Quarterly Magazine Af-kl Cargo Volume 23 ˆ No. 34 ˆ

QUARTERLY MAGAZINE AF-KL CARGO VOLUME 23 ˆ NO. 34 ˆ SEPTEMBER 2008

cargovisioncargovisionThe importance of being connectedWindow seatsFuel surcharge

HIGHER EVOLUTION

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■ October marks the third year since the integration of Air France Cargo and KLM Cargo began. We want to invite you to learn of the changes and improvements to AF-KL Cargo during this time. Inside this specialanniversary issue of Cargovision, you will find management’s discussion of the company’s recent achieve-ments and current expectations. During the past 24 months, 24 airlines filed for bankruptcy in the US and experts say it’s not over. Keroseneprices are rising even faster than oil prices. Expensive fuel and the recession are slowing global manufacturingwith a harsh and disproportionate effect on air cargo.Much of today’s production material moves through the global supply chains as airfreight. High fuel priceshandicap air shipments because fuel is a larger part of the operating cost for an aircraft than it is for an oceanvessel. With increasing logistics costs and ongoing pressures to reduce them, many companies arerethinking their global supply networks and relocating production to lower cost neighbors. Yet, as markets diminish and their challenges grow, we must acknowledge a coincidence of timing. Threeyears of constructing AF-KL Cargo has transformed us into a company that will thrive in the current environ-ment. In our main feature, Michael Wisbrun and Jean Charles Foucault recall the strategy and the initiativesthat the Joint Cargo Management Committee introduced in order to position AF-KL Cargo for the future. Inother areas of interest, we asked our experts to report on the progress in their specialized fields. Process reform is central to the company’s efforts to improve the quality of its services. Mattijs ten Brink andFrancis Isidoro explain how alignment has added to the quality at Charles de Gaulle and Schiphol.E-commerce is more efficient than paper for exchanging information and documents. Edwin Borst and Eelcovan Asch describe how integrating the various electronic programs will help AF-KL Cargo reduce costs andimprove the service for the customer. Fleet planning is a complicated part of running a profitable airline. Bringing in new aircraft and coping withexpensive fuel add even more spice, as Arend de Jong reports. In another twist, the amount of air cargocarried in passenger bellies compared to freighters has grown during the last two years. Dick van den Berg,our in-house analyst, looks at the trends and their causes.AF-KL operates in 45 unique markets. In our feature entitled ‘Sweet Paradise’, Michael Westlake looks atthree of the lesser known though fascinating places off the beaten track – hugely popular as tourist spots with great natural beauty and each with its own colorful history.

We hope you will find interesting reading in this issue of Cargovision.

Sincerely,The JCMCJoint Cargo Management Committee

Michael WisbrunArend de JongJean Charles FoucaultClaude SerenoPascal Morvan

PORTRAIT VIEW

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4 HIGHER EVOLUTIONThe Air France Cargo and KLM Cargo integration, now celebrating its third anniversary, formed a new, efficient organization that is now preparing to withstand economic headwinds. Cargovision spoke to Michael Wisbrun and Jean-Charles Foucault.

14 WINDOW SEATSTo find out how customers are experiencing the AF-KL Cargo merger, Cargovision spoke with two forwarders:Luc Desreveaux, branch manager for the Sogetra office at Lille airport, and Lionel Rittner, deputy airfreightmanager, France, for Gondrand Group.

16 THE IMPORTANCE OF BEING CONNECTEDIndividual e-commerce tools may produce benefits, but when they are linked up, the advantages become really clear. Integration is the key to the AF–KL Cargo implementation of this technology.

19 HEAD CALCULATORReducing an organization’s carbon dioxide emissions, the so-called carbon footprint, is moving swiftly up the strategic agenda of companies around the world. AF-KL Cargo has its own experts in this field. Dr. ThomasLesobre’s goal is to have AF-KL Cargo take up the lead in sustainabe air transport.

20 QUALITY BREEDSA key driver behind the merger of Air France and KLM was the desire to improve efficiency, flexibility andcustomer service in both organizations. Achieving such a goal is never easy, but it is possible.

26 ASSET SHUFFLEFleet planning is always tricky, even without the additional complication of introducing a new aircraft, like the Boeing 777 freighter. Add high fuel prices to the equation and you have constantly changing imperatives for network planners.

8 NEWS & DATELINES22 COUNTRY FILES: ST. MARTIN, TAHITI & NEW CALEDONIA25 FUEL SURCHARGE OVERHAUL28 MARKET MONITOR30 POSTSCRIPT31 INFORMATION AND COLOPHON

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HIGHER EVOLUTION

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The Air France Cargo and KLM Cargo integration, now celebratingits third anniversary, formed a new, efficient organization that isnow preparing to withstand economic headwinds.

BY TONY CARDING

“Clearly, we have a difficult environment before us.As Giovanni Bisignani, IATA’s CEO, stated: the oilprice shock is bigger now than it was during the1970s. This and the US financial crisis are causingpeople to alter their purchasing behavior and ourindustry to anticipate lower revenue. Under theseconditions, no company in transportation can affordto continue as before. Shippers will make new trade-offs and reorganize their logistics. Carriers will changetheir networks and fleets to accommodate them.

Fortunately, our three-year integration has consoli-dated our strength and ability to weather a down-turn. The future holds risks but I am not concernedfor the outcome. We will work hard and we willmanage. We do have advantages: AF-KL has aglobal network and a relatively new fleet that canserve our customers and still operate economically.The company is financially sound and we keep thefleet young with continuous investment. Even though the merger produced synergies thathave lowered costs by over US$100 million, greatersavings are still to come. We will introduce evenmore unit cost reductions this coming year. Our strong hub system allows greater fleet utilizationand operates more economically than a point-to-point network. We have the flexibility with ourfreighters to allocate capacity to the most profitable

routes. We have a diverse product portfolio thatserves a wide range of customers.We have hedged fuel and that gives us a window oftwo to three years to refocus the network, reallocatecapacity and lower costs.

THREE YEARS ONOur three-year evolution to this robust state can besummarized with three Ps. The first one is for people:those in the Joint Cargo Management Committee(JCMC), the team we created to lead our two organi-zations step-by-step into one integrated team, andthose within the organizations, who continuallyshowed us new ways to work together effectively.The second P is for the processes we designed forthe merger, for its preparation, decision-making andcooperation. We found a steady rhythm formanaging our business and our customers. It wassomething completely new for a French-Dutchcombination. We can maintain the pace, in part,because the JCMC developed a schedule for variousmanagement groups to review the practical issuesthey supervise. I meet weekly with the top team,monthly with the top 10 and quarterly with the top40. During these gatherings, we strive for clarity inreaching decisions, in where we make tradeoffs andin how we organize ourselves.

RUGGED LANDSCAPE

Michael Wisbrun recalls how the Joint Cargo Management Committee oversaw AF-KL Cargo’s successful merger and how the company intends to remain profitablewhile it tackles new partnerships, new technologies and the environment.


The third P stands for purpose in life – our businesslife. What is our goal? In 2005, we introduced theconcept of one team, one process and one facetowards the customer. This helped define ourpurpose. It helped us unite and recognize our role asa leading cargo airline. Leading in for examplereducing CO2 emissions and innovating e-commerce, e-freight and other technologies.

PRIORITY WITH A “P”Remaining profitable means that we put our dailyeffort in satisfying our customers and in creatingsynergies. If we find that we are not profitable, we willstop and change the scale or the scope of our busi-ness. Profits are the basis for our investment andtherefore our future. Going forward, our second priority is to strengthenthe AF-KL Cargo presence at our home bases. Our aircraft and equipment may be like our competi-tors’ but we have created noticeable differences inservice by the clever management of our businessprocesses and consideration for our customers. At Charles de Gaulle and Schiphol, our innovationsare really investments with customs and industry tomake the airfreight process easier for our clients; forexample, introducing e-freight at both hubs and anexpress lane for cargo at Schiphol, where simulta-neous checks for customs and security will enableshipments to proceed directly to the aircraft. The third priority is to position us in key markets. In the largest market of the future, China, we arecreating a Sino-European cargo joint venture withChina Southern Airlines. It will have shareholdingfrom the AF-KL Group and management from AF-KL Cargo too. It begins flying early in 2009 withthe Boeing 777 freighter too. It is a welcome steptowards increasing our involvement in China.

PARTNER WITH PURPOSEWe signed a framework agreement for the jointventure in June and expect formal approval from theCivil Aviation Authority of China by the year-end. In the meantime, we are assigning people for thenew management team. This investment is for cargotoday but perhaps for passengers tomorrow. Our current work with China Southern in cateringand other activities is building trust and moving thetwo companies closer together.Now the USA Anti Trust Immunity has been granted,we will be able to coordinate service and capacitybetween Europe and America with our SkyTeampartners. Now, the consolidation of the Air France

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Cargo and KLM Cargo businesses in North Americahas become a priority. We will soon discuss withDelta the best solutions for integrating the combinedairfreight business of Delta and Northwest. Ourorganization will gain efficiency and our customerswill gain options. Similarly, the Martinair Scenario, as I like to call it, is intended to strengthen the AF-KL Group. We havefiled for the full takeover of the remaining 50% of theshares. Currently the European Union is studying the case and we are awaiting approval.

