QUARTERLY MAGAZINE AF-KL CARGO VOLUME 23 ˆ NR 33 ˆ JUNE 2008

cargovision

Looking for gaps

RFID on the skids
What a relief!

CHAINED
TOGETHER
 cargovision editorial

OPPORTUNITY AND OBLIGATION

■ The economic volatility introduced by record commodity prices and the financial crisis in the West suggests
that 2008 will be a tense year for the airfreight business. However, our industry is one of many suffering the
fallout from a tremendous upheaval in financial markets: power that once lay with the developed economies has
now spread to other centers. Oil-rich countries and Asian central banks are among the world’s largest sources
of capital, and their money has helped hedge funds and private-equity firms become power players in the world
of finance. The assets of these four groups of investors have nearly tripled since 2000, to $8.5 trillion by the end
of 2006 or about 5% of the world’s financial assets ($167 trillion), according to the McKinsey Global Institute.
The transportation business has felt this shifting influence in the financing of property and equipment as well as
airports and seaports, but also in the worldwide consolidation of forwarders and handlers, and the changing
patterns of global trade.

With turmoil of this magnitude comes confusion in business and in society. An international transportation
company like AF-KL Cargo thrives on global trade. However, surveys show that the average person does not
believe global trade is a good thing. Perhaps other businesses have been too cautious on this controversial
issue. No doubt there is a gap in most societies between the realities and the politics of globalization.
However, businesses could affect the willingness of societies to stay open to globalization if they were stronger
advocates for policies that benefit workers, such as retirement benefits, health care, retraining or educational
opportunities that follow workers when they change jobs.

Large multinational firms like ours have a tremendous opportunity and also an obligation to make a difference in
people’s lives. We see many businesses in the vanguard when it comes to climate change, having realized that
sound environmental decisions are often financially beneficial. Corporate social responsibility is another area
where changes will eventually contribute to the bottom line.

In this issue of Cargovision, we report on several examples of how the airfreight industry is reaching out to serve
the wider needs of its global stakeholders. We discuss how various relief organizations are seeking stronger ties
with the logistics industry to optimize their response in times of crisis. We analyze what happens when supply
chains compete for resources, space and time, and whether the global logistics system could work more
smoothly. We report on progress in the implementation of radio frequency identification tags in the supply chain.
We review the status of global security with industry expert Arthur Arway of DHL, and take a look at IATA’s new
Safety Audit for Ground Organizations.

In short, there’s plenty to stir your thirst for opportunity in this issue of Cargovision.
Pleasant reading!

Marcel de Nooijer
Vice President – Europe
Air France Cargo-KLM Cargo

2 cargovision | JUNE 08
 cargovision contents

© Caro/Image Select
RIFD on the skids, page 16

4 CHAINED TOGETHER
A single supply chain is a simple concept that is easy to sell. But what happens when many supply chains
compete for resources, space, and time? Do the traditional interactions between shippers, forwarders and
airlines hinder reliability?

14 LOOKING FOR GAPS

As a 30-year veteran in security and law enforcement, Arthur G. Arway has developed a sharp eye for gaps in
the fence. He is currently chief watchdog for the Americas at DHL Global Forwarding. He discussed some of his
concerns with Cargovision.

16 RFID ON THE SKIDS

Wal-Mart and Tesco caused a stir when they told suppliers they would lose their business if they did not use
radio frequency identification (RFID) in the supply chain. We’ve heard little since from either firm. But that
doesn’t mean progress is standing still.
Looking for gaps, page 14

19 IBERIAN LYNX
Satisfying the air cargo service requirements of a large, multinational and fast-growing client is always a chal-
lenging task. But Jorge Costa Leite relishes his role as Air France Cargo-KLM Cargo’s key account manager for
Inditex Iberia.

20 WHAT A RELIEF!
After scrambling to deal with the aftermath of the South East Asia tsunami in 2004, the Pakistan earthquake in
2005, and the Central America hurricanes in 2007, a number of relief organizations have sought stronger ties
with the logistics industry.
What a relief, page 20

24 GROUND OUT
Airlines have service level agreements with handlers and they usually include safety standards, but these may
vary from place to place. Enter IATA Safety Audit for Ground Organizations, a service level agreement promising
greater benefit to the industry.

8 NEWS & DATELINES

22 A WEEK IN THE LIFE OF GIOVANNI BISIGNANI
26 COUNTRY FILE: BANGLADESH
28 MARKET MONITOR
30 POSTSCRIPT
31 INFORMATION AND COLOPHON

COVER IMAGE
A Terracotta Warrior statue wrapped in protective foam
© PeterMacdiarmid/Getty Images

cargovision 3
 CHAINED
TOGETHER

4 cargovision | JUNE 08
A single supply chain is a simple concept that is easy to sell.
But what happens when many supply chains compete for resources,
space, and time? Does the global logistics system work smoothly or do
the traditional interactions between shippers, forwarders and airlines
hinder reliability?
BY TONY CARDING

■ Jarmand takes no prisoners. His customers like

him because he can move their freight through stone
walls. “Chang just bumped two pallets from Hong
Kong for us,” he told Davies sitting across the desk.
“Those mobiles we were worried about? Forget it.
They’ll make the distribution center by Monday.”
“Well that’s only fair,” Davies said. “Chang bumped
three of our pallets last month, and it took four days
to find another slot. I thought they were going to
have a stroke in Kuala. They were running so low on
fasteners they almost shut down the line.”
“Yeah, well Kuala’s not one to talk,” Jarmand shot
back. “Remember when they sent us those lighting
units? Supposed to be eight cubic meters but turned
out to be 11? We didn’t hear the end of that for
weeks.”
Cooperation – the essence of global logistics. It’s
tempting to believe that airlines, forwarders and ship-
pers would think less about self-interest and more
about long-term achievement, especially in airfreight,
with its tight schedules and just-in-time operations.
Unless everyone in the supply chain plays his part
and operates by the same rules, the smooth flow of
shipments through the system is compromised, no
matter how good the individual players may be.
Around the water-cooler, these same shippers,
© Peter Macdiarmid/Getty Images

forwarders and carriers can be quick to blame each

other for operational failures: late delivery to the
airport, overbooked flights, incorrect data entry, or
lost shipments. While they are rather more restrained
in public, most of these individuals would agree that
certain changes could improve the overall success of
the transportation industry.

cargovision 5
 cargovision chained together
Mr. Newbold:
“The current situation
forces the airlines
to work more efficiently
in order to cut costs,
while focusing on
the quality at the
same time”
ETERNAL ARMY
Some of China's world famous
terracotta soldiers travel
abroad in 2008 and AF-KL
Cargo had the honour of trans-
porting them to Paris, and of
supervising the loading and
unloading of the statues. The
Eternal Soldiers star in several
European museums this year,
among them the Pinacothèque
de Paris. The Terracotta Army is
a form of funerary art buried
with the Emperor of Qin in
209-210 BC. The army was
discovered in March 1974 by
local farmers drilling a water
well to the east of Lishan.
(source: Wikipedia)
6 cargovision | JUNE 08
NO VACANCY
It is very much a buyer’s market for shippers at the
moment, which puts the forwarding community
under pressure to cut prices to the bone in order to
win and keep business, says Andy Newbold,
commercial manager UK of Air France Cargo-KLM
Cargo. “While we would prefer to focus the discus-
sion on quality efficient solutions rather than on
prices only.”
Some years ago, shippers didn’t know much about
the logistics chain and they just accepted the
airfreight charges, Mr. Newbold says. Transparency,
vast amounts of information became available on the
internet, caused the shipper's ignorance to quickly
pass. Firms began hiring shipping managers away
from the forwarders.
Today, shippers tend to offer their business to a
number of forwarders so they can optimize pricing.
This forces forwarders to reduce their margins and
eliminate costs from within the chain by working more
efficiently. With the huge overcapacity in the airfreight
market today, airlines are not in a strong position to
resist forwarder’s demands for lower rates, particu-
larly on heavily traveled routes such as London to
New York, where there is 90% overcapacity. That
means freight, if spread evenly among the airlines,
would give an average load factor of 10% on a New
York flight. With every airline scrambling for the same
tiny slice of the pie, the marketing situation has
becoming a matter of bargaining over pennies.
THE DAYS OF WINE AND REGULATION
This dismal situation came about after European and
American anti-competitive authorities ruled that the
International Air Transport Association could not set
fixed charges for cargo going from one place to
another. Rates today of less than £0.40/kg from the
UK to New York would have been £1.40/kg before
the rule change. People who worked in the airfreight
business during that time believe that carriers then
could afford to offer much better service than they
can with today’s rock-bottom rates.
The decision about which airline flew the freight was
also different when people concerned themselves
more with quality. It was based on two things: first,
how good was the quality of the airline’s perform-
ance, and second, how good was the relationship
between the airline’s sales management and the
forwarder. In contrast, many forwarders and shippers
today choose the carrier that gives the lowest price,
although a common exception is a forwarder
working for a shipper that wants high-quality service,
because he has specialized cargo. “This is a chal-
lenging position for our industry,” Mr. Newbold says.
“The current situation forces the airlines to work
more efficiently in order to cut costs, while focusing
on the quality at the same time.”
Many people who have been in the air cargo busi-
ness for a while would like to return to the days of
selling on quality and solutions only, investing in the
future, and modernizing the industry. It is extremely
challenging to relinquish the notion that a high-quality
cargo service should sell for a premium even when
so many customers force them to compete on price.
The question of price versus quality also concerns
forwarders. “The exporter or importer is always
looking for the best deal,” says Chris Edwards,
director airfreight for Northwestern Europe at Kuehne
+ Nagel. “But it’s not just about price.”
A forwarder can always find cheap transportation,
but needs to know the quality of the service being
sold. Is it good and consistent? Does it provide for
the customer’s needs or is it just a rock-bottom
quote? What is the value of the service relative to the
needs of the business under consideration? What
can be done to remove rates from the discussion?
NOT A ONE-NIGHT STAND
The way to offset rate erosion is by urging carriers to
move faster towards Cargo 2000 compliance, Mr.
Edwards says. “That is not just for us, but for the
industry. It is important that they take this seriously,
and look at performance much more seriously. Tradi-
tional forwarders must create a seamless service
with the airlines if we are to compete successfully
with courier companies that operate their own equip-
ment on the ground and in the air. We don’t have our
own aircraft and must depend on the major carriers
to move our customers’ products.”
The Cargo 2000 route map is the promise to the
customer, Mr. Edwards continues. “If you fail on the
route map performance, you fail the customer.”
Kuehne + Nagel is the only company that is accred-
ited to Cargo 2000 Phase Two, but others are about
to achieve the same status. This is good news,
because it demonstrates that the industry is taking
the initiative seriously as a standard for performance,
and that will be better for customers.
Kuehne + Nagel has sufficient resources as a multi-
national forwarder to be able to enhance any offering
to its customers and widen the discussion beyond
the topic of price. “Shippers and the consignees are
always looking for low cost,” Mr. Edwards says.
“But low cost is not necessarily just the price per
kilo, it’s everything added together. Price per kilo is
not the basis for a partnership that we would like to

