Monthly Archives: February 2017

Cargo News

Survey Sheds Light on Supply Chain Transparency

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Transparency has been examined.

Transparency is a key consideration throughout every facet of the supply chain, from product creation to transport, due to evolving consumer expectations.

A study from the University of Tennessee, Knoxville’s Global Supply Chain Institute has illustrated how companies can use transparency in the supply chain, e.g. by partnering with trusted air cargo carriers, for financial gain.

Creating transparency

Titled Creating a Transparent Supply Chain, the research outlined six core practises that firms can adopt to reach this aim. This includes promoting sustainability, forming partnerships with sustainable providers, fostering a company culture of transparency, enabling transparency via promoting traceability, determine a “transparency sweet spot” and hiring outside auditing partners.

Commenting the Institute’s Director, Mike Burnette, was quoted by Global Trade Mag, saying: “Companies don’t need to have their sustainability practices completely figured out… Many see it as a work in process. But it is important to establish and stick to a set of ideals and goals on which they communicate progress.” The study added that firms must take up commitments to sustainability as a revenue driver and their executive leadership must spearhead efforts to foster a transparent company culture, to ensure supply chain integrity.

Supply chain risk

The study emphasised the importance of bringing sustainability into the supply chain. It noted that this is now highly demanded by consumers, so without sustainability, firms may facilitate risk in the supply chain. It advised that companies should partner strategies such as ensuring product materials are traceable, with raising their communications with the public, to promote their sustainability credentials among their target consumers, developing a positive reputation.

Going on, he said: “Consumers want to know where a product came from, all the way to the cashmere goat herd on the slopes of the Himalayas… A lack of ability to provide that kind of information in the face of safety or environmental violations can create a negative perception of the brand that may require immediate remediation and could take a brand years to recover from, if at all.”

Sweet spot

The report added that forming good partnerships is key to promoting sustainability. But this typically involves proprietary business information, so it’s wise to figure out that communications sweet spot, which fosters trust for both providers and consumes. The paper cited The SC Johnson Company, a US-based household cleaning products supplier, as an example of a firm which has found this sweet spot.

Explaining, SC Johnson’s Senior Vice President for Global Corporate Affairs, Communication and Sustainability, Kelly M. Semrau, said: “Last year we took an unprecedented step in the industry by launching the first product with 100% of the fragrance ingredients disclosed… We believe consumers should know a product’s ingredients so they can make educated choices about what they bring in to their homes for their families.”

They drew on the expertise of the International Fragrance Association, to ensure that their ingredients were sustainable and safe. This fulfils the study’s last recommendation – hire outside auditing partners. Continuing, Semrau said: “Companies must choose these partners carefully… but they can never hope to replicate the databases of industry information that sustainability coalitions compile.”

Promoting trust

We live in a world where consumers can find product information anytime, anywhere they want online, through devices such as smartphones. The increasing free-flow of information which has been facilitated by the onset of the digital age, has made consumers far more discerning.  Now that many people know how some practises can harm the environment, as well as other people, they’re often unwilling to go against their consciences and buy products and services from businesses which engage in said practises, or partner with those firms that do.

At the same time, however, many consumers are often willing to reward businesses which align with their values. Therefore, if companies can leverage transparency in their supply chains effectively, they can foster trust, which is crucial. According to the 2015 Edelman Trust Barometer, a measure of the global impact of trust, compiled by marketing firm Edelman, 80% consumers will buy a product, because they trust the company behind it. Therefore, if businesses safeguard transparency at every part of the supply chain, including transport, they can actually potentially create new revenue.

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Hong Kong Racks Up “Steady Growth” in Air Cargo

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New reports confirm that Hong Kong International Airport (HKIA) managed to rack up “steady growth” in its air cargo segment across the opening month of 2017.

Major hub

The city has become a cargo hub.

Hong Kong boasts a vibrant, modern economy, along with highly-developed logistics infrastructure. It also provides companies with easy access to the Chinese market, which is the second largest economy on earth. Hong Kong has become a major global air cargo hub, facilitating trade between the world’s big manufacturers, such as China and India, and major consumer markets, such as the US and Europe.

HKIA is the busiest air freight hub on earth. The facility handles roughly 4.5m tonnes of cargo annually. Hong Kong has also benefitted from globalisation, as e-commerce is making it easier for consumers to purchase goods directly across international borders than ever before. The airport’s rising fortunes were reflected by new figures released recently by the Airport Authority Hong Kong (AA).

