Aircargopedia Newsblast: June 2022!
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21st June 2022  
 


Dear Air Cargo Professional:

Russia-Ukraine war threatens prolonged effect on global economy - by Pat from SUNTEC.

Read more about Bullwhip Effect of Supply Networks in this article by Peter Canellis, Professor of Management, Vaughn College.

In more World Air Cargo news, Taiwan says Chinese attack would hit global economy harder than Ukraine war.

Lufthansa Cargo opens ARTcube storagefacility for fine art at Frankfurt Hub. Emirates SkyCargo makes a splash at Air Cargo India 2022.
  DJ Ghosh

D.J. Ghosh
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Russia-Ukraine war threatens prolonged effect on global economy

The world economy will pay a “hefty price” for the war in Ukraine encompassing weaker growth, stronger inflation and potentially long-lasting damage to supply chains, the OECD said.

The organization slashed its outlook for global growth this year to 3% from the 4.5% it predicted in December and doubled its inflation projection to nearly 9% for its 38 member countries, according to forecasts released on Wednesday in Paris. In 2023, it expects growth to slow to 2.8%.

The price of war could be “even higher,” it warned, describing a long list of risks ranging from an abrupt cut-off of Russian supply in Europe to vulnerabilities on financial markets from high debt and elevated asset prices.

“There have been several significant changes in the global economic environment in recent months, including the worldwide spread of the Omicron variant of Covid and the greater-than-expected persistence of inflationary pressures,” the organization said in its economic outlook. “The single greatest change, however, is the economic impact of the war in Ukraine.”

The gloomy assessment, which echoes a similar warning from the World Bank, indicates a deeper and broader economic fallout from Russia’s invasion that will make it harder to set the right fiscal and monetary policies. This is the first detailed view from the OECD, which didn’t issue full forecasts in April because of the prevailing uncertainty.

The early effects of surging prices have already forced central banks to tighten monetary policy, with the US Federal Reserve for example having just raised interest rates at a quickened pace of 50 basis points last month. Meanwhile governments are rethinking spending plans as they attempt to shelter households.

While the OECD said it’s warranted for all monetary authorities to pare back stimulus, it urged caution particularly in the euro area, where surging prices mainly reflect supply pressures.

“Central banks will have to conduct a delicate balancing act between keeping inflation under control and maintaining the post-pandemic economic rebound, especially where the recovery is not yet complete,” the organization said.

The OECD observed that inflation is hitting living standards and reducing consumer spending across the globe, and business are becoming less optimistic about future production. Crucially, that hit to confidence is deterring investment, which in turn threatens to hurt supply “for years to come,” it said.

Still, the organization is cautious about whether the global economy is on the brink of stagflation despite similarities with the oil shock of the 1970s.

Compared to that time, major economies are less energy intensive, central banks have more robust frameworks and independence, and consumers have a stock of excess savings leftover from the Covid pandemic, it said.

“Nonetheless, there are clear risks that growth could slow more sharply than expected and inflationary pressures could intensify further,” the OECD said.

Pat Praveen
SUTEC LLC.
suntecrm.com

For any questions, please contact Pat at pat@suntecrm.com
For more info please visit www.suntecrm.com


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Supply Chain’s “Bullwhip Effect”: A Macroeconomic Perspective

The “Bullwhip Effect” describes what may be considered the ultimate focus of all efforts to manage the production and movement of raw materials, intermediate goods and finished goods; namely, synchronizing supply with demand.

The “classical” representation is seen in Figure 1 below. It describes the mismatch between supply and demand for a new product that has entered the market. Distributors and retailers order more product than initial projections of demand in order to prevent stocking out of what is expected to be a popular product. This triggers hyperactive production which then fails to adjust downward as orders are cancelled to adjust for the original excessive ordering.

Supply Chain

While this depiction of the problem is conceptually accurate and useful at the product level (where it is most needed!) it is interesting to explore the extent to which the mismatch is occurring in the economy as a whole. Fig.2 provides a trendline for the Economic Optimism Index published by Investor’s Business Daily. Here, we see a declining trend in economic optimism from June 2021 to May 2022.

