Aircargopedia Newsblast: July 2020!
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20th July 2020  
 


Dear Air Cargo Professional:

Airlines see cargo as a 'core business' due to the pandemic. Read to find out.

Learn to maintain accurate inventories using Cycle Counting with this informative article written by Peter Canellis, PhD, PE, Professor of Management.

In more World Air Cargo news, Air France KLM Martinair and DHL announce their partnership.

Emirates SkyCargo expands cargo connectivity to 100 destinations. 
  DJ Ghosh

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


______________________________________________________________________________

Air Canada Cargo

Airlines see cargo as a 'core business' due to the pandemic

Compiled by Aircargopedia 


Air cargo will be a critical area of resiliency for airlines and airports for the foreseeable future — if managements make it a strategic priority

The passenger airline industry news these days is unremittingly bleak:
• Commercial flights decreased 74% globally in April 2020 compared with April 2019.
• Passenger traffic has declined even faster: by the end of April 2020, the number of US air passengers had fallen 94% compared with the previous year.
• Passenger aircraft are flying nearly empty. US carrier load factor, normally above 80%, was only 22% for the week ending 3 May 2020.
• More than 16.000 passenger jets were parked worldwide as of the end of April 2020, representing 55% of the global fleet.

Flybe, Virgin Australia, South African Airways, Air Mauritius, Avianca, Trans States, Compass Airlines and Miami Air International have entered administration, and this may be just the beginning of a wave of airline bankruptcies and liquidations. IATA projects that the global airline industry will lose $314bn in 2020, representing a 55% reduction in 2019 revenue.

Warren Buffett’s Berkshire Hathaway has sold all of its airline stockholdings, seeing limited future prospects for a positive return in the industry. Even with a gradual lifting of social distancing restrictions, the industry will remain in a perilous state for a long time to come. It is likely that airlines will maintain some sort of social distancing on aircraft as well as other health protocols, either required by law or to lure back passengers. However, social distancing on aircraft, by its nature, equates to low load factors, and until a vaccine is found for Covid-19 the traveling public may be very reluctant to begin flying again in any event.

Passenger willingness to pay will remain low as travel propensity decreases in line with the global economic collapse. Leisure passengers will forego discretionary travel, and business travel will return only at a slow pace as businesses become more accustomed to videoconferencing and companies continue to put limits on employee travel. If passenger yields continue to decrease, break-even load factors will surely rise, even with the benefit that airlines are getting from the current low fuel prices. Some in the industry have noted that air fares must increase for airlines to make money with onboard social distancing, but any fare increases would further limit the return of air passenger demand.

Price elasticity in most major passenger air travel sectors – leisure, VFR (“visiting friends and relatives”) and business – will increase and this will likely endure for years, even after a Covid-19 vaccine is found, as the global economy slowly heals from what will have been the biggest economic cataclysm since the great depression. The travelling public – in North America, Europe, Asia, Russia/CIS and elsewhere — will simply not have the resources or willingness to pay to return to the level of flying that it had done prior to the crisis.

In short, it is difficult to foresee passenger airlines returning to profitable operations anytime soon. Many airlines will shed assets to try to right-size to the new demand realities, getting rid of older, less efficient aircraft. Other airlines will disappear entirely. But it is unlikely that the same equilibrium of supply and demand will return for years, and many industry experts are predicting that load factors will remain lower even after the Covid-19 crisis is over.

This situation calls for renewed attention to alternative sources of revenue. If passenger revenue will be insufficient for airlines to reach breakeven, then airlines must seek alternative sources of revenue. Carriers – particularly LCCs – have for a long time sought to generate ancillary revenues as a key part of their business models, not only to provide supplemental revenue but also as a means of keeping passenger fares competitive.

Products have been unbundled, with airlines charging “a la carte” for items such as checked baggage, fast track security screening, priority boarding, extra legroom seats, buy-on-board meals and so forth, and ancillary offerings also have included sales of frequent flyer miles, duty-free sales and commissions on car rentals and vacation packages.

At some low-cost carriers, ancillary revenues accounted for nearly 50% of their total operating revenue before the crisis, and even such major carriers as Qantas, American and United were averaging more than $35 in ancillary revenue per passenger. However, the major drawback for most ancillary revenue in the current crisis environment is that it is very much linked to passenger traffic. If fewer passengers travel, there will be less spending as well on ancillaries.