ADVOCATE AND INNOVATE In my role as chairman of the IATA Cargo Committee,I challenged the organization to put e-freight at thetop of the priority list and translate it into action. Theyhave done this through a number of pilot projects,including one through Schiphol.The pilots showed that we could eliminate paperfrom cargo. However, it is a bit tougher than paper-less travel for passengers. There, they removed theticket but kept the passport. In cargo, we want toremove both the ticket and the passport at the sametime. That means additional steps for customs andinvolves additional stakeholders. Nevertheless, afterthe success of paperless transport in the pilotprograms, we are seeing greater variety among theshipments booked and are now working to increasevolume before adding more routes. We expect elec-tronic bookings for half of the cargo on the existingroutes within five years. AF-KL Cargo now receives 23% of its bookings elec-tronically. We intend to add other electronic servicesfor our customers and we will replace the two AirFrance Cargo and KLM Cargo legacy systems with a single new web-based platform. Besides loweringcosts and consolidating our two back offices, it willhelp us use customer databases to develop newservices.

Air France – KLM is pursuing CO2 neutral operationsby reducing aircraft weight and increasing overall effi-ciency. In cargo, we will offer CO2 neutral transport forcustomers’ shipments. By the end of the year, theywill be able to buy CO2 rights to offset the impact oftheir shipment.Along with IATA, we are supporting aconsultant who is mapping CO2 footprints for variousmethods of production and transportation. Our industry still does not know which mode has theleast CO2 impact: asparagus brought to the cornermarket by air from Africa or by truck from a localgreenhouse. Once we have the facts, we can offercustomers tradeoffs to lower their emission profile.”

Michael Wisbrun: “Our innovations arereally investments withcustoms and industry to make the airfreightprocess easier for our clients”

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Jean-Charles Foucault: “We encountered aparadox: change theorganization but maintaina stable environment”

“At the beginning of the merger, we encountered aparadox: change the organization but maintain a sta-ble environment. It told us to proceed with very smallsteps. We aligned the operating networks betweenSchiphol and Charles de Gaulle, putting considerableeffort at both hubs into improving basic skills andincreasing the quality of service on the ground. Weintroduced Cargo 2000 with full support. It gives us ameasure for high-quality service and a definiteadvantage when customers are buying capacity inan oversaturated market.

At the same time, we combined the best features ofthe two sales and marketing organizations. Increating AF-KL Cargo, we merged offices and reor-ganized the responsibilities of people in Sales,Customer Service and Operations. Introducing these‘Model Offices’ was a big change but it clarified thedivision of labor for our staff around the world. Now,they perform more consistently with customers.Everyone has a clear job description and knowswhich responsibilities belong to presales, to ordertaking and to the back office.

Highly efficient people improve our quality of service.Sales people can now focus on their portfolios of

clients while Customer Service people can attend tothe immediate business. Between reorganizing andadding new computer tools, we have significantlylowered the amount of time spent per booking. Newautomation, such as the Unique Voice Portal for thecustomer services organization, and new e-businesstools that link with our customers have improvedproductivity. The number of bookings per person hasgrown continually since the merger. We have beenable to reassign people to Sales and watch thenumber of bookings grow for Equation, Cohesionand Variation.

Our business from tripartite agreements, those withshippers and forwarders together, is now the fastestgrowing part of our business. We do not target ship-pers; our policy is based strictly on relationships withforwarders. However, shippers and forwarders wantjoint discussions with airlines when contracts getvery large. Then, we are included.

Looking ahead, into a hostile shipping climate, wefeel prepared. But conditions force us to be ever-more efficient and clever in identifying airfreightbuyers in key markets so we can offer them theappropriate service from our broad portfolio.”

RESOLVED TO ONE VOICE

Jean-Charles Foucault recalls how AF-KL Cargo changed its commercial organization in order to move closer to customers with a revised product portfolio.


Environment – North America

IRVINEDimitri Papamoschou devised a new method for lowering jet noise in bothcurrent and future engines by redirecting their exhaust gases. He wasawarded a US patent last November and has attracted an industry partnerthat could offer his technology to the airline industry within three to fiveyears at a still-to-be-determined price. Dr. Papamoschou is a professor ofmechanical and aerospace engineering at the University of California,Irvine, who says he found the inspiration for his invention while experi-menting with ways to hide the hot exhaust plume of a military jet frominfrared sensors on the ground. He adds that his technique for lowering thenoise of a hot jet exhaust shearing against the cold ambient air representsa new approach, and possibly an improvement, over the chevrons used forthis purpose on the engines for the Boeing 787.

Research by Boeing, NASA and Goodrich during the last decade showedthat serrations, or chevrons, cut into the rear edges of an engine’s coreshroud and its cowling will blend the very hot air exiting the engine core

and the relatively cooler bypass air flowing around thecore. This cooled gas stream then joins the cold airflowing past the engine with less disturbance and lessof the hissing sound associated with jets. Dr. Papamoschou’s solution reduces the noise byplacing vanes in the bypass duct near the rear of theengine. An alternative implementation places vanes onthe pylon that supports the engine. The vanes deflectthe slower moving bypass air downward, concen-trating it into a long plume below the region where thefaster moving core gasses generate most of theirintense noise. In this position, the unmixed bypassplume acts like a sound buffer to reduce the noisereaching the ground.

Dr. Papamoschou’s experiments suggest that deflec-tors could reduce the noise of a low-bypass engine,like the JT8D, by 4 dB to 5 dB. Experiments at higherbypass ratios have shown the potential for reductionsfrom 1.5 dB to 3 dB. His methods could be applied toexisting engines and included in future subsonic andsupersonic engines.

Introducing deflector or mixer devices in the jetexhausts reduces their thrust. The chevrons on theBoeing 787 are fixed and therefore reduce thrust forthe entire flight, even though the noise-sensitivesegment lasts only a few minutes. Experiments areunderway to make chevrons with a heat sensitive alloythat bends them inward slightly during takeoff, mixingthe gas flows, and straightens them during cruise,leaving the flows unchanged. The deflector vanes in Dr. Papamoschou’s solutioncan be adjusted also to redirect airflow during takeoff,but remain inactive during cruise. NASA researchersare testing another method for reducing noise byplacing small nozzles around the circumference of the

cargovision news around the world

Our quarterly review ofindustry news keeps youabreast of developments in key sectors around the world.

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bypass duct to blow air into the stream and enhanceits mixing. Shutting off these nozzles during cruisewould leave the exhaust flows undisturbed. “We are alltrying to find alternatives,” says Dr. Papamoschou.“The successful solution, ultimately, will be the onethat reduces noise with least aerodynamic penalty.”

Carriers - World

BANGKOKThe Thai Government told Thai Airways International inJune to begin setting up a cargo airline to increase theflow of Thailand’s exports to international markets.High fuel prices and internal politics have distractedthe airline’s management lately and could delaystartup of the cargo carrier. However, this is only onecourse that Thai government officials are pursuing intheir quest to improve the nation’s transport infrastruc-ture. They also want to see greater utilization of bothDon Muang and Suvarnabhumi airports for movingcargo. And they are considering the possibility of liber-alizing the logistics industry under the World TradeOrganization. Foreign ownership is currently capped ata maximum of 49% for logistics service operators inThailand.

BRUSSELSBrussels Cargo launched daylight courier services inJune to major cities across Europe. The cargo divisionof Brussels Airlines will carry shipments of up to 32 kgbetween Brussels and Athens, Barcelona, Lisbon,Nice, Madrid and Warsaw.

BOGOTÁColombian authorities endorsed the creation of a newcargo affiliate airline of LAN Cargo in their country. Theoperational and technical certification process shouldtake six months, enabling the Colombian carrier tobegin operations during the first quarter of 2009.Colombia exports about 200,000 tons of airfreight tothe US, making it one of the largest markets in LatinAmerica. LAN Cargo also owns and operates cargoaffiliates in Brazil and Mexico.


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Online - World

SINGAPORECargo Community Network received Cargo 2000 accreditation in March.The network has been providing online connectivity to the cargo commu-nity in the Asia-Pacific region since 1991. CCN has actively promotedCargo 2000 in addition to IATA’s e-freight and MIP programs.

Jet8 Airlines Cargo, Singapore’s first privately owned cargo carrier, said inJuly that it would automate its airline and revenue accounting with ChampCargo systems. Jet8 operates Boeing 747-200s and 400s in an alliancewith Nippon Cargo Airlines. Previously, in June, Royal Jordanian signed acontract to use Champ, as did Skyport for its operations at Prague cargoterminal.

ABU DHABIEtihad said in July it would begin using OAG Cargo’s Air Freight Ratesapplication and its Inforwarding Announcements service. Approximately9,700 forwarders now access information on the enhanced OAG Cargowebsite, which describes the cargo carrying flights operated by 900airlines to and from nearly 3,500 cities.

