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QUARTERLY MAGAZINE AF-KL CARGO VOLUME 23 ˆ NR 33 ˆ JUNE 2008

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Looking for gapsRFID on the skidsWhat a relief!

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■ The economic volatility introduced by record commodity prices and the financial crisis in the West suggeststhat 2008 will be a tense year for the airfreight business. However, our industry is one of many suffering thefallout from a tremendous upheaval in financial markets: power that once lay with the developed economies hasnow spread to other centers. Oil-rich countries and Asian central banks are among the world’s largest sourcesof capital, and their money has helped hedge funds and private-equity firms become power players in the worldof finance. The assets of these four groups of investors have nearly tripled since 2000, to $8.5 trillion by the endof 2006 or about 5% of the world’s financial assets ($167 trillion), according to the McKinsey Global Institute.The transportation business has felt this shifting influence in the financing of property and equipment as well asairports and seaports, but also in the worldwide consolidation of forwarders and handlers, and the changingpatterns of global trade.

With turmoil of this magnitude comes confusion in business and in society. An international transportationcompany like AF-KL Cargo thrives on global trade. However, surveys show that the average person does notbelieve global trade is a good thing. Perhaps other businesses have been too cautious on this controversialissue. No doubt there is a gap in most societies between the realities and the politics of globalization. However, businesses could affect the willingness of societies to stay open to globalization if they were strongeradvocates for policies that benefit workers, such as retirement benefits, health care, retraining or educationalopportunities that follow workers when they change jobs.

Large multinational firms like ours have a tremendous opportunity and also an obligation to make a difference inpeople’s lives. We see many businesses in the vanguard when it comes to climate change, having realized thatsound environmental decisions are often financially beneficial. Corporate social responsibility is another areawhere changes will eventually contribute to the bottom line.

In this issue of Cargovision, we report on several examples of how the airfreight industry is reaching out to servethe wider needs of its global stakeholders. We discuss how various relief organizations are seeking stronger tieswith the logistics industry to optimize their response in times of crisis. We analyze what happens when supplychains compete for resources, space and time, and whether the global logistics system could work moresmoothly. We report on progress in the implementation of radio frequency identification tags in the supply chain.We review the status of global security with industry expert Arthur Arway of DHL, and take a look at IATA’s newSafety Audit for Ground Organizations.

In short, there’s plenty to stir your thirst for opportunity in this issue of Cargovision. Pleasant reading!

Marcel de NooijerVice President – EuropeAir France Cargo-KLM Cargo

OPPORTUNITY AND OBLIGATION

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4 CHAINED TOGETHERA single supply chain is a simple concept that is easy to sell. But what happens when many supply chainscompete for resources, space, and time? Do the traditional interactions between shippers, forwarders andairlines hinder reliability?

14 LOOKING FOR GAPSAs a 30-year veteran in security and law enforcement, Arthur G. Arway has developed a sharp eye for gaps inthe fence. He is currently chief watchdog for the Americas at DHL Global Forwarding. He discussed some of hisconcerns with Cargovision.

16 RFID ON THE SKIDSWal-Mart and Tesco caused a stir when they told suppliers they would lose their business if they did not useradio frequency identification (RFID) in the supply chain. We’ve heard little since from either firm. But thatdoesn’t mean progress is standing still.

19 IBERIAN LYNXSatisfying the air cargo service requirements of a large, multinational and fast-growing client is always a chal-lenging task. But Jorge Costa Leite relishes his role as Air France Cargo-KLM Cargo’s key account manager forInditex Iberia.

20 WHAT A RELIEF!After scrambling to deal with the aftermath of the South East Asia tsunami in 2004, the Pakistan earthquake in2005, and the Central America hurricanes in 2007, a number of relief organizations have sought stronger tieswith the logistics industry.

24 GROUND OUTAirlines have service level agreements with handlers and they usually include safety standards, but these mayvary from place to place. Enter IATA Safety Audit for Ground Organizations, a service level agreement promisinggreater benefit to the industry.

8 NEWS & DATELINES22 A WEEK IN THE LIFE OF GIOVANNI BISIGNANI26 COUNTRY FILE: BANGLADESH28 MARKET MONITOR30 POSTSCRIPT31 INFORMATION AND COLOPHON

COVER IMAGE A Terracotta Warrior statue wrapped in protective foam© PeterMacdiarmid/Getty Images

Looking for gaps, page 14

RIFD on the skids, page 16

What a relief, page 20

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A single supply chain is a simple concept that is easy to sell. But what happens when many supply chains compete for resources,space, and time? Does the global logistics system work smoothly or dothe traditional interactions between shippers, forwarders and airlineshinder reliability?

BY TONY CARDING

■ Jarmand takes no prisoners. His customers likehim because he can move their freight through stonewalls. “Chang just bumped two pallets from HongKong for us,” he told Davies sitting across the desk.“Those mobiles we were worried about? Forget it.They’ll make the distribution center by Monday.”“Well that’s only fair,” Davies said. “Chang bumpedthree of our pallets last month, and it took four daysto find another slot. I thought they were going tohave a stroke in Kuala. They were running so low onfasteners they almost shut down the line.”“Yeah, well Kuala’s not one to talk,” Jarmand shotback. “Remember when they sent us those lightingunits? Supposed to be eight cubic meters but turnedout to be 11? We didn’t hear the end of that forweeks.”Cooperation – the essence of global logistics. It’stempting to believe that airlines, forwarders and ship-pers would think less about self-interest and moreabout long-term achievement, especially in airfreight,with its tight schedules and just-in-time operations.Unless everyone in the supply chain plays his partand operates by the same rules, the smooth flow ofshipments through the system is compromised, nomatter how good the individual players may be.Around the water-cooler, these same shippers,forwarders and carriers can be quick to blame eachother for operational failures: late delivery to theairport, overbooked flights, incorrect data entry, orlost shipments. While they are rather more restrainedin public, most of these individuals would agree thatcertain changes could improve the overall success ofthe transportation industry.

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NO VACANCYIt is very much a buyer’s market for shippers at themoment, which puts the forwarding communityunder pressure to cut prices to the bone in order towin and keep business, says Andy Newbold,commercial manager UK of Air France Cargo-KLMCargo. “While we would prefer to focus the discus-sion on quality efficient solutions rather than onprices only.”Some years ago, shippers didn’t know much aboutthe logistics chain and they just accepted theairfreight charges, Mr. Newbold says. Transparency,vast amounts of information became available on theinternet, caused the shipper's ignorance to quicklypass. Firms began hiring shipping managers awayfrom the forwarders. Today, shippers tend to offer their business to anumber of forwarders so they can optimize pricing.This forces forwarders to reduce their margins andeliminate costs from within the chain by working moreefficiently. With the huge overcapacity in the airfreightmarket today, airlines are not in a strong position toresist forwarder’s demands for lower rates, particu-larly on heavily traveled routes such as London toNew York, where there is 90% overcapacity. Thatmeans freight, if spread evenly among the airlines,would give an average load factor of 10% on a NewYork flight. With every airline scrambling for the sametiny slice of the pie, the marketing situation hasbecoming a matter of bargaining over pennies.

THE DAYS OF WINE AND REGULATIONThis dismal situation came about after European andAmerican anti-competitive authorities ruled that theInternational Air Transport Association could not setfixed charges for cargo going from one place toanother. Rates today of less than £0.40/kg from theUK to New York would have been £1.40/kg beforethe rule change. People who worked in the airfreightbusiness during that time believe that carriers thencould afford to offer much better service than theycan with today’s rock-bottom rates.The decision about which airline flew the freight wasalso different when people concerned themselvesmore with quality. It was based on two things: first,how good was the quality of the airline’s perform-ance, and second, how good was the relationshipbetween the airline’s sales management and theforwarder. In contrast, many forwarders and shipperstoday choose the carrier that gives the lowest price,although a common exception is a forwarderworking for a shipper that wants high-quality service,because he has specialized cargo. “This is a chal-

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lenging position for our industry,” Mr. Newbold says.“The current situation forces the airlines to workmore efficiently in order to cut costs, while focusingon the quality at the same time.”Many people who have been in the air cargo busi-ness for a while would like to return to the days ofselling on quality and solutions only, investing in thefuture, and modernizing the industry. It is extremelychallenging to relinquish the notion that a high-qualitycargo service should sell for a premium even whenso many customers force them to compete on price. The question of price versus quality also concernsforwarders. “The exporter or importer is alwayslooking for the best deal,” says Chris Edwards,director airfreight for Northwestern Europe at Kuehne+ Nagel. “But it’s not just about price.” A forwarder can always find cheap transportation,but needs to know the quality of the service beingsold. Is it good and consistent? Does it provide forthe customer’s needs or is it just a rock-bottomquote? What is the value of the service relative to theneeds of the business under consideration? Whatcan be done to remove rates from the discussion?

