Aircargopedia Newsblast: April 2020!
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15th April 2020  
 


Dear Air Cargo Professional:

Cargo aircraft are roaring to life, setting new records for utilization amid corona crisis.

Understand Asset Management in detail with this informative article written by Peter Canellis, PhD, PE, Professor of Management.

Delta Cargo has expanded its 24/7 pick-up and delivery service with Roadie to include DASH Heavy.

Emirates SkyCargo scales up network and operations for transport of essential commodities
  DJ Ghosh

D.J. Ghosh
President & Publisher
AIRCARGOPEDIA
WWW.AIRCARGOPEDIA.COM
”The Complete Encyclopedia for the Air Cargo Professional & Investor”


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Air Canada Cargo

Cargo Aircraft Roar To Life, Reaching Record Utilization As Coronavirus Creates Urgent Demand For Air Freight

Compiled by Aircargopedia 


Even today some flights still have to wait for a place to park at the airport. Yet the backlog is not at the passenger terminal but instead the cargo apron. Cargo aircraft are roaring to life, setting new records for utilization.

China Southern’s freighters are flying 15.5 hours a day, a rate enviable even for passenger aircraft. Freighters at Air China, China Airlines and Korean Air have also surpassed their annual record. Airlines with cargo aircraft have a rare source of revenue and cash flow as passenger flights dwindle and refunds outstrip new bookings. Air cargo sustained some Asian airlines during SARS, and may do so again during this coronavirus downturn.

There is a near halt on intercontinental passenger flights, where in the cabin airlines seek mood lighting and the latest lie-flat seats, but below are scuffed cargo compartments with containers featuring outdated airline logos from decades past.

It is in this unglamorous part of the plane that typically transports at least half of the world’s air cargo. Korean Air carries over 60% of its cargo in the bellies of passenger flights, while for Singapore Airlines it is 75%.Stopping passenger flights during the coronavirus outbreak has removed this cargo capacity. China alone has lost the equivalent of 50 daily 747 flights. The utilization gains airlines are achieving this month add up. The extra 45 minutes of flying for a China Southern freighter theoretically allows the airline another Guangzhou-Frankfurt roundtrip every 2.5 days. With its improvements, Korean Air can fly an extra Seoul-Singapore roundtrip every day. Air China can make 12 Shanghai-Los Angeles returns in a month with its same fleet. Factory output persists as much of Asia returns to work, and there is new urgent demand to move medical supplies to fight coronavirus. Demand well outstrips this increased freighter utilization, so airlines are even using passenger aircraft as freighters, loading the belly – and sometimes the cabin – with freight but no passengers. Dedicated freighters have larger capacity and can carry over-sized shipments on their main deck. A Boeing 777 freighter can carry almost four times as much cargo as a passenger variant. Of the seven Asian airlines in this study, all but one had a sharp seasonal peak in November, when cargo aircraft are usually at near-maximum output due to new tech products and pre-Christmas consumer demand. Singapore Airlines’ freighters typically average under 10 hours of flying a day, but in November reached over 12.5 hours. The average utilization for a widebody freighter in the last two years was under 11 hours, according to IATA.

Winter and spring are usually quiet for cargo, indicated by the low January utilization rates. February was even weaker than normal as China all but shut down to contain the coronavirus.

Now those November peak utilization rates are being surpassed as four airlines in March push their cargo fleet even more. Air China, China Airlines, China Southern and Korean Air are at record output, and Cathay Pacific almost is. These projected aircraft utilization figures are based on flight logs over the last year from Flightradar24 and are amended to correct any gaps, but they may show some small under-representation. Data is through March 26 and excludes a handful of aircraft used ad hoc.

There can be variation in utilization at airlines with multiple types of freight aircraft. Korean Air’s 777 freighters in March are at about the same output as last November during the peak, but its overall average is pushed by a large increase in 747-400 freighter utilization. The -400Fs are older and less fuel efficient, so they may not have been favoured during the peak. Now demand is high and fuel costs are low.