have with our customers. We’re in business for the
long term, not just to be with a customer for the
next six months.”
ROLE PLAYING
Every consignee has a need, says Ram Menen, divi-
sional SVP cargo for Emirates Airline. And everything
that transpires in the supply chain ought to happen
because someone is trying to fulfill that need. Ideally,
everyone works to create collective efficiency. But
sometimes people get so focused on their own areas
they forget that the efficiency they create for their
customer could end up producing inefficiency some-
where else in the chain.
This is one reason airlines want to work with
everyone in the chain so they can understand what it
requires. “Supply chains are like fingerprints,”
Mr. Menen says. “They are all different and they
have their own unique characteristics. The better the
understanding we have, the more seamless the
movement we can create.”
The shipper, the forwarder, the airline, the trucker
and the ocean operators are all peas in the same
pod, Mr. Menen says. Yet, each one brings different
© Glow Images/Alamy
© Peter Macdiarmid/Getty Images
expertise to the table. He believes that the airline’s
role in the supply chain is to create the supply lines
while the forwarder has the equally important role of
managing the ground part of it. Also, the most critical
part of the supply chain for any business today is
inventory management. The process of optimizing
inventory is done best with the freight forwarder.
Mr. Menen:
The consignee usually sets the tone of the overall
“Supply chains are like
supply chain because he is looking closely at the
fingerprints, they are all
supply chain and creating the blueprint for it,
different and they have
Mr. Menen says, although, the shipper can also set
their own unique
the tone. “If you look at your mobile phone and the
characteristic”
number of parts in it, you will see that they are all
being manufactured in different parts of the world
and then brought together for assembly. In this
case, the mobile phone manufacturer is calling the
shots. They know what their supply chain should
look like.” Nevertheless, it is critical that all these
elements work in sync, Mr. Menen says. “If you are
only trying to make a buck off each other, the effi-
ciency of the whole supply chain itself comes into
question. The only way you can optimize supply
chain management as a whole is to have a colla-
borative strategy.” ■
cargovision 7
 cargovision news around the world
Our quarterly review of
industry news keeps you
abreast of developments
in key sectors around
the world.
Krasnoyarsk
Carriers - Eurasia
KRASNOYARSK
The Russian authorities have been playing chess with Lufthansa Cargo.
Last October, they stopped their automatic approval of the German airline’s
rights to fly over Russian territory to its hub in Astana. The suspension
forced LHC to divert 49 weekly flights around Russia in order to land in
Kazakhstan. This added 90 minutes flying time each way to the Frankfurt-
Asia service. Russian aviation authorities would like Krasnoyarsk to
become a major transit hub, a competitor to Dubai, and want foreign
airlines to reroute traffic through the Siberian city. LHC said it would
consider relocation if and when Krasnoyarsk’s Yemelyanovo airport
modernized its facilities and met certain operational and commercial condi-
tions. It may have been just a coincidence, but Russian tax authorities froze
several Lufthansa accounts in February, saying that the carrier owed about
US$10 million, although the parties disagreed on the interpretation of the
tax regulations that led to the claim.
Closing in from a different angle in February, Volga Dnepr and Krasnoyarsk
Airlines opened a multimodal cargo hub at Yemelyanovo. The new 60,000-
8 cargovision | JUNE 08
tonne handling terminal will enable Airbridge cargo to
double its trans-Siberian frequencies to 40 times a
week. In March, LHC said it would relocate its regional
hub to Yemelyanovo by 2009 and begin test flights
there in June. And lo, the Russian authorities once
again approved the LHC request to fly over their terri-
tory.
TASHKENT
Uzbekistan Airways and Korean Air are talking about
building a logistics center at Navioi airport, 360 km
southwest of Tashkent’s main airport. The two carriers
said in March that their cooperation would enable
Korean Air to help Uzbekistan Airways obtain asso-
ciate membership in the SkyTeam alliance and to offer
the Central Asian carrier support for sales and for
operations at Navoi. In exchange, Korean would gain
an important base in Central Asia.
ABU DHABI
Issam Khairallah, president of Midex Airlines, said in
January that the carrier would soon begin cargo flights
from Al Ain International Airport, which is located near
an ancient oasis 120 km south of Dubai and 160 km
east of Abu Dhabi. Midex will begin cargo flights to
Beirut, Dhaka, Istanbul Kochin, Mumbai, and Paris.
Passenger flights may begin later, Mr. Khairallah said.
BEIJING
“There is a danger that China’s cargo airlines are
being marginalized in the world air cargo market,”
Li Jiaxiang, acting director of China’s civil aviation
administration, said in March. Although nearly 4 million
tonnes of Chinese cargo flew on international routes
last year, the share carried by domestic carriers
dropped to 18% from 44% in 2000. Although not as
 cargovision news around the world

© Ian Trower/Image Select

Architecture of Tashkent train station

dramatic a decline, the number of passengers flown years, serve on TIACA’s board, and write a book about the airfreight
on international routes by Chinese airlines last year industry. In January, the Chinese government issued his company a wholly-
dropped to 44% from 55% in 2000. These figures are owned foreign enterprise trade license, allowing the firm to operate in
troubling to Chinese authorities who want to see their China without a local partner. In March, Barloworld Logistics of Johannes-
nation become a strong power in civil aviation. burg, with airfreight revenue of €172 million in 2007, acquired Swift and its
affiliates for €43 million. Swift’s turnover in 2007 was €127 million.
Barloworld originally said that Mr. Baluch would stay on as chairman.
LEIPZIG However, he subsequently stated that he “…will continue to play a leading
Executives at the DVB Bank AG were quick to spot an role in the organization alongside the management team from Swift.” The
opportunity. When Iceland’s Avion Group cancelled an takeover catapults Barloworld onto the global stage. Having Mr. Baluch
order for eight B777-200 freighters last fall, DVB there to help would be a good thing.
subsidiary, Deucalion Capital, stepped in to buy the lot
from Boeing and turn it around on lease to AeroLogic.
The new cargo airline expects to begin operations
between Europe, Asia and North America when it
receives the first four freighters in 2009, and will then
add frequencies when it accepts the second four in
2010. The airline’s owners, DHL Express and
Lufthansa Cargo, will take all of AeroLogic’s capacity,
allocating most of it to DHL midweek and to LHC on
weekends.