NOT A ONE-NIGHT STANDThe way to offset rate erosion is by urging carriers tomove faster towards Cargo 2000 compliance, Mr.Edwards says. “That is not just for us, but for theindustry. It is important that they take this seriously,and look at performance much more seriously. Tradi-tional forwarders must create a seamless servicewith the airlines if we are to compete successfullywith courier companies that operate their own equip-ment on the ground and in the air. We don’t have ourown aircraft and must depend on the major carriersto move our customers’ products.”The Cargo 2000 route map is the promise to thecustomer, Mr. Edwards continues. “If you fail on theroute map performance, you fail the customer.”Kuehne + Nagel is the only company that is accred-ited to Cargo 2000 Phase Two, but others are aboutto achieve the same status. This is good news,because it demonstrates that the industry is takingthe initiative seriously as a standard for performance,and that will be better for customers.Kuehne + Nagel has sufficient resources as a multi-national forwarder to be able to enhance any offeringto its customers and widen the discussion beyondthe topic of price. “Shippers and the consignees arealways looking for low cost,” Mr. Edwards says. “But low cost is not necessarily just the price perkilo, it’s everything added together. Price per kilo isnot the basis for a partnership that we would like to

Mr. Newbold:“The current situationforces the airlines to work more efficiently in order to cut costs,while focusing on the quality at the same time”

ETERNAL ARMYSome of China's world famousterracotta soldiers travelabroad in 2008 and AF-KLCargo had the honour of trans-porting them to Paris, and ofsupervising the loading andunloading of the statues. TheEternal Soldiers star in severalEuropean museums this year,among them the Pinacothèquede Paris. The Terracotta Army isa form of funerary art buriedwith the Emperor of Qin in 209-210 BC. The army wasdiscovered in March 1974 bylocal farmers drilling a waterwell to the east of Lishan. (source: Wikipedia)


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have with our customers. We’re in business for thelong term, not just to be with a customer for thenext six months.”

ROLE PLAYINGEvery consignee has a need, says Ram Menen, divi-sional SVP cargo for Emirates Airline. And everythingthat transpires in the supply chain ought to happenbecause someone is trying to fulfill that need. Ideally,everyone works to create collective efficiency. Butsometimes people get so focused on their own areasthey forget that the efficiency they create for theircustomer could end up producing inefficiency some-where else in the chain.This is one reason airlines want to work witheveryone in the chain so they can understand what itrequires. “Supply chains are like fingerprints,” Mr. Menen says. “They are all different and they have their own unique characteristics. The better theunderstanding we have, the more seamless themovement we can create.”The shipper, the forwarder, the airline, the truckerand the ocean operators are all peas in the samepod, Mr. Menen says. Yet, each one brings different

expertise to the table. He believes that the airline’srole in the supply chain is to create the supply lineswhile the forwarder has the equally important role ofmanaging the ground part of it. Also, the most criticalpart of the supply chain for any business today isinventory management. The process of optimizinginventory is done best with the freight forwarder.

The consignee usually sets the tone of the overallsupply chain because he is looking closely at thesupply chain and creating the blueprint for it, Mr. Menen says, although, the shipper can also setthe tone. “If you look at your mobile phone and thenumber of parts in it, you will see that they are allbeing manufactured in different parts of the worldand then brought together for assembly. In thiscase, the mobile phone manufacturer is calling theshots. They know what their supply chain shouldlook like.” Nevertheless, it is critical that all theseelements work in sync, Mr. Menen says. “If you areonly trying to make a buck off each other, the effi-ciency of the whole supply chain itself comes intoquestion. The only way you can optimize supplychain management as a whole is to have a colla-borative strategy.” ■

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Mr. Menen: “Supply chains are likefingerprints, they are alldifferent and they havetheir own uniquecharacteristic”

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Carriers - Eurasia

KRASNOYARSKThe Russian authorities have been playing chess with Lufthansa Cargo.Last October, they stopped their automatic approval of the German airline’srights to fly over Russian territory to its hub in Astana. The suspensionforced LHC to divert 49 weekly flights around Russia in order to land inKazakhstan. This added 90 minutes flying time each way to the Frankfurt-Asia service. Russian aviation authorities would like Krasnoyarsk tobecome a major transit hub, a competitor to Dubai, and want foreignairlines to reroute traffic through the Siberian city. LHC said it wouldconsider relocation if and when Krasnoyarsk’s Yemelyanovo airportmodernized its facilities and met certain operational and commercial condi-tions. It may have been just a coincidence, but Russian tax authorities frozeseveral Lufthansa accounts in February, saying that the carrier owed aboutUS$10 million, although the parties disagreed on the interpretation of thetax regulations that led to the claim. Closing in from a different angle in February, Volga Dnepr and KrasnoyarskAirlines opened a multimodal cargo hub at Yemelyanovo. The new 60,000-

tonne handling terminal will enable Airbridge cargo todouble its trans-Siberian frequencies to 40 times aweek. In March, LHC said it would relocate its regionalhub to Yemelyanovo by 2009 and begin test flightsthere in June. And lo, the Russian authorities onceagain approved the LHC request to fly over their terri-tory.

TASHKENTUzbekistan Airways and Korean Air are talking aboutbuilding a logistics center at Navioi airport, 360 kmsouthwest of Tashkent’s main airport. The two carrierssaid in March that their cooperation would enableKorean Air to help Uzbekistan Airways obtain asso-ciate membership in the SkyTeam alliance and to offerthe Central Asian carrier support for sales and foroperations at Navoi. In exchange, Korean would gainan important base in Central Asia.

ABU DHABIIssam Khairallah, president of Midex Airlines, said inJanuary that the carrier would soon begin cargo flightsfrom Al Ain International Airport, which is located nearan ancient oasis 120 km south of Dubai and 160 kmeast of Abu Dhabi. Midex will begin cargo flights toBeirut, Dhaka, Istanbul Kochin, Mumbai, and Paris.Passenger flights may begin later, Mr. Khairallah said.

BEIJING“There is a danger that China’s cargo airlines are being marginalized in the world air cargo market,” Li Jiaxiang, acting director of China’s civil aviationadministration, said in March. Although nearly 4 milliontonnes of Chinese cargo flew on international routeslast year, the share carried by domestic carriersdropped to 18% from 44% in 2000. Although not as

cargovision news around the world

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

Krasnoyarsk


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dramatic a decline, the number of passengers flownon international routes by Chinese airlines last yeardropped to 44% from 55% in 2000. These figures aretroubling to Chinese authorities who want to see theirnation become a strong power in civil aviation.

LEIPZIGExecutives at the DVB Bank AG were quick to spot anopportunity. When Iceland’s Avion Group cancelled anorder for eight B777-200 freighters last fall, DVBsubsidiary, Deucalion Capital, stepped in to buy the lotfrom Boeing and turn it around on lease to AeroLogic.The new cargo airline expects to begin operationsbetween Europe, Asia and North America when itreceives the first four freighters in 2009, and will thenadd frequencies when it accepts the second four in2010. The airline’s owners, DHL Express andLufthansa Cargo, will take all of AeroLogic’s capacity,allocating most of it to DHL midweek and to LHC onweekends.

Weddings - Middle East

Issah Baluch is diligent and clever. He founded theSwift Group in Dubai in 1989 and developed thefreight agency into a network of 46 offices in 21 coun-tries throughout Africa, the Middle East, and Asia. Yethe still found time to preside over FIATA for three


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years, serve on TIACA’s board, and write a book about the airfreightindustry. In January, the Chinese government issued his company a wholly-owned foreign enterprise trade license, allowing the firm to operate inChina without a local partner. In March, Barloworld Logistics of Johannes-burg, with airfreight revenue of €172 million in 2007, acquired Swift and itsaffiliates for €43 million. Swift’s turnover in 2007 was €127 million.Barloworld originally said that Mr. Baluch would stay on as chairman.However, he subsequently stated that he “…will continue to play a leadingrole in the organization alongside the management team from Swift.” Thetakeover catapults Barloworld onto the global stage. Having Mr. Baluchthere to help would be a good thing.

Architecture of Tashkent train station



Financial - World

SCHINDELLEGIKuehne + Nagel’s airfreight business was more prof-itable and efficient during 2007 than during 2006. Net revenue on airfreight increased 13% last year to€3,284 million. The gross profit from airfreight, or theamount the company books after paying for third partyservices from airlines and ground handlers, grewsomewhat faster, rising 17% to €444 million. Earnings from airfreight grew even faster, by 30% to€139 million, before deduction of interest, taxes,depreciation and amortization. One indicator of aforwarder’s performance is how much money it keepsafter paying its operating expenses. Before paying interest and taxes last year, K+N’sairfreight business kept 28% of its gross profit, anincrease of 12 points over 2006. Whereas, the entireK+N Group kept 11 points of its gross profit, adecrease of 0.3 points from the previous year.

SEATTLEExpeditors airfreight revenue increased by 8% toUS$2,408 million during 2007. Its sea freight turnovergrew 17% to US$1,821 million. The company’scombined revenue for air, sea and brokerage servicestotaled US$5,236 million, an increase of 13%. Expeditors operating income of US$423 millionyielded an operating margin of 8%.

