2010 State of Logistics

8/9/2019 2010 State of Logistics

http://slidepdf.com/reader/full/2010-state-of-logistics 1/9

By PATRICK BURNSON, exeCUTIve edITOR

during Worl War II, th U.S. Na nlistworl champion chss plar Rubn Finto calculat—on th basis o positionalprobabilit—whr nm submarinswr most likl to surac. yars latr, Finwas ask about th projct’s outcom, an

mostl rpli: “It work out all right.”Whil logistics managrs ma not b consulting with

chss mastrs ths as, th ar posing on big qustion toconomic thorists willing to tak it on: Is “Th Grat Fright

Rcssion” nall coming to an n? Analsts an inustrinsirs ar tlling us that things ar in gtting bttr orshippr organizations, but that th tnuous businss climatan tightn crit controls will mak it icult or carrirsto rapil pan capacit or th rmainr o 2010.

Th shippr imprati, thn, will b to collaborat withcarrirs lik nr bor. With capacit tightning, a nwurgnc shoul b plac on mitigating risk an controllingcost.

Th 21st Annual Stat o Logistics Rport (SoL), rlasb th Council o Suppl Chain Managmnt Prossionals(CSCMP) an prsnt b Pnsk Logistics at th NationalPrss Club last month, conrm what man shipprs habn suspcting. Th worst ma b or, but as th conom

continus its slow rcor, shipprs ar going to b acwith an ntirl nw st o tactical challngs.

“W ar nitl sing a rcor,” sas Rosaln Wilson,th rport’s author, “but not th kin that will gnrat a loto nw businss this ar. Grant, shipprs ha alrama a grat man sacrics—that shouln’t chang su-nl in th short trm.”

In, accoring to Wilson’s rsarch, th cost o th U.S.businss logistics sstm clin 18.2 prcnt in 2009—thbiggst rop in th histor o th rport. Manwhil, businss

logistics costs ll to $1.1 trillion, a cras o $244 billionrom 2008. Combin with th rop in 2008, total logisticscosts ha clin almost $300 billion uring th rcssion.In act, 2009 logistics costs as a prcnt o th nominal Grossdomstic Prouct (GdP) hit a historic low at 7.7 prcnt.

“Both major componnts o th cost mols clin in2009,” plains Wilson. “Inntor carring costs ll 14.1prcnt in 2009, an this cras in carring costs was uto both a 4.6 prcnt rop in inntoris an a 10 prcntrop in th inntor carring rat.” Transportation costs, shas, plummt 20.2 prcnt rom 2008 lls. Trucking,which compriss 78 prcnt o th transportation compo-nnt, clin 20.3 prcnt whil all othr mos combinclin 20.5 prcnt.

2 2 L O GIS T IC S MA N A Ge Me N T WWW.LOGISTICSMGMT.COM | Jul 2010

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2010 STATe OF LOGISTICS:

Mak our

mo Th cost o th U.S. businss logistics sstm clin 18.2

prcnt in 2009—th largst rop in th histor o th State

of Logistics Report . But as th conom slowl impros,

shipprs will n to b mor cautious an tactical as th

ac incrasing olums, tight capacit, an highr rats.



CAPACITy GAMBIT Th rcssion—which bgan in dcmbr o 2007

an continu through mor than hal o 2009—haa ngati impact on all sgmnts o th logistics ss-tm.

Th ntir inustr lt th ngati cts o thownturn mor than most othr inustris sinc thslump in ach iniiual sctor translat into a lossin shipmnt olum. Accoring to Wilson, innto-ris continu to climb or th rst hal o 2008 ll-

Jul 2010 | WWW.LOGISTICSMGMT.COM L OG I S T I C S M A NA G e M e NT 2 3

Rapheal Ricoy

Snapshot of the U.S. Logistics Market 2009$ billions

Taxes, Obsolescence, Depreciation, Insurance 233

Interest 5

357

Logistics Administration

42

697

Truck - Intercity 368

Warehousing 119

ShipperRelated Costs

542

9

Truck - Local 174

Railroads 50Water 29Oil Pipelines 10

Air 29Forwarders 28

Total logistics cost

$1,095 billion

Carrying Costs - $1.851 Trillion All Business Inventory Down14.1%from 2008

Motor Carriers

Transportation Costs Down 20.2% from 2008

Other Carriers

Down 18.2%from 2008

Logistics Administration

146

Source: CSCMP’s 21st Annual State of Logistics Report



ing warhouss an rtail shls. Inmi-2008, bloat inntoris bgan to

b rawn own until th rach pr-rcssion lls in lat 2009.“Throughout th prio, orrs or

nw goos ropp o substantiallan carrirs compt or a win-

ling olum o shipmnts,” Wilsonsas. “Spot rats or som mos llblow costs, urthr aing to nancial