GENEVAIATA has posted an interactive e-freight map on its website:http://www.iata.org/stbsupportportal/maps/e-freight.htm. It enables you to track the progress of various e-freight initiatives around the world. Clicking on a destination shows the protocols it has signed and whether itis e-freight capable, when it plans to implement the service and whether ornot it has passed either of IATA’s e-freight assessments.


has been carrying half of the weight of DHL ExpressUS traffic and had signed a new contract with DHLjust three months earlier. In June, ALPA filed a griev-ance against the merger, saying that DHL hadendorsed the commitments and at no time mentionedany ongoing negotiations with UPS. DHL is a 49%owner of ASTAR and is represented on ASTAR’sBoard of Directors.By July, the prospect of losing 9,000 jobs at theASTAR sorting facility near Dayton, Ohio, got theattention of the area’s congressman, Mike Turner,who, along with Ohio’s two senators, sent a letter tothe US Attorney General asking the Justice Depart-ment to look at the potential anti-competitive impact ofDHL’s planned agreement with UPS.

ISTANBULAir France-KLM and China Southern met near theBosporus in June. The two airlines agreed to establisha Sino-European cargo joint venture. The new busi-ness will provide airlift for cargo and mail, groundhandling services, operation of warehouses and otherstorage services, customs clearance activities, andimport and export services. The agreement is forChina Southern to hold a 75% stake in the ventureand the Air France-KLM Group to hold 25%. It stillneeds government approval, which is expected byyear-end.

Financial – United Kingdom

LONDONA market in purchasing future contracts for airfreightcapacity may be moving closer to reality given theconstantly rising fuel prices and the vigorous activity inthe market for contracts based on ocean shipping.Brokers say that the shipping futures market reachedUS$125 billon last February, up from US$50 billion atthe same time in 2007. Several large companies haveset up freight derivatives desks in the past year,including Citigroup, Merrill Lynch, Macquarie Bank,Goldman Sachs, Credit Suisse, Lehman Brothers,Morgan Stanley, and hedge funds GMI and AkuilaOkeanos. Since 1991, agents have managed risk in ocean ship-ping with contracts known as Forward Freight Agree-ments that enable ship owners and operators toestablish prices in advance. The number of these


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Weddings and Funerals - World

ATLANTADelta and Northwest agreed to merge in April. The combined companyand its regional partners will provide access to more than 390 destinationsin 67 countries. They will have revenue of US$35 billion, a staff of 75,000,and a fleet of 800 aircraft. The deal with Northwest could improve Delta’sposition in the cargo business, adding Northwest’s strength in Asia toDelta’s in Europe. However, fuel is the highest single expense for both carriers and thebiggest headache. Its record prices threaten to cancel the financial benefitsof restructuring as well as the combined airline’s long-term strength andstability. Some analysts wanted to see Delta propose greater reductions inshort-term costs and capacity because the revenue benefits of the mergerwill not accrue for another two to four years.

BONNDeutsche Post World Net said in May that it would restructure its DHLExpress US business. Under the plan, DHL will develop a contract withUPS during the next few months that enables UPS to provide airfreightcapacity for the domestic and international services of DHL Express inNorth America. DHL will also consolidate and close sorting facilities andrationalize its ground networks. DPWN said that this would affect less than4% of its shipments and produce no changes in its product range orservice commitment in North America. The contract with UPS is expectedto last 10 years and could save DHL US$1 billion annually. It was describedas a straightforward airlift agreement and would enable UPS and DHL tocompete for customers.

The announcement did not sit well with ASTAR Air Cargo or its crewmembers, who are represented by the Airline Pilots Association. ASTAR

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agreements grew 150% during the past year. Risingdemand for commodities has driven up the cost ofchartering ships to transport them and increased theappetite for instruments that help shippers managefuture rates. For example, rates for a Capesize ship,used to transport iron ore and coal, rose toUS$233,988 a day in June, 180% higher than theJanuary rate of US$80,000. A volatile airfreight marketwith carriers and forwarders concluding similar agree-ments could inspire brokerage firms to develop finan-cial instruments for them.

Gateways - World

DELHIIndia’s air cargo industry wants the government tobuild airfreight stations, known as agent-bondedterminals, near seven major international airports. TheAir Cargo Agents Association of India has suggestedthat a single company or authority run these terminals,which would be modeled along the lines of the oceancontainer stations. This action could enable industry,especially exporters and importers, to cut transactioncosts and save time on freight movement. The aircargo industry has sought land near the internationalairports at Mumbai, Kolkata, Delhi and Bangalore toset up airfreight stations. The request was supported

by a study released last year by the Associated Chambers of Commerceand Industry of India that said surging demand had pushed the growth ofair cargo ahead of that moved by rail and sea.

HAMBURGAirport officials from Germany’s northern port city are talking with ShanghaiAirlines and Air China to develop a sea-air business. With 400 local China-based companies reputedly located in Hamburg, it is the largest containerport for import traffic from China.

Aircraft - Asia

ZHUKOVSKYRussia’s Sukhoi Civil Aircraft has started developing a cargo version of itsSuperjet 100 that will carry 15 tons. The medium-range aircraft developedby the Sukhoi Design Bureau in cooperation with Boeing, Snecma, Thales,Messier Dowty, Liebherr Aerospace and Honeywell made its first flight inMay. The first delivery to Aeroflot is now scheduled for the second half of2009, a delay of one year from the original schedule.

SINGAPOREAll Nippon Airways took delivery of the first Boeing 767-300BCF convertedfreighter in June. The conversion work for the 50-ton freighter involvedremoving the passenger interior, installing a main deck surround structureand side cargo door, replacing the main deck floor structures, and installingcargo-handling systems. ST Aviation Services, a subsidiary of SingaporeTechnologies Aerospace performed the work.


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Sue Presti began the task of representing the inter-ests of the International Air Cargo Association beforethe regulatory authorities and legislators in Wash-ington, DC, in August. Previously, Ms. Presti spent 13years as executive director of the Express Delivery &Logistics Association’s Government AffairsCommittee.

Mike Staeck was elected by the members ofEGSAC as a vice president in June. He helped foundthe network of independent cargo GSSA companies in2002.

David Reid assumed the role of acting chairman ofthe Transport Asset Protection Association’s region forEurope, Middle East and Africa following the departureof Thorsten Neumann in May. Mr. Reid had been theorganization’s vice chairman. Mr. Neumann relin-quished the chairman’s job to concentrate on otherwork commitments. During 2007, TAPA’s EMEAmembers experienced a drop in the value of cargocrimes reported, to €53.1 million compared to €67.6million in 2006.


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Infrastructure - Asia

BEIJINGChina formed a new Ministry of Transport in March from parts of its Ministryof Communications and its General Administration of Civil Aviation China.The new ministry, which oversees the state’s road, sea and air traffic, didn’twaste any time in making its presence felt. It announced plans in June tobuild 97 feeder airports, upgrade the country’s main air hubs, and createclusters of airports in six geographical regions. The groupings will be organ-ized to support international, domestic or feeder traffic. The US$64 billionplan intends to balance airport development by coordinating trunk andfeeder traffic and increasing the capacity of medium-sized and large airports.

Rail - Europe

BERLINIn May, German lawmakers approved the privatization of 24.9% ofDeutsche Bahn. Europe’s largest rail and logistics group will become aholding company, controlling 75.1% of passenger and freight transport andall of the stations and rail network. Sale of the transport arm is expected tobring US$7 to US$112 billion. The company’s 80 subsidiaries include sea,truck and airfreight operations, which account for 50% of its sales, up from20% in 2000. In June, Deutsche Bahn said that cargo rail service betweenChina and Germany could begin in October. China United InternationalRailway Container Transport will operate the route, which is expected toachieve annual sales of up to €20 million. The 15-day rail journey will cut 20 days from an ocean transport.

BRUSSELSThe European Commission agreed to a common standard for rail signalingin April. The standard will remove one technical barrier in the commission’sgoal of integrating rail freight services across Europe.

PARISAlstom SA, the French manufacturer of transport and energy equipment,said in June that it would develop a cargo version of its TGV train thatwould enable operators to carry express parcels over Europe’s growinghigh speed rail network. Meanwhile, France’s state railway company,SNCF, said it would increase its 42% holding in the French forwardinggroup, Geodis, by acquiring the remaining shares at €135 per share. Themove is seen as a way for SNCF to lower its labor costs for freight handlingand return it to profitability. Also, Air France-KLM said in July they wouldjoin forces with French freight operator Veolia Transport and launch high-speed rail services from Charles de Gaulle to destinations throughoutEurope. Although the announcement concerned passengers, there is astrong possibility the services could include freight. Rail transportation useshalf as much fuel as trucks and a quarter as much as aircraft.

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cargovision datelines

SEPTEMBER 15-17CargoFacts 2008Loews Miami Beach ResortMiamiT: +1 206-587-6537F: +1 206-587-6540E: [email protected]/symposium/index.htm

SEPTEMBER 23-26FIATA World CongressVancouver Convention & ExhibitionCentreVancouverE: [email protected]/

SEPTEMBER 30 –OCTOBER 1IDTechEx RFID Europe 2008Churchill College CambridgeT: + 44 (0) 1223 813 703E: [email protected]

OCTOBER 1-5CSCMP Annual Global Conference 2008Colorado Convention CenterDenverF: +1 630 574 0989www.cscmp.org

OCTOBER 2Nordic Air Cargo Symposium 2008Radisson SAS Scandinavia HotelGothenburgContact: Lars-Gunnar ComenT: +46-33-129841E: [email protected]

OCTOBER 15-17Sustainable Supply Chain SummitStanford Court HotelSan FranciscoT: +44 0207 375 7207www.eft.com/Green

OCTOBER 15-18India Aviation 2008Hyderabad AirportHyderabadContact: Des GregoryT: + 44 1252 532 800E: [email protected]

NOVEMBER 4-6ACF 2008Kuala Lumpur Convention CenterKuala LumpurT: +49 89 949-20 245 www.tiaca.org/2008

NOVEMBER 23-25International Freight WeekAbu Dhabi National Exhibition CentreUAEContact: Sarah WoodbridgeT: +971 4 336 5161E: [email protected]

Aleksey Chertenkov was elected president ofthe Airport Association of Civil Aviation of the RussianCommonwealth of Independent States in May. Theassociation of 231 members from 22 countries helpsairports discover and adapt new practices. Mr. Chertenkov is also the director general of theTolmachevo Airport.