HONG KONGSinotrans reported a 27% growth in its freightforwarding business during 2007 to €2.765 billion.The strong forwarding result offset losses in its marinebusiness and slower growth in express deliveries dueto cutbacks by its partner DHL. Overall, Sinotrans’ netprofit rose 30% to €73 million.

Rail - Eurasia

MOSCOWThe race among rail operators to steal airfreight ship-ments between Asia and Europe has entered a newphase. In February, Far Eastern Transport Group,DVTG and Finnish Railways began operating containertrains between Moscow and Kotka. DVTG, which says


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Automation - Europe

ROMEOnly 17 airlines and seven freight forwarders have received any Cargo2000 certification, says Nicolette van der Jagt, secretary general of theEuropean Shippers Council. Her frustration was palpable, as it is for manypeople who have witnessed the fiasco of airfreight automation unfold overthe past two decades. Little wonder then that so few shippers know about Cargo 2000 or how it can improve airfreight, Ms. Van der Jagt adds.Traxon’s managing director Felix Keck also took a shot at the industry’sslow progress. Only 12 of Cargo 2000’s 17 airline members are consis-tently applying the right procedures while seven of its 12 forwarders areopen to systematic monitoring and control. This cannot help business, Mr. Keck says. “When airfreight is managed inthe conventional way, it has longer transport times and ultimately highercosts.” The above comments notwithstanding, a trip to the Cargo 2000website and a review of the monthly traffic reports reveals that there areslow but steady improvements in performance.

Freight ready to be shipped off


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it is among Russia’s three largest rail operators, hasspent US$400 million upgrading its equipment, infra-structure and information systems in preparation forthe new service, but has not yet posted a schedule.

BERLINIn January, Deutsche Bahn and Russian Railwayshauled 49 freight containers full of shoes, electronicsand apparel from Beijing to Hamburg in 15 days.During the 6,200-mile trek through China, Mongolia,Russia, Belarus, Poland and Germany, handlers at theMongolian border had to transfer containers from railcars that run on Chinese tracks to ones that run onRussian tracks, which are 3.5 inches further apart thanthose in most other countries. Other handlersperformed the same task again when the gagechanged back at the crossing from Belarus to Poland.Then, to complete the final stage to Hamburg, the loadhad to be split onto two shorter trains, becauseGermany limits the length of freight trains to 700meters. Rail officials said afterwards that with a bitmore practice shuffling containers back and forth, theycould knock another 5 days off the journey. In March,

the German rail group began experimenting with longer freight trains,hoping eventually to permit 1,000-meter trains on some routes. Also in March, Deutsche Bahn and Russian Railways finally establishedTrans-Eurasia Logistics with a 30% share for each partner and includedTransContainer (20%), Polzug (10%) and Kombiverkehr (10%) in the deal.The joint venture to provide direct services between Western Europe andRussia was originally signed in June 2007. The next step will be to estab-lish a trilateral venture with the addition of Chinese Railways in order tocomplete the rail link from Asia to Europe.

Gateways - Asia

NEW DELHIThe Union Cabinet, the Indian government’s executive body, eased curbson overseas investments in the country’s real estate, petroleum refining,commodity exchange and aviation sectors on January 30. Foreign directinvestment in cargo and chartered airlines was raised to 74% from 49%previously. Foreign investors can also own 74% of ground handling serv-ices once they have obtained security clearances. On February 1,Lufthansa confirmed that it had begun talking with Jet Airways and QuikJetof Bangalore to establish strategic alliances for cargo operations. Also inFebruary, India’s Ministry of Civil Aviation said it had been approached byFedEx, Malaysia Airlines and Heavylift Cargo Airlines to establish cargo


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Freight train entering a tunnel in Goa, India




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operations within India. Besides Air India, which has dedicated freighteroperations, Jet Airways plans to fly cargo within 18 months. FlyingtonFreighters and Aryan Cargo Express are also planning to start cargo serv-ices. Still, the nation’s poor infrastructure will continue to hinder itsdomestic airfreight market. The Directorate General of Civil Aviation said itwould issue more licenses for air cargo after upgrades have beencompleted at both international and metropolitan airports, possibly as earlyas 2010. There are very few aircraft dedicated to freighter services in Indiaand few pilots. India’s airline operators have had to hire almost 1,000foreign pilots to keep their planes in the air.

HONG KONGAfter a long and productive symbiosis with Hong Kong Air Cargo TerminalsLimited, Cathay Pacific will dispose of its 10% stake in HACTL and investHK$4.8 billion (€391 million) in a new 2.6-million-tonne cargo terminal atHong Kong International Airport. The Airport Authority of Hong Kong andCathay Pacific Services Ltd. signed a 20-year franchises agreement inMarch to build a new facility. It is scheduled to open during the second halfof 2011. HACTL, one of the world’s most successful terminal operators,runs the existing 3.5-million-tonne cargo facility at Hong Kong InternationalAirport, which serves nearly 90 international airlines and 1,000 freightforwarders. HACTL’s management opposed Cathay’s plans for a newterminal, saying it would fragment business and stifle competition. Cathayargued that it needed lower handling costs so it could compete effectively

in the cost-conscious freight market. The airline’s newterminal plans to serve other carriers and, presumably,use fees from them to mitigate its own handling costs.

Commodities - Europe & Africa

ROMETony Wright worries that the safety of pharmaceuticalproducts could be at risk when they travel by air. Asmanaging director of a cold-chain managementconsultancy, Exelsius, Mr. Wright does have a dog inthis particular hunt, however. He said during the ColdChain Storage & Distribution Conference, in Februarythat an airfreight company and a pharmaceuticalmanufacturer might easily have different proceduresand perhaps different values in handling pharma prod-ucts. For example, when an airline focuses on itsinternal operations and performance, it may overlookspecific product requirements such as temperaturesensitivity. Any airline that handles temperature sensi-tive goods would dispute this statement. Still, Mr.Wright said that aligning operating procedure in asingle logistics assurance plan would make flyingpharmaceuticals safer. Although pharmaceuticalmanufacturers and airlines are trying to understandeach other better, there is still a long way to go, Mr.Wright said.

MOSHIPaul Courtright and Susan Lewallen, co-directors ofthe Kilimanjaro Centre for Community Ophthalmology,received a shipment of eyeglass frames in Februaryfrom Seva Canada in Vancouver. The frames,designed for infants and children, were donated to thecentre, a part of Tumaini University’s Kilimanjaro Chris-tian Medical College. Pascal Leutwyler of World WideAnimal Travel, a man who knows a thing or two aboutshipping goods to Tanzania, arranged for the framesto fly with AF-KL Cargo less than 48 hours after theyarrived at Seva’s office in British Colombia.


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MOVING ON - World

Ton Smulders assumes the presidency of theEGSAC, the network of independent sales and serviceagents for cargo, in May. Mr. Smulders was the associ-ation’s vice president under Glauco Martinelli, who waspresident from 2002 and helped membership grow to31 members from 13 during his six-year tenure.

Eric Kirchner became president of freightforwarding at UPS in March. In his new position, Mr.Kirchner will oversee the company’s forwarding serv-ices as well as its global brokerage and non-assetnetwork management services. The work will includedirecting air and ocean carrier relationships, devel-oping trade lanes, supervising freight sales to mid-sized businesses, and managing truckload and less-than-truckload contract services.

Frank Appel replaced Klaus Zumwinkel as CEO ofDeutsche Post World Net in February. Mr. Zumwinkelresigned over reports that he had evaded US$1.5million in taxes. Mr. Appel has been a member of theDPWN management board since 2002 with oversightresponsibilities for logistics, international mail, regula-tions, and key accounts.

Dr Joachim Schäfer joined Panalpina inFebruary as head of corporate development. Mr.Schäfer, who is responsible for mergers and acquisi-tions transactions, came from Deutsche Post, wherehe was a manager in corporate development, salesand marketing.

Bryan Vining is the new VP of strategic develop-ment for SEKO based in Itasca, IL, and is responsiblefor developing new offices within the SEKO network.Mr. Vining was previously director of corporate busi-ness development for Kitty Hawk.

Paul Farnan moves into the newly created post ofsales and development manager for the Pacific regionfor freight wholesaler, AMI. From the Auckland office,Mr. Farnan’s role will be to sell AMI services fromaround the world to destinations in the Pacific Islands.

Jorgen Veslov became CEO of Skycooler in theUK in February. Mr. Veslov was previously involved incontainer leasing, information technology, and logis-tics. With his partner, Philip Hill, who took over asSkycooler’s chairman in February, Mr. Veslov foundedthe ULD pooling services in the UK in 2002.

cargovision datelines

JUNE 23-25 EyeForTansport 6th Annual 3PL SummitInterContinental BuckheadAtlantaT: +1 800 814 3459 ext.209T: +44 (0) 207 375 7591E: [email protected]

JULY 1-2 The Mail and Express Delivery ShowNovotel London West HotelLondonT: +44 (0) 870 950 7900 F: +44 (0) 870 950 7910www.triangle.eu.com/MEDS

JUNE 9-10Frankfurt: Air Cargo Handling 2008Steigenberger Airport HotelT: +44 208 668 9118www.evaint.com

JUNE 17-19Air Cargo China 2008Shanghai New International Expo CentreT: +44 1737 645 777F: +44 1737 645 888E: [email protected]

SEPTEMBER 15-17CargoFacts 2008Loews Miami Beach ResortMiamiT: 206-587-6537F: 206-587-6540E: [email protected]/symposium/index.htm

SEPTEMBER 23-26FIATA World CongressVancouver Convention & Exhibition CentreVancouverE: [email protected]



How successful is the air cargo securityprogram today?