Not yet reflected in available figures are expected high load factors and yields. Unlike passengers, which typically fly round-trip, freight is highly directional. A 747 can arrive empty into Hong Kong, depart fully loaded and still be profitable. Representative of the sector, Cathay’s cargo load factor was 64% last year versus 82% for the passenger division.

There is more demand for cargo leaving Asia, often valuable tech products that fetch a high yield for transport to North America, Europe and Australia. Demand from those regions into Asia is lower in volume and yield quality, but growing as Asia develops an appetite for more foreign shopping – Amazon, eBay – as well as perishables from lobster in Boston to strawberries in Portland.

North America is the most common freight market. For example, at Air China, China Airlines and Korean Air, North America directly accounts for half or more of their freighters’ flying hours. Indirectly the share is higher when considering the intra-Asia flights carrying cargo for onward transport to/from North America.

The Trans-Pacific route links the world’s two largest economies. In the same way Gulf airlines have become a connecting option for passengers between Asia and Europe, they are also an intermediary carrier for freight between Asia and Europe, adding competitive pressure for Asian airlines’ dedicated Asia-Europe freight flights.

Asia’s airlines have the most freight aircraft of so-called combination passenger and cargo carriers. (FedEx is purely a cargo operator.) North America’s airlines have no dedicated freight aircraft. A notable exception in Europe is Lufthansa, which has a sizeable cargo business, as do airlines in the Middle East. Not all major Asian airlines have a notable freighter presence. Japan Airlines discontinued freight aircraft while All Nippon Airways has only two long-range freighters, fortuitously acquired in just the last year.

Passenger fleets dominate: Korean Air has 146 passenger planes to its 23 freighters. But freighters at Korean Air and other carriers are a rare source of revenue while the passenger business all but shuts.

Estimating revenue inflow is difficult. Cargo generated about a third as much revenue as the passenger division at Cathay and Korean Air last year. Over half of their cargo by weight was in passenger flights that are temporarily cancelled. But freight on cargo planes is typically higher-yielding than the freight in bellies on passenger jets. Now overall yields are higher.

With the downturn of passenger flights, it is easier for cargo operators to secure airport slots, allowing for freight aircraft to be better utilized. But there are also constraints. At operators like Cathay and Singapore Airlines, their only cargo aircraft are 747s. They do not have any passenger 747s, so their pilot pool is limited to existing numbers based around average year-round needs and not a sudden out of season spike. There is greater flexibility for airlines like China Airlines that have passenger and freight variants of the same aircraft. Pilots can usually switch between passenger and freight versions.

Loading and unloading cargo takes time, hence those instances when a pilot tells passengers boarding is complete but they are waiting for freight to finish. Freight loading can be even longer if there are sensitive or hazardous goods. The ad hoc nature of cargo schedules means pilots may need to commute to cities using regular passenger flights. That becomes difficult as commercial flights rapidly decrease.

This cargo rush comes after a weak year for cargo, once again characterized by over-supply and low-yields as well as the U.S.-China trade war. Resumption of passenger flights, even to a partial rebound, will once again add pressure to the cargo sector. That will see airlines reluctant to make medium- to long-term cargo additions. The focus now is maximizing available capacity while looking for short-term opportunities.

For more news and information about the air cargo industry, please visit AIRCARGOPEDIA.COM.


Airbridge banner

Asset Management: It’s Everyone’s Business!

Peter Canellis, PhD, PE, Professor of Management

“People can be divided into two groups: those who divide everything into two groups, and those who don’t.”

This old joke may be a bit stale (OK, very stale!), but it serves to make a key point in this discussion of asset management applied to logistics.

Assets may be divided (I’ll bet you’ve already figured out where this is going!) into two groups. The first group, ‘fixed assets’, includes office buildings, distribution centers, terminal facilities, etc. The second group, ‘mobile assets’ includes planes, vessels, containers and chassis, tractors and trailers, and so on

Asset Management img1

When considering the myriad of logistics service providers, we also divide them into two groups: asset based and non-asset based, both of which have a critical role to play. Asset-based providers make assets available. Non-asset based providers select from among those available assets to provide the best possible arrangements for cargo handling and transportation of each shipment.