Furthermore, with increased price sensitivity across all segments of travel, it is much less likely that the passengers who do return will choose to spend as much on ancillary purchases as they had prior to the crisis.

Even with passenger aircraft being used temporarily as freighters, there still will be a severe cargo capacity shortage and air freight rates are likely to remain high for some time to come. “Passenger freighters” are inefficient, cannot accommodate palletised cargo, and are a temporary solution at best.

The global airline industry is widely projected to shrink in the long term following the end of the Covid-19 crisis, as the economic crisis continues to exact a toll on passenger demand. As passenger aircraft are permanently parked and smaller-gauge, less cargo-friendly aircraft such as the A321LR replace passenger widebodies on some intercontinental routes, air cargo capacity will remain tight worldwide. A number of the retired passenger widebodies may ultimately be converted into full freighters with main deck cargo doors and reinforced floors, but it will be a long time before a new cargo demand/capacity equilibrium is reached and freight rates decline to the levels they were at before the crisis.

Cargo will continue to represent a much larger share of airline revenue for years to come. The more cargo revenue that passenger airlines can generate, the more they will be able to keep passenger fares at a reasonable level and attract back passenger traffic.

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


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Keep Inventories Accurate With Cycle Counting

Peter Canellis, PhD, PE, Professor of Management

Inaccurate inventories cause a number of problems in the supply chain. Discrepancies in which products or components that are actually available are fewer than the quantities recorded in inventory information systems generate excess costs resulting from the need for special production runs and expedited deliveries. Conversely, discrepancies in which quantities exceed recorded amounts result in carrying inventory that has been purchased but not recognized as available. This results in excessive inventory and all of its associated costs.

If left unresolved, the pernicious effects of cumulative discrepancies across many SKU’s will lead to large inaccuracies when physical inventories are taken. Since physical inventories are costly and interrupt normal business operations, it behooves all inventory managers to ensure that their inventory records are accurate. Cycle counting is a cost-effective way to do this.

Establishing and implementing a cycle counting program starts with something called an ABC analysis. This process consists of identifying all SKU’s that are managed by a manufacturer or distribution center and ranking them either by throughput (i.e. the quantity of each SKU processed by the facility) or total value. Different controls are put in place for different classifications.

Figure 1 below provides an example of a relatively simple situation. The distribution center in our example manages 10 SKU’s with respective throughputs as shown in Figure 1

Cycle Counting img1

As mentioned above, some managers focus on value of total throughput for each SKU. This is shown in Figure 2

Cycle Counting img2

We will use value rather than throughput in the further development of this example. Accordingly, the 10 SKU’s are ranked as shown in Figure 3, and given an ‘A’, ‘B’, or ‘C’ designation according to the following criteria

Category Designation % of Value
A Top 80%
B Next 15%
C Bottom 5%


Cycle Counting img3

Once the classification phase is completed, each SKU must be scheduled for counting. The schedule for the next cycle count for each SKU is determined by applying standard industry formulae that calculate elapsed time to the next count as a function of two variables:
1. The SKU’s classification level (A, B, or C), and
2. The disparity between the physical count and the count stated in the inventory control system.

In other words, the more “important” a SKU is (determined by classification level) and the higher the disparity between the expected and the physical count, the more often it has to be counted.

The effect of this process is to make physical counts progressively more accurate. Large disparities in high value (or high volume) SKU’s require more frequent checking; but because of more frequent checking, the counts will become more accurate. As the counts become more accurate, the number of required physical counts decreases. In other words, the process is self- correcting, and is continued with the objective of maximizing the time period between cycle counts for each SKU.

This self-correcting feature is illustrated in Figures 4 and 5.

Figure 4 shows the required cycle count time for Class A SKU’s, which require 99.8% accuracy. Because of this high standard, a variance probability of just one in one thousand SKU’s requires that the procedure be repeated in two weeks.

Cycle Counting img4

Figure 5 shows the required cycle count time for Class B SKU’s, which require 99.0% accuracy. Because of the slightly less stringent accuracy requirements for Class B SKU’s, a variance probability of one in one thousand requires a follow-up count in ten weeks, rather than in two as required for Class A SKU’s.

Cycle Counting img5

Viewing this from an alternative perspective, a Class B SKU would require a recount in two weeks only if the variance probability were up to five in one thousand.

Complete physical inventories are costly to perform. They require resources to count and record results. Since the inventory must be ‘frozen’ during the process, the cost of business disruption from the temporary closure of normal business operations must also be included.