Ludwig Hamburger became AirBridge Cargo’sregional director in Europe, the Middle East and Africain June. Previously, Mr. Hamburger was Air NewZealand’s regional manager in Europe.

Ken Allen was named CEO of DHL Express US inMay, at the same time that Deutsche Poste World Net,announced it would restructure its US operation. Mr.Allen moved from his previous role as CEO of DHLExpress in Eastern Europe, the Middle East and Africa.

Michael Coffman became CEO of Aloha AirCargo, the new company formed when SaltchukResources of Seattle bought Aloha Airlines’ cargooperation in May. Aloha had declared bankruptcy inMarch. Saltchuk bought Hawaiian Tug & Barges in1999 and also owns Northern Air Cargo, the largestcargo carrier in Alaska.

Holger van den Heuvel was appointedchairman and managing director of Cargoitalia in May.He was a member of the company’s board of directorspreviously.

Philippe Gilbert and Peter Nevhagenbecame joint head the global freight management divi-sion of Geodis Wilson in May. The two men willcontinue their existing roles as chief operations officerand chief marketing officer, respectively.

Walther Nahr was re-elected as chairman of theHong Kong Association of Freight Forwarding andLogistics Limited. Mr. Nahr was the organization’schairman twice before from 1988 to 1990 and from1992 to 1996. He is currently the corporate vice presi-dent of AGI Logistics (Hong Kong) Limited.


Q: How does working with the combinedAF-KL Cargo organization today differ fromworking with the individual carriers beforethe merger?

Luc Desreveaux: The most important advan-tage has been the consolidation of Air France Cargoand KLM Cargo professionals under one roof. Obvi-ously, before the merger we would have to reach outfor Air France employees at one location and KLMemployees at another. Today, we have the conven-ience and flexibility of having all employees, prod-ucts and services at consolidated locations system-wide. Given our expanded footprint and the

increasing complexity of our system, this is a veryimportant factor.We were impressed at how quickly and seamlesslythe two companies were brought together. We havefelt very comfortable about the combination from thestart. That is something you cannot say about everymerger that has taken place in our industry.

Lionel Rittner: Air France Cargo and KLMCargo have streamlined and consolidated theirteams with a single point of contact for us. This isvery important to a midsized company like Gondrandbecause we obtain direct, efficient and personalizedservice from the combined company. This has madeour customer relationships and us more productiveand more successful.

Q: How has AF-KL Cargo’s service to youimproved since the merger?

LD: We have seen more freight capacity availableacross the combined network. We cannot overstatethe importance of main-deck capacity when we areexpanding deeper into China, the Indian sub-conti-nent and other regions of the world where air cargooperations have not been commonplace. We havetraditionally used KLM to Beijing, and Air France toShanghai. Now we can consolidate our flying opera-tions in and out of China, which is today our mostimportant import-export market.

To find out how customers are experiencing the merger of AF-KL Cargo we spoke withtwo forwarders: Luc Desreveaux, branch manager for the Sogetra office at Lille airport,and Lionel Rittner, deputy airfreight manager, France, for Gondrand Group.

BY MARK SOLOMON

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Lionel Rittner is deputyairfreight manager, France, forGondrand Group, and is incharge of airfreight and seafreight purchases. He joined the company in 2004 withnearly 20 years experience inthe air and ocean freight.

Gondrand provides interna-tional air and ocean freightservices with a staff of 1,250people. It was founded in Italyin 1866 and is now headquar-tered in Paris. Gondrand’sturnover was €377 million in 2007.

Luc Desreveaux has beenbranch manager for theSogetra office at Lille airportsince 1993. He joined thecompany in 1987 and workedpreviously as sales representa-tive for a regional French freightforwarding company. He graduated with degrees inmarketing, sales, and English & German languages.

Sogetra provides internationalair, ocean and highway serviceswith a staff of 160 people.Founded in 1952, companyheadquarters are in Dunkirkand the Lille airport office,under Mr. Desreveaux, special-izes in textiles, garments andpharmaceuticals. Sogetra’sturnover was €100 million in 2007.

cargovision 15

The availability of lift has become even more impor-tant now that rising fuel costs are forcing airlines torationalize freighter and belly space. We have notexperienced problems with lift from AF-KL Cargo.

LR: The global network is larger and more efficient,which enables us to offer more attractive and innova-tive solutions. We are also pleased with thecompany’s patient and deliberate approach toassembling a combined network. It was well thoughtout and left nothing to chance.

Access to a geographically dense network with twoentrance points in Europe has increased our flexibilityin the services we offer. Overall, their service is bettertoday with the single company than it was a fewyears ago with two separate organizations.

Q: How have the expanded services createdby the merger helped you?

LD: We have seen improved access to complimen-tary products and effective balancing of the twoairlines’ strengths. For example, Air France is veryskilled in general cargo while KLM has extensive expe-rience and knowledge in perishables, especially cutflowers. Besides increasing their geographiccoverage, the two companies have now combinedtheir complimentary product strengths under one roof.That is a great benefit to our customers and to us.

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LR: We have one contact buying and selling bothAir France and KLM destinations. This helps us bemore productive in purchasing airfreight. We havealso experienced faster responses to our raterequests, bookings and special requests.

Q: Why did the merger of AF-KL Cargosucceed after so many previous unionsbetween airfreight companies failed?

LD: In our view, the key was a total acceptance andunderstanding of the combination at all levels fromtop management down the ladder. Communicationat all levels was superb, and everyone was stronglyencouraged to work together towards a commongoal. There was no “clash of cultures” that you oftensee with combinations in the airline business. Theemerging AF-KL Cargo organization embraced andaccepted everyone’s viewpoints, including ours, andthere was very strong and positive cooperationamong all participants.

LR: Sometimes we make things more complicatedthan they need to be. Air France and KLM took acombined entity and built simple solutions that corre-sponded to our needs and those of our customers.The message to the industry from the combination is to act simply and efficiently and your customerswill follow. ■

Lyon-Saint Exupéry Airport


Individual e-commerce tools may produce benefits,but when they are linked up, the advantages becomereally clear. Integration is the key to the AF–KL Cargoimplementation of this technology.

BY PETER CONWAY

■ The commercial aviation industry passed a newmilestone at the end of May when IATA announcedcompletion of its e-ticketing project – that is, thecomplete phasing out of paper tickets for all airlinepassengers.This achievement underlined just how pervasive theairlines’ use of the internet and other electronic toolshas become over the past seven years. Few travelersnow think twice about booking an airplane ticketonline or checking in via the web.

However, AF-KL Cargo’s goal of eliminating paperfrom its air cargo business lags well behind itsachievements for passengers. Yet the use of e-toolsis quietly growing. “Air cargo is still a very traditionalbusiness, but e-commerce is becoming more andmore important,” says Eelco van Asch, AF-KL CargoVice President of Marketing, Communications & E-Commerce. “At AF-KL Cargo we are determined toclose the gap with the passenger business.”

Mr. van Asch sees several drivers accelerating theadoption of e-commerce. One is the high fuel price,which is driving companies to look at ways to improveefficiency and reduce costs. Another is competition

THE IMPORTANCE OF BEING

CONNECTED

from other modes of transport, particularly sea-freight, where the adoption of e-tools is often moreadvanced than it is in airfreight. But he also thinksthere is a demographic factor. “A new generation ofyoung people is coming into the business for whomdoing things electronically comes naturally. They arethe customers of tomorrow and they are going toexpect to be able to interact with carriers in this way.”

INTEGRATE OR DISINTEGRATEThe strategy of AF-KL Cargo is to treat e-commerceas an integrated function, Mr. van Asch says. “E-commerce used to be seen as a series of separateprojects, a matter for the IT department. But whenyou bring them all together and see them as a singleentity, that’s when you can really understand thebenefits.”

For example, IATA’s e-freight initiative to removepaper documents from air cargo transport could belinked to e-booking, so that data provided at the timeof booking could be used to create an electronic airwaybill. A track and trace function could give thecustomer a snapshot of the documents he has ©

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received electronically and those that are still needed. This approach has yet to be adopted, but it is defi-nitely in the making, says Mr. van Asch. Better inte-gration may also increase its popularity among thosewho are reluctant to abandon the phone and fax. Themore they can do online, the more willing they will beto switch.

Edwin Borst, Vice President of Customer Service forAF-KL Cargo, and another member of the e-commerce team, says that the carrier now tries tobring a complete package of e-services into conver-sations with its customers. “We try to point out that itis not just about booking, but about other servicessuch as online schedules, claims processing, or trackand trace.”

