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TIACA ACF: Cargo execs look to new regions

By control on October 5, 2012

Economic malaise in key markets has led cargo leaders to look to new regions for growth — a point driven home during “The CEO Viewpoint” session at TIACA’s 26th International Air Cargo Forum and Exposition in Atlanta. Mexico and Brazil are two of the emerging markets these leaders listed as potential hotspots for cargo during the session.

Four CEOs — Mitch Nichols of UPS, Richard Anderson from Delta Air Lines, Atlas Air's William Flynn and CEVA Logistics' John Pattullo — as well as Brian Kelley, Coca-Cola Refreshments’ chief product supply officer, discussed the key issues currently facing the global airfreight industry. Chief among them is the sluggishness permeating world markets.

Pattullo cited the eurozone crisis as having an especially marked effect on the global airfreight sector in 2012. Unfortunately, he doesn’t anticipate a sudden resurgence in the coming months.

“I don’t see it getting better for the next three or four years,” he said during the panel. As a European company, he said CEVA Logistics, like many others, will “continue to battle for share in a relatively stable, sluggish economy.”

Delta's Anderson said the continued “choppiness” of the European economy has led the carrier to reduce capacity to the region. Globally, Delta has trimmed capacity by 3 percent, year-over-year, in 2012 — a byproduct of stalled demand in key markets. Even so, Anderson sees a lot of potential in emerging markets. From a cargo standpoint, he said, “Mexico is doing well; Brazil is going well.”

But Anderson thinks the economic problems in the U.S. are a bit overblown. “The U.S. appears to be a bit stronger that what we read about in the paper,” he said. “Corporate profits are really solid, and U.S. productivity is at all all-time high.” He said U.S. housing markets have bottomed out, which bodes well for the nation’s economy.

UPS’ Nichols didn’t dispute these points during the executive roundtable, but said that U.S. carriers should look beyond their domestic market for growth. He said 70 percent of the global purchasing power is outside of the U.S. — a fact propelling demand for new routes to emerging markets.

Atlas Air has been on a growth trend lately, despite the sluggish economic conditions. Flynn revealed during the executive roundtable that Atlas Air is increasing capacity by 18 percent this year, a trend that will continue into 2013.

He said that demand is coming from the growing population of global consumers — especially from Southeast Asia — and the increased sophistication of consumers. Flynn pointed to the higher perishables traffic between Latin America and Southeast Asia as a manifestation of the latter.

Ensuring that such flights aren’t held up by logistics will require the airfreight sector to take cues from the passenger business, however, Anderson asserted. “We’re still running a paper-based business,” he said. Anderson maintained that the industry operating the airfreight sector is in vast need of a technology upgrade, an idea championed by the global e-freight initiative.

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