Aircargopedia Newsblast: May 2022!
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12th May 2022  
 


Dear Air Cargo Professional:

Logistics companies report rising costs driven by fuel price - by Pat from SUNTEC.

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

In more World Air Cargo news, Air cargo market risks downturn as export orders contract.

dnata extends partnership with Qatar Airways Cargo in Belgium. Join transport logistic Americas & air cargo forum Miami on November 08-10, 2022 in Miami
  DJ Ghosh

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


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Logistics Costs Boom

Nearly three quarters of logistics companies report rising costs driven by fuel price increases. A report says 71% of logistics companies reported cost of transporting goods during up the first quarter compared to the same period last year. And 40% of respondents said that costs had climbed by 25% or more.

Surging costs are feeding through to freight rates particularly air and by road to outside the UK with more than six in ten respondents saying air and international road freight rates had increased substantially. And at least half of respondents said freight rates for transporting goods by sea, domestic roads and rail had increased substantially, the report finds.

The results suggest that the cost to transport goods and the broader cost of living squeeze are beginning to affect demand for goods with 35% of respondents reporting a decrease in orders, while 12% said orders had fallen by at least a quarter.

The cost to transport goods is surging at an unprecedented rate amid significant increases in the cost of fuel. The sheer numbers of logistics companies reporting increases in both freight rates and the costs to move goods suggests rising prices are deeply embedded and are unlikely to subside in the coming weeks. The sector is particularly reliant on diesel, the cost of which is likely to remain elevated even as the cost of other fuels subside.

Activity in the logistics sector is a reliable leading indicator for the broader economy and survey reveals worrying signs. More than a third of our respondents say orders are declining, likely because of both rising freight costs and as consumers cut back amid a broader cost of living squeeze.

Pat Praveen
SUTEC LLC.
suntecrm.com

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


CNS 2022

When will Supply Networks Stabilize Again?

When we acknowledge Complexity and learn how to deal with it

In the most recent newsletter from the Association for Supply Chain Management (ASCM),the discussion focused on the renewed COVID lockdowns in China and their effects on worldwide supply networks. 1 While the lockdown in China may be the single most important issue at the moment, it is by no means the only one. We also have the war in Ukraine, rampant inflation, a skills gap that leaves commercial organizations desperate for talent, etc., etc., etc,….

So what can we make of all this? A partial answer, for me at least, comes from my recent developing interest in Complexity Science. I have made references to this and provided citations in some of my previous articles in this series. Back when things “made sense” trends and events in Geopolitics and Economics were dynamic but reasonably in control. Low probability events with high impact were treated largely as “low probability” without much regard for the “high impact” part.

Some might say that we just have to be more “agile”; but what does this mean? For me, it means working rapid adaptation into the fabric of our culture and our processes, whereby we just don’t have a “Plan B”, but numerous options in place to respond to disruptions as they occur. This is what happens in Nature: and Nature has been around for a long time. Maybe there are lessons here.

Optimization exercises can take us so far before we find ourselves on a fool’s errand. Today’s “optimal” solution may not be so tomorrow. For example, is that low-price supplier the “optimal” solution if quality, reliability and the supplier’s solvency might even be in question?

I imagine that many who manage in the supply network feel like the frazzled air traffic controller who told the pilots in his airspace to “just stay where you are!!”. That would be great, but life just doesn’t work that way.

Some of the greatest thinkers ever have a lot to say about Complexity and, most importantly, how to embrace it for good effect. We can apply many of these concepts to supply management. It’s definitely worth investigating: the planes won’t “just stay where they are.”


Yours in Supply Chain,
Peter Canellis

Peter Canellis

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


Air Canada Cargo

Air cargo market risks downturn as export orders contract

The two-year bull market for air cargo could be headed for a downturn. Freight volumes moved by passenger and cargo airlines contracted in March and April as manufacturing and supply chains faltered in the face of war and COVID headwinds, according to figures from a major airline trade group and independent analysts.

The International Air Transport Association said air freight demand in March fell 5.2% year-over-year and that seasonally adjusted volumes reached a 16-month low. Air cargo volumes in April declined 8% from 2021 after it previously reported a 4.5% drop for March.

IATA’s reporting which benchmarks air freight supply and demand using a different methodology and current transaction information instead of monthly weight-based statistics from airlines.

It attributed the air cargo slowdown to the conflict in Ukraine, COVID isolation measures in China that limited factory output and airport access, airport processing delays due to warehouse staffing shortages, and high inflation that is dampening consumer demand for goods.

IATA said the air cargo market appears to be heading for a downturn after growth decelerated from 6.9% in 2021 to 2.7% in January and February, with demand tracking below 2019 levels year-to-date. Cargo-ton kilometers this year have declined more than the drop in overall global trade.

New export orders, a leading indicator of cargo demand, are shrinking in all markets except the U.S. Export orders during the first quarter fell in Germany, Japan and South Korea, and shrank in China. The inventory restocking cycle that had started during the initial rebound from the pandemic in late-2020, and that led to businesses turning to air freight to rapidly meet demand, seems to have come to an end, IATA said. And economists are forecasting China’s economy will only grow 4% to 4.5% this year compared with 8% a year ago.

The combination of war in Ukraine and the spread of the omicron variant in Asia have led to rising energy costs, exacerbated supply chain disruptions and fed inflationary pressure. As a result, compared to a year ago, there are fewer goods being shipped.