Supply Chain

If we consider “Economic Optimism” to be a possible proxy for “Demand”, we can compare this trend with the value of inventories across the economy. Fig.3 indicates an increasing trend in inventories from June 2021 to April 2022 as reported by the Federal Reserve Bank of St. Louis.

Supply Chain

From looking at the above two charts, we see an alternative representation of the Bullwhip Effect: while economic optimism is declining, inventories continue to rise. Data from Figures 2 and 3 are combined in the scatter plot shown in Fig.4.

Supply Chain

What does this mean? The data indicate that, at a macroeconomic level, industry is not “getting the message” about skepticism in the economy’s recovery and continues to build inventories. Some of this may be attributable to political activities over the past two months (note the rise in optimism from March to April and the subsequent downturn in May).

An alternative interpretation could be that industry got the message but is betting against what might be a temporary public pessimism about the post-pandemic bounce-back: let’s hope so!


Yours in Supply Chain,
Peter Canellis

Peter Canellis

Regards,
Peter Canellis
Professor of Management
Vaughn College of Aeronautics and Technology


Air Canada Cargo

Taiwan says Chinese attack would hit global economy harder than Ukraine war

Taiwan’s top trade negotiator said on Tuesday that a Chinese military attack on the island would harm the global economy more than Russia’s invasion of Ukraine.

John Deng noted that the world relies on Taiwan for computer chips used in electric vehicles and mobile phones, meaning the implications of a Chinese invasion would be sweeping for any industry that relies on the technology.

China has stepped up its military drills and rhetoric toward Taiwan since Russia invaded Ukraine, adding to global fears that China may feel emboldened to invade the island, which it claims historical control of.

Russia’s invasion has sent economic shockwaves across the world, sharply increasing oil and gas prices and raising fears of famine in multiple countries in light of food export bans and other disruptions within the “bread basket” to much of the world.

“The disruption to international supply chains; disruption on the international economic order; and the chance to grow would be much, much (more) significant than this one,” Deng said, comparing the Russian invasion to a potential Chinese one.

Reuters reported that Taiwan’s chip exports last year were worth $118 billion. Deng said 40 percent of Taiwan’s chip exports go to China, but Taiwanese officials are attempting to diversify further.

President Biden added fuel to tensions between China and Taiwan when he said last month that the United States would be willing to defend Taiwan if China invaded. The White House clarified that the U.S. was still following the “One China” policy and has not changed its stance.

These cities, states have said they won’t enforce an abortion ban Thousands of flights canceled ahead of Father’s Day, Juneteenth

The Taiwan Relations Act of 1979 commits the U.S. to helping Taiwan defend itself but does not commit to direct U.S. engagement, and America has maintained a stance of “strategic ambiguity” on the island’s independence.

After Biden made his comments, China announced it would conduct military drills near Taiwan, which a spokesperson said were a “solemn warning to the recent U.S.-Taiwan collusion activities.”

Defense Secretary Lloyd Austin told Gen. Wei Fenghe, his Chinese counterpart, on Friday that Beijing must avoid “further destabilizing actions” toward Taiwan.

Pat Praveen
SUTEC LLC.
suntecrm.com

For any questions, please contact Pat at pat@suntecrm.com
For more info please visit www.suntecrm.com

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Lufthansa Cargo Opens ARTcube Storage Facility for Fine Art at Frankfurt Hub

Earlier this month at the company’s Frankfurt Hub, Lufthansa Cargo opened the ARTcube, a new warehouse facility for fine art. With 155 square meters, the ARTcube in the Lufthansa Cargo Center now offers its customers twice as much space for safe and professional storage of fine arts of all kinds.