I would give the global program an overall grade ofB+. But that would depend on the provider, the cate-gory, and the region. For example, I would givefreight forwarders an A, because they approachsecurity issues proactively in order to meet theircustomer’s needs. The world’s airlines would get anA-minus. There is a lot of pressure on airlines fromgovernment authorities and from their owncustomers to tighten their security programs. Whilethe major international carriers are enhancing theirsupply chain security, many of the companies thatfeed traffic into their systems need to improve theiroperations. The biggest concern globally is for small,independent truckers. Thousands of them aroundthe world move airfreight either as pick-ups, last-mileservices, or between hubs and airports on bills oflading. Many of them operate independently withlittle government oversight and minimum licensingand insurance. Their security programs should be asrobust as those of any other partner in the supplychain, and they should be equally accountable. Letme add that we are seeing some progress. Forexample, some authorities in Asia are demandingthat truckers working in their countries strengthentheir security. However, many areas of the world haveshown little meaningful progress on this issue.

What about ground handling? Many expertssay it is the biggest gap in the air security net.

It remains a global, systemic problem. One main

reason is that ground-handling jurisdiction – if itexists at all – runs the gamut of control and thereisn’t a central source of responsibility. Ground-handling operators could be under the control ofcarriers or the airport authorities, but too oftenneither party wants the responsibility. Regardless, itis absolutely critical to begin strengthening the stan-dards of the companies handling goods on theground. However, this raises the larger issue ofcommunication. Regulators in different regions priori-tize security issues differently. So the global system isnot as standardized or harmonized as it needs to be.This is important because airfreight has never beenmore global than it is today. Regulators may notagree on the procedures their counterparts are initi-ating, but they must understand what they mean andhow it affects them. Without common under-standing, there will continue to be gaps and peoplewho try to use those gaps to their advantage.

Since 9-11, security has centered oncounter-terrorism. Has that distractedattention away from the traditionalchallenges; theft, loss, and damage?

Ironically, many of the counter-terrorism initiatives inplace today evolved from anti-theft and anti-smug-gling programs that were developed years ago. Inaddition, the counter-terrorism plans our industry hasimplemented since 9-11 have dramatically improvedour ability to challenge criminals who would disruptthe supply chain. It has been a virtuous cycle. Also,supply chain security has little impact on some overtcriminal activities such as truck hijacking. However, it has curtailed hidden theft such aspilfering high-value goods from a warehouse. Wescrutinize cargo movements much more closelytoday and can respond faster to an event. These are very positive developments.

Are you encouraged by the trends you see in air security?

Much work remains. Regulators need to catch up tothe industry, which is way ahead of governmentauthorities in many areas. We need greater collabo-ration among airlines, forwarders and airport author-

COMPANY PROFILEDHL Global Forwarding wasfounded in 1969 by Messrs.Dalsey, Hillblom and Lynn.From its humble beginnings,shuttling bills of lading betweenSan Francisco and Honolulu,the company steadilyexpanded and is now theworld’s largest and most experienced international airexpress network, serving120,000 destinations in morethan 220 countries and territories.

As a 30-year veteran in security and law enforcement, Arthur G. Arway has developed a sharp eye for gaps in the fence. He is currently chief watchdog for the Americas at DHL Global Forwarding. He discussed some of his concerns with Cargovision.

BY ECCO SANDONE

LOOKING FOR GAPS


RESUMEFollowing a 30-year career insecurity and law enforcement,Arthur G. Arway joined DHLGlobal Forwarding in July 2002.He is currently vice presidentand head of regional securityfor North, Central and SouthAmerica. In this capacity, heregularly interacts withcolleagues, carriers andcustomers to address globalsecurity issues.

cargovision 15

ties to make security a seamless process for themovement of goods by air. However, there has beenprogress. Five years ago, security challenges were atthe intercontinental level. Many of those issues havebeen resolved and we are now concentrating onproblems at the local level. This is freeing the timeand resources to tackle new problems as they arise. I am also encouraged by the European effort tostrengthen the stakeholder partnership betweengovernment and business. When the EU’s Autho-rized Economic Operator (AEO) initiative rolls out this

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year, it will create economic incentives for providersto invest in supply chain security programs. The AEOprogram is patterned after the Customs-Trade Part-nership Against Terrorism (C-TPAT) initiative in theUnited States. Although C-TPAT is not a totallyunqualified success, it has been effective in danglinga carrot for businesses to strengthen their supplychains voluntarily. AEO shows how the world’s regu-latory authorities can move in step to help secure thesupply chains under their supervision. That is a verymeaningful and positive trend. ■

cargo.2.08 DEF 26-05-2008 09:41 Pagina 15


Wal-Mart and Tesco caused a stir when they told suppliers they wouldlose their business if they did not use radio frequency identification

(RFID) in the supply chain. We’ve heard little since from either firm, mostlikely because of the difficulties with installing and using RFID. But that

doesn’t mean progress is standing still.

BY MARCIA MACLEOD

RFID

cargo.2.08 DEF 26-05-2008 09:38 Pagina 16

cargovision 17

D ON THE SKIDS

■ Raghu Das is worried because RFID tags do notscan reliably. The managing director of the consul-tancy ID TechEx, says that a company like KimberleyClark might have no problem, because RFID tags areeasy to read on tissues and toilet rolls, but a firm likeSara Lee might only read 30% of the tags accuratelyon its frozen foods. “There’s no business benefit inthat,” says Mr. Das.Producers also worry about tag costs, althoughprices have dropped. While tag manufacturers tout aprice of US$0.10 each, a more rugged version,essential for many logistics applications, costs US$1to US$2 for a passive tag and nearly US$50 for anactive one. Add to that the infrastructure cost: howmany readers need to be installed, and where?Passive tags are cheaper than active tags and whilethey often read more reliably, they have a more limitedfunctionality. Scanners positioned along the supplychain read a passive tag, whereas an active tagenables real time location and can store and transmitadditional data.Widespread RFID implementation is also hindered bya lack of comprehensive standards. Although a lot ofwork has been done regionally and globally, there areno universal benchmarks yet. A tag put on an item inJapan or China may not be readable in Europe or theUS, unless it incorporates electronic product codes,which were created as a low-cost method of trackinggoods using RFID.There are a number of successful RFID implementa-tions, all driven by shippers in retail, automotive, andhigh-tech. Indeed, shipping containers controlled bySavi Technology’s RFID-based tracking system,which incorporates readers at several ports aroundthe world, are nearly all owned by shippers, not ship-ping lines. Logistics companies are finding little interest for thetechnology. “Our customers are not really driving ourRFID projects,” says Dr Helmut Faerber, senior VPinnovation and strategic projects for Schenker.“Customers can’t see the benefits.”

TAG, YOU’RE ITIATA has been involved with five RFID projects:baggage, catering, parts, turnaround, and cargo. Anumber of projects testing baggage tags for BritishAirways, Singapore Airlines and Air France KLM weresuccessful. Las Vegas and Milan airports have nowgone live with baggage tagging.

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Airlines have tagged catering trolleys to improve theirrate of return. For example, KLM Cityhopper hastagged its 1,200 catering trolleys in Amsterdam,Bordeaux, and Vienna. However, attempts to tagairline parts for Boeing and Airbus have failed thus far.Plans to reduce aircraft turnaround, which costs theindustry US$1.28 billion annually, are also beingdrawn up, although it is not clear how RFID will fit in.Various airfreight applications around the world havetagged pallets, containers, and road trailers.“Everyone knows that cargo containers are an asset,”says Andrew Price, RFID project manager at IATA.“And they want to know where they are.”AF-KL Cargo, TNT and Emirates are working withIATA to find an active tag solution acceptable to theUS Federal Aviation Authority. The FAA has not yetmade any recommendations for commercial airlinesalthough moving US military goods with the transmit-ting tags is common. Although it is only a recommen-dation, not a regulation, no carrier has been willing toput tags on aircraft. As Sybren Tuinstra, TNT Express’global manager of strategic innovation, points out, ifjust one aircraft comes down, even though it hadnothing to do with tag interference, the newspaperheadline would have enormous impact.