Weddings - Middle East

© Bill Lyons/Image Select

Issah Baluch is diligent and clever. He founded the

Swift Group in Dubai in 1989 and developed the
freight agency into a network of 46 offices in 21 coun-
tries throughout Africa, the Middle East, and Asia. Yet
he still found time to preside over FIATA for three

cargovision 9
 cargovision news around the world
© Kuhne + Nagel
Freight ready to be shipped off
Automation - Europe
ROME
Only 17 airlines and seven freight forwarders have received any Cargo
2000 certification, says Nicolette van der Jagt, secretary general of the
European Shippers Council. Her frustration was palpable, as it is for many
people who have witnessed the fiasco of airfreight automation unfold over
the past two decades. Little wonder then that so few shippers know
about Cargo 2000 or how it can improve airfreight, Ms. Van der Jagt adds.
Traxon’s managing director Felix Keck also took a shot at the industry’s
slow progress. Only 12 of Cargo 2000’s 17 airline members are consis-
tently applying the right procedures while seven of its 12 forwarders are
open to systematic monitoring and control.
This cannot help business, Mr. Keck says. “When airfreight is managed in
the conventional way, it has longer transport times and ultimately higher
costs.” The above comments notwithstanding, a trip to the Cargo 2000
website and a review of the monthly traffic reports reveals that there are
slow but steady improvements in performance.
10 cargovision | JUNE 08
Financial - World
SCHINDELLEGI
Kuehne + Nagel’s airfreight business was more prof-
itable and efficient during 2007 than during 2006.
Net revenue on airfreight increased 13% last year to
€3,284 million. The gross profit from airfreight, or the
amount the company books after paying for third party
services from airlines and ground handlers, grew
somewhat faster, rising 17% to €444 million.
Earnings from airfreight grew even faster, by 30% to
€139 million, before deduction of interest, taxes,
depreciation and amortization. One indicator of a
forwarder’s performance is how much money it keeps
after paying its operating expenses.
Before paying interest and taxes last year, K+N’s
airfreight business kept 28% of its gross profit, an
increase of 12 points over 2006. Whereas, the entire
K+N Group kept 11 points of its gross profit, a
decrease of 0.3 points from the previous year.
SEATTLE
Expeditors airfreight revenue increased by 8% to
US$2,408 million during 2007. Its sea freight turnover
grew 17% to US$1,821 million. The company’s
combined revenue for air, sea and brokerage services
totaled US$5,236 million, an increase of 13%.
Expeditors operating income of US$423 million
yielded an operating margin of 8%.
HONG KONG
Sinotrans reported a 27% growth in its freight
forwarding business during 2007 to €2.765 billion.
The strong forwarding result offset losses in its marine
business and slower growth in express deliveries due
to cutbacks by its partner DHL. Overall, Sinotrans’ net
profit rose 30% to €73 million.
Rail - Eurasia
MOSCOW
The race among rail operators to steal airfreight ship-
ments between Asia and Europe has entered a new
phase. In February, Far Eastern Transport Group,
DVTG and Finnish Railways began operating container
trains between Moscow and Kotka. DVTG, which says

Freight train entering a tunnel in Goa, India
it is among Russia’s three largest rail operators, has
spent US$400 million upgrading its equipment, infra-
structure and information systems in preparation for
the new service, but has not yet posted a schedule.
BERLIN
In January, Deutsche Bahn and Russian Railways
hauled 49 freight containers full of shoes, electronics
and apparel from Beijing to Hamburg in 15 days.
During the 6,200-mile trek through China, Mongolia,
Russia, Belarus, Poland and Germany, handlers at the
Mongolian border had to transfer containers from rail
cars that run on Chinese tracks to ones that run on
Russian tracks, which are 3.5 inches further apart than
those in most other countries. Other handlers
performed the same task again when the gage
changed back at the crossing from Belarus to Poland.
Then, to complete the final stage to Hamburg, the load
had to be split onto two shorter trains, because
Germany limits the length of freight trains to 700
meters. Rail officials said afterwards that with a bit
more practice shuffling containers back and forth, they
could knock another 5 days off the journey. In March,
cargovision news around the world
© Ladi Kirn/Image Select
the German rail group began experimenting with longer freight trains,
hoping eventually to permit 1,000-meter trains on some routes.
Also in March, Deutsche Bahn and Russian Railways finally established
Trans-Eurasia Logistics with a 30% share for each partner and included
TransContainer (20%), Polzug (10%) and Kombiverkehr (10%) in the deal.
The joint venture to provide direct services between Western Europe and
Russia was originally signed in June 2007. The next step will be to estab-
lish a trilateral venture with the addition of Chinese Railways in order to
complete the rail link from Asia to Europe.
Gateways - Asia
NEW DELHI
The Union Cabinet, the Indian government’s executive body, eased curbs
on overseas investments in the country’s real estate, petroleum refining,
commodity exchange and aviation sectors on January 30. Foreign direct
investment in cargo and chartered airlines was raised to 74% from 49%
previously. Foreign investors can also own 74% of ground handling serv-
ices once they have obtained security clearances. On February 1,
Lufthansa confirmed that it had begun talking with Jet Airways and QuikJet
of Bangalore to establish strategic alliances for cargo operations. Also in
February, India’s Ministry of Civil Aviation said it had been approached by
FedEx, Malaysia Airlines and Heavylift Cargo Airlines to establish cargo
cargovision 11
 cargovision news around the world

operations within India. Besides Air India, which has dedicated freighter in the cost-conscious freight market. The airline’s new
operations, Jet Airways plans to fly cargo within 18 months. Flyington terminal plans to serve other carriers and, presumably,
Freighters and Aryan Cargo Express are also planning to start cargo serv- use fees from them to mitigate its own handling costs.
ices. Still, the nation’s poor infrastructure will continue to hinder its
domestic airfreight market. The Directorate General of Civil Aviation said it
would issue more licenses for air cargo after upgrades have been Commodities - Europe & Africa
completed at both international and metropolitan airports, possibly as early
as 2010. There are very few aircraft dedicated to freighter services in India ROME
and few pilots. India’s airline operators have had to hire almost 1,000 Tony Wright worries that the safety of pharmaceutical
foreign pilots to keep their planes in the air. products could be at risk when they travel by air. As
managing director of a cold-chain management
consultancy, Exelsius, Mr. Wright does have a dog in
HONG KONG this particular hunt, however. He said during the Cold
After a long and productive symbiosis with Hong Kong Air Cargo Terminals Chain Storage & Distribution Conference, in February
Limited, Cathay Pacific will dispose of its 10% stake in HACTL and invest that an airfreight company and a pharmaceutical
HK$4.8 billion (€391 million) in a new 2.6-million-tonne cargo terminal at manufacturer might easily have different procedures
Hong Kong International Airport. The Airport Authority of Hong Kong and and perhaps different values in handling pharma prod-
Cathay Pacific Services Ltd. signed a 20-year franchises agreement in ucts. For example, when an airline focuses on its
March to build a new facility. It is scheduled to open during the second half internal operations and performance, it may overlook
of 2011. HACTL, one of the world’s most successful terminal operators, specific product requirements such as temperature
runs the existing 3.5-million-tonne cargo facility at Hong Kong International sensitivity. Any airline that handles temperature sensi-
Airport, which serves nearly 90 international airlines and 1,000 freight tive goods would dispute this statement. Still, Mr.
forwarders. HACTL’s management opposed Cathay’s plans for a new Wright said that aligning operating procedure in a
terminal, saying it would fragment business and stifle competition. Cathay single logistics assurance plan would make flying
argued that it needed lower handling costs so it could compete effectively pharmaceuticals safer. Although pharmaceutical
manufacturers and airlines are trying to understand
each other better, there is still a long way to go, Mr.
Wright said.

MOSHI
Paul Courtright and Susan Lewallen, co-directors of
the Kilimanjaro Centre for Community Ophthalmology,
received a shipment of eyeglass frames in February
from Seva Canada in Vancouver. The frames,
designed for infants and children, were donated to the
centre, a part of Tumaini University’s Kilimanjaro Chris-
tian Medical College. Pascal Leutwyler of World Wide
Jon Arnold/Image Select

Animal Travel, a man who knows a thing or two about

shipping goods to Tanzania, arranged for the frames
to fly with AF-KL Cargo less than 48 hours after they
arrived at Seva’s office in British Colombia.

12 cargovision | JUNE 08
 cargovision datelines

MOVING ON - World

Ton Smulders assumes the presidency of the JUNE 23-25 SEPTEMBER 15-17
EGSAC, the network of independent sales and service EyeForTansport 6th Annual 3PL Summit CargoFacts 2008
agents for cargo, in May. Mr. Smulders was the associ- InterContinental Buckhead Loews Miami Beach Resort
ation’s vice president under Glauco Martinelli, who was Atlanta Miami
president from 2002 and helped membership grow to T: +1 800 814 3459 ext.209 T: 206-587-6537
31 members from 13 during his six-year tenure. T: +44 (0) 207 375 7591 F: 206-587-6540
E: rcanete@eyefortransport.com E: mfortner@cargofacts.com
Eric Kirchner became president of freight www.cargofacts.com/symposium/
forwarding at UPS in March. In his new position, Mr. index.htm
Kirchner will oversee the company’s forwarding serv- JULY 1-2
ices as well as its global brokerage and non-asset The Mail and Express Delivery Show
network management services. The work will include Novotel London West Hotel SEPTEMBER 23-26
directing air and ocean carrier relationships, devel- London FIATA World Congress
oping trade lanes, supervising freight sales to mid- T: +44 (0) 870 950 7900 Vancouver Convention &
sized businesses, and managing truckload and less- F: +44 (0) 870 950 7910 Exhibition Centre
than-truckload contract services. www.triangle.eu.com/MEDS Vancouver
E: info@fiata.com
Frank Appel replaced Klaus Zumwinkel as CEO of www.fiata2008.com
Deutsche Post World Net in February. Mr. Zumwinkel JUNE 9-10
resigned over reports that he had evaded US$1.5 Frankfurt: Air Cargo Handling 2008
million in taxes. Mr. Appel has been a member of the Steigenberger Airport Hotel
DPWN management board since 2002 with oversight T: +44 208 668 9118
responsibilities for logistics, international mail, regula- www.evaint.com
tions, and key accounts.