Now that we’ve identified what assets are of concern to us and through what means they are made available and deployed, the next question to be answered is ‘What are the business processes that comprise ‘asset management’? I’m sure that you’ll be pleased to hear that asset management processes may be divided into not two, but five categories. They are:

• Forecasting requirements
• Procuring assets
• Deploying assets
• Preserving and extending each asset’s economic life
• Disposing of assets at the end of their economic life

Forecasting

In choosing forecasting methods and tools and deciding how much resource should be applied, the costs of forecasting must be weighed against the costs of inaccuracy. Costs of inaccuracy include:
• Lost opportunities resulting from underestimation of asset requirements,
• Excessive carrying costs when assets requirements are overestimated and go underutilized.

As illustrated in the following figure, minimum total cost will be incurred at the point where spending on forecasting equals the cost of inaccuracy.

Asset Management img2

Procurement

Assets must be procured if the forecasted need exceeds what is already in inventory. For example, if an air cargo carrier forecasts the need for 1,000 Unit Load Devices (ULD’s) of a specific type in the coming year but has only 750 in its fleet, an additional 250 must be procured. This will require that plans and specifications be created and distributed to suppliers for quotations, that quotations are reviewed for conformance with the specifications, and that a contract is awarded for production and delivery.

As a second example, consider a distribution center operator with 200,000 square feet of space that is currently well-utilized. Forecasts for retaining existing business and generating new work indicate that another 25,000 square feet will be required. The distribution center operator must proceed in a manner similar to the air cargo carrier in the first example, developing specifications and soliciting quotations for the space that is needed.

In both cases, at the same time that these technical efforts are under way, operational and financial decisions must also be made. Assets must be procured in such a way that flexibility is balanced against cost. This is important because some hedge must be made against errors in the forecast: as mentioned above, insufficient procurement would result in missed opportunity, while excessive procurement would result in additional costs that would erode profitability.

Because of all the variables that affect these decisions, there is no easy way to do this exactly right. An effective strategy includes a mixture of three procurement alternatives: purchase, lease, and rental.

Purchase is typically the least cost alternative, but it should be used only when there is a high probability of high utilization. Rental arrangements are at the other end of the spectrum, offering high flexibility (i.e., the ability to return the asset to the owner) at a relatively high price, while leasing presents an intermediate position between purchase and rental.

Since every situation is different, a balanced approach to procurement that uses some combination of all three commercial arrangements will balance the risk of lost business against the excessive cost of over-investment.

Asset Management img3

Deployment

Asset deployment is comprised of four basic processes:

Tracking of location and status

Knowledge of where assets are located, and their current, status are necessary in order to make the best possible decision about what to do with them next. For example, I must know that a container is either at a terminal, on an aircraft, or in transit to or from a container freight station, and whether it is empty or laden before deciding if it can be used to cover a booking.

Identification of shortage and surplus

With respect to mobile assets, knowledge of shortage and surplus areas must be known in order to decide whether, and if so by what means, to move assets from an area to one of shortage where it can be deployed.

In the case of fixed assets such as distribution centers, decisions must be made as to whether additional space will be procured, excessive space will be eliminated (i.e. by sale or by allowing leases or rentals to expire) or priced more aggressively to improve utilization.

Positioning

Positioning may be thought of as meeting a shortage requirement from a surplus area by using assets that are already in inventory. For example, if container capacity is required to cover a booking in a shortage area, it can be purchased, leased, or rented locally. If the booking is to be covered from existing inventory, it must be positioned into the area of shortage.

Positioning is decision that cannot be taken lightly. If an empty container must be positioned, the cost of doing so will include some or all of the following:

• Loading at terminal where the asset is idle
• Transport to the terminal where the asset can be utilized
• Discharge at the terminal where the asset can be utilized
• Administrative costs

These costs must be recaptured quickly if the asset is to remain profitable.