PROJECT FEVERIn Europe, AF-KL Cargo installed RFID in its ware-house at Charles de Gaulle 10 years ago, tagging 10-foot aluminum pallets and installing readers at entriesand exits. Now that the system needs replacing, thecompany is designing a system to track both the ULDand the freight it carries. For now, it will tag only valu-able, express and non-routine consignments, buteventually expects to have a real-time view of everyULD in the warehouse. Schenker is conducting two pilots: one with RFID andthe second combining RFID with telematics. The firstproject involves equipping trailers and depots inGermany with tags that log trailers in and out of thedepot. Using active tags will allow Schenker to extendthe pilot for yard management. The company plans toadd the ability soon, to see trailers at the docks, knowtheir destination and ensure they are loading the rightcargo.In the US, FedEx has combined RFID with GPRS andmapping software to create a continuous, real-timeview of packages, except when they are onboardaircraft. Additional sensors will eventually allow the tagto monitor temperature, humidity and other variables.In Asia, a project is being designed to use RFID inwarehouse management, combined with telematicsto monitor containers moving by sea from Hamburg

cargovision RFID on the skids

to Hong Kong. Ten containers were purchased for thepilot and the units are traced from warehouse totrailer to port, where Savi Technology’s readers arealready installed. GPS locates the container andsensors coupled to the door check temperatures.

HOLLAND HOPESTNT Express begins its first RFID implementation thisyear by installing the tags on cages, says Mr. Tuinstra.Introducing passive RFID on shipments will takelonger due to the extensive and expensive infrastruc-ture for the company’s 1,200 to 1,300 locations. DHLwants to control containers in night operations atLiege where workers have a short time in which tomove containers that all look alike. The firm is alsodeveloping RFID solutions for customers. Forexample, attaching passive tags to cases and palletsof fashion items at four warehouses in Germany andusing active tags, sensors and other technology oncontainers that move high value goods.DHL Forwarding and TNT are both involved in aproject in the Netherlands, along with AF-KL Cargo,Martinair and others, to test RFID at Schiphol Airportand Amsterdam seaport. The project, supported witha 670,000 grant from national and provincial govern-ments and the City of Amsterdam, is placing tags onaluminum pallets moving from AF-KL Cargo to TNTand from DHL to AF-KL Cargo. The airline reads thepassive tags on DHL’s export shipments as they enterits warehouse and again as they move onto trucks fortransport to the aircraft. TNT’s imports are tagged inthe AF-KL Cargo warehouse, put into TNT trucks andtransported to the TNT warehouse, where they areread again as they are unloaded. Messages in bothpilots are being sent to the airport community system,including customs. The Amsterdam port projects include taggingimported newsprint rolls and cocoa consignments.The latter project tags handling equipment to ensurethe beans are loaded in the right place.“These are the first steps,” says Ben Radstaak,managing director of the association Air CargoNetherlands. “We want to see if RFID speeds upcargo handling, makes it more efficient or reliable,facilitates customs, and improves security controls.”It sounds like a tall order, but other projects aroundthe world indicate that RFID can do all that and moreif used correctly. Once the barriers are overcome, thetechnology could prove to be the catalyst for dramaticchanges in logistics. ■

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Andrew Price:“Everyone knows thatcargo containers arean asset, and theywant to know wherethey are”


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Satisfying the air cargo service requirements of a large, multinationaland fast-growing client is always a challenging task. But when youare based in one country and the customer’s head office is located inanother, several hundred kilometers away, the challenge is taken to awhole new level.

BY PHILLIP HASTINGS

■ Jorge Costa Leite relishes his role as Air France Cargo-KLM Cargo’s key account manager for Inditex Iberia. Heis based at Oporto Airport, Portugal, whereas Inditex, amajor Spanish fashion goods manufacturer and retailerwith worldwide operations, has its head office in LaCoruna, some 350 kilometers away in northern Spain.

Not surprisingly, Mr. Leite is constantly roaming across hisrange, like a great cat. “My brief is huge and covers boththe export and import sides of the client’s business. Thatinvolves regularly visiting Inditex locations in La Coruna,Zaragoza, Madrid, Barcelona, and elsewhere in Spain.”

Mr. Leite must also maintain close contact withcolleagues throughout the AF-KL Cargo organization.“Basically, my role is to listen to what Inditex wants andthen work with other people in AF-KL Cargo to see whatsolutions we can provide.”

With eight major brands and more than 3,720 stores in 68 countries worldwide, the solutions required by Inditexare continuously changing and expanding. Thecompany’s plans for this year, for example, includedoubling the number of its stores in Moscow to 32 andopening a new market in South Korea. “I have to checkthe AF-KL Cargo schedules constantly to see how theycan meet the current and planned future needs ofInditex,” says Mr. Leite.

He took up his present position four years ago when AF Cargo, as it was known then, first secured the Inditexaccount and began operating a weekly A300 freighterservice out of Oporto, to move the Spanish company’sexport traffic though Charles de Gaulle onto connectingflights to markets all over the world. That 48-tonnecapacity A300F was to have been replaced in April with a larger B747 freighter. Mr. Leite is also the Cohesionproduct manager for Inditex and, in that context, saysthat AF-KL Cargo operates two additional Inditex-dedi-cated B747F flights a week out of Zaragoza, Spain, toBahrain.

“The key to success is a close partnership with theclient,” concludes Mr. Leite. “I have a deep understandingof Inditex’s business and know what they need. In fact, it was the head of that company who originally proposedme for the job I do now!” ■

cargovision people make a difference: Jorge Costa Leite

IBERIAN LYNX

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gency relief operations. Until recently, disasters typi-cally involved many small logistics companies, eachworking in a particular geographical niche or sectionof the supply chain, says Bertrand Navereau, vicepresident in charge of emergency relief and defenselogistics at Kuehne + Nagel. “The major humanitarianagencies are now looking to establish ongoing part-nerships with strong international partners that canorganize an entire supply chain anywhere in theworld.” Partly in response to those efforts, K+N created aspecial department in Paris last December to supportnon-governmental agencies and other humanitarianorganizations involved in responding to disasters.“Certainly, there was a commercial aspect to theproject,” says Mr. Navereau, who heads the new

Dramatic pictures of aircraft rushing emergency supplies to victimsof natural disasters flash across our television screens far too often.After scrambling to deal with the aftermath of the South East Asiatsunami in 2004, the Pakistan earthquake in 2005, and the CentralAmerica hurricanes in 2007, a number of relief organizations havesought stronger ties with the logistics industry.

BY PHILLIP HASTINGS

■ Behind the headline-hitting scenes of food, medicines, tentsand other equipment being loaded or unloaded at disaster sites,lies a massive and complex logistics exercise. Until relativelyrecently, though, such operations were often organized in an adhoc fashion. The many government agencies and independentcharities involved would work with a wide range of logisticsservice providers on individual local projects.

Inevitably, the urgent and hectic nature of those operationssometimes led to operational and economic inefficiencies andmistakes in both planning and implementing the humanitarianlogistics. However, since the South East Asia tsunami high-lighted many of those issues to a wider international audience,there has been a noticeable push by leading humanitarian agen-cies to develop close and permanent links with logisticsproviders and carriers in order to improve the efficiency of emer-

WHAT A RELIEF!© Tom Pietrasik/Corbis


cargovision 21

office. “But that was not the main reason we estab-lished the new department. It would be indecent,when we have such logistical resources and skills, toremain indifferent to the huge need for humanitarianservices around the world.”

THREE AND ONEThe trend towards partnerships between humani-tarian agencies and the international logistics industrybecame more apparent at the beginning of this year,when the United Nations announced that a new initia-tive was being pioneered by members of the WorldEconomic Forum and the UN. It said that three globallogistics companies, Agility, TNT and UPS, would joinforces to manage the logistics of responding to large-scale natural disasters.The three companies and the UN agreed on thecircumstances and procedures for activating jointlogistics emergency teams. These teams will providetransportation services and support from logisticsspecialists, including airport coordinators, airportmanagers, and warehouse managers, in addition tologistics assets like warehouses, trucks and forklifts.The teams will operate during the first three to sixweeks after a disaster.The Asian tsunami spurred a conscious effort amonginternational logistics firms to work together andsupport humanitarian relief operations, says LudoOelrich, director of the TNT-WFP initiative. “During ameeting at the World Economic Forum in early 2005,our CEO, Peter Bakker, and other logistics industryCEOs discussed the tsunami responses during the

time when those operations were still running. They agreed tolook into areas where they could share expertise and best prac-tices. They also agreed to examine collaborative models, whichprobably started the process towards the UN initiative involvingTNT, UPS, and Agility.”