TOOLS FOR SPEEDThe e-commerce team has recently made greatstrides in bringing more services to the airline’s cargocustomers. It made a claims status tool available onthe AF-KL Cargo website in June says Mr. Borst.“Previously, claims processing could be held up byminor misunderstandings. For example, if we ask aforwarder for more information and the letter goesastray, he wonders why he has not heard from us andwe wonder why we have not heard from him.”Now, in an e-commerce environment, a forwarderwould solve this problem by entering the air waybillnumber and getting a current history of the claim. “As with so many other services, the forwarder cando this one 24/7, at a time that suits him,” Mr. Borstsays. “And we don’t need staff waiting to take queries on the phone.”

Another new tool, a pre-claims notification, now elimi-nates an irritating administrative task for forwardersand carriers. Under the Montreal Convention, if aforwarder intends to file a claim for a shipment, he hasto send the carrier a pre-claim notification within 24 hours of the shipment’s arrival.Forwarders may now know whether a claim will ariseor not and may send a pre-claim just in case. “Thesewere traditionally submitted by fax,” Mr. Borst says.“The forwarder then rings up asking whether wereceived it. This is a big administrative headache forsomething that goes no further 99% of the time. Withthe new tool, forwarders can now file a pre-claimonline and receive a confirmation number immedi-ately, saving everyone’s time.”Another example of how the internet is simplifyingroutine administrative tasks is the publishing of ratesand schedules online. When they were printed on

cargovision the importance of being connected

paper and stored in a forwarder’s office, workerscould not always find them quickly. Today, both areavailable online. Rates are published through the AF-KL Cargo website and the Inforwarding Air FreightRates service of OAG.

IN- OR INTER-DEPENDENCEMr. van Asch says that AF-KL Cargo currentlyreceives 23% of its bookings online, a 10% increasein just the last year. These include bookings via EDImessage as well as by CPS or GF-X.

Working patiently with individual customers is oneway AF-KL Cargo intends to increase the number ofe-bookings. However, Mr. Borst says, air cargo is abusiness-to-business environment and very differentfrom the business-to-consumer channels of thepassenger business. “In air cargo, there is the wholechain to think about and a solution will only workeffectively if it addresses all of the participants. After apassenger books online, he is finished. But aforwarder may need to update his own system, which quickly reduces the benefit of the electronicapproach. That is why we have adopted the integrated approach for e-commerce.”

IATA’s e-freight initiative to eliminate paper documentsfrom air cargo shows the interdependence of partiesin the supply chain. AF-KL Cargo participated in therecently completed first phase, which involved fivecountries including the Netherlands. The technologywas not challenging: e-freight uses EDI messagesand the Netherlands has a venerable cargo commu-nity system that could accommodate them. However, three of the 13 paper documents used inthe trial have no EDI equivalent: the packing list, thecertificate of origin, and the invoice. Forwarders hadto scan each one, burdening their staff and theircommunications bandwidth.IATA is working with forwarders and others to createEDI versions for these messages and get shippers toprovide the data electronically. Mr. van Asch reckonsthat the simplicity of this new process will greatlyincrease the use of e-freight. The need to pass dataalong from one function to another is vital if theindustry is to wean itself from its old habits and realize the benefits of e-commerce.

Mr. Borst agrees. “Once all the elements worktogether, companies will realize how wasteful it is touse expensive manpower for tasks that can be doneelectronically. People should be freed for the complexwork that actually needs human intervention.” ■

Edwin Borst: “As with so manyother services, the forwarder can do this one 24/7, at a time that suits him”

Eelco van Asch:“Air cargo is still avery traditionalbusiness, but e-commerce isbecoming more andmore important”

cargovision 19

Reducing an organization’s carbon dioxide emissions, the so-calledcarbon footprint, is moving swiftly up the strategic agenda ofcompanies around the world. AF-KL Cargo has its own experts inthis field. Dr. Thomas Lesobre’s goal is to have AF-KL Cargo take upthe lead in sustainabe air transport.

BY PHILLIP HASTINGS

■ The starting point towards lowering emissions is toidentify the current emission levels. In the case of AF-KLCargo and its customers, that’s where Dr. ThomasLesobre and his colleague Ms. Monelle Sourdot come in.His role as the organization’s controlling director in chargeof network issues includes calculating the CO2 emissionlevels of air cargo traffic so that management andcustomers have access to reliable figures.

On the external front, Dr. Lesobre says some customers,particularly from the pharmaceutical and luxury goodssectors, are already telling AF-KL Cargo that they want tobe CO2 neutral. “To do that, they need to know the fuelburn of the cargo they are moving on AF-KL flights. We must be able to provide that information. Our goal isto give them figures for fuel burn and CO2 emission forevery kilo of their cargo moving between any origin anddestination.”

To achieve that objective, Dr. Lesobre has had to adapt a methodology used by his passenger colleagues.However, calculating the CO2 emissions for an individualcargo shipment is much trickier than for a passenger,because there are many more multi-leg flights and combinations available to move cargo.

“For example, if a passenger travels from Abidjan toShanghai, his complete routing will be Abidjan-Paris orAmsterdam-Shanghai. It’s nice and simple,” explains Dr. Lesobre. “But if you want to send cargo between thesame two points, you can choose from 21 differentroutes, probably with intermediate stops, on differentaircraft types, either passenger or freighter or a combina-tion of both. Although fuel consumption figures are nowonly available for each flight and each leg, we need it forcargo according to route and business flow. So, we mustbe very creative to get the data in the format we need.”

Now based in Amsterdam, Dr. Lesobre graduated with a PhD degree in airline management from DauphineUniversity in Paris before joining Air France in 1995. He spent the first two years of his career working toprepare the merger of Air France and Air Inter. He moved to Air France Cargo in 2002 and took up his present role with AF-KL Cargo in late 2005. ■

cargovision people make a difference: Thomas Lesobre

HEAD CALCULATOR

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for handling special products,” explains FrancisIsidoro, who is responsible for quality, safety, environ-ment and regulations at AF-KL Cargo. “It will tell thestaff and sub-contractors how to build and handle apallet. For example, Air France and KLM used topalletize luxury cars differently. However, KLM haddeveloped special tools and procedures for thisprocess and now the Air France stations haveadopted them as well.”

REAL ALIGNMENT“Customers gain confidence in the AF-KL Cargoproduct, because they know their cargo will behandled in the same way wherever it is loaded orcleared,” Mr. Isidoro continues. “For example, phar-maceutical and perishable shipping customers cansee how we develop and operate our temperature-controlled services to ensure their requirements formaintaining the cool chain are met.”

■ One of our main goals is to achieve comparable servicelevels at Charles de Gaulle and Schiphol, says Mattijs ten Brink, AF-KL Cargo’s Vice President of Worldwide Operations. “But the infrastructure at the two hubs iscompletely different. Charles de Gaulle is more mechanizedand with less opportunity in handling mixed pallets. Moreshipper-built pallets are moved at CDG than at Schiphol,and more freighters land in Paris, also.”Nevertheless, Mr. ten Brink and his team have created onequality management system, one safety and securitysystem and one audit system for both hubs. In addition,they have aligned front and back office processes. “This allows our outstations, suppliers and customers tobenefit from consistency in our cargo products throughoutthe AF-KL Cargo organization.”

AF-KL Cargo published its first integrated handling manual inJuly, detailing the operational procedures for its staff andsub-contractors when handling freight in both the Air Franceand KLM networks. “The manual also sets out the processes

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Internal process alignments have helped AF-KL Cargoimprove the quality of its services, and now an externalincentive is also at work: Cargo 2000, the industry-widestandard and certification system for creating quality in theairfreight industry.“Teams at work with operational staff at both Air France Cargo and KLM Cargo come up with standards for meas-uring quality under Cargo 2000,” explains Kester Meijer,Director of Shipment & Payload Logistics at AF-KL Cargo. “Among other things, these standards may cover exceptionhandling codes that identify mishandled or undeliveredfreight. In the past, we analyzed those failures based onanecdotal evidence. Now we are able to identify the specificissues we need to resolve in order to improve our servicequality.”Cargo 2000 is adapting some of AF-KL Cargo’s coding workfor other members to use, Mr. Meijer adds. “Cargo 2000 has44 codes, but they were not organized sensibly. We groupedthem into categories such as ground handling issues andgovernmental issues, like security.”

Common training methods are also improvingservice. At the two network hubs, staff are beginningto train with the same manuals and methods and will soon learn to handle cargo in the same way. In addition, the company is developing a common e-training program for all of the outstations.

“By investing in the standardized training andprocesses of Cargo 2000, the AF-KL Cargo staff at both hubs can now actually discuss effectivemethods of improving quality and differentiatingourselves from competitors,” explains Mr. Meijer. The benefits of aligning the two networks go beyondhandling procedures, adds Mr. Ten Brink. “We nowjoin forces to lobby governments, using our collectiveexperience to influence rulings in the EU and US.”Where Air France and KLM are concerned, twoheads are definitely better than one. ■

A key driver behind the merger of Air France Cargo and KLM Cargo was thedesire to improve efficiency, flexibility and customer service in both organizations.Achieving such a goal is never easy, but it is possible. While the operations at the two main hubs (Charles de Gaulle and Schiphol) are not integrated, of course the best practices are shared and processes are being aligned.