Steady growth  

The data, industry portal Air Cargo News writes, indicates that across 2016, HKIA’s air cargo traffic volumes climbed by 3.2% to hit 4.52m tonnes, when compared to 2015. These statistics also suggest that HKIA recorded “steady growth” in all its air traffic segments in January 2017, with volumes rising by 3.1%, when contrasted with January 2016, reaching 372,000 tonnes.

In their analysis, the AA primarily attributed HKIA’s January 2017 growth to an 8% rise in export traffic. The Authority also noted that by the end of January 2017, the airport’s freight throughput reached 4.5m, ticking up by 3.4%, when analysed on a rolling, 12 month basis.

Key factors

Also among Hong Kong’s primary regional trading partners, the largest increases in cargo traffic rates were seen in North America and Europe, year-on-year. Evidence supplied by the TAC Index, a definitive authority on air cargo pricing, bears this out. On the Hong Kong/US route, air cargo prices rose by 9.1%, year-on-year, in January 2017, with an expansion rate of 6.5% on the Hong/Kong Europe route.

HKIA also benefited from Chinese New Year, which took place in January. Explaining more, the AA’s Deputy Director of Airport Operations, Vivian Cheung, said: “The airport community made an excellent concerted effort to maintain smooth operations at HKIA during the festive period… Since the Chinese New Year period fell in February last year, a more meaningful comparison of the traffic performance could be made when the combined statistics for the first two months of 2017 are available.”

Rising fortunes

January is traditionally a slow time of year for air cargo. With the end of Christmas and New Year, consumers often start to tighten their belts in January, to overcompensate from abundant holiday spending, resulting in fewer purchases to transport via air. The AA’s latest figures indicate that HKIA managed to buck this trend, to report “steady growth.” Yes, Chinese New Year was a contributing factor, but Hong Kong’s air cargo business with North America and Europe also expanded in the first month of 2017. This indicates that HKIA’s fortunes are only set to keep rising across 2017.

Cargo News

Air Freight Outpaces 2016 Levels in January

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New figures indicate that air freight price rates in some of the world’s most important trade lanes kept tracking ahead of the year before’s levels in January 2017. Cargo News comments.

Results were strong in January

New opportunities

The rapid speed of technological advancement has spurred the rise of e-commerce, creating new opportunities for the air cargo sector. Figures collected by MarketLine, a research company, indicate that the global air freight industry expanded at a Compound Annual Growth Rate (CAGR) of 0.7% from 2012 to 2016, being valued at US$101.3bn by the end of last year. It will keep growing over the next five years, at a stronger forecasted CAGR of 3.2%, so by 2021 the market is expected to be valued at US$118.7bn.

This long-term potential is already making itself apparent. Figures suggest that air cargo confidence will remain strong over the first half of 2017, due to expanding e-commerce volumes. We are already seeing evidence that industry optimism is strong right now. In Europe, for example, it is traditional for air cargo rates to drop off in December. In the last month of 2016, European rates did fall when compared to November, but it was the smallest drop since 2012, indicating industry optimism.

January progress

January is also traditionally bad time for air cargo, as it marks the end of the holiday season, with drops in shipments due to renewed financial cautiousness in consumers. But even in this typically slow month there was progress, according to the TAC Index, a definitive authority on air cargo pricing.

On key routes, there were drops when compared to December 2016. Air cargo rates on transpacific services from Hong Kong, the world’s busiest air freight hub and the US, its largest economy, fell from US$3.51 per kg to US$3.24 per kg in this period. The Hong Kong/Europe and Frankfurt/North America routes saw falls of US$2.78 per kg to US$2.46 kg and US$3.08 kg to US$2.55 kg each, in the period between December 2016 and January 2017. But prices are ahead of where they were in January 2016.

Air freight rates are 9.1% higher, year-on-year, on the Hong Kong/US route and 6.5% higher on the Hong/Kong Europe route. The rate of the December to January fall was lower on the Hong Kong/US route, at 7.5% in 2017, compared to 12.1% in 2016. However, the month-on-month drop rate was higher on the Hong Kong/Europe route, at 10.1% to 11.5%. According to the Index, demand will remain flat until July, in line with seasonal demand, then start picking up, as we head into its peak period.

Bright outlook

The fact that air freight prices are stronger in January 2017, than they were in the same month of 2016, is important. It suggests that on the world’s busiest air freight routes, business is booming, as consumers are purchasing goods in increasingly higher volumes year-round, not just during peak spending periods. As the global digital economy expands and advancing digital technologies make it easier for consumers to purchase products online, the air cargo sector could climb to new heights.