JOHNNY ON THE SPOTUnder the TNT-WFP initiative, the logistics company supportsthe World Food Program in three areas: response to disaster,projects to improve the program’s logistics expertise, and effortsto raise funds to reduce global hunger. “On the disasterresponse side, we have a pool of trained TNT people who canbe available to help within 48 hours,” Mr. Oelrich says. “Thelocal TNT organization can also play a role, for example byproviding on-the-spot resources like trucks or office space. Wecan also provide airlift for emergency supplies, using the 40 orso aircraft in our network.”Providing airlift is often the most complex task, says PascalMorvan, AF-KL Cargo SVP of operations. AF-KL Cargo hasfirsthand experience with disaster operations, having organizedspecial freighter flights to Colombo in the aftermath of thetsunami, and to Islamabad following the 2005 earthquake. “Inthese instances, we must first secure a B747 freighter from ourfleet. That means we must compress the rest of our scheduledfreighter program in order to free up an aircraft. Then we have tosecure the necessary flight clearances and, in the case ofColombo and Islamabad, plan the handling of the aircraft andcargo at airports we do not usually serve. All this must happenin the space of three or four days.” Better planning and cooperation will help logistics and humani-tarian organizations coordinate their activities in times of crisis,better enabling them to deliver relief where it is needed. ■

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Mr. Oelrich: “On the disasterresponse side, we have a pool oftrained TNT peoplewho can be availableto help within 48hours”

cargo.2.08 DEF 26-05-2008 09:37 Pagina 21


cargovision a week in the life of


cargovision 23

SUNDAY Geneva-RomeI spend more than half my time traveling theglobe and banging the drum for our industry;so today, it feels pleasant to be boarding aplane heading for my hometown. Still, ademanding week ahead at the World CargoSymposium means that I must hit the groundrunning. Once seated, I review the final prepa-rations for the event. We're expecting over800 delegates: customs authorities, airlines,postal services, freight forwarders, suppliers,and shippers. The schedule looks tight.

MONDAY RomeHaving dealt with e-mail and called theGeneva office, I meet with the IATA Cargoteam, led by Aleksander Popovich, to reviewfinal arrangements. The symposium will be anopportunity to measure progress since lastyear's event in Mexico and to set toughtargets for the challenges ahead. Our preparations last until late, but a familydinner means that I can end another hecticday on a relaxed note.

TUESDAY RomeOn the first day of the symposium, I arriveearly to meet our opening speaker, formerItalian Prime Minister, Lamberto Dini. We haveknown each other since the 1970s in NewYork, when I worked for Citibank and he wasworking for the International Monetary Fund.We catch up briefly before the proceedingsbegin. Soon it will my turn to take to thepodium and present the state of our industry.During the coffee break, I meet with Korean AirCargo President, Chi Hang-Choon. After themorning plenary, I go straight into a press

conference with about two dozen businessand trade journalists. Since Rome is my home-town, we have many one-to-one interviewslined up in the afternoon. As an IATA official, Itry to avoid answering questions about Alitalia,but this is difficult with the Air France KLM deal on the front pages. However, I underlinethe urgency for avoiding a financial crisis. I finish the day with phone calls to various IATA offices.

WEDNESDAY RomeI start the day by meeting with Alitalia. Then,after calls to our Geneva and Beijing offices,it's time to prepare for an afternoon meeting ofthe IATA Cargo Committee. The group is moti-vated, effective and works with leadership andvision. I explain that cargo is now at the top ofthe IATA’s agenda and our board memberssupport plans to deliver eight new e-freightlocations by year-end. In addition, 14 newCargo Account Settlement System (CASS)operations have opened since last year'ssymposium. Later, I meet with the symposiumsponsors, Argol, the internal event organizers,various postal service representatives, ship-pers, and forwarders. In the evening, I joindelegates for a gala dinner at the magnificentVilla Miani. I proudly show the wonders ofRome from the terrace, but light rain keeps usfrom walking around.

THURSDAY Rome-GenevaOn the closing day of the symposium, I thankthe IATA Cargo team for a great job beforeleaving for Fiumicino airport. However, my planto attend an event on the way back to Genevais thwarted by Rome’s busy traffic. I arrive at

the airport just in time to see my flight to Zurichpushing back. Reflecting on the ups anddowns of frequent travel, I rebook my ticket.Upon landing in Geneva, I go to the office andorganize a meeting to address the problem ofslots we had discussed during recent visits toHong Kong and Italy.

FRIDAY GenevaI arrive at my desk very early to deal with theflood of accumulated papers. With ThomasWindmuller, IATA SVP and corporate secretary,I discuss plans for our June board meetingand annual general meeting in Istanbul. I calltwo CEOs and invite them to participate on apanel there. During the afternoon, I plan tripsto South America and Africa and check theagenda for a week in Montreal, where I will visitour offices and discuss the environment withInternational Civil Aviation Organization (ICAO).Paul Steele, our new environment director,gives me an update on ICAO's new Govern-ment Committee on Environment. I spend theevening ensuring that I have completed all mytasks in Geneva.

SATURDAY Swiss CountrysideOn the drive into the mountains, I sift throughpress cuttings from the Cargo Symposium. Ithink about the leadership IATA has assumedin strengthening communications and drivingchange in the air cargo supply chain. A bleep from the Blackberry momentarilydistracts me from the alpine scenery. I stop thecar to discuss some problems with a contractnegotiation in Beijing. Once they are resolved, I set about attending to a couple of communi-cations of my own.

GIOVANNI BISIGNANI

Giovanni Bisignani has been director general and CEO of the International Air Transport Association (IATA)since 2002. Under his leadership, IATA has spearheaded improvements in safety and efficiency andfocused regulatory attention on important long-term issues: liberalization, the environment, and taxation.Previously, Mr. Bisignani spent five years as Alitalia’s CEO and managing director. During that period, hewas also a member of IATA’s Executive Committee and chairman of the Association of European Airlines.

BY ANDY WESTON



■ Cargo handlers keep Francis Isidoro awake atnight. Airlines are responsible for flight safety, eventhough subcontractors perform some of their mostbasic activities, like ground handling. Mr. Isidoro isthe cargo director of quality, safety, environment andregulations for Air France. He represents AF-KLCargo in the IATA project to develop a safety audit forground organizations. With luck, Mr. Isidoro will sleeppeacefully once the ISAGO initiative launches thissummer. This measure will bring uniformity to a sector of theindustry that has so far lacked universal operatingstandards. This situation has impeded handlers fromadopting common practices and airlines fromsharing meaningful comparisons of their perform-ance. To overcome this deficiency, an IATA taskforcespent the last year formulating standards and animplementation strategy. It conducted trial auditsbetween November and January. Finalizing the stan-dards in April opened the way for the first audits tobegin by June.The objective is to reduce accidents and injuries, butthe program has a number of other benefits. It shouldreduce costs, because handlers will not have toendure separate audits from each customer. Applyinga uniform auditing process and harmonized standardsshould raise efficiency and spread best practices.

“ISAGO will definitely put pressure on substandardground service providers,” says Lilian Chan, generalmanager of marketing and customer service at Hong Kong Air Cargo Terminals (HACTL). “It will add administrative costs but handlers can achievelong-term benefits and savings from reducedpersonnel injuries, equipment damage, andenhanced performance.”

ISAGO vs. IOSAThe 10-section audit comprises over 350 standards.They cover the gamut of activities from the cargowarehousing to load control and handling forpassengers and baggage. A task force of 30 expertsfrom airlines, handling companies and regulatorsdeveloped the standards under the leadership ofIATA. The group drew many of the standards fromthe IATA Operational Safety Audit (IOSA). This earlierinitiative, introduced in 2004, was developed to intro-duce uniform safety auditing standards for airlines.IOSA covers all aspects of a carrier’s operations,from corporate organization and management toflight operations, cargo operations, and groundhandling. About 200 airlines have IOSA certification,which must be renewed every two years. Thebiggest difference between the two programs is that

Airlines have service level agreements with handlers and theyusually include safety standards. These agreements vary from placeto place where handlers may operate according to their ownprinciples. Now comes the IATA Safety Audit for GroundOrganizations (ISAGO). It’s a service level agreement with moredetail and more benefit to the industry.BY IAN PUTZGER

THE RENAISSANCE

Lilian Chan: “ISAGO willdefinitely put pressure onsubstandard groundservice providers”

GROUND OUT


cargovision 25

inspectors from independent third-party firmsconduct IOSA audits while a pool of 30 to 40 partici-pating airlines provides the auditing staff for ISAGO.Third party auditing would not be viable for ISAGOgiven the large number of handling companies to bevetted.Mr. Isidoro has been involved in both industry drivesand believes the airline certification program was theideal launch pad for the new undertaking to auditground handlers. “We wanted full coherence of IOSAand ISAGO standards,” he says.An ISAGO audit consists of two parts: auditing thehandler’s headquarters and inspections of individualstations. Certificates will probably be valid for twoyears, says Michael O’Brien, IATA’s director ofprogram implementation and auditing. “That isunless pool members suggest on the basis of theirexperience that we audit a particular handler morefrequently.”

QUEUE YOUThe pool of carriers that contribute auditors to theprogram will determine which handlers are going tobe vetted. IATA has yet to announce who will be thefirst in line, but interest from handlers is lively, Mr.O’Brien says. HACTL participated in the ISAGO

development and opened its facility to a trial auditlast November. The handler learned from that exer-cise what it would need for a certification when theISAGO program is launched. In some areas, biddingwars have erupted between handlers who want tobe first on the list for an audit. That raises the ques-tion of how handlers get on the list for certificationwhen they have not been nominated by a partici-pating airline. “We have to work out a mechanism ofhow we get in handlers from outside that pool,” Mr.O’Brien says.