Assignment prioritization

When assets are in short supply, they must be applied where the greatest return on investment can be realized.

Preservation and Life Extension

Assets depreciate because they get used up and cannot continue to function properly without various types of intervention. These interventions are:

Maintenance

Maintenance is more correctly described as preventive maintenance in order to distinguish it from repair, which is discussed immediately below. Preventive maintenance is scheduled in accordance with manufacturers’ specifications to ensure that an asset will function for the period of its expected economic life. It is preemptive, i.e. it is performed on an asset that is already capable of functioning in accordance with its intended application. Maintenance is performed to keep it doing exactly that.

Repair

Repairs restore an asset to its proper operating condition by fixing damages that have rendered the asset temporarily inoperable.

Refurbishing

Refurbishment is an upgrading or replacement of an asset’s major components. Unlike maintenance and repair, refurbishment is performed in order to extend the economic life of the asset. Taking an example from the ocean freight industry, blasting and painting a container chassis might be accompanied by replacement of wiring harnesses, pneumatic system components, and tires.

Remanufacturing

A remanufactured asset is ‘like new’, in that the full economic life is restored and certified by the manufacturer. A remanufactured asset carries the same warranty as a new asset.

The difficulty and associated cost for maintaining and extending the economic life of assets depends on the extent of their mobility and their degree of technical complexity. For example, it is much easier to manage a fleet of forklifts that never leaves a distribution center and employs relatively low levels of technology than it is to manage a fleet of specialized ULD containers that can move anywhere in the world and employ high levels of embedded technology.

The figure below illustrates this concept.

Asset Management img4

Disposal

Equipment disposal must be preceded by an analysis of whether or not disposal is in fact the appropriate course of action. The steps required in the disposal decision process are:

Analyze asset repair history

Repair history will inform as to whether extraordinary repair costs have been incurred to date for the specific asset in question. Historical daily (per diem) costs can then be calculated over the expended economic life of the asset to determine how much money is needed to keep the asset in working condition.

Compare Estimated Future Life Extension Costs with Fair Market Value

The fair market value of a damaged asset must be known in order to decide how much should be spent to return it to operating condition. For example, if an asset requires $2,000 in repairs but can only command a price of $1,700 in the local market (determined by a combination of its age and local market demand), repairing it would be equivalent to losing $300; or as the saying goes, “throwing good money after bad”. Accordingly, a higher fair market value will justify a higher investment in life extension.

As illustrated in the figure below, a relatively new asset that has high revenue generation capabilities will justify a high expenditure in life extension costs, i.e. it will be restored even if severely damaged.

Asset Management img5


Sell Asset or Salvage Components

If the decision is made not to invest in restoration, the asset will either be sold for scrap value or cannibalized for its parts.

These are the major processes that comprise asset management: but responsibility for their execution does not lie exclusively with the ‘owner’ of the asset. Everyone in the supply chain has responsibility for contributing to the asset’s efficient use.

Owners must:
• Develop specifications that minimize total life cycle costs
• Get the best possible price from the manufacturer
• Know when and how much to invest in economic life extension to drive down life cycle costs even further

Shippers and intermediaries (e.g., forwarders, brokers, truckers, distribution center operators, etc.) that deploy and use the asset must:
• Coordinate to provide sufficient carrying capacity when required, but not so far in advance that it will lay idle for an excessive time.
• Strive for optimum weight and volume utilization through accurate forecasting of capacity requirements and efficient operating management

Peter Canellis


Peter Canellis, PhD, PE
Professor of Management
Vaughn College of Aeronautics and Technology
peter.canellis@vaughn.edu

Southwestcargo

Delta Cargo expands DASH® Door-to-Door to large shipments

ATLANTA, April 9, 2020

Delta Cargo has expanded its 24/7 pick-up and delivery service with Roadie to include DASH Heavy. Now customers can use the service for packages between 101 to 300 pounds, or between 90 linear inches (length + width + height) up to the maximum size that will fit on the aircraft, per piece for loose shipments.

