How To Understand The Value Of Air Cargo

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Sandra Richardson
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1 The Air Cargo Some Fundamentals Vladimir D. Zubkov Vice-President, Volga-Dnepr Group Board Member of TIACA

2 Volga-Dnepr Group some facts Charter flights Scheduled flights Atran Scheduled flights Volga-Dnepr Offices AirBridgeCargo Offices Maintenance Bases Countries Airports around the world

3 Loading/Unloading System for up to 80 Tons Heavy Cargo Moscow Le Bourget. Angara Space Launcher

4 Under Own Power Loading System Сonstruction engineering

5 Value of Air Cargo The Value to modern life Consumers The Value to economic prosperity Governments / Regulators The Value to the global community everyone The Value to Airline CEOs

6 One Theme The air cargo industry came up with a campaign: Air Cargo Makes it Happen

7 The Value to modern life Daily Impact if Air Cargo didn t exist Food Clothes Entertainment Technology Leisure...

10 The Value to the Global Community First responder in getting relief to natural disaster sites Safe and controlled transport of medicines Vaccines. etc

13 Billion FTKs index of world trade, 2000= The Value to the World Economies Air cargo was always considered as a barometer of the global economy International FTKs (left scale) World trade in goods and air FTKs Source: Netherlands CPB and IATA World goods trade volumes (right scale)

14 However, in the recent years air cargo is on decline

15 Source: Haver Where the economic growth is coming from Share of world GDP growth CE Europe, 3% SS Africa, 3% Euro-zone, 4% MENA, 6% China, 35% US, 9% Latin America, 9% India, 12%

Annual GDP growth 2011 2030 South Asia 7.1 China Asia Pacific Africa Southeast Asia Latin America Middle East 4.7 4.

16 Annual GDP growth South Asia 7.1 China Asia Pacific Africa Southeast Asia Latin America Middle East CIS 3.4 World 3.3 Oceania North America Europe Northeast Asia Source: IHS Global Insight

17 All is Interconnected: iphone Manufacturing & Distribution Process Demonstrates Importance of Good Logistics and the Utility of Air Cargo to World Economies iphone Components & Source Countries LCD Display Flash Memory Chip Applications Processor DRAM Memory Bluetooth, GPS Chips Radio Frequency Memory Touch Screen Control, Wi-Fi Receiver/Transceiver Power Management Accelerator/Gyroscope Compass **iphones are available in all blue countries Source: New York Times, 05 July 2010, Supply Chain for iphone Highlights Costs in China. Component Manufacturing Final iphone Assembly

18 The importance of air cargo USD 6.4 Trillion

22 The Value to Airline CEOS Air Cargo makes DOLLARS and SENSE Quality, Premium Service, Vital.

23 The importance of air cargo

24 The importance of air cargo Industry Revenue contribution

25 Air Cargo Traffic Is Forecasted To Outpace Passenger Traffic Growth in Most Major World Markets 6.1% 5.1% Asia North America 2.6% 2.3% Intra North America 5.4% 5.4% North America - Latin America 3.8% 3.6% Europe - North America 5.2% 4.8% Europe - Latin America 3.1% 4.0% Intra Europe 4.9% 4.6% Europe Africa Europe- Asia World Cargo 5.6% Passenger 5.1% 6.2% 5.9% Intra Asia 7.4% 7.0% Average Annual Traffic Growth Rate

26 1500 Freighter Fleet will Nearly Double with a Shift Toward Larger Freighters Large (>80 tonnes): MD-11, 747, 777, A350, A380, AN-124, IL-96, etc. Medium widebody (40-80 tonnes): DC-10, A300, A310, A330, A340, 767, 787, etc. Standard-body (<45 tonnes): DC-8, DC-9, Tu-204, A320, 727, 737, 757, etc % 35% % 35% 35% 30% 0 Standard-body Medium widebody 1,760 freighters Large 0 Standard-body Medium widebody 3,500 freighters Large

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28 % Growth, Semi-Conductor Shipments % growth - International FTKs But key customers are reducing shipments Semi-Conductor Shipments and Air Freight Source: IATA, SIA International FTKs Semi-Conductor Shipments