IATA estimates that a typical audit for a handlingcompany will occupy three inspectors for three days.It has targeted audits at the headquarters level foreight companies and at the airport level for 60stations. “We will learn how many we can conductduring the first year,” Mr. O’Brien says. For reference,IOSA audits reached 230 firms last year up from 30in 2004.Mr. Isidoro expects ISAGO to establish itself as acore element in the relationship between airlines andhandlers. Over time, it will become part of the servicelevel agreements between them. It has happenedalready with the airline safety standard. “Today,whoever is not IOSA-compliant cannot be a code-share partner for us,” says Mr. Isidoro.■

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Francis Isidoro: “We wanted fullcoherence of IOSA andISAGO standards”

cargo.2.08 DEF 26-05-2008 09:36 Pagina 25

NEED TO KNOW■ Population: 150,448,339 (July 2007 est.)■ Capital city and major financialcentre: Dhaka.■ Languages: Bangla (the officialname for Bengali) and English.■ GDP real growth rate: 6%(2007 est.); GDP composition:agriculture 19%, industry 29%,services 52%■ Economy: Almost two-thirdsof Bangladeshi people areemployed in agriculture,producing mostly rice. Remittances from overseasBangladeshi workers in theMiddle East and Malaysiaaccounted for about US$4.8billion in 2005-06; garmentsform a major pillar of theeconomy.■ Trade: There have been wavesof liberalization in trade policy,but protective tariffs still shieldlocal products besides gener-ating revenue. ■ Exports: US$11.25 billion in2007 (est.), mostly garments,jute and jute goods, leather,frozen fish, and seafood. Majorexport partners in 2006 were:United States 24.9%, Germany12.8%, Britain 9.8%, andFrance 5%.■ Imports: US$14.91 billion(2007 est.), mostly machineryand equipment, chemicals, ironand steel, textiles, foodstuffs,petroleum products andcement.■ Currency: The Taka. US$1:70.177 Bangladeshi Taka (BDT)(on March 25, 2008)

Sources: CIA - The WorldFactbook, The World Bank,Oanda.com.


■ It’s a common complaint in developing countries:cargo handling is controlled by one operator, usuallythe local airline or an offshoot of it, very often ownedby the government. Bangladesh is no different,except in detail. The national carrier, BimanBangladesh Airlines, was turned into a public limitedcompany in July 2007, but the government retainedall the shares.

Zia International Airport handles about 95% ofBangladesh’s international air cargo, with Chittagonghandling the remaining 5%. The bias towards Dhakaisn’t so bad, because the road and rail transportsystems are rated as reasonably efficient – mostdeliveries can be made within about 12 hours oflanding - and Chittagong doesn’t have much in theway of handling equipment yet.However, the general opinion is that Dhaka’s cargovillage, inside the airport, is hopelessly small, under-equipped, and inefficient. At peak times, when ready-made garment exports overlap with seasonal vegeta-bles and other perishables, the pressure on spacedrives up rates. This problem is unlikely to go away inthe near or mid-term future. The other common complaint is that export volume isfour times higher than import. This hinders pure

freighter operations, because the backhaul intoBangladesh isn’t worth it unless loads can be consoli-dated from other ports. Airfreight tonnage reported byBangladesh’s Export Promotion Bureau for 2007 was98,641 tonnes, a 22% drop from 2006, largelybecause of flooding in mid-year. The Board’s figures show ready-to-wear garmentsforming 60% of export freight, with perishables at25%; other categories include leather and leatherproducts at 7% and handicrafts at 3%. Europe is themajor destination area, taking 50% of Bangladesh’sexports, with North America absorbing 35%.Most of the food exports used to head for overseasBangladeshi workers in the Middle East, but nowa-days are distributed to restaurants and shops in manyplaces. Passenger aircraft bellies dominate themarket, taking about 85% of cargo, though freightershave become more common during seasonal peaks. Sources of inbound cargo are mostly China, HongKong, Taiwan and Japan for clothing accessories,machinery, textiles and foodstuffs, with France,Germany, Switzerland and Sweden supplyingtelecommunications equipment and raw pharmaceu-tical materials. Pharmaceutical exports have becomebig business, following the trend established by India,though figures are hard to obtain.

BANGLADESH BY MICHAEL WESTLAKE

cargovision country file

Rickshaws on the streets of Dhaka © David H. Wells/Hollandse Hoogte


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There are plans for expansion of the cargo village, orpossibly even an entire new airport, but localobservers say there has been little sign that anythingwill happen soon. Politics is a more popular subjectlocally, with many things waiting to be settled aftergeneral elections, due later this year. But there has been good news: in a countryrenowned for its bureaucracy, operators now say thatsince last year the paperwork relating to air cargo hasbeen simplified and has become faster to process.Indeed, all documentation is expected to becomeelectronic within the next three months.

As for the future, much depends on the upcomingelection. The Civil Aviation Authority of Bangladesh,the regulatory authority, is heavily bureaucratic andwill need a hefty kick from a new government to startheading towards something like an open skies avia-tion policy. As one air cargo manager said, “First wehave to change our mindset as a country and theneverything can move forward one step at a time.”

WHAT THEY SAY

AIRPORT HANDLING IS INEFFICIENTMahabubul Anam, Managing Director, Expolanka Bangladesh Ltd

Handling at the Zia International Airport needs to beimproved. It’s inefficient; it’s a monopoly. The Civil

Aviation Authority of Bangladesh is starting atendering exercise soon, but it’s a political process.Biman is bringing in more equipment to help improvetraffic flows. Flights have increased, because of trafficto the Middle East.

PRIVATIZATION WOULD BE GREATAnonymous cargo industry executiveDhaka

A lot of influence should be given to private enterpriseto persuade people to invest in the airfreight trade, sowe won’t be so controlled by foreign carriers who canset the rates. If there is competition from privateenterprise, there will be fewer fluctuations in themarket. When the cargo village was built, they hadvery different needs, and now it’s completely inade-quate. We have asked the government for land tocomplement the cargo village, but I don’t know whenanything will happen.

A WALK IN THE PARKAshique Uz Zaman, Executive Director, Hellmann Worldwide Logistics Ltd.Dhaka

The cargo village is completely inadequate. At themoment we have to unload cargo in the parking lot.There’s been talk of opening another airport 50 kilo-metres away from Zia International Airport, but I don’tsee anything happening for at least 10 years.

TRAVELER TIPS■ Tipping (called baksheesh) isnormal in restaurants and forfares; about 5% is standard.■ Outside the main cities,currency exchange or use ofcredit cards may be difficult.Cash is king.■ Skimpy beachwear may causeproblems - this is a conservativenation, with a mixture of Muslim(83% of the population) andHindu (16%) cultures. Also,beaches may not be secure atnight.■ October-February is the driestand coolest season, with therest of the year being hot andhumid. Heavy rains can causemuch damage and loss of life,especially in coastal areas. ■ Spicy food is the norm;alcohol can usually be found inexpensive hotels and restau-rants.■ Electrical power for theconsumer is 220 volts, 50Hz.Weights and measures aremetric.■ US dollars are preferred overother currency. When bargaining(which is standard), start atabout half the asking price andwork your way up to what isacceptable to you and to theseller.■ Political uncertainty meansthat street demonstrations mayspring up with little warning andthere is a real risk of beingkidnapped in the Chittagong HillTracts region.

Sources: worldtraveltips.net,lonelyplanet.com, smartraveller.gov.au, CIA - The World Factbook.

The skylight ceiling inside a shopping mall in Dhaka

Decoration of a rickshaw

© Susan Liebold/Image Select

©Je

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Oct ‘06

Major Scheduled Airlines - Global Freight Traffic Growth

-2%

0%

2%

4%

6%

8%

10%

Jan ‘07 Apr ‘07 Jul ‘07 Oct ‘07 Jan ‘08Jan ‘05 Apr ‘05 Jul ‘05 Oct ‘05 Jan ‘06 Apr ‘06 Jul ‘06

Ann

ual G

row

th

Growth - Quarter vs Quarter previous Year

Average Growth of Last 3 Years = 3,9%

Growth - Month vs Month Previous Year

Airline Growth in Diffirent RegionsAnnual International FTK growth rates per month

30%

20%

10%

0

-10%

-20%

-30%

Far Eastern AirlinesUS AirlinesEuroppean AirlinesIATA world

Jan ‘01 Jul ‘01 Jan ‘02 Jul ‘02 Jan ‘03 Jul ‘03 Jan ‘04 Jul ‘04 Jan ‘05 Jul ‘05 Jan ‘06 Jul ‘06 Jan ‘07

GDP - Trade - Air FreightAnnual growth rates

15%

10%

5%

0%

-5%

-10%

IATA FTKWorld GDPManufacturing Trade

2000 2001 2002 2003 2004 2005 2006 2007

CALM BEFORE THE STORMFig.1.■ 2007 ended better than it started. During the first quarter,airfreight growth was minimal, because traffic shifted to maritimetransport and companies reduced inventories. After May, the cargomarket recovered and the industry recorded higher growth duringthe final six months. Remarkably, this growth took place at thesame time the financial crisis hit the US. It did not affect the fastgrowing markets of China, India, Russia and the Middle East. While high oil prices toppled economic growth in oil-consumingcountries, it stimulated business in oil-producing states.