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Air Cargo Confidence to be Strong in First Half of 2017

The confidence that key industry professionals display, concerning their firms’ growth potential, can be an indicator of their sector’s overall fortunes. Things are looking bright for the air freight industry, a new report indicates, as air cargo confidence levels will be strong in the opening half of 2017.

Confidence is strong.

Confidence boost

The global air freight industry has expanded significantly in the past few years, thanks largely to the rise of cross-border e-commerce. This provides consumers with more convenience than ever, as they can buy products and services via handheld devices on the go, incentivising them to execute more purchases. Therefore, this supplies more cargo for carriers to transports by plane across the world.

In a recent report, German logistics firm DHL Express found that cross-border e-commerce volumes are predicted to expand by an annual rate of 25%, from 2015 to 2020. This could provide more business for air cargo services and this sector itself is expected to expand at a Compound Annual Growth Rate of 3.2% between 2016 and 2021, according to a study recently carried out by MarketLine, a research company. Combined with China’s recent fiscal stimulus and new US President Donald Trump’s pledge to lower taxes and regulation, this is inspiring optimism in the air cargo sector.

Talking recently to Loadster, an industry site, Zahra Ward, the Global Equity Strategist for research institute Absolute Strategy Research (ASR) noted that air cargo industry confidence rose towards the end of 2016. This optimism is projected to remain robust in the first six months of this year. Expanding, she noted: “There is a reported pick-up in airfreight confidence… [global aviation body] the International Air Transport Association says this is a lot to do with carriers improving efficiency.”

Market conditions

Ward noted that confidence will be especially robust in Asia, where air cargo volumes are currently believed to be expanding by roughly 10%. This reflected data gathered by Drewry, a maritime research consultancy, concerning the Asian market’s progress in December 2016. In its December purchasing index, Drewry registered 11% and 11% increases at Hong Kong Airport and Incheon Airport respectively. In Incheon’s case, Ward argued, the collapse of Hanjin has benefited air cargo services.

Turning to Europe, ASR noted that here, air freight volumes expanded by 5.4% in October, but stalled in November 2016, due partially to Germany’s recent pilot strike. But Spain experience a 13% expansion for the fourth month in a row at the same time, which Ward argued shows that the rise in European air cargo confidence registered at the end of 2016 will continue. Drewry’s purchasing index showed that compared to December 2015, some European airports experienced growth in the last month of 2016. London Heathrow, where ASC Cargo operates, saw a 5% uptick in December.

Compared to November 2016, European rates on Drewry’s purchasing index declined by 6% in December, but even this was good news. Commenting, Drewry noted: “As December traditionally sees a drop off in rates the latest slide was not unexpected… It is testament to the growing strength of the market, that the rate decrease from November to December was smallest of its kind since 2012… We expect to see a further seasonal decrease to the index in January, once again smaller than usual.”

Spotlight on America

This picture appears to be far murkier, when it come to the US – the world’s largest economy. Both ASR and Drewry agreed that the American air cargo market is pretty flat right now and Ward added that the relevant January purchasing index for the US air cargo sector still looks positive. It is hard, however, to give a complete assessment of the US sector, due to the lack of information that is expected to come out of China, upon which the US heavily relies, between now and February.

However, Ward argued, it is likely that the US air freight industry will record a somewhat positive performance in the opening six months of 2017. Expanding on this point, she noted: “Whether we see 10% growth until June remains to be seen, but the base level from last year is poor. Furthermore, there is the boost from China and businesses seem to be getting more confident about Trump.”

Yet Ward suggested that the US may serve as a threat, to the fortunes of the international air cargo market. Continuing, she said: “I don’t know how it will play out, but it doesn’t seem as if he [Trump] has thought through the massive cost increases US consumers will face if he begins imposing tariffs. But with Asia showing the first signs of growth in June that led to this run of good form, I would say look to there as a bellwether for any potential slowdown” for the worldwide air freight sector.

Ignazio Coraci’s comments

There are various reasons why air cargo confidence is currently robust. The rapid advancement of the global digital economy, coupled with rising consumer trust in e-commerce, is facilitating various new opportunities. But air cargo firms face a lacklustre worldwide economy and a growing anti-globalist movement across the Western World, which could impose new trade costs. It is crucial that air cargo services target key markets with established transport infrastructure like London, whose Heathrow airport is one of the busiest air export hubs on earth, to turn strong confidence into real growth.