Peace in Ukraine and a shift in China’s COVID-19 policy would do much to ease the industry’s headwinds. As neither appears likely in the short term, we can expect growing challenges for air cargo just as passenger markets are accelerating their recovery.

IATA said passenger traffic increased 76% in March from a year ago and is now down 41% from the pre-COVID level. International volume, which supports widebody aircraft that can also carry large amounts of cargo, grew 285%.

The dynamic load factor, which measures how much a plane’s payload capacity is filled by volume and weight, fell 9 points to 62% last month. The load factor faced a difficult comparison because the 71% fill rate a year ago was exceptionally high.

Despite a 1% uptick in cargo space, the market remains at a 13% capacity deficit relative to pre-pandemic times. Russia’s invasion of Ukraine led to a reduced supply of freighters serving Europe when Russian carriers were sanctioned by Western countries and Ukrainian cargo jets were destroyed or reallocated for humanitarian missions.

IATA measured the March cargo load factor in available tonnage at 54.9%, a 3.7 point decrease from a year ago. It follows a 4.9 point drop in February and highlights how weakening demand is chipping away at cargo yields. The trade association said interest in utilizing passenger aircraft for dedicated cargo service, common when passenger flying stopped because of the pandemic, has diminished in recent months in the face of weaker demand.

Lower volumes last month did not lead to lower overall air freight rates. April spot rates were nearly 2.5 times greater than in 2019 and even edged up from March. Air cargo prices were 26% more than the prior year.

The disconnect between demand, supply and pricing is well illustrated by the trade lane between North America and Northern Europe. Flight delays due to airport backlogs reduced effective capacity on the trans-Atlantic corridor despite an influx of more passenger aircraft for the busy summer travel season as airlines put COVID in the rear-view mirror. Outsourced logistics providers say it can take more than 10 days in Europe between the time a shipment is booked and can get loaded on an aircraft. the combination of logistics snarls and airlines passing rising jet fuel costs to customers partially offset the lower-price environment due to looser market conditions.

Air cargo demand skyrocketed in the second half of 2020 as the global economy worked to recalibrate from pandemic shutdowns, but it leveled off for the better part of last year as measured by seasonally adjusted cargo-ton-kilometers. Now the sector appears to be contracting, according to IATA.

But there could be another explanation. Logistics managers say there is still substantial airfreight demand in many markets, including Singapore and the trans-Atlantic. That suggests freight bookings are strong relative to 2019 but aren’t getting measured in a timely way because of supply chain disruptions and airport backlogs that are squeezing what is actually carried on aircraft.

European carriers reported the largest decrease of any region in March, with volumes down 11.1% vs. March 2021. The domestic market plummeted 19.7% due to the war in Ukraine. Labor shortages and lower manufacturing activity in Asia due to COVID outbreaks also affected demand, IATA said.

Demand among North American carriers dipped 0.7%. The trans-Pacific market declined significantly with seasonally adjusted volumes falling by 9.2% while capacity increased 6.7%. Middle Eastern carriers experienced a 9.7% year-over-year decrease in cargo volumes as the expected benefit of traffic rerouting south to avoid flying over Russia failed to materialize.

Pat Praveen
SUTEC LLC.
suntecrm.com

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

Airbridge banner

dnata extends partnership with Qatar Airways Cargo in Belgium

Brussels, Belgium, 28 April 2022

dnata, a leading global air and travel services provider, and Qatar Airways Cargo, the world’s leading air cargo carrier, have extended their partnership in Belgium. The multi-year extension of the contract will see dnata continue to deliver a range of cargo handling and road feeder services for the airline from its state-of-the-art facility at Brussels Airport (BRU).

Qatar Airways Cargo currently operates a mix of 15 freighter and passenger flights each week to and from the Belgian capital. In 2021, dnata handled 25% more cargo for the airline at BRU than in the previous year.

Emirates

Stef Vanbinst, Managing Director of dnata Belgium, said: "We are proud to have earned the trust and loyalty of Qatar Airways Cargo with our reliable and safe services. We continue to invest in our operations to consistently provide world-class quality to the airline and its customers."

dnata entered the Belgian cargo market in 2019, substantially increasing cargo capacity in the Benelux states. Since then, it has more than doubled the size of its advanced cargo centre which now covers an area of 7,000 m². dnata has also been operating the Animal Care & Inspection Centre offering a top-notch, 2,000 m² facility for the handling of live animals at BRU.

In addition to expanding its operations, dnata has invested in equipment and technologies, including an Elevating Transfer Vehicle (ETV) system. In 2021 dnata handled 80,000 tonnes of cargo with a team of 120 highly trained employees in Brussels.

In recent years, dnata has made significant investments in advanced infrastructure to enhance its cargo offering. This included the opening of new, state-of-the-art cargo facilities in London, Manchester (UK), Karachi and Lahore (Pakistan), and additional cargo capacity and infrastructure in Brussels (Belgium), Sydney (Australia) and Toronto (Canada). Most recently, dnata has announced that it would invest over €200 million in its operations in Amsterdam (The Netherlands) and operate one of the world’s largest and most advanced cargo facilities at Schiphol Airport.

As one of the world’s leading air services providers, dnata currently provides ground handling, cargo, catering and retail services at over 120 airports in 19 countries.


Turkish Cargo

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