Dr Joachim Schäfer joined Panalpina in JUNE 17-19

February as head of corporate development. Mr. Air Cargo China 2008
Schäfer, who is responsible for mergers and acquisi- Shanghai New International Expo Centre
tions transactions, came from Deutsche Post, where T: +44 1737 645 777
he was a manager in corporate development, sales F: +44 1737 645 888
and marketing. E: sales@a-zgroup.com
www.aircargochina.com
Bryan Vining is the new VP of strategic develop-
ment for SEKO based in Itasca, IL, and is responsible
for developing new offices within the SEKO network.
Mr. Vining was previously director of corporate busi-
ness development for Kitty Hawk.

Paul Farnan moves into the newly created post of

sales and development manager for the Pacific region
for freight wholesaler, AMI. From the Auckland office,
Mr. Farnan’s role will be to sell AMI services from
around the world to destinations in the Pacific Islands.

Jorgen Veslov became CEO of Skycooler in the

UK in February. Mr. Veslov was previously involved in
container leasing, information technology, and logis-
tics. With his partner, Philip Hill, who took over as
Skycooler’s chairman in February, Mr. Veslov founded
the ULD pooling services in the UK in 2002.

cargovision 13
 As a 30-year veteran in security and law enforcement, Arthur G.
Arway has developed a sharp eye for gaps in the fence.
He is currently chief watchdog for the Americas at DHL Global Forwarding.
He discussed some of his concerns with Cargovision.
BY ECCO SANDONE
LOOKING
FOR GAPS
COMPANY PROFILE
DHL Global Forwarding was
founded in 1969 by Messrs.
Dalsey, Hillblom and Lynn.
From its humble beginnings,
shuttling bills of lading between
San Francisco and Honolulu,
the company steadily
expanded and is now the
world’s largest and most
experienced international air
express network, serving
120,000 destinations in more
than 220 countries and
territories.
14 cargovision | JUNE 08
How successful is the air cargo security
program today?
I would give the global program an overall grade of
B+. But that would depend on the provider, the cate-
gory, and the region. For example, I would give
freight forwarders an A, because they approach
security issues proactively in order to meet their
customer’s needs. The world’s airlines would get an
A-minus. There is a lot of pressure on airlines from
government authorities and from their own
customers to tighten their security programs. While
the major international carriers are enhancing their
supply chain security, many of the companies that
feed traffic into their systems need to improve their
operations. The biggest concern globally is for small,
independent truckers. Thousands of them around
the world move airfreight either as pick-ups, last-mile
services, or between hubs and airports on bills of
lading. Many of them operate independently with
little government oversight and minimum licensing
and insurance. Their security programs should be as
robust as those of any other partner in the supply
chain, and they should be equally accountable. Let
me add that we are seeing some progress. For
example, some authorities in Asia are demanding
that truckers working in their countries strengthen
their security. However, many areas of the world have
shown little meaningful progress on this issue.
What about ground handling? Many experts
say it is the biggest gap in the air security net.
It remains a global, systemic problem. One main
reason is that ground-handling jurisdiction – if it
exists at all – runs the gamut of control and there
isn’t a central source of responsibility. Ground-
handling operators could be under the control of
carriers or the airport authorities, but too often
neither party wants the responsibility. Regardless, it
is absolutely critical to begin strengthening the stan-
dards of the companies handling goods on the
ground. However, this raises the larger issue of
communication. Regulators in different regions priori-
tize security issues differently. So the global system is
not as standardized or harmonized as it needs to be.
This is important because airfreight has never been
more global than it is today. Regulators may not
agree on the procedures their counterparts are initi-
ating, but they must understand what they mean and
how it affects them. Without common under-
standing, there will continue to be gaps and people
who try to use those gaps to their advantage.
Since 9-11, security has centered on
counter-terrorism. Has that distracted
attention away from the traditional
challenges; theft, loss, and damage?
Ironically, many of the counter-terrorism initiatives in
place today evolved from anti-theft and anti-smug-
gling programs that were developed years ago. In
addition, the counter-terrorism plans our industry has
implemented since 9-11 have dramatically improved
our ability to challenge criminals who would disrupt
the supply chain. It has been a virtuous cycle. Also,
supply chain security has little impact on some overt
criminal activities such as truck hijacking.
However, it has curtailed hidden theft such as
pilfering high-value goods from a warehouse. We
scrutinize cargo movements much more closely
today and can respond faster to an event. These
are very positive developments.
Are you encouraged by the trends you see
in air security?
Much work remains. Regulators need to catch up to
the industry, which is way ahead of government
authorities in many areas. We need greater collabo-
ration among airlines, forwarders and airport author-
ties to make security a seamless process for the
movement of goods by air. However, there has been
progress. Five years ago, security challenges were at
the intercontinental level. Many of those issues have
been resolved and we are now concentrating on
problems at the local level. This is freeing the time
and resources to tackle new problems as they arise.
I am also encouraged by the European effort to
strengthen the stakeholder partnership between
government and business. When the EU’s Autho-
rized Economic Operator (AEO) initiative rolls out this
year, it will create economic incentives for providers
to invest in supply chain security programs. The AEO
program is patterned after the Customs-Trade Part-
nership Against Terrorism (C-TPAT) initiative in the
United States. Although C-TPAT is not a totally
unqualified success, it has been effective in dangling
a carrot for businesses to strengthen their supply
chains voluntarily. AEO shows how the world’s regu-
latory authorities can move in step to help secure the
supply chains under their supervision. That is a very
meaningful and positive trend. ■
© Photodisc/Image Select
RESUME
Following a 30-year career in
security and law enforcement,
Arthur G. Arway joined DHL
Global Forwarding in July 2002.
He is currently vice president
and head of regional security
for North, Central and South
America. In this capacity, he
regularly interacts with
colleagues, carriers and
customers to address global
security issues.
cargovision 15
 RFID
Wal-Mart and Tesco caused a stir when they told suppliers they would
lose their business if they did not use radio frequency identification
(RFID) in the supply chain. We’ve heard little since from either firm, most
likely because of the difficulties with installing and using RFID. But that
doesn’t mean progress is standing still.

BY MARCIA MACLEOD

16 cargovision | JUNE 08
ON THE ■ Raghu Das is worried because RFID tags do not
scan reliably. The managing director of the consul-

SKIDS
tancy ID TechEx, says that a company like Kimberley
Clark might have no problem, because RFID tags are
easy to read on tissues and toilet rolls, but a firm like
Sara Lee might only read 30% of the tags accurately
on its frozen foods. “There’s no business benefit in
that,” says Mr. Das.
Producers also worry about tag costs, although
prices have dropped. While tag manufacturers tout a
price of US$0.10 each, a more rugged version,
essential for many logistics applications, costs US$1
to US$2 for a passive tag and nearly US$50 for an
active one. Add to that the infrastructure cost: how
many readers need to be installed, and where?
Passive tags are cheaper than active tags and while
they often read more reliably, they have a more limited
functionality. Scanners positioned along the supply
chain read a passive tag, whereas an active tag
enables real time location and can store and transmit
additional data.
Widespread RFID implementation is also hindered by
a lack of comprehensive standards. Although a lot of
work has been done regionally and globally, there are
no universal benchmarks yet. A tag put on an item in
Japan or China may not be readable in Europe or the
US, unless it incorporates electronic product codes,
which were created as a low-cost method of tracking
goods using RFID.
There are a number of successful RFID implementa-
tions, all driven by shippers in retail, automotive, and
high-tech. Indeed, shipping containers controlled by
Savi Technology’s RFID-based tracking system,
which incorporates readers at several ports around
the world, are nearly all owned by shippers, not ship-
ping lines.
Logistics companies are finding little interest for the
technology. “Our customers are not really driving our
RFID projects,” says Dr Helmut Faerber, senior VP
innovation and strategic projects for Schenker.
“Customers can’t see the benefits.”