A cycle counting program is really a complete physical inventory that is performed in stages with self-correction built into the process. A company with inventory will typically go through this process annually as required by its auditors. This requirement may be waived after a well-documented history of accurate cycle counting is established, allowing the company to save the costs associated with the annual physical inventory. This, along with the improvements in customer satisfaction and reductions in operating costs, make a compelling case for implementing such a process.

Peter Canellis



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

Southwestcargo

Air France KLM Martinair and DHL Announce Partnership To Increase Transparency for Pharma Shipments

July 16, 2020

Air France KLM Martinair (“AFKLMP”) Cargo and DHL Global Forwarding have announced the expansion of a new initiative to increase transparency and data flow with regard to shipments of pharmaceutical products.

The two companies have created a direct host-to-host connection to enhance the data reliability and availability for their customers. Through DHL’s LifeTrack Portal, vital information about pharmaceutical deliveries can be easily accessed and monitored. By joining forces, DHL and AFKLMP Cargo enhance the integration of their systems and enable shared temperature readings for active pharma solutions.

In the pharmaceutical industry, total transparency of the logistics chain is fundamental in order to maintain the integrity of the product. This new initiative will help facilitate the flow of real-time data and information for pharmaceutical products.

The joint solution enables a host-to-host connection through an application-programming interface that allows for system-based integrated information sharing about the shipment journey, including all shipments’ important milestones and temperature checks for active containers. This facilitates both higher standards for reliability and real-time updates of product temperature in the cold chain while it is transported in special climate-controlled containers.

According to Nina Heinz, Global Head of Network & Quality at DHL Global Forwarding, “When securing product integrity and patient safety in the supply chain, data transparency is key. Taking a partnership approach to automating shipment data sharing for cargo characteristics like container temperatures is an essential step to providing our customers with peace of mind about how their shipments are being moved across the globe.”

Enrica Calonghi, AFKLMP’s Global Head of Pharmaceutical Logistics, observed that, “This is an important milestone and yet another example of our strong innovative ambition. Within Pharmaceutical Logistics, we aim to create transparency and visibility in each step of the cold chain. It is the next stage in the digitization of our industry.”

Currently, this service is provided at AFKLMP’s largest life sciences hubs in Amsterdam Schiphol and Paris CDG. Following the successful experience at these two locations, AFKLMP and DHL have agreed to extend the roll out of active container temperature readings to all the main pharma points in their networks.

Peter Canellis
Kevin Pflug

Turkish Cargo

dnata team takes on new roles to support and create value for airline customers and local communities amid COVID-19 challenges

Dubai, UAE, 15 July 2020

dnata has continued to deliver reliable and safe air services and taken on new roles to support and create value for airline customers and local communities amid COVID-19 challenges.

Cooperating closely with government authorities, customers and suppliers, the company’s dedicated teams have worked around the clock to make a difference by ensuring smooth and safe turnaround of repatriation flights, handling essential cargo, supporting industries facing a labour shortage, launching innovative new products and services as well as donating high-nutrition meals to organisations and individuals in need.

Gary Chapman, President of dnata, said: "The COVID-19 pandemic has caused unprecedented disruption to the travel and aviation industries. dnata is not immune. Like our customers and competitors, we are also facing serious challenges and working hard to recalibrate our business and operations for what, right now, is an uncertain future. Despite this extraordinary operating environment, we must stay focussed on delivering the promises we made and continually creating value for our customers and the communities around us.

dnata

"Over the past few months, we have adapted our operations and processes to the new normal, enhanced our existing services, and launched new ones to meet changing demand. This has all been achieved thanks to the team of talented colleagues across our businesses, who live and breathe dnata’s promise to deliver quality and safe services for our customers and their customers."

Although flights have been dramatically reduced globally, dnata’s ground and passenger handling teams have continued to help airline partners deliver on special missions across the globe. From London to Manila and Dubai, the company’s dedicated employees have helped thousands of families reunite by handling more than 2,600 repatriation flights between March-July. With health and safety being dnata’s number one priority, all employees have been thoroughly trained on updated protocols, including the correct use of personal protective equipment (PPE) and the application of social distancing across airport operations.

dnata has also continued to support airlines in maintaining global trade and the flow of essential goods by delivering best-in-class cargo services. dnata’s teams have handled over 67,000 tonnes of PPE, life-saving medical supplies and pharmaceuticals over the past four months. At each of its 46 cargo stations, dnata has been using the latest technology, best practices and certified warehouses to ensure that every pharma and vaccine shipment is handled in compliance with the highest international standards.