As offices move to homes and businesses explore ways to reach existing and new customers and clients, DASH® Door-to-Door provides an easy solution in a matter of hours instead of days. From fresh flowers to auto parts, medical and electronic equipment to apparel, DASH Door-to-Door is a convenient logistics service that offers the fastest cross-country door-to-door delivery.

Delta partnered with Roadie, an Atlanta-based same-day delivery service, to launch DASH Door-to-Door in 2019. The partnership is an industry first for a U.S. passenger airline. The service is now available in more than 60 cities with ongoing expansion.

"This is an exciting opportunity for businesses to further benefit from DASH Door-to-Door by shipping large items and making nationwide expansion a reality," said Shawn Cole, Vice President – Delta Cargo. “We’re always looking for ways to enhance product offerings and make life easier for our customers.”

DASH Door-to-Door pairs TSA-approved drivers with air cargo to create the fastest cross-country door-to-door service available in the U.S. with competitive prices. Customers can send time-critical shipments through deltacargo.com with a single booking for flights with pick-up/delivery and receive end-to-end tracking and real-time status updates. The service is backed by a limited service-level guarantee.

“We ship architectural goods and love that we can do all bookings online and get shipments picked up at our facility,” said Cheryl Tanner, Bruce Wall Systems Corporation. “We used to pay much more to get shipments out, but since we started using DASH Door-to-Door, we’ve saved a lot of money.”

Roadie has more than 150,000 verified drivers nationwide and the largest local same-day delivery footprint in the U.S. Delta and Roadie have worked together since 2015 to expediate the delivery of delayed bags.


Turkish Cargo

Emirates SkyCargo scales up network and operations for transport of essential commodities

Dubai, UAE, 09 April 202

Keeping up its unwavering commitment to deliver food, medical supplies and other essential commodities to markets across the world during the Covid-19 pandemic, Emirates SkyCargo has rapidly scaled up its cargo services to connect an increasing number of global destinations. The air cargo carrier currently operates flights to 51 destinations globally, out of which 19 cities are served by the Emirates SkyCargo Boeing 777 freighter aircraft offering up to 100 tonnes of capacity per flight and 38 destinations are served by dedicated cargo flights on Emirates' Boeing 777 passenger aircraft offering up to 50 tonnes belly capacity. (For a full list of destination and schedules, visit the Emirates SkyCargo website)

Nabil Sultan, Emirates Divisional Senior Vice President, Emirates, said: "We have particularly ramped up operations for transporting cargo in the bellyhold of our passenger aircraft in the last two weeks. Emirates SkyCargo has been expanding its network on a daily basis and some of the latest destinations for our cargo flights on passenger aircraft include Bangkok, Casablanca, Johannesburg, Singapore and Taipei. Air cargo remains the fastest means of connecting essential supplies to those that need them and our expanded network allows for increased connectivity across different global origins and destinations."

During the week ending 4 April 2020, Emirates SkyCargo had operated more than 160 flights on its freighter aircraft and close to 90 flights on its passenger aircraft. The following week, the air cargo carrier had operated close to 160 flights on its passenger aircraft alone.

In order to streamline operations and cut costs under rapidly changing global conditions, Emirates SkyCargo has also transferred all its cargo handling operations in Dubai to Dubai International Airport. Watch a video about the change to Emirates SkyCargo's hub operations.

Sky Cargo

Charter Operations

Over and above scheduled operations, Emirates SkyCargo has also operated an increasing number of special charter flights for cargo both on its freighter and passenger aircraft. Since the start of April, the carrier has executed more than 30 charter flights connecting over 20 global destinations. The main commodities transported on the charter flights are medical supplies including face masks, protective covers, sanitisers, equipment for hospitals in addition to pharmaceuticals, raw materials and spare parts.

In the space of just three days between 7 and 9 April, some of the notable charters operated by Emirates SkyCargo included

• 100 tonnes of masks and other protective supplies transported from Guangzhou to Dubai on 7 April. This was part of several other charters to bring medical supplies into the UAE.