TAG, YOU’RE IT
© Rick Smeets/Hollandse Hoogte

IATA has been involved with five RFID projects:

baggage, catering, parts, turnaround, and cargo. A
number of projects testing baggage tags for British
Airways, Singapore Airlines and Air France KLM were
successful. Las Vegas and Milan airports have now
gone live with baggage tagging.

cargovision 17
 cargovision RFID on the skids
Airlines have tagged catering trolleys to improve their
rate of return. For example, KLM Cityhopper has
tagged its 1,200 catering trolleys in Amsterdam,
Bordeaux, and Vienna. However, attempts to tag
airline parts for Boeing and Airbus have failed thus far.
Plans to reduce aircraft turnaround, which costs the
industry US$1.28 billion annually, are also being
Andrew Price: drawn up, although it is not clear how RFID will fit in.
“Everyone knows that Various airfreight applications around the world have
cargo containers are tagged pallets, containers, and road trailers.
an asset, and they “Everyone knows that cargo containers are an asset,”
want to know where says Andrew Price, RFID project manager at IATA.
they are” “And they want to know where they are.”
AF-KL Cargo, TNT and Emirates are working with
IATA to find an active tag solution acceptable to the
US Federal Aviation Authority. The FAA has not yet
made any recommendations for commercial airlines
although moving US military goods with the transmit-
ting tags is common. Although it is only a recommen-
dation, not a regulation, no carrier has been willing to
put tags on aircraft. As Sybren Tuinstra, TNT Express’
global manager of strategic innovation, points out, if
just one aircraft comes down, even though it had
nothing to do with tag interference, the newspaper
headline would have enormous impact.
PROJECT FEVER
In Europe, AF-KL Cargo installed RFID in its ware-
house at Charles de Gaulle 10 years ago, tagging 10-
foot aluminum pallets and installing readers at entries
and exits. Now that the system needs replacing, the
company is designing a system to track both the ULD
and the freight it carries. For now, it will tag only valu-
able, express and non-routine consignments, but
eventually expects to have a real-time view of every
ULD in the warehouse.
Schenker is conducting two pilots: one with RFID and
© Caro/Image Select
the second combining RFID with telematics. The first
project involves equipping trailers and depots in
Germany with tags that log trailers in and out of the
depot. Using active tags will allow Schenker to extend
the pilot for yard management. The company plans to
add the ability soon, to see trailers at the docks, know
their destination and ensure they are loading the right
cargo.
In the US, FedEx has combined RFID with GPRS and
mapping software to create a continuous, real-time
view of packages, except when they are onboard
aircraft. Additional sensors will eventually allow the tag
to monitor temperature, humidity and other variables.
In Asia, a project is being designed to use RFID in
warehouse management, combined with telematics
to monitor containers moving by sea from Hamburg
18 cargovision | JUNE 08
to Hong Kong. Ten containers were purchased for the
pilot and the units are traced from warehouse to
trailer to port, where Savi Technology’s readers are
already installed. GPS locates the container and
sensors coupled to the door check temperatures.
HOLLAND HOPES
TNT Express begins its first RFID implementation this
year by installing the tags on cages, says Mr. Tuinstra.
Introducing passive RFID on shipments will take
longer due to the extensive and expensive infrastruc-
ture for the company’s 1,200 to 1,300 locations. DHL
wants to control containers in night operations at
Liege where workers have a short time in which to
move containers that all look alike. The firm is also
developing RFID solutions for customers. For
example, attaching passive tags to cases and pallets
of fashion items at four warehouses in Germany and
using active tags, sensors and other technology on
containers that move high value goods.
DHL Forwarding and TNT are both involved in a
project in the Netherlands, along with AF-KL Cargo,
Martinair and others, to test RFID at Schiphol Airport
and Amsterdam seaport. The project, supported with
a 670,000 grant from national and provincial govern-
ments and the City of Amsterdam, is placing tags on
aluminum pallets moving from AF-KL Cargo to TNT
and from DHL to AF-KL Cargo. The airline reads the
passive tags on DHL’s export shipments as they enter
its warehouse and again as they move onto trucks for
transport to the aircraft. TNT’s imports are tagged in
the AF-KL Cargo warehouse, put into TNT trucks and
transported to the TNT warehouse, where they are
read again as they are unloaded. Messages in both
pilots are being sent to the airport community system,
including customs.
The Amsterdam port projects include tagging
imported newsprint rolls and cocoa consignments.
The latter project tags handling equipment to ensure
the beans are loaded in the right place.
“These are the first steps,” says Ben Radstaak,
managing director of the association Air Cargo
Netherlands. “We want to see if RFID speeds up
cargo handling, makes it more efficient or reliable,
facilitates customs, and improves security controls.”
It sounds like a tall order, but other projects around
the world indicate that RFID can do all that and more
if used correctly. Once the barriers are overcome, the
technology could prove to be the catalyst for dramatic
changes in logistics. ■
cargovision people make a difference: Jorge Costa Leite
IBERIAN LYNX
Satisfying the air cargo service requirements of a large, multinational
and fast-growing client is always a challenging task. But when you
are based in one country and the customer’s head office is located in
another, several hundred kilometers away, the challenge is taken to a
whole new level.
BY PHILLIP HASTINGS
© Image Select
■ Jorge Costa Leite relishes his role as Air France Cargo-
KLM Cargo’s key account manager for Inditex Iberia. He
is based at Oporto Airport, Portugal, whereas Inditex, a
major Spanish fashion goods manufacturer and retailer
with worldwide operations, has its head office in La
Coruna, some 350 kilometers away in northern Spain.
Not surprisingly, Mr. Leite is constantly roaming across his
range, like a great cat. “My brief is huge and covers both
the export and import sides of the client’s business. That
involves regularly visiting Inditex locations in La Coruna,
Zaragoza, Madrid, Barcelona, and elsewhere in Spain.”
Mr. Leite must also maintain close contact with
colleagues throughout the AF-KL Cargo organization.
“Basically, my role is to listen to what Inditex wants and
then work with other people in AF-KL Cargo to see what
solutions we can provide.”
With eight major brands and more than 3,720 stores in
68 countries worldwide, the solutions required by Inditex
are continuously changing and expanding. The
company’s plans for this year, for example, include
doubling the number of its stores in Moscow to 32 and
opening a new market in South Korea. “I have to check
the AF-KL Cargo schedules constantly to see how they
can meet the current and planned future needs of
Inditex,” says Mr. Leite.
He took up his present position four years ago when
AF Cargo, as it was known then, first secured the Inditex
account and began operating a weekly A300 freighter
service out of Oporto, to move the Spanish company’s
export traffic though Charles de Gaulle onto connecting
flights to markets all over the world. That 48-tonne
capacity A300F was to have been replaced in April with
a larger B747 freighter. Mr. Leite is also the Cohesion
product manager for Inditex and, in that context, says
that AF-KL Cargo operates two additional Inditex-dedi-
cated B747F flights a week out of Zaragoza, Spain, to
Bahrain.
“The key to success is a close partnership with the
client,” concludes Mr. Leite. “I have a deep understanding
of Inditex’s business and know what they need. In fact,
it was the head of that company who originally proposed
me for the job I do now!” ■
cargovision 19
 Dramatic pictures of aircraft rushing emergency supplies to victims
of natural disasters flash across our television screens far too often.
After scrambling to deal with the aftermath of the South East Asia
tsunami in 2004, the Pakistan earthquake in 2005, and the Central
America hurricanes in 2007, a number of relief organizations have
sought stronger ties with the logistics industry.
BY PHILLIP HASTINGS
WHAT A RELIEF!
■ Behind the headline-hitting scenes of food, medicines, tents
and other equipment being loaded or unloaded at disaster sites,
lies a massive and complex logistics exercise. Until relatively
recently, though, such operations were often organized in an ad
hoc fashion. The many government agencies and independent
charities involved would work with a wide range of logistics
service providers on individual local projects.
Inevitably, the urgent and hectic nature of those operations
sometimes led to operational and economic inefficiencies and
mistakes in both planning and implementing the humanitarian
logistics. However, since the South East Asia tsunami high-
lighted many of those issues to a wider international audience,
there has been a noticeable push by leading humanitarian agen-
cies to develop close and permanent links with logistics
providers and carriers in order to improve the efficiency of emer-
20 cargovision | JUNE 08
© Tom Pietrasik/Corbis
gency relief operations. Until recently, disasters typi-
cally involved many small logistics companies, each
working in a particular geographical niche or section
of the supply chain, says Bertrand Navereau, vice
president in charge of emergency relief and defense
logistics at Kuehne + Nagel. “The major humanitarian
agencies are now looking to establish ongoing part-
nerships with strong international partners that can
organize an entire supply chain anywhere in the
world.”
Partly in response to those efforts, K+N created a
special department in Paris last December to support
non-governmental agencies and other humanitarian
organizations involved in responding to disasters.
“Certainly, there was a commercial aspect to the
project,” says Mr. Navereau, who heads the new
© Tom Pietrasik/Corbis
office. “But that was not the main reason we estab-
lished the new department. It would be indecent,
when we have such logistical resources and skills, to
remain indifferent to the huge need for humanitarian
services around the world.”
THREE AND ONE
The trend towards partnerships between humani-
tarian agencies and the international logistics industry
became more apparent at the beginning of this year,
when the United Nations announced that a new initia-
tive was being pioneered by members of the World
Economic Forum and the UN. It said that three global
logistics companies, Agility, TNT and UPS, would join
forces to manage the logistics of responding to large-
scale natural disasters.
The three companies and the UN agreed on the
circumstances and procedures for activating joint
logistics emergency teams. These teams will provide
transportation services and support from logistics
specialists, including airport coordinators, airport
managers, and warehouse managers, in addition to
logistics assets like warehouses, trucks and forklifts.
The teams will operate during the first three to six
weeks after a disaster.
The Asian tsunami spurred a conscious effort among
international logistics firms to work together and
support humanitarian relief operations, says Ludo
Oelrich, director of the TNT-WFP initiative. “During a
meeting at the World Economic Forum in early 2005,
our CEO, Peter Bakker, and other logistics industry
CEOs discussed the tsunami responses during the
time when those operations were still running. They agreed to Mr. Oelrich:
look into areas where they could share expertise and best prac- “On the disaster
tices. They also agreed to examine collaborative models, which response side,
probably started the process towards the UN initiative involving we have a pool of
TNT, UPS, and Agility.” trained TNT people
who can be available
to help within 48
JOHNNY ON THE SPOT hours”
Under the TNT-WFP initiative, the logistics company supports
the World Food Program in three areas: response to disaster,
projects to improve the program’s logistics expertise, and efforts
to raise funds to reduce global hunger. “On the disaster
response side, we have a pool of trained TNT people who can
be available to help within 48 hours,” Mr. Oelrich says. “The
local TNT organization can also play a role, for example by
providing on-the-spot resources like trucks or office space. We
can also provide airlift for emergency supplies, using the 40 or
so aircraft in our network.”
Providing airlift is often the most complex task, says Pascal
Morvan, AF-KL Cargo SVP of operations. AF-KL Cargo has
firsthand experience with disaster operations, having organized
special freighter flights to Colombo in the aftermath of the
tsunami, and to Islamabad following the 2005 earthquake. “In
these instances, we must first secure a B747 freighter from our
fleet. That means we must compress the rest of our scheduled
freighter program in order to free up an aircraft. Then we have to
secure the necessary flight clearances and, in the case of
Colombo and Islamabad, plan the handling of the aircraft and
cargo at airports we do not usually serve. All this must happen
in the space of three or four days.”
Better planning and cooperation will help logistics and humani-
tarian organizations coordinate their activities in times of crisis,
better enabling them to deliver relief where it is needed. ■
cargovision 21
 cargovision a week in the life of

