysis of Eurostat data

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Concluding remarks

§  Modal shim: yes, but accompanied by absolute growth for pharma by air, parTcularly in bio pharmaceuTcals

§  Likely to remain one of the top growth segments in air cargo §  Transport requirements are such that top posiTon in the

market calls for highly specialized equipment / service §  Yield premium does not necessarily lead to higher margins

for airlines, given addiTonal cost factors §  ProducTon to go to new places: pharma-‐by-‐air flows likely to

shim

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Ken de Witt Hamer Director Market Analysis & Commercial Development [email protected] Mob +31-6-2265-0855 WorldACD Market Data BV Rubensstraat 66 1077 MZ Amsterdam The Netherlands Tel +31-20-379-2799 [email protected] www.worldacd.com

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