BY MARCIA MACLEOD

QUALITYBREEDS

OPEN WIDECargo handling at Schipholwill enter a new phase withthe addition of anotherwarehouse, scheduled toopen after 2012. The13,000-m2 site will have an unusual design forhandling cargo more efficiently.“We want to remove themechanization from cargohandling,” says Mattijs tenBrink. “We prefer to havepeople build pallets, ratherthan machines, becausethey can optimize thembetter and increase ourpayload. We will have goodIT systems to guide theprocess, but people willmake the final decision.For that, they need to seeall of the cargo in the ware-house and that means weneed a lot more room.”

In addition to more space,the warehouse will havemore docking doors, so that trucks can delivercargo loose, eliminatingthe double-handlingpenalty of breaking downand re-building pallets. It will also include new cool storage, an animalhotel, and separate areasfor valuable cargo andexpress mail. Meanwhile, a new 6,000- m2 warehousewill open in October atOrly, the site of the first AirFrance Cargo warehousebuilt in Paris. It is beingconstructed along withAeroports de Paris, mainlyto handle the French WestIndies traffic that flies onthe Boeing 777s.

Tahiti

NEED TO KNOW■ Government: Tahiti is the largestisland in French Polynesia.■ Population: 260,000 peopleon 120 islands.■ Capital city and major finan-cial center: Papeete.■ Language: French (the officiallanguage), Polynesian, someAsian languages.■ Economy: About 25%comprises tourism, plus pearlfarming and deep-sea fishing. ■ Trade: Exporting mainly toFrance (46%) and Japan (20%),importing from France (53%)and Singapore (15%).■ Exports: Cultured pearls,coconut products, mother-of-pearl, vanilla and shark meat.■ Imports: Fuels, foodstuffs,machinery and equipment. ■ Currency: Comptoirs Francaisdu Pacifique francs (XPF). US$1is 75.42 XPF.

TRAVELER TIPS■ Take light, casual clothing forthe balmy temperature.■ Shopping hours are Mondayto Friday 7.30 a.m.-11.30 a.m.and 1.30 p.m. to 5 p.m./6 p.m.,and on. Saturdays 7.30 a.m.-11.30 a.m. ■ Power: voltage is 220 (60cycles), and most hotels have110-volt outlets as well.■ Tipping is not customary; it iscontrary to the Tahitian spirit ofhospitality. There are no salestaxes or hidden service charges. ■ Public transport is cheap andreliable bus services known as“Le Truck.” Taxis are expensive.


■ TAHITI

“I have come to an unalterable decision – to go andlive forever in Polynesia. Then I can end my days inpeace and freedom, without thoughts of tomorrowand this eternal struggle against idiots.” So saidrenowned French artist Paul Gauguin, probablyTahiti’s most famous import. The largest of the SouthPacific’s Society Islands at the eastern end of the Ilesdu Vent (Windward Islands) group, Tahiti is controlledby France. It is a major tourism center, though it alsohas substantial coconut and related products exportindustries. All flights carry passengers and cargo, asthere is not enough traffic to justify using freighters.

Competition is very tough, with government-ownedlocal company Air Tahiti Nui – for which the mainFaa’a airport near the capital, Papeete, is the majorhub – setting prices. Last year’s total throughput(imports and exports) was 13,750 tons of freight and870 tons of mail, of which Air Tahiti Nui carried 10,736tons and 4,444 tons respectively. AF-KL Cargo took964 tons and 335 tons respectively.One private ground handling company, Air Tahiti Inter-national, looks after all passengers and cargo, withsoftware linked to French Customs authorities. Local

facilities and offices are controlled by one privatecompany, SETIL, a French acronym meaning TahitiSociety for Equipment and the Islands.Major local industries include tuna fishing, pearls andpearl shells, vanilla beans and local handicrafts,though few local products are produced in sufficientquantities to be exported.

Export items for air cargo largely comprise generalcargo, personal effects, live animals (pets), items suchas aircraft engines for overhaul and repair, valuablessuch as pearls, fresh tuna fish, aquarium fish, house-hold goods, military materiel, mail and a few localproducts such as vanilla beans and some handicrafts.

Imports by air include perishable foodstuffs, pharma-ceuticals, consolidated packages and spare parts.

SWEET PARADISE BY MICHAEL WESTLAKE

cargovision country files

© Eric Nathan/Image Select

© Anton Dijkgraaf/Hollandse Hoogte

Air France-KLM operates in 45 unique markets. Here we look at three of the lesser known thoughfascinating places somewhat off the beaten track – hugely popular as tourist spots with great naturalbeauty and each with its own colorful history.

Sint Maarten/Saint Martin

NEED TO KNOW■ Government: the southern halfof the island is part of theNetherlands Antilles, with repre-sentatives in the main Antilleangovernment in Curacao. The northern half is an overseasFrench Collectivity.■ Population: 77,000 (41,000 inSt Maarten, 36,000 in St Martin)■ Capital city: Philipsburg for theDutch, Marigot for the French.■ Language: French and Dutch(both official languages), English,French Patois, Spanish, Papia-mento■ Economy: Centers on tourism.■ Imports: Food, luxury goods. ■ Currency: the NetherlandsAntilles Florin (N.A.F.). US$1equals approximately 1.80 N.A.F.On the French side, the euro isused – US$1 is 0.631 euro.

TRAVELER TIPS■ Princess Juliana is the mainairport and is on the Dutch(south) side of the island, whilethe French side’s Grand CaseAirport is for flights to and fromother Caribbean islands.■ Dress code is mostly casual, inline with tropical temperatures. ■ Banks in Sint Maarten aregenerally open from 8:30 a.m. to1 p.m. and then 4 p.m.-5 p.m.from Monday to Thursday. InSaint Martin they are open everyweekday from 2 p.m. to 5 p.m.■ Electrical power varies. TheDutch side runs on 120 volts (60cycles) and the French side runson 220 volts (50 cycles).■ In Sint Maarten, hotels add a15% service charge and 5%government tax to the final bill.In Saint Martin, the servicecharge is 10%-15%, plus avisitor’s tax on rooms that variesup to 5%.■ Local public transport is byunscheduled minibuses. Mostvisitors rent cars.

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■ SAINT MARTIN

A small Caribbean island split between Dutch andFrench administrations, Sint Maarten/Saint Martin(depending on which part you’re visiting) is one of thefascinating leftovers from historical exploration,discovery and conquest that speckle the world’soceans. Christopher Columbus saw it and claimed itfor Spain, but never landed there. Spain took littleinterest in it, and the Dutch occupied it from 1631 asa way station between South and North America.Spain booted the Dutch out in 1633, and was in turnevicted by the Dutch in 1647 after a series ofassaults and sieges. The remaining Dutch andFrench who had hidden on the island divided theterritory with official agreement, and their distinctivecultural influences are apparent even today. Fast forward to present times: the Dutch/Frenchcooperation continues and the tiny – 37 square miles– spot in the Leeward Islands is an immenselypopular holiday destination. It is also a well-knowncentre for yachts and luxury mega-yachts eitherpassing through to the rest of the Caribbean orseeking a comfortable base.

There is virtually no manufacturing industry of anykind, so just about everything has to be imported,meaning opportunities for air cargo operators tobring in foodstuffs and high value items to feed thedemands of the luxury hotel and shopping trades.

Beaches, dining, nightlife and shopping are the majoractivities. With a short runway at the international airport, loadsare limited on Boeing 747s, though for outboundflights it doesn’t matter too much as there’s preciouslittle cargo to shift – personal belongings and the like,of which AF-KL Cargo moved about 200 tons lastyear. For arrivals, the beach by the airport is amagnet for aircraft spotters because of spectacularlow approaches.

Two private ground-handling companies deal with allfreight via a cargo area at the airport, and there areno customs formalities or duty payable.

© Richard Cummins/Image Select

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cargovision country files

■ NEW CALEDONIA

Outstanding natural beauty characterizes NewCaledonia, situated east of Australia in the Melane-sian region of the southwestern Pacific. Tourism isa major industry, though the mainstays of theeconomy are nickel mining and refining plus majorfinancial support from France. The AF-KL Cargoconnection is via Osaka, Tokyo and Seoul to orfrom flights operated by Air Calédonie International(Aircalin), which runs two Airbus 330s, an 320 anda Twin Otter. The Airbus fleet operates the majorinternational routes between Tontouta International Airport, about 30 miles outside thecapital city, Nouméa, and Japan, Australia and New Zealand. Domestic flights run from Magenta Airport in Nouméa.

The airline moves about 5,000 tons of cargo a year,about 70% of all New Caledonia’s airfreight. Allhandling is done at the airport, about 35 minutesfrom Noumea, the capital city. There is only onehandling company, Tontouta Air. Aircalin is the onlycarrier to accept cargo downtown.

For customs clearance, everyone uses Sydoniasoftware, which does not allow pre-clearing. The

dwell time for cargo is said to be acceptable,though the airport Customs office closes at 3 p.m.There is no clearance during weekends, except foragents that have received special dispensation.

Though New Caledonia is French territory, dutiesand taxes are applied for imports from Europe. This does not seem to be an obstacle to the devel-opment of the air cargo industry, which as might beexpected moves mostly exports of general cargo,personal effects and seafood, while imports consistmostly of foodstuffs, electronics and luxury goods.