22 cargovision | JUNE 08
Giovanni Bisignani has been director general and CEO of the International Air Transport Association (IATA)
since 2002. Under his leadership, IATA has spearheaded improvements in safety and efficiency and
focused regulatory attention on important long-term issues: liberalization, the environment, and taxation.
Previously, Mr. Bisignani spent five years as Alitalia’s CEO and managing director. During that period, he
was also a member of IATA’s Executive Committee and chairman of the Association of European Airlines.

BY ANDY WESTON

GIOVANNI BISIGNANI
SUNDAY Geneva-Rome
I spend more than half my time traveling the
globe and banging the drum for our industry;
so today, it feels pleasant to be boarding a
plane heading for my hometown. Still, a
demanding week ahead at the World Cargo
Symposium means that I must hit the ground
running. Once seated, I review the final prepa-
rations for the event. We're expecting over
800 delegates: customs authorities, airlines,
postal services, freight forwarders, suppliers,
and shippers. The schedule looks tight.
MONDAY Rome
Having dealt with e-mail and called the
Geneva office, I meet with the IATA Cargo
team, led by Aleksander Popovich, to review
final arrangements. The symposium will be an
opportunity to measure progress since last
year's event in Mexico and to set tough
targets for the challenges ahead.
Our preparations last until late, but a family
dinner means that I can end another hectic
day on a relaxed note.
TUESDAY Rome
On the first day of the symposium, I arrive
early to meet our opening speaker, former
Italian Prime Minister, Lamberto Dini. We have
known each other since the 1970s in New
York, when I worked for Citibank and he was
working for the International Monetary Fund.
We catch up briefly before the proceedings
begin. Soon it will my turn to take to the
podium and present the state of our industry.
During the coffee break, I meet with Korean Air
Cargo President, Chi Hang-Choon. After the
morning plenary, I go straight into a press
conference with about two dozen business
and trade journalists. Since Rome is my home-
town, we have many one-to-one interviews
lined up in the afternoon. As an IATA official, I
try to avoid answering questions about Alitalia,
but this is difficult with the Air France KLM
deal on the front pages. However, I underline
the urgency for avoiding a financial crisis.
I finish the day with phone calls to various
IATA offices.
WEDNESDAY Rome
I start the day by meeting with Alitalia. Then,
after calls to our Geneva and Beijing offices,
it's time to prepare for an afternoon meeting of
the IATA Cargo Committee. The group is moti-
vated, effective and works with leadership and
vision. I explain that cargo is now at the top of
the IATA’s agenda and our board members
support plans to deliver eight new e-freight
locations by year-end. In addition, 14 new
Cargo Account Settlement System (CASS)
operations have opened since last year's
symposium. Later, I meet with the symposium
sponsors, Argol, the internal event organizers,
various postal service representatives, ship-
pers, and forwarders. In the evening, I join
delegates for a gala dinner at the magnificent
Villa Miani. I proudly show the wonders of
Rome from the terrace, but light rain keeps us
from walking around.
THURSDAY Rome- Geneva
On the closing day of the symposium, I thank
the IATA Cargo team for a great job before
leaving for Fiumicino airport. However, my plan
to attend an event on the way back to Geneva
is thwarted by Rome’s busy traffic. I arrive at
the airport just in time to see my flight to Zurich
pushing back. Reflecting on the ups and
downs of frequent travel, I rebook my ticket.
Upon landing in Geneva, I go to the office and
organize a meeting to address the problem of
slots we had discussed during recent visits to
Hong Kong and Italy.
FRIDAY Geneva
I arrive at my desk very early to deal with the
flood of accumulated papers. With Thomas
Windmuller, IATA SVP and corporate secretary,
I discuss plans for our June board meeting
and annual general meeting in Istanbul. I call
two CEOs and invite them to participate on a
panel there. During the afternoon, I plan trips
to South America and Africa and check the
agenda for a week in Montreal, where I will visit
our offices and discuss the environment with
International Civil Aviation Organization (ICAO).
Paul Steele, our new environment director,
gives me an update on ICAO's new Govern-
ment Committee on Environment. I spend the
evening ensuring that I have completed all my
tasks in Geneva.
SATURDAY Swiss Countryside
On the drive into the mountains, I sift through
press cuttings from the Cargo Symposium. I
think about the leadership IATA has assumed
in strengthening communications and driving
change in the air cargo supply chain.
A bleep from the Blackberry momentarily
distracts me from the alpine scenery. I stop the
car to discuss some problems with a contract
negotiation in Beijing. Once they are resolved,
I set about attending to a couple of communi-
cations of my own.

cargovision 23
THE RENAISSANCE
GROUND OUT
Airlines have service level agreements with handlers and they
usually include safety standards. These agreements vary from place
to place where handlers may operate according to their own
principles. Now comes the IATA Safety Audit for Ground
Organizations (ISAGO). It’s a service level agreement with more
detail and more benefit to the industry.
BY IAN PUTZGER
■ Cargo handlers keep Francis Isidoro awake at
night. Airlines are responsible for flight safety, even
though subcontractors perform some of their most
basic activities, like ground handling. Mr. Isidoro is
the cargo director of quality, safety, environment and
regulations for Air France. He represents AF-KL
Cargo in the IATA project to develop a safety audit for
ground organizations. With luck, Mr. Isidoro will sleep
peacefully once the ISAGO initiative launches this
summer.
This measure will bring uniformity to a sector of the
Lilian Chan: “ISAGO will industry that has so far lacked universal operating
definitely put pressure on standards. This situation has impeded handlers from
substandard ground adopting common practices and airlines from
service providers” sharing meaningful comparisons of their perform-
ance. To overcome this deficiency, an IATA taskforce
spent the last year formulating standards and an
implementation strategy. It conducted trial audits
between November and January. Finalizing the stan-
dards in April opened the way for the first audits to
begin by June.
The objective is to reduce accidents and injuries, but
the program has a number of other benefits. It should
reduce costs, because handlers will not have to
endure separate audits from each customer. Applying
a uniform auditing process and harmonized standards
should raise efficiency and spread best practices.
24 cargovision | JUNE 08
“ISAGO will definitely put pressure on substandard
ground service providers,” says Lilian Chan, general
manager of marketing and customer service at
Hong Kong Air Cargo Terminals (HACTL). “It will
add administrative costs but handlers can achieve
long-term benefits and savings from reduced
personnel injuries, equipment damage, and
enhanced performance.”
ISAGO vs. IOSA
The 10-section audit comprises over 350 standards.
They cover the gamut of activities from the cargo
warehousing to load control and handling for
passengers and baggage. A task force of 30 experts
from airlines, handling companies and regulators
developed the standards under the leadership of
IATA. The group drew many of the standards from
the IATA Operational Safety Audit (IOSA). This earlier
initiative, introduced in 2004, was developed to intro-
duce uniform safety auditing standards for airlines.
IOSA covers all aspects of a carrier’s operations,
from corporate organization and management to
flight operations, cargo operations, and ground
handling. About 200 airlines have IOSA certification,
which must be renewed every two years. The
biggest difference between the two programs is that