• Close to 100 tonnes of medical supplies including masks and other protective equipment transported on 8 April from Shanghai to Mumbai on the Emirates SkyCargo Boeing 777 freighter

• 100 tonnes of protective equipment transported from Shanghai to Dubai on a Boeing 777 freighter on 8 April. The supplies will then be flown to Bucharest on 10 and 11 April on four separate flights on the Boeing 777 passenger aircraft.

• Over seven tonnes of medical supplies transported to Los Angeles on 8 April in the belly hold of an Emirates' Boeing 777 passenger aircraft. This was also the first dedicated cargo flight on a passenger aircraft operated by Emirates SkyCargo to North America.

• Close to 1 million Covid-19 testing kits to be transported to Sao Paulo on 9 April. An earlier shipment containing 500,000 kits was transported on 30 March.

Emirates SkyCargo has a dynamic and responsive team handling charter operations. In some cases, the team has been able to deploy aircraft within 24 hours of the original request coming in for a charter operation.

Sky Cargo

Emirates SkyCargo global teams go the extra mile

Both at Hub Dubai and across the world, Emirates SkyCargo's staff have been working hard to ensure the safe and efficient transport of cargo despite challenging conditions.

"Under these unprecedented conditions, our staff are fully committed to making sure that that medicines, medical equipment, food and other necessary commodities for people and businesses around the world are being transported without any compromise of the high service levels that differentiate Emirates SkyCargo from other players in the market. We are truly grateful to the non-stop efforts of our team that contribute to our successful operations," added Sultan.

Some of Emirates SkyCargo's stations including Hong Kong and Amsterdam have had to manage increased freighter operations with Hong Kong managing more than 30 and Amsterdam managing more than 16 freighter flights a week.

Emirates SkyCargo's team at Karachi were even able to break a global record for maximum cargo loaded in the lower deck of a Boeing 777-300ER passenger aircraft. The team helped transport just under 62 tonnes of cargo, primarily food items including vegetables, fish and meat, on a single flights bound to Dubai.

Bringing food and medical supplies to the UAE

From across its global network, Emirates SkyCargo has helped import more than 33,000 tonnes of perishable items and more than 1,700 tonnes of pharmaceuticals into the UAE since the start of the year. Food items are brought in from several markets including Australia, India, Kenya and Pakistan.

"With our expanded network now covering more than 50 global destinations, we are able to ensure a constant supply of food and medicines from across the world into the UAE. Emirates SkyCargo remains committed to maintaining and constantly replenishing vital food and medical supplies in the country," emphasized Sultan.

Globally, the air cargo carrier has transported more than 93,000 tonnes of perishables and more than 20,000 tonnes of pharmaceuticals. The carrier has also transported more than 3000 tonnes of medical supplies for combatting Covid-19 across the world.

South African Airways
IATA Welcomes EC Efforts to Keep Air Cargo Flowing

26 March 2020 (Geneva)

The International Air Transport Association (IATA) welcomed the European Commission’s (EC) Guidelines on Facilitating Air Cargo Operations During COVID-19 Outbreak.

Ensuring smooth air cargo shipments is crucial. With the evaporation of passenger demand and cancellation of passenger flights, vital air cargo capacity has disappeared. Airlines are taking all measures to meet the remaining cargo demand. Unfortunately, airlines faced bottlenecks in getting appropriate permissions and crewing cargo flights amid quarantine restrictions. The result was delays to shipments when time is of the essence to fight the COVID-19 outbreak and keep global supply chains functioning.

The EC has understood the industry’s challenges and provided comprehensive and practical guidance to ensure that permissions to operate are quickly granted and that air crew are able to operate efficiently with exemptions from quarantine measures.

“We are in an emergency and the European Commission has responded with speed and clarity. EU member states need to act quickly to ensure that the guidance is followed so that air cargo—including vital shipments of medicines and medical equipment—gets to where it needs to be. Other governments should follow the EC’s example and implement similar measures so that we can unblock the global air cargo networks on which we all depend,” said Alexandre de Juniac, IATA’s Director General and CEO.

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