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Cross-Border E-Commerce to Grow Rapidly in Next Five Years

The expanding global cross-border e-commerce sector has fuelled the growth of the air cargo industry, as it’s extremely convenient to transport goods by air, due to fast travel times. New figures indicate that cross-border e-commerce will grow rapidly over the next five years, benefitting air cargo carriers.

Opportunities are present

E-commerce opportunities

This information was collated by DHL Express, a German logistics firm, in its latest report – The 21st Century Spice Trade: A Guide to the cross-border E-Commerce Opportunity. It was based on a poll of 1,800 professionals in the retail and manufacturing industries, across six countries, as well as research and in-depth interviews of experts carried out by a leading worldwide management consultancy.

According to Global Trade Mag, a logistics industry portal, the report’s remit was extensive. It sought to examine the world’s highest growth potential markets and products, as well as the motivations and preferences which inspire consumers to execute global online purchases and the factors which govern the success of digital retailers who hope to expand their operations across borders. The study especially focused on the opportunities available premium products and service offerings worldwide.

High growth potential

DHL Express found that higher basket values comprise a larger proportion of cross-border transaction orders than anything else, by a strong margin. It noted that the aggregate expansion rates afforded by international e-commerce, simply cannot be found in the majority of other retail markets.

The report concluded that between 2015 and 2020, cross-border e-retail volumes are forecast to rise from US$300bn to US$900bn. This signals a 25% annual rate of growth, meaning that this sector is predicted to grow at twice the rate of domestic e-commerce sectors within this period. DHL Express further noted that simply by expanding their offerings to global consumers, digital retailers have already managed to spur their sales upwards by around 10% to 15% over the last year alone.

Changing landscape

The report shed light on the advancing nature of global e-commerce. It noted that both supply and demand are growing more sophisticated, with each passing year. The study discovered that this may be fuelling demand for premium services. For example firms who offered consumers a faster shipping option in their digital stores, grew 1.6 times faster than their peers on average during this time frame.

The report offered additional key insight, into why cross-border e-commerce is set to keep growing, in the period to 2020. Primarily those retailers who provide their products online can cut out the middlemen, appealing directly to consumers and these firms are expected to expand 30% faster than other companies operating in the cross-border retail sector in the next few years. Other contributing factors included the rising availability of attractive online deals and increasing consumer product availability, which are incentivising customers to become more discerning and shop online.

When polling consumers, DHL found that the cross-border e-commerce industry faces a number of key challenges. These primarily relate to logistics, price, trust and consumer experience. Concurrently, there are various measures digital retailers can adopt to identify and cultivate demand from overseas. DHL Express suggested that many retailers can now open up new markets, by adapting their offerings to the digital marketplace, as we’re increasingly operating in a trade eco-system characterised by facilitators and off-the-shelf solutions, such as website check-out localisation programmes.

Forming partnerships

The cross-border e-commerce sector is set to grow exponentially to 2020, due to strengthening consumer trust, allowing more businesses to sell products online. However, many firms still find it difficult to transport their goods easily across borders, so it is key that they partner with global logistics experts going forward. Logistics operators have the infrastructure in place to deliver fast, reliable, flexible delivery, as well as both localised and centralised warehousing and fulfilment. This gives e-commerce traders the ability to provide the first rate service consumers are increasingly demanding.

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World’s Air Cargo Sector to Grow Across Next Five Years

Recent reports suggest that the world’s air cargo sector is set to record significant growth during the next five years.

Market progress

Ignazio Coraci - Aero
The market is progressing

The world’s export landscape is rapidly changing. The breakneck-speed of technological advancement is making it easier for firms to ship products to the other side of the world than ever before. Meanwhile, emerging nations across the world, especially in the Middle East and Asia-Pacific (APAC), are increasing their manufacturing output constantly, delivering more opportunities for air exporters.

A report compiled by MarketLine, a research firm, indicates that rising Middle East and APAC manufacturing has been beneficial for the international air cargo sector. Global Trade Mag reports that according to MarketLine, the sector expanded at a Compound Annual Growth Rate (CAGR) of 0.7% from 2012 to 2016, although there were times of varied growth and decline within this period. This means that by the close of last year, the global air cargo market was valued at US$101.3bn.