In making the announcement, Thomas Rohrmeier, Head of Frankfurt Handling at Lufthansa Cargo stated, "The modern ARTcube combines optimal handling processes with the highest security features. This allows us to meet the special requirements of sensitive art objects and offer customized solutions for the storage of Fine Arts in our Hub. With the new building, we have further sharpened our qualitative focus on this special product and thus curators and art collectors experience the best storage conditions for their Fine Arts shipments with us."

The new ARTcube facility has a state-of-the-art ventilation system, which contains heating and cooling functions that allow for precise targeted temperature control. In addition, the facility is equipped with vertical window strips on the facade that allow for natural lighting, which is optimized by a supporting lighting system. As an additional service, the company allows customers to book an individual attendant for high-value art pieces.

The construction of the ARTcube warehouse is part of Lufthansa Cargo’s multi-year infrastructure improvement program called "LCCevolution.” This program includes several infrastructure upgrades to the Company’s Frankfurt hub, such as the construction of a central high-rack storage system and a gradual core refurbishment of the logistics infrastructure. The company expects to complete the entire infrastructure improvement project by 2029.

Peter Canellis
Kevin Pflug


Turkish Cargo

Emirates SkyCargo makes a splash at Air Cargo India 2022

Dubai, UAE, 02 June 2022

Emirates SkyCargo has concluded a successful Air Cargo India in Mumbai, engaging with its industry partners and customers through a packed schedule of meetings, panel discussions, networking events and media briefings, culminating in a celebratory awards and gala dinner event for over 300 guests.

Leading the Emirates SkyCargo delegation at Air Cargo India, Jassim Saif, VP Commercial, West Asia, Emirates SkyCargo said: "This is our first major cargo conference on Indian soil since 2019 and meeting clients face to face is such an integral part of doing business here. There were lots of updates to share and business opportunities to discuss; from offering our customers more cargo capacity with our expanding freighter fleet, to our plans to help connect India’s agri-tech farmers to a wider network of clients from Dubai."

Emirates

Dennis Lister, VP Cargo Commercial Development, Emirates SkyCargo added: "Emirates SkyCargo has deep ties with India, dating back to our first flight in 1985. Today, we are proud to serve customers at nine gateways in India offering rapid access to global markets through our network, as well as unmatched solutions for all manner of important export goods from pharma and perishables to textiles and high value tech items."

In the coming months, Emirates SkyCargo will identify and invite a number of Indian agri-tech farmers who practice sustainable farming and circular economy principles, to participate in next year’s Gulfood, one of the world’s largest food distribution exhibitions held annually in Dubai.

Abdulla Alkhallafi, Emirates SkyCargo Cargo Manager, India and Nepal said: "By supporting agri-tech farmers, the pioneers in their field and connecting them with potential business and growth opportunities will also help Emirates SkyCargo grow more out of India, particularly around perishables."

Bringing welcome capacity to serve strong customer demand across its network, Emirates SkyCargo last week welcomed its 11th Boeing 777 to its freighter fleet and expects delivery of its 12th 777 freighter in June. At a media briefing held on the side lines of Air Cargo India, Emirates SkyCargo also revealed plans to convert six passenger 777s into freighters; boosting its fleet to 20 by the end of 2026.

On the opening night of Air Cargo India, Emirates hosted 300 guests from the cargo and logistics industry, treating them to Emirates’ world class hospitality including a raffle to win Business Class tickets to Melbourne, money-can’t-buy Emirates hospitality passes to the highly anticipated cricket T20 World Cup clash between India and Pakistan, and a coveted cricket bat signed by the Indian cricket team.

Emirates SkyCargo also picked up an award on the second night for its shipment of Covid-19 vaccine. The Global Air Cargo Transport Leader of Covid Vaccine Award was given to Emirates SkyCargo after it transported more than 1 billion doses of COVID-19 vaccines on its aircraft. The air cargo carrier has achieved this historic milestone within a span of 18 months from the first shipment of COVID-19 vaccines trialled in October 2020. More than 4,200 tonnes of COVID-19 vaccines, equivalent to over 1 billion doses, have been moved to over 80 destinations on over 2,000 Emirates flights.


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