29 However, as stated before the air cargo is on decline

30 Monthly RPK (Billions) Monthly FTK (Billions) Cargo and passenger markets have diverged 450 Total Air Freight and Passenger Volumes Seasonally Adjusted FTK RPK

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32 Forces and Constraints for Air Cargo Growth Industry relocation Currency revaluations Trade quotas and restrictions New trade relationships Export promotion New commodities Widebody freighters, and lower holds Airline market research Directional imbalances Environmental regulations National development programs Open Skies & new air services agreements World and regional GDP growth Airline market and shipper education Shipper utilization Surface competition Lack of airport access Deregulation Express market "Just in time" concepts Proliferation of points served Airport curfews Terrorism/ armed conflict Air and surface labor stoppages Oil/fuel prices and availability

33 Modal Shift AstraZeneca is shifting transport of pharma products from air to sea, with the objective by end of last year to have moved 40% to sea transport and by end of %. Ericcson: better production planning will support strategic shift away from Air Cargo Sony Corp.: CSR (Modal shift) nearly 30% of total VAIO notebook computers are now by sea transport

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35 The industry must reshape Solutions must align with customer demands Costs must be reduced Processes must be simplified Technology must be embraced Innovation must replace status quo We must collaborate to produce integrated solutions Relationships with Forwarders must be redefined

36 The air supply chain Complex interfaces 36

37 E freight: what happens with the documents

38 The GACAG* vision for Global e-freight Network 2 Digitization Core Transport Docs 3 Digitization Commercial docs Customs and Handler Airline Forwarder Shipper Forwarder Airline Regulators 2015 Goal 80% world trade lanes allow paperless air cargo transport 100% e-awb, e-house Manifest & e- Flight Manifest capability on e-freight trade lanes Use of e-pouch for large set of cargo shipments Lead IATA (GACAG support) IATA (FIATA support) FIATA & GSF * GACAG - the Global Air Cargo Advisory Group, which comprises four global industry associations IATA, FIATA, TIACA, and the Global Shipper s Forum

39 Generation born

40 Acceleration of new consumer paradigm Cyber Monday Online SalesSource: comscore, Inc. Day Year Sales (millions of US$) % Change November $610 N/A November $730 20% December $846 16% November $887 5% November $1,028 16% November $1,251 22% 40

41 A vision for a modern industry (1/3) Strengthening industry relationships Modernize IATA Agency model: partnership based, aligned with airline / forwarder evolution Reacting to business model evolution Respond to changing consumer patterns collaboration with supply chain partners a must to address click-buy-fly home-to-home or factory-to-home trends. Value price, service revaluation bespoke supply chain solutions (commodity specific)

42 A vision for a modern industry (2/3) Maintaining high level safety & security Re-engineering ground processes Acceleration of transportation process. Collaboration with supply chain partners a must to address shipper to aircraft process. Ensuring technology is fully embraced Reduce reliance on human intervention e-booking, e- track, e-claims, e-delivery, e-perform Data exchange rather than message exchange

A vision for a modern industry (3/3) Collaborating for a sustainable industry Accelerate Value of Air Cargo campaign - shout not whisper air cargo s role in today s world Target young and

43 A vision for a modern industry (3/3) Collaborating for a sustainable industry Accelerate Value of Air Cargo campaign - shout not whisper air cargo s role in today s world Target young and entrepreneurs to embrace logistics as a career choice Focus on training must increase hard and soft skills Work on environmental issues: ability to calculate our carbon footprint, best practices to be greener

44 Security: protecting the skies ACC3 ACAS New ICAO guidance material RA / KC programs +++

45 Fighting the Green battle MISINFORMATION: Air Cargo accounts for 2% of global CO2 emissions Port to Port reporting is sufficient Airlines are doing nothing

46 Air Cargo Vital for todays society and economy 46

Current Market. Predicting the future is a risky business. Meet your new

Current Market. Predicting the future is a risky business. Meet your new By Dawsalee Griffin Meet your new Current Market Outlook What s in store for the next 20 years of the global jetliner market? The just-released version of this annual Boeing report offers the company s