inspectors from independent third-party firms
conduct IOSA audits while a pool of 30 to 40 partici-
pating airlines provides the auditing staff for ISAGO.
Third party auditing would not be viable for ISAGO
given the large number of handling companies to be
vetted.
Mr. Isidoro has been involved in both industry drives
and believes the airline certification program was the
ideal launch pad for the new undertaking to audit
ground handlers. “We wanted full coherence of IOSA
and ISAGO standards,” he says.
An ISAGO audit consists of two parts: auditing the
handler’s headquarters and inspections of individual
stations. Certificates will probably be valid for two
years, says Michael O’Brien, IATA’s director of
program implementation and auditing. “That is
unless pool members suggest on the basis of their
experience that we audit a particular handler more
frequently.”
QUEUE YOU
The pool of carriers that contribute auditors to the
program will determine which handlers are going to
be vetted. IATA has yet to announce who will be the
first in line, but interest from handlers is lively, Mr.
O’Brien says. HACTL participated in the ISAGO
© AFP/Getty Images
development and opened its facility to a trial audit
last November. The handler learned from that exer-
cise what it would need for a certification when the
ISAGO program is launched. In some areas, bidding
wars have erupted between handlers who want to
be first on the list for an audit. That raises the ques-
tion of how handlers get on the list for certification
when they have not been nominated by a partici-
pating airline. “We have to work out a mechanism of
how we get in handlers from outside that pool,” Mr.
O’Brien says.
Francis Isidoro:
IATA estimates that a typical audit for a handling “We wanted full
company will occupy three inspectors for three days. coherence of IOSA and
It has targeted audits at the headquarters level for ISAGO standards”
eight companies and at the airport level for 60
stations. “We will learn how many we can conduct
during the first year,” Mr. O’Brien says. For reference,
IOSA audits reached 230 firms last year up from 30
in 2004.
Mr. Isidoro expects ISAGO to establish itself as a
core element in the relationship between airlines and
handlers. Over time, it will become part of the service
level agreements between them. It has happened
already with the airline safety standard. “Today,
whoever is not IOSA-compliant cannot be a code-
share partner for us,” says Mr. Isidoro.■
cargovision 25
 cargovision country file

BANGLADESH BY MICHAEL WESTLAKE

NEED TO KNOW
■ Population: 150,448,339
(July 2007 est.)
■ Capital city and major financial
centre: Dhaka.
■ Languages: Bangla (the official
name for Bengali) and English.
■ GDP real growth rate: 6%
(2007 est.); GDP composition:
agriculture 19%, industry 29%,
services 52%
■ Economy: Almost two-thirds
of Bangladeshi people are
employed in agriculture,
producing mostly rice.
Remittances from overseas
Bangladeshi workers in the
Middle East and Malaysia
accounted for about US$4.8
© David H. Wells/Hollandse Hoogte
billion in 2005-06; garments Rickshaws on the streets of Dhaka
form a major pillar of the
economy.
■ Trade: There have been waves ■ It’s a common complaint in developing countries: freighter operations, because the backhaul into
of liberalization in trade policy, cargo handling is controlled by one operator, usually Bangladesh isn’t worth it unless loads can be consoli-
but protective tariffs still shield the local airline or an offshoot of it, very often owned dated from other ports. Airfreight tonnage reported by
local products besides gener- by the government. Bangladesh is no different, Bangladesh’s Export Promotion Bureau for 2007 was
ating revenue. except in detail. The national carrier, Biman 98,641 tonnes, a 22% drop from 2006, largely
■ Exports: US$11.25 billion in Bangladesh Airlines, was turned into a public limited because of flooding in mid-year.
2007 (est.), mostly garments, company in July 2007, but the government retained The Board’s figures show ready-to-wear garments
jute and jute goods, leather, all the shares. forming 60% of export freight, with perishables at
frozen fish, and seafood. Major 25%; other categories include leather and leather
export partners in 2006 were: Zia International Airport handles about 95% of products at 7% and handicrafts at 3%. Europe is the
United States 24.9%, Germany Bangladesh’s international air cargo, with Chittagong major destination area, taking 50% of Bangladesh’s
12.8%, Britain 9.8%, and handling the remaining 5%. The bias towards Dhaka exports, with North America absorbing 35%.
France 5%. isn’t so bad, because the road and rail transport Most of the food exports used to head for overseas
■ Imports: US$14.91 billion systems are rated as reasonably efficient – most Bangladeshi workers in the Middle East, but nowa-
(2007 est.), mostly machinery deliveries can be made within about 12 hours of days are distributed to restaurants and shops in many
and equipment, chemicals, iron landing - and Chittagong doesn’t have much in the places. Passenger aircraft bellies dominate the
and steel, textiles, foodstuffs, way of handling equipment yet. market, taking about 85% of cargo, though freighters
petroleum products and However, the general opinion is that Dhaka’s cargo have become more common during seasonal peaks.
cement. village, inside the airport, is hopelessly small, under- Sources of inbound cargo are mostly China, Hong
■ Currency: The Taka. US$1: equipped, and inefficient. At peak times, when ready- Kong, Taiwan and Japan for clothing accessories,
70.177 Bangladeshi Taka (BDT) made garment exports overlap with seasonal vegeta- machinery, textiles and foodstuffs, with France,
(on March 25, 2008) bles and other perishables, the pressure on space Germany, Switzerland and Sweden supplying
drives up rates. This problem is unlikely to go away in telecommunications equipment and raw pharmaceu-
Sources: CIA - The World the near or mid-term future. tical materials. Pharmaceutical exports have become
Factbook, The World Bank, The other common complaint is that export volume is big business, following the trend established by India,
Oanda.com. four times higher than import. This hinders pure though figures are hard to obtain.

26 cargovision | JUNE 08
 TRAVELER TIPS
©Jenny Matthews/Image Select

■ Tipping (called baksheesh) is

normal in restaurants and for
fares; about 5% is standard.
■ Outside the main cities,
currency exchange or use of
credit cards may be difficult.
Cash is king.
Decoration of a rickshaw ■ Skimpy beachwear may cause
problems - this is a conservative
nation, with a mixture of Muslim
(83% of the population) and
Hindu (16%) cultures. Also,
© Susan Liebold/Image Select
The skylight ceiling inside a shopping mall in Dhaka beaches may not be secure at
night.
■ October-February is the driest
There are plans for expansion of the cargo village, or Aviation Authority of Bangladesh is starting a and coolest season, with the
possibly even an entire new airport, but local tendering exercise soon, but it’s a political process. rest of the year being hot and
observers say there has been little sign that anything Biman is bringing in more equipment to help improve humid. Heavy rains can cause
will happen soon. Politics is a more popular subject traffic flows. Flights have increased, because of traffic much damage and loss of life,
locally, with many things waiting to be settled after to the Middle East. especially in coastal areas.
general elections, due later this year. ■ Spicy food is the norm;
But there has been good news: in a country PRIVATIZATION WOULD BE GREAT alcohol can usually be found in
renowned for its bureaucracy, operators now say that Anonymous cargo industry executive expensive hotels and restau-
since last year the paperwork relating to air cargo has Dhaka rants.
been simplified and has become faster to process. ■ Electrical power for the
Indeed, all documentation is expected to become A lot of influence should be given to private enterprise consumer is 220 volts, 50Hz.
electronic within the next three months. to persuade people to invest in the airfreight trade, so Weights and measures are
we won’t be so controlled by foreign carriers who can metric.
As for the future, much depends on the upcoming set the rates. If there is competition from private ■ US dollars are preferred over
election. The Civil Aviation Authority of Bangladesh, enterprise, there will be fewer fluctuations in the other currency. When bargaining
the regulatory authority, is heavily bureaucratic and market. When the cargo village was built, they had (which is standard), start at
will need a hefty kick from a new government to start very different needs, and now it’s completely inade- about half the asking price and
heading towards something like an open skies avia- quate. We have asked the government for land to work your way up to what is
tion policy. As one air cargo manager said, “First we complement the cargo village, but I don’t know when acceptable to you and to the
have to change our mindset as a country and then anything will happen. seller.
everything can move forward one step at a time.” ■ Political uncertainty means

A WALK IN THE PARK that street demonstrations may

Ashique Uz Zaman, Executive Director, spring up with little warning and
WHAT THEY SAY Hellmann Worldwide Logistics Ltd. there is a real risk of being
Dhaka kidnapped in the Chittagong Hill
AIRPORT HANDLING IS INEFFICIENT Tracts region.
Mahabubul Anam, Managing Director, The cargo village is completely inadequate. At the
Expolanka Bangladesh Ltd moment we have to unload cargo in the parking lot. Sources: worldtraveltips.net,
There’s been talk of opening another airport 50 kilo- lonelyplanet.com,
Handling at the Zia International Airport needs to be metres away from Zia International Airport, but I don’t smartraveller.gov.au,
improved. It’s inefficient; it’s a monopoly. The Civil see anything happening for at least 10 years. CIA - The World Factbook.