New Caledonia

NEED TO KNOW■ Government: is an overseasterritory of France.■ Population: 224,824 (July2008 est.).■ Capital city and major financial centre: Noumea.■ Languages: French (the official language), 33 Polynesiandialects■ Economy: 25% of the world’snickel deposits. Tourism plusfinancial support from Francemake up the rest. ■ Exports: Nickel ore and products, fish. ■ Imports: Food (about 20% of total imports)■ Currency: Comptoirs Francaisdu Pacifique francs (XPF). US$1is 75.42 XPF.

TRAVELER TIPS■ The warm season is fromSeptember to March, withaverage temperatures of 77-80degrees F (25-27 degrees C),with most rainfall in Jan-Mar. ■ Public bus services run onvarious routes within Noumeafrom morning to early evening.There are also buses runningbetween towns. Car hire isreasonably priced.■ There is no tipping, though ifyou round up a bill or leavesome change, it probably willnot be refused.■ Electric power is 220 volts (50 cycles).■ If you go for a swim at abeach, beware of yellow-banded sea snakes (Tricots Rayes). ■ Shops are open Monday-Friday 7:30 a.m.-11 a.m. and 2 p.m.-6 p.m., and on Saturdaysfrom 7:30 a.m.-11 a.m.Sources: CIA – The World Fact-book, local government Websites, Official and commercialWeb sites.

© Arcaid/Image SelectJean Marie Tjibaon Cultural Centre, Noumea

© Oxford Scientific/Hollandse Hoogte

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■ AF-KL Cargo introduced a new fuel surcharge mecha-nism on September 1. Beginning on that date, the fuelsurcharge is based on the US-dollar price of jet fuel and theduration of the flight. On September 1, the day we switchedto the new mechanism, everyone paid exactly the sameinvoice amount as he paid under the old system. We calculated all subsequent changes in the fuel surchargewith the new mechanism, which corrects some basic flaws found in previous methods.Existing formulas calculate fuel surcharges based on theprice of oil in 1996. They do not include provisions formoving exchange rates or distances flown. By definition, a surcharge is an extraordinary item that should be propor-tional to an extraordinary cost while an airfreight rate shouldreflect market demand. Yet, we see surcharge calculationsthat price oil at US$17/bbl when crude sells today forUS$120/bbl. Combined with escalating euro-dollarexchange rates, this causes customers in Europe, forexample, to receive airfreight invoices containing 90% fuelsurcharges and 10% rates. Forwarders and shippers have been asking us for sometime to come up with a more up-to-date method of deter-mining surcharges, one that is more stable, predictable andincludes adjustments for flight distances and exchangerates. After consulting fuel experts and customers, AF-KLCargo has created a new mechanism that incorporatesthose requests.

Our new mechanism makes three changes that areintended to stabilize the surcharge: it increases the baselineprice of jet fuel to US$550/t from US$177/t, providing anample cushion for future change. It introduces a new fuelsurcharge whenever the price of jet fuel changes byUS$0.10, rather than by US$0.05 as in the past. And it usesan index that is now based on a moving average of the jetfuel price during the previous month. These last two innova-tions will minimize the effect of short-term price fluctuations. The new mechanism also establishes a surcharge in USdollars, the currency used to buy fuel, and converts it intolocal currencies at prevailing exchange rates. Since aircraftfuel consumption increases with distance and the durationof a flight, we prorate the surcharge according to the block

hours flown. The mechanism has three zones that use a multiplicationfactor of 1.0 for flights over 9h, 0.8 for flights of 4h to 9h and 0.5 forflights under 4h.The goal of balancing fuel surcharges for all markets, currencies andflight distances, so that everyone paid the same invoice amount onSeptember 1 as paid on August 31, required a one-time adjustment tosome airfreight rates. In those instances, the correction left the totalinvoice price unchanged but increased the airfreight rate and reducedthe fuel surcharge by the same amount. All subsequent changes inthe surcharge will proceed from the new adjusted value.

The new surcharge calculation is straightforward. If jet fuel increasesUS$60 per ton, the surcharge goes up US$0.10. Multiply thatUS$0.10 increase by the distance factor for the shipment to find thesurcharge adjustment per kilogram. If necessary, multiply that result bythe currency exchange rate to find the surcharge adjustment in localcurrency. Add the adjustment to the existing surcharge to find the newsurcharge.Introducing any new methodology asks for changes to current prac-tices. We would like to thank our customers for their cooperation andeffort in making this work. AF-KL Cargo trusts that you will understandand value the transparency of this new mechanism. We hope that itmay even bring a beneficial change to the airfreight industry. ■

FUEL SURCHARGEOVERHAUL

Forwarders and shippers have been asking AF-KL Cargo to come up with a more stable andpredictable method of determining fuel surcharges.

BY MARK LYON

© Bert Stephani/Image Select


■ In October, the first Boeing 777 freighter is tocome off the line at Boeing’s plant in Everett to jointhe AF-KL Cargo network. Although it will joinpassenger versions of the Triple-Seven already in theAir France fleet, smooth integration requires muchforethought.With a maximum takeoff weight of766,000 lb (347,450 kg), the Boeing 777 freighteroffers a revenue payload capacity of 226,000 lb (103 tons). According to Boeing, the aircraft will alsobe capable of flying 4,885 nmi with a full payload and general cargo market densities.

Arend de Jong, AF-KL Cargo Senior Vice Presidentfor Marketing & Network, says that while Air Francealready operates 51 Boeing 777 passenger aircraft,planners must accommodate specifics unique to thefreighter version, including weight and balanceconcerns. “Commercially, the aircraft is replacing the747s. The 777 has an enormous payload range andis also a very efficient aircraft in terms of fuel.However, it has a bit less maximum payload than a747, so we must involve network, marketing, salesand almost every other discipline in our company tosee where it fits best.”

BALANCED EQUATIONOne of the operational issues that network plannersmust keep in mind is the different payload range andfuel consumption for each type of aircraft, Mr. deJong adds. Different aircraft types are more suited for certain ranges and flying times: “There are newoptimal ranges to be defined for different aircrafttypes and that is an extremely interesting issue wecurrently have on the table.”Henjo Grisnigt, the AF-KL Cargo Director of NetworkPlanning for the AMS network, agrees that there are some complexities with the new Boeing 777freighter, but its greater fuel efficiency creates manyopportunities. “We can serve a portfolio of destina-tions that will make a profitable route, whereas wecould not do that with our Boeing 747-200 freighter. On the other hand, the new aircraft has a differentpayload and shape, which adds complexity. Weneed special pallets and building them is not thesame as building ones for the 747. It is simplyanother issue we must consider as the launchcustomer, and it will be one of the challenges.”And nobody is overlooking the high price of fuel. It may reduce belly capacity in some markets or

Fleet planning is tricky, even without the additional complication of introducing a new aircraft, like the Boeing 777 freighter. Add high fuel prices to the equation and you have constantly changingimperatives for network planners.

BY TONY CARDING

ASSETSHUFFLE

Arend de Jong: “The 777 has anenormous payloadrange and is also a very efficient aircraft in terms of fuel”

cargovision 27

tempt planners to cancel freighter flights with smallor negative margins if the route is also covered bypassenger flights. They will certainly try to avoid fillingup at stations where fuel is expensive, for example in West Africa and Central Asia. As the Boeing 777 freighters replace Boeing 747-200 freighters at Charles de Gaulle, they bringgreater efficiency. “Planners really begin to focus ondefendable markets, where they see competitorsalready falling by the wayside,” Mr. Grisnigt says.“We expect the high fuel prices to shake up theindustry. As we are No. 1 in terms of network andservice possibilities for the forwarder, we expect tosurvive, even though the margins are under tremen-dous pressure.”

UPSIDE POTENTIALStill, no freighter is universally suited to all routes,says Bruno Duval, Vice President of the CDGnetwork for AF-KL Cargo and Vice President of FleetPlanning & Scheduling for Air France. “Each type ofaircraft performs best according to three factors:payload, range and fuel burn. Capacity costs

depend on the aircraft type, but also on the way it is operated. A freighter fleet within a global carriercan benefit from the commonality in maintenance,engineering and crews when the airline operates the same type of aircraft in a passenger version.”