Fig.2. ■ Growth in air cargo volume has been fairly flat for the past threeyears. The boom-bust cycle last seen between 2000 and 2004 isnow gone. Most airline growth rates followed the same patternindicating the effects of globalization. In 2006, the US airline sectorwas growing a bit faster than the world average, because itscarriers were expanding internationally. Their growth slowed in2007 in step with the overall US economic slowdown. Airlines of the Middle East recorded the highest growth rates in2007, while the Asia-Pacific carriers showed lower rates, especiallythe Japanese and Taiwanese companies.

Fig.3.■ International airfreight has a strong correlation with manufac-turing trade. Both airfreight and trade grew less during 2007 thanduring 2006. The fluctuation in GDP growth is less than the othertwo indices, because most of the data comes from the servicessector, which is more stable than the manufacturing sector. In 2001, both trade and IATA growth recorded negative numbers, due to the crunch of the computer and telecom industries and thestock market crashes that followed. The outlook for the currentyear is for slower growth in trade due to a sharp slowdown in theUS economy.

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Airports: Top 15 in International Freight

0HKG

4,5%

Total 2006

Increase in 2007

.000.000

.000.000

.000.000

.000.000

tonn

es

ICN NRT PVG FRA CDG SIN MIA AMS TPE DXB LHR BKK JFK ORD

9,4%

-1,1%17,2% 1,7%

6,4% -0,9%

5,9% 5,5% -5,5%9,5%

4,0%5,8% -3,9%

1,4%

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Fig.5.■ The Middle East and Asia were mainly responsible for the overallincrease of freight-tonne kilometers flown during 2007. Of the 10airlines with the largest absolute increase, Cathay Pacificcontributed the most because it consolidated Dragonair’s fleet.UPS and FedEx are also in the top-10 along with Air France-KLM.LAN Airlines from Chile is growing fast in Latin America, which isenjoying high economic growth because of rising commodityprices.

Fig.4.■ The major goods exporting countries are also the major airfreightcountries, except for those nations that export bulk commodities.Their exports have high growth but the goods travel by ship orpipeline. Germany, the US and China are the worlds largestexporters. China surpassed the USA in 2007 and it is expectedthat within 10 years it will be larger than Germany. Canada andMexico export mainly to the US; consequently their airfreightperformance is less than their export performance. The same is true for most European countries, because theyexport mainly to other European nations. The UK is the onlycountry with negative export growth, which is also reflected in itslow airfreight performance.

Given the economic volatility introduced by the combination of record commodity prices andfinancial crisis in the West, 2008 will be a tense year for the airfreight industry.

BY DICK VAN DEN BERG

Fig.6.■ The impact of China’s growth is clearly visible at the world’sairports. Shanghai Pudong and Hong Kong are among those thatcontributed most to the increase of traffic during 2007. SeoulIncheon is also close to China and has above average growth.Notably, the growth at most US airports was rather low, whileTokyo and Taipei had none at all. The latter is the consequence ofindustry’s move into China, while the former shows that the USeconomy was already cooling by 2007. Miami was an exception inthe US because of the high growth in Latin America.

Major goods exporting nations in 2007 and growth

20

40

60

80

100

120

0

-5% 0% 5% 10% 15% 20% 25% 30%

Exp

ort

in 2

007

(bln

US

$)

Growth vs 2006

Germany

USAChina

Russia

Mexico

Korea

UK

NetherlandsFrance

Japan

CanadaItaly

Belgium

10 Airlines with largest FTK increase in 2007

Increase in FTK (000)500.000 1.000.000 1.500.000 2.000.000

Cathay Pacific

Korean Air

Emirates Skycargo

UPS

Qatar Airways

Thai Airways

Air China

LAn Airlines

FedEx

Air France - KLM

increase in 2007

increase in 2006

© O

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ntw

erp

ers


JUST IN TIME■ Are some aviation authorities second-guessing themselves? In March,the US Department of Transportation and the European Commissionlaunched a joint research project to study airline alliances and competition inthe context of open skies agreements. The agencies want to know howalliances affect competition in transatlantic markets and the potential impactof the new US-EU Air Transport Open Skies Agreement. It does seem like anafterthought, now that pact is already in place. However, the Commissionand the DOT will interview airlines, travel agents, industry analysts, andconsumer groups, in addition to evaluating air traffic data. It will publish areport in mid-2009.

SQUIGGLES IN THE COCKPIT■ Professor Andrew Steckl of the University of Cincinnati has managed toenhance the brightness of light-emitting diodes, used for flat screen televi-sions and cockpit displays, by modifying them with the DNA found in salmonsperm. He is developing what he calls BioLED’s in cooperation with the USAir Force. It seems that the good professor quickly depleted the DefenseDepartment’s stock of fish fertilizer and is now searching for other sources.Sperm is considered a waste product in the fishing industry - Don’t askwhy? - so the professor should have little trouble getting more.

NEXT IN LINE, PLEASE■ AP Moller-Maersk said it would cut costs by replacing 200 Danish stew-ards with foreign crews on ships flying the Danish flag. “The layoffs are aresult of the internationalization of the seafarers,” the company said. “Inter-national crews have proven their capabilities and abilities to offer a qualifiedalternative.” Multinational staffs are common in the airfreight business,although pay rates for similar work may vary greatly between regions andnationalities, with colleagues in the same company none the wiser. Money tobuild new plants and create jobs travels freely across national boundaries.But workers usually cannot, which leads to frequent strife between oppo-nents and supporters of immigration policies and globalization. In the area oflabor equality, the airfreight business, at least, has something good to show.

CLEAR PRIZE■ Sad to say, but the airline passenger business isshowing the air cargo business how to get the jobdone. A New York firm, Clear, announced aUS$500,000 prize in February for anyone who can getpeople through airport security 15% faster at a cost ofless than US$0.25 per passenger. It has received over150 responses from individuals, startup firms, defensecontractors and universities, and will award the moneyto the first team that can install technology, at Clear’sexpense, in a real-world security checkpoint. Clearpromises to purchase the winning team’s technology


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“International crews have proven their capabilitiesand abilities to offer a qualified alternative”


cargovision 31

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 Air France KLM. Reproduction in whole or in part without written permission is prohibited.

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Published by AF-KL Cargo Communication, P.O. Box 7700, 1117 ZL Schiphol, The Netherlands. Christelle Dufour Theuws, [email protected] Maaike Arwert, [email protected] & Realization: vdBJ Communicatie Groep, Bloemendaal-NLwww.vdbj.nl, [email protected] in Chief: Mark W. Lyon, [email protected] Manager: Jurgen van Gessel, [email protected] Manager: Urtha Ririhatuela, [email protected] Direction: Sok Visueel Management, [email protected] Editorial Office: Vijverweg 18, 2016 GX Bloemendaal-NL, T +31(0) 23 541 1701Circulation: Pondres Direct Mail B.V., T +32 13 595 35 00Printed on 90 grs. Galerie Silk, M-real. Promoting sustainable forest management - for more info: www.pefc.org

AF-KL Cargo © June 2008 Volume 23 Number 33

cargovision

MARK W. LYON, EDITOR-IN-CHIEF

in bulk, once it is approved for use by the Transporta-tion Security Administration at any of the 13 USairports where Clear operates fast-pass lanes. So,where’s the “Clear Cargo” prize? Surely someone inthe US$80-billion airfreight market can pony up US$1million or so for a solution to speed cargo clearances,especially when regulators have proposed limitationson the industry that could cost it US$10 billion a year.

ENVIRONMENTAL SLOWDOWN■ The US trucking firm Con-way Freight said inMarch that it would limit its trucks to a speed of 62mph (100 km/hr), 3 mph (5 km/hr) slower than theprevious limit. This would reduce the diesel fuelconsumption of its fleet by 3.2 million gallons andtherefore its carbon emissions by 72 million pounds.We wondered whether flying aircraft slower wouldreduce their emissions also. We put the question toBoeing. Terrance Scott, an environmental communica-tions specialist at Boeing said in an e-mail that today’saircrafts are designed to fly with a premium on speedand fuel efficiency and are optimized for the speeds atwhich they operate. Changing their operation by flyingslower wouldn’t necessarily increase efficiency orreduce emissions. We asked Mr. Scott whetheranyone at Boeing questioned the assumption thataircraft designs need to place a premium on speed,but didn’t receive an answer. However, he did explainthat operating current aircraft at less than theirpreferred cruise speeds would require them to fly witha more nose up attitude, thus creating more drag andreducing aerodynamic efficiency. This would requireengines to produce more thrust, burn more fuel andincrease emissions.

CHAINEDTOGETHER

cargo.2.08 DEF2 26-05-2008 10:00 Pagina 31

You have cargo to ship by air. You can choose between many airlines, but you only need one. Tough decision? Not really. You go for the carrier that makes you its number one priority. That delivers as promised. That has the biggest cargo network worldwide. With smart products. More than 500 aircraft. Over 400 destinations. And 6,000 dedicated professionals all over the world... putting you fi rst.

AIRF_0804064_Call_215x280.indd 1 15/05/08 15:04:40

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