Sector forecasts

The closing quarter of 2016 signalled a time of renewed growth for the global air cargo sector. Data from the International Air Transport Association (IATA), a worldwide aviation body, suggests that the volume of air cargo increased by 6.8% in the year to November 2016. Meanwhile, of J.P. Morgan/IHS Markit Global’s manufacturing Purchasing Managers Index (PMI), expanded at its fastest pace in the last quarter of 2016, than it had since the third quarter of 2015, indicating growing confidence.

MarketLine’s study also suggested that the air cargo market will keep expanding, going forward. The firm noted that even though cargo volume expansion slowed in 2015 and 2016, new technology is entering the sector and this is set to ensure that volumes rise at a steady rate going forward. Coupled with increasing APAC infrastructure, this is set to ensure that the global air cargo sector climbs by a CAGR of 3.2% between 2016 and 2021. By 2021, the market will be valued at US$118.7bn.

Favourable conditions

As the report was released, MarketLine Analyst Paul Todd issued a clear warning to air cargo firms. Expanding, Todd said: “Despite a positive outlook for the air freight sector, companies must always consider the threat from alternative freight methods. The advantages to the customer must be sufficient to ensure healthy growth in this sector.

However, Todd added that the market is ripe for expansion in the next few years. Going on, he noted: “Oversupply or increased competition may be potential threats… but the recent bankruptcy of Hanjin, a leading marine freight company, could be positive for the air freight sector as its players may pick up some trade from consumers who have lost confidence in marine transport.”

Tackling issues

There are many factors, which could influence the fortunes of the international air freight sector in the next five years. Overcapacity was a big issue for the industry in 2016, as it suppressed cargo yields and forced rates downwards and it was primarily the decreasing price of crude oil, which allowed the sector to grow significantly in the final quarter. Yes, conditions are currently favourable for growth, but the industry must deal with the overcapacity problem, to ensure it thrives going forward.

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SW Italia Starts Expanding its Fleet

SW Italia’s CEO, Ignazio Coraci, recently announced that the leading Italian all air-cargo carrier will pursue ambitious expansion plans in 2017, by extending its air shipment services globally.

Leading carrier

SW Italia has expanded. Cargo News from cargonews.it
SW Italia’s fleet has expanded.

Based at Milan’s Malpensa Airport, SW Italia was founded in January 2015. Right from its inception, SW Italia has aimed to become Italy’s leading completely air cargo service and to make headway in the lucrative European market. SW Italia is now increasingly connecting with the main cargo markets for Italy, from Korea, China and Hong Kong in the East, to the booming United States in the West.

SW Italia established its fleet with a Boeing 747-400F. This is the best-selling model in the Boeing 747 family of jet airliners. This full freight unit has been out on rent to Qatar Airways, one of the most prosperous carriers in the Middle East, for the past year. Qatar Airways has relied on this Boeing 747-400F to conduct key services from Doha, the Qatari capital, to China and on to Northern Europe.

Expansion plans

SW Italia has now added a second Boeing 747-400F to its fleet. It will be employed by the key Chinese courier STO Express on its Hong Kong to Prague service, which it established in late 2016. The plane, which now bears STO Express’ insignia, will travel this Hong Kong to Prague route three times a week, but is also expected to make stopovers in Brescia Montichiari and Baku on the return flight.

The company has also announced that it will add a third Boeing 747-400F to its fleet in November 2017. It is expected that this unit may serve the US market, where SW Italia recently secured flight authorisations to carry cargo between top European and American transport hubs. Reports have revealed, for example, that SW Italia is planning to cultivate a Milan to Chicago service.

Commenting on SW Italia’s expansion plans, Ignazio Coraci was quoted by Avio News, an online air news agency, saying: “In 2017 we expect to further increase our fleet with another and open new routes.” Ignazio also stated that now SW Italia has received the necessary US authorisations, it will start pursuing its American expansion plans and it also hopes to move into the African market, which is a small but growing export destination for Italian companies, at some point in the future.

Ambitious goals

SW Italia may have only been established two years ago, but the firm has already positioned itself successfully in the global air cargo market. It has also consolidated critical partnerships in the worldwide arena, to take advantage of new business opportunities. With its 2017 expansion plans, SW Italia will clearly continue to grow its air cargo delivery business across the world in future.

About Ignazio Coraci

Ignazio Coraci is a senior player in the global aviation industry, specialising in air-cargo delivery services. Ignazio is currently the Chief Executive Officer of Heathrow Airport-based ground-handling service ASC Cargo and holds the same position at SW Italia, one of Italy’s leading all-cargo airlines.