“Managing a freighter fleet composed of several sub-types limits an airline’s ability to perform well,” Mr. Duval continues. “It represents additional costsand increased risks for our customers’ servicequality. Therefore, we focus on one aircraft type that best fits the network design.”However, life is not perfect, Mr. Duval says. Phasingin the Boeining 777 freighter will require a temporaryperiod of managing three sub-fleets, along with twoseparate crews and two different pallet shapes. “This is a necessary intermediate step, a bridge tomove to a new fleet, and it is really an interestingchallenge. We believe that the fuel savings and thecrew and maintenance synergies with the passengerfleet will eventually mean that our fleet compositiongives us the best reactivity and flexibility to meet our customers’ needs for the immediate and long-range future.” ■

© BoeingThe Boeing company unveils the new 777 freighter


Oct ‘06

Major Scheduled Airlines - Global Freight Traffic Growth

-2%

0%

2%

4%

6%

8%

Jan ‘07 Apr ‘07 Jul ‘07 Oct ‘07 Jan ‘08 Apr ‘08Apr ‘05 Jul ‘05 Oct ‘05 Jan ‘06 Apr ‘06 Jul ‘06

Annual G

row

th

Growth - Quarter vs Quarter previous Year

Average Growth of Last 3 Years = 3,5%

Growth - Month vs Month Previous Year

20%

15%

10%

5%

0%

-5%

-10%

19891990

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

2007

IATA International: RPK, Total FTK and Freighter FTK growth

Total FTK growthFreighter FTK growthRPK growth

IATA International - Index of RPK and FTK1990 = 100

300

250

200

150

100

50

RPKFTK

19901991

19921993

19941995

19961997

19981999

20002001

20022003

20042005

20062007

WILL 2008 BE A YEAR OF NOFig.1.■ Although growth looked positive during the first quarter of 2008,it worsened as summer neared. A slowdown in the US and Europe,caused by the credit crisis and record fuel prices, also had animpact on the transportation market. Shipping lines decided toreduce the speed of their ships and airlines saw demand growthslacken. The profitability of the whole airline industry is under attackby this unprecedented cost increase. Several airlines alreadysuspended operations and passenger airlines especially arereducing capacity.

Fig.2. ■ IATA published its new World Airline Statistics (WATS) with lotsof useful information. Growth of FTK and RPK is plotted based onthe WATS information along with the growth of FTK by IATAfreighters. After a deep trough in 2001, all figures peaked in 2004,but declined again sharply after 2004. The outlook for 2008 and2009 is rather grim. It is remarkable that the growth rates ofpassenger and freight traffic are so similar.

Fig.3.■ Many forecasters claim that airfreight growth always exceedspassenger growth. However, the IATA figures for international trafficpoint to a different conclusion. The graph shows an indexed chartof RPK and FTK traffic since 1990. Until 2006, there was no difference in growth for both segments, but the past two yearsshow passenger traffic growing faster than freight traffic. If the chart included non-IATA carriers, the difference would beeven greater. The largest growth in passenger traffic comes fromlow-cost carriers whose figures would have increased the RPKtotals considerably.

cargovision market monitor

IATA - Increase in Wide Body Jets 1997 - 2007Top 15 airlines of increase

0

Increase in number of WB Jets

20 40 60 80 100 120 140

FedEx

UPS

Emirates Airlines

Cathay Pacific

Air France - KLM

Lufthansa

Qatar Airways

Etihad Airways

Saudi Arabian

Air China

Singapore Airlines

China Airlines

EVA Airways

American Airlines

Thai Airways

cargovision 29

GROWTH?

Fig.5.■ The mix of aircraft types is also evolving. The Boeing 747 alwaysconstituted the largest proportion of the world wide-body fleet.Then, last year, there were more Airbus 330/340s in operation thanBoeing 747s. The number of Boeing 777s is also rising fast. Both of these aircraft types have more belly capacity than theBoeing 747, thus increasing the volume of capacity in the market. The DC-10 is facing the end of a long life and, with fuel prices atrecord highs, airlines are retiring these old aircraft rapidly.

Fig.4.■ The growth of FTK carried in freighters has been somewhathigher than in passenger carriers for most of the last 20 years. This increased the share of cargo traffic carried by freighters. In the past two years, however, the percentage for freighter traffichas not increased. Two factors are responsible for this change:firstly, a large increase in the number of Airbus 330/340 and Boeing777 deliveries has added considerable belly capacity. The cost ofbelly capacity is relatively low and more of it on the market gener-ates more traffic. And secondly, the rising cost of fuel is hinderingthe growth of freighter fleets.

The amount of air cargo carried in passenger bellies compared tofreighters has grown over the past two years. Dick van den Berg,our in-house analyst, looks at the trends and their causes.

BY DICK VAN DEN BERG

Fig.6.■ The growth of wide-body aircraft is concentrated in a smallnumber of IATA airlines. Over the past decade, 15 airlines wereresponsible for adding 75% of the wide-body aircraft to the worldfleet. The US integrators FedEx and UPS have added the mostaircraft. Many of them were passenger jets converted intofreighters. The large European carriers, Air France-KLM andLufthansa, have expanded their fleets, as have six of the majorAsian carriers. The presence of four Gulf carriers in this group of 15airlines is striking: the accounted for 40% of the wide-body aircraftadded by this group.

0%

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IATA - International FTK per Aircraft type

Freighters

Belly & Combi

19891990

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IATA Wide-Body FleetNumber of aircraft (including freighters) in operation

Others

A330/340

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MD-11

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DC-10

B747

19901991

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© O

lé o

ntw

erp

ers

WORLD’S SMALLEST SHIPMENT

■ Other researchers in Spain, Austria and Switzerland have built ananoscale monorail that recently moved its first load: a gold nugget 250nanometers wide that was carried for a distance of 500 nanometers.Observers recorded the event through an atomic force microscope. The so-called nano-freighter was heralded as a good first step towardsmaking nanotransport a reality. We wonder how long before someonedevelops nanoscale logistics and bills customers for breaking down itemsinto their molecular parts, transporting them to another site, and reassem-bling them into a whole. Beam me up, Scottie, but what’s the fare?


cargovision postscript

A NEW WRINKLE■ Researchers have known for a decade thatdolphins go faster by wrinkling their skin to stopwater molecules from clinging to it, creatingturbulence that slows them down. Morerecently, engineers at Texas A&M Universityapplied this knowledge to reduce skin frictiondrag in a laboratory experiment by half. Usingelectric fields to corrugate a skin’s surface at aspecific wavelength and amplitude, they wereable to calm the chaotic flow of the fluid movingover it. Because the amount of deformationrequired to calm the waves varies with thevelocity of the fluid, they have now set to workcreating a smart skin that uses active materialsto change shape and reduce drag during real-istic flight conditions. Lower drag can reduceaircraft fuel consumption along with its associ-ated economic and environmental conse-quences, increase flight range and endurance,and achieve higher speeds.

YOU COULDA BEEN A CONTENDA■ The 46-year-old whistleblower Mark Oehmreceived US$3.3 million for telling the USgovernment that his former employer, NationalAir Cargo, a freight forwarder located in Orchard Park, NY, did, among other misrepre-sentations, routinely ship US Department ofDefense goods by truck, but billed them formore expensive airfreight. Mr. Oehm, whoworked for National from 1996 to 2001, was the key government witness in the over-billingcase, which resulted in a US$28 million settlement in Buffalo’s federal court.

© A&J Visages/Image Select

cargovision 31

Cargovision is the management magazine of AF-KL Cargo. Its function is to disseminate information on transport, distribution, logistics, information services, and general business developments. The editorial opinions expressed in the magazine are not necessarily those of Air France KLM. Reproduction in whole or in part without written permission is prohibited.

cargovision information

SUBSCRIBER SERVICES

Cargovision is published quarterly by AF-KL Cargo and mailed to subscribers in almost every country.

Please visit www.cargovision.org and click on the subscribe icon. You will be able to:

■ Sign up for a free subscription■ Change your address■ Cancel your subscription■ Review recent editions

cargovision

Published by AF-KL Cargo Communication, P.O. Box 7700, 1117 ZL Schiphol, The Netherlands. Maaike Arwert, [email protected]

Concept & Realization: vdBJ Communicatie Groep, Bloemendaal-NLwww.vdbj.nl, [email protected] in Chief: Mark W. Lyon, [email protected] Manager: Jurgen van Gessel, [email protected] Manager: Urtha Ririhatuela, [email protected] Direction: Sok Visueel Management, [email protected] Editorial Office: Vijverweg 18, 2016 GX Bloemendaal-NL, T +31(0) 23 541 1701Circulation: Pondres Direct Mail B.V., T +32 13 595 35 00Printed on 90 grs. Galerie Silk, M-real. Promoting sustainable forest management - for more info: www.pefc.org

AF-KL Cargo © September 2008 Volume 23 Number 34

cargovision

MARK W. LYON, EDITOR-IN-CHIEF

HIGHER EVOLUTIN

PARTNERS IN SINE■ Using X-rays to show objects inside a containeris simple. Using them to identify the composition ofmaterials inside is hard. Designers at Nuctech CoLtd., a company that was spun off from Beijing'sTsinghua University to research and develop X-rayscanning technology, built the prototype of anadvanced scanner in December 2005. Themachine sent X-ray pulses of interlaced high andlow energy beams into a container.

Afterward, it combined the two scans with asophisticated fusing algorithm and showed imageswith excellent discrimination between organic andinorganic materials. Other algorithms enabled it toshow objects hidden behind heavy metals. Mean-while, Australia's Commonwealth Scientific andIndustrial Research Organization began testing itsown scanner prototype at Brisbane Airport in 2006.The CSIRO machine did not use X-rays. Instead,it collected scans of a gamma ray and neutronbeams to build its composite images. Not long afterCSIRO completed the Brisbane trials in 2007, thecompany agreed with Nuctech to collaborate indeveloping a new scanner that would incorporateCSIRO's neutron technology and Nuctech's X-raysystems. The two firms are now building the proto-type in Beijing. They expect the production designsto integrate easily with existing airport systems andkeep freight moving rapidly. Scanning an airfreightcontainer should take less than a minute. In August 2008, the scanner won the CSIRO Medal for Research Achievement.

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