cargovision 27
 cargovision market monitor

CALM BEFORE THE STORM

Major Scheduled Airlines - Global Freight Traffic Growth Fig.1.
10%
Growth - Quarter vs Quarter previous Year
Average Growth of Last 3 Years = 3,9%
■ 2007 ended better than it started. During the first quarter,
Growth - Month vs Month Previous Year
airfreight growth was minimal, because traffic shifted to maritime
8% transport and companies reduced inventories. After May, the cargo
market recovered and the industry recorded higher growth during
6% the final six months. Remarkably, this growth took place at the
same time the financial crisis hit the US. It did not affect the fast
4% growing markets of China, India, Russia and the Middle East.
While high oil prices toppled economic growth in oil-consuming
2%
countries, it stimulated business in oil-producing states.
Annual Growth

0%

-2%
Jan ‘05 Apr ‘05 Jul ‘05 Oct ‘05 Jan ‘06 Apr ‘06 Jul ‘06 Oct ‘06 Jan ‘07 Apr ‘07 Jul ‘07 Oct ‘07 Jan ‘08

Airline Growth in Diffirent Regions

Annual International FTK growth rates per month Far Eastern Airlines
US Airlines
Fig.2.
30% Europpean Airlines ■ Growth in air cargo volume has been fairly flat for the past three
IATA world
years. The boom-bust cycle last seen between 2000 and 2004 is
20% now gone. Most airline growth rates followed the same pattern
indicating the effects of globalization. In 2006, the US airline sector
10% was growing a bit faster than the world average, because its
carriers were expanding internationally. Their growth slowed in
0 2007 in step with the overall US economic slowdown.
Airlines of the Middle East recorded the highest growth rates in
-10% 2007, while the Asia-Pacific carriers showed lower rates, especially
the Japanese and Taiwanese companies.
-20%

-30%
Jan ‘01 Jul ‘01 Jan ‘02 Jul ‘02 Jan ‘03 Jul ‘03 Jan ‘04 Jul ‘04 Jan ‘05 Jul ‘05 Jan ‘06 Jul ‘06 Jan ‘07

GDP - Trade - Air Freight

Annual growth rates IATA FTK

15%
World GDP Fig.3.
Manufacturing Trade
■ International airfreight has a strong correlation with manufac-
turing trade. Both airfreight and trade grew less during 2007 than
10% during 2006. The fluctuation in GDP growth is less than the other
two indices, because most of the data comes from the services
5%
sector, which is more stable than the manufacturing sector.
In 2001, both trade and IATA growth recorded negative numbers,
due to the crunch of the computer and telecom industries and the
0% stock market crashes that followed. The outlook for the current
year is for slower growth in trade due to a sharp slowdown in the
US economy.
-5%

-10%
2000 2001 2002 2003 2004 2005 2006 2007

28 cargovision | JUNE 08
 Given the economic volatility introduced by the combination of record commodity prices and
financial crisis in the West, 2008 will be a tense year for the airfreight industry.

BY DICK VAN DEN BERG

Major goods exporting nations in 2007 and growth

Fig.4.
120
Germany
■ The major goods exporting countries are also the major airfreight
China
USA
countries, except for those nations that export bulk commodities.
100 Their exports have high growth but the goods travel by ship or
pipeline. Germany, the US and China are the worlds largest
80 exporters. China surpassed the USA in 2007 and it is expected
Japan
that within 10 years it will be larger than Germany. Canada and
60 Mexico export mainly to the US; consequently their airfreight
Netherlands
France performance is less than their export performance.
Export in 2007 (bln US$)

Italy
40 UK Canada Belgium The same is true for most European countries, because they
Korea export mainly to other European nations. The UK is the only
Russia
20 Mexico country with negative export growth, which is also reflected in its
low airfreight performance.
0
-5% 0% 5% 10% 15% 20% 25% 30%
Growth vs 2006

10 Airlines with largest FTK increase in 2007 increase in 2007

increase in 2006 Fig.5.
Cathay Pacific
■ The Middle East and Asia were mainly responsible for the overall
increase of freight-tonne kilometers flown during 2007. Of the 10
Korean Air
airlines with the largest absolute increase, Cathay Pacific
Emirates Skycargo
contributed the most because it consolidated Dragonair’s fleet.
UPS UPS and FedEx are also in the top-10 along with Air France-KLM.
Qatar Airways
LAN Airlines from Chile is growing fast in Latin America, which is
enjoying high economic growth because of rising commodity
Thai Airways
prices.
Air China

LAn Airlines

FedEx

Air France - KLM

500.000 1.000.000 1.500.000 2.000.000

Increase in FTK (000)

Airports: Top 15 in International Freight Total 2006

Fig.6.
Increase in 2007
.000.000 ■ The impact of China’s growth is clearly visible at the world’s
4,5%
airports. Shanghai Pudong and Hong Kong are among those that
contributed most to the increase of traffic during 2007. Seoul
.000.000 Incheon is also close to China and has above average growth.
9,4%
Notably, the growth at most US airports was rather low, while
-1,1%
17,2% 1,7%
6,4% -0,9%
Tokyo and Taipei had none at all. The latter is the consequence of
.000.000
5,9% 5,5% -5,5%
9,5%
industry’s move into China, while the former shows that the US
4,0% economy was already cooling by 2007. Miami was an exception in
© Olé ontwerpers

5,8% -3,9%
1,4% the US because of the high growth in Latin America.
.000.000
tonnes

0
HKG ICN NRT PVG FRA CDG SIN MIA AMS TPE DXB LHR BKK JFK ORD

cargovision 29
 cargovision postscript

JUST IN TIME CLEAR PRIZE

■ Are some aviation authorities second-guessing themselves? In March,
the US Department of Transportation and the European Commission
launched a joint research project to study airline alliances and competition in
the context of open skies agreements. The agencies want to know how
alliances affect competition in transatlantic markets and the potential impact
of the new US-EU Air Transport Open Skies Agreement. It does seem like an
afterthought, now that pact is already in place. However, the Commission
and the DOT will interview airlines, travel agents, industry analysts, and
consumer groups, in addition to evaluating air traffic data. It will publish a
report in mid-2009.
■ Sad to say, but the airline passenger business is
showing the air cargo business how to get the job
done. A New York firm, Clear, announced a
US$500,000 prize in February for anyone who can get
people through airport security 15% faster at a cost of
less than US$0.25 per passenger. It has received over
150 responses from individuals, startup firms, defense
contractors and universities, and will award the money
to the first team that can install technology, at Clear’s
expense, in a real-world security checkpoint. Clear
promises to purchase the winning team’s technology

SQUIGGLES IN “International crews have proven their capabilities

and abilities to offer a qualified alternative”
THE COCKPIT
■ Professor Andrew Steckl of the University of Cincinnati has managed to
enhance the brightness of light-emitting diodes, used for flat screen televi-
sions and cockpit displays, by modifying them with the DNA found in salmon
sperm. He is developing what he calls BioLED’s in cooperation with the US
Air Force. It seems that the good professor quickly depleted the Defense
Department’s stock of fish fertilizer and is now searching for other sources.
Sperm is considered a waste product in the fishing industry - Don’t ask
why? - so the professor should have little trouble getting more.

NEXT IN LINE,
PLEASE
■ AP Moller-Maersk said it would cut costs by replacing 200 Danish stew-
ards with foreign crews on ships flying the Danish flag. “The layoffs are a
result of the internationalization of the seafarers,” the company said. “Inter-
national crews have proven their capabilities and abilities to offer a qualified
alternative.” Multinational staffs are common in the airfreight business,
although pay rates for similar work may vary greatly between regions and
nationalities, with colleagues in the same company none the wiser. Money to
build new plants and create jobs travels freely across national boundaries.
But workers usually cannot, which leads to frequent strife between oppo-
nents and supporters of immigration policies and globalization. In the area of
labor equality, the airfreight business, at least, has something good to show.

30 cargovision | JUNE 08

cargovision
in bulk, once it is approved for use by the Transporta-
tion Security Administration at any of the 13 US
airports where Clear operates fast-pass lanes. So,
where’s the “Clear Cargo” prize? Surely someone in
the US$80-billion airfreight market can pony up US$1
million or so for a solution to speed cargo clearances,
especially when regulators have proposed limitations
on the industry that could cost it US$10 billion a year.
ENVIRONMENTAL
SLOWDOWN
■ The US trucking firm Con-way Freight said in
March that it would limit its trucks to a speed of 62
mph (100 km/hr), 3 mph (5 km/hr) slower than the
previous limit. This would reduce the diesel fuel
consumption of its fleet by 3.2 million gallons and
therefore its carbon emissions by 72 million pounds.
We wondered whether flying aircraft slower would
reduce their emissions also. We put the question to
Boeing. Terrance Scott, an environmental communica-
tions specialist at Boeing said in an e-mail that today’s
aircrafts are designed to fly with a premium on speed
and fuel efficiency and are optimized for the speeds at
which they operate. Changing their operation by flying
slower wouldn’t necessarily increase efficiency or
reduce emissions. We asked Mr. Scott whether
anyone at Boeing questioned the assumption that
aircraft designs need to place a premium on speed,
but didn’t receive an answer. However, he did explain
that operating current aircraft at less than their
preferred cruise speeds would require them to fly with
a more nose up attitude, thus creating more drag and
reducing aerodynamic efficiency. This would require
engines to produce more thrust, burn more fuel and
increase emissions.
MARK W. LYON, EDITOR-IN-CHIEF
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cargovision 31
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