dnata

In response to the strong air cargo market demand for the rapid, reliable and efficient transportation of essential commodities, several airlines have introduced additional cargo capacity by using passenger aircraft with seats fully or partially removed from the cabin. To adapt to changing customer needs, dnata has enhanced services, improved processes and trained employees to safely and efficiently handle passenger planes carrying cargo only. In Australia, Pakistan and the UK, dnata’s professionally trained staff achieved remarkable milestones by loading record amounts of up to 71 tonnes of cargo onto airline customers’ passenger aircraft.

dnata has also enhanced its aircraft cabin cleaning services to ensure the highest possible level of safety on board its customers’ flights. The new process involves extensive cleaning with a stronger disinfectant, and includes a comprehensive wipedown of all surfaces – from windows, tray tables, seatback screens, armrests, seats, in-seat controls, panels, air vents and overhead lockers in the cabin to lavatories, galleys and crew rest areas. The on-board cleaning chemicals are approved by the relevant authorities and proven to kill viruses and germs. They leave a long-lasting protective coating against new contamination of viruses, bacteria and fungi on surfaces, and are eco-friendly. A dedicated quality team and shift managers oversee the cleaning on the majority of flights.

In addition, dnata has launched innovative new products and services across its global operations to help airlines and passengers navigate the new normal. The company has added thermal screening, baggage disinfection and even home COVID-testing services to its offering at various locations around the world.

Operating over 60 state-of-the-art facilities, dnata has significant capacity to provide safe, quality catering services to industries in need. Since the COVID-19 outbreak began, dnata’s catering team has adapted its catering products and services in line with demand, and increased its capability to serve health and aged-care industries to support relief efforts alongside local authorities. In several countries, dnata delivers meals for quarantine facilities, looking after those who have to compulsorily isolate.

dnata’s skilled workforce has also taken on new roles to support communities. In Singapore and Australia the company has partnered with authorities and companies to temporarily redeploy employees to organisations in industries facing a labour shortage. To date, over 400 dnata employees have been trained and started working in other organisations.

dnata has remained committed to giving back to communities globally. The company teamed up with authorities, organisations and partners to provide ingredients, meals and packaged goods to local communities in need. To date, more than 200,000 wholesome meals have been donated to various organisations in Australia, Ireland, Italy and the UK to enable them to support those who need it the most


South African Airways
Emirates SkyCargo expands cargo connectivity to 100 destinations 

Dubai, UAE, 05 July 2020

Emirates SkyCargo will be operating scheduled cargo flights to 100 destinations across six continents during the month of July 2020. Some of the new cities added to the air cargo carrier’s network include Accra, Algiers, Athens, Fort Lauderdale, Glasgow, Larnaca, Los Angeles, Male, Moscow (SVO), Phnom Penh, Rome, Santiago, Sialkot and Tunis.

Emirates SkyCargo’s network expansion is in response to the growing economic activity and demand for air cargo capacity from markets across the world along with Emirates’ increased passenger flight operations. By offering multiple daily or weekly cargo flight frequencies to major production and consumer markets, the carrier is helping facilitate supplies of goods required for combatting the current pandemic as well as machinery and equipment required for manufacturing and several key economic sectors across global trade lanes.

Emirates Sky Cargo

In addition to scheduled services, Emirates SkyCargo also operates a number of special charter flights every week to transport a range of commodities from Personal Protective Supplies (PPE) and pharmaceuticals to food and outsized machinery and components.

The freight division of Emirates offers an innovative range of cargo capacity options for businesses and exporters on its modern, wide-body aircraft fleet. In addition to loading of cargo in the belly hold, Emirates SkyCargo has introduced loading of select cargo on the passenger seats and in the overhead bins of the passenger cabin of its Boeing 777-300ER aircraft. Recently the carrier also modified 10 Boeing 777-300ER aircraft from its fleet by removing seats from the Economy Class in the passenger cabin to make room for additional cargo. Emirates SkyCargo also operates 11 Boeing 777 F full freighters currently deployed to over 30 destinations every week.

Emirates SkyCargo places a strong emphasis on the safety of operations. Working with its partners, including ground handlers, the carrier has introduced a number of strict guidelines on cabin loading of cargo covering the type of permitted cargo as well as proper packaging and handling in accordance with IATA guidelines.


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