clin. ecss capacit in th sstmwas rationaliz—or ruc—particu-

larl in th trucking an air cargo inus-tris. Som was th natural rsult o carrirs that wnt out o businss, butmuch o th ruction was th rsult o businss cisions.”

An with th conom showingstrongr signs o nw li as w mointo th scon hal o 2010, Wilsonan othrs maintain that it’s likl thatw’ll ha capacit problms in manaras b ar’s n.

As in morn chss, th tpicalrspons to a moratl soun gambitis to accpt th matrial (b it mab bishop, knight, or rook) an gith matrial back at an aantagoustim. vincnt Hartntt, Jr., Pnsk’sprsint, suggsts that this boar placan work or logistics managrs as wll,taking what carrirs will or now anngotiating or balanc rats latr.

“Shipprs ar striking up stratgic

alliancs with logistics srics proi-rs that can rspon quickl to marktchangs an ar capabl o rucingcosts rapil,” Harntt sas. “At thsam tim, proirs ar looking outor bst practics an shipprs with thmost agil suppl chains.”

KeeP PUSHING PAWNSBut it wasn’t as i shipprs han’t

bn tring this all along. In an intr-iw with LM, Wilson tlls us thatatr rising mor than 50 prcnt in


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“Shipprs wr shllshock last aru to low olumsan trm ratprssurs, an rsoon bcam risk ars.”

—Rosaln Wilson, author o th Stat o Logistics Rport



th ars laing up toth rcssion, total logis-

tics costs ll in 2008 an2009. Transportation costswr own mor than 20prcnt in 2009.

“Shipprs wr shllshock last ar u tolow olums an trmrat prssurs, an rsoon bcam risk ars,”Wilson sas. “At th samtim, intrst rats con-tinu thir ownwarspiral whil inntor l-

ls ropp o, laingto anothr oubl igitrop in inntor carringcosts. Logistics as a pr-cnt o our nominal GdPll to 7.7 prcnt to thlowst ll masursinc th sris start in1981.”

Although irtuall rshippr an carrir inolin th suppl chain slashcosts an incras prouc-

tiit, this prcipitous ropwas caus mor b thrapi clin in shipmntsan th cut-throat rat ni-ronmnt. Rnus or mostcarrirs wr prss

in 2009 an som—likMarsk Lin—ha losss

or th rst tim in thirrm’s histor. Howr, manocan carrirs ar orcast-ing a bttr rnu picturor 2010. (S Ocan Cargosnopsis pag 31.)

Haing hit rock bottom,inntoris ar slowl “inch-ing up,” sas Wilson. Shalso nots that orrs arbing plac an commoi-tis ar moing again. Inaition, intrst rats ha

bn stail rising. “Witholums picking up, capac-it tightning, an highrrats on th wa, much o th rop in transportationcosts shoul rrs itsl.Although it will probablb 2011 bor w s pr-rcssion lls,” sh sas.

For carrirs who hasuri ths har tims,as Wilson, th uturlooks rlatil bright, but

it’s still not tim or thmto lt thir guar own.

Th will ha mrg ina sriousl wakn statan will pn on thirabilit to capitaliz on grow-ing markt opportunitis to

bolstr thir position. This poss a rshchallng or shipprs: “Th woul bwis to b rst at th tabl ngotiatingrats an capacit,” sas Wilson. “Guar-ant a minimum ll o businss inrturn or guarant carriag an lim-

it rat hiks two or thr ars out.Consir oring assistanc, prhapsin th orm o nw trms, to wakrlinks in our suppl chain to nsurcarrir surial.”

In othr wors, kp pushing pawnsuntil a tactical goal is ma an strat-gic mols ar lop. “W n tocontinu to min th bottom lin ankp costs in chck,” sas Wilson.

Patrick Burnson is ecuti eitor o Logistics Managmnt


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U.S. Business Logistics Costs

$ trillions

1.01

2000

0.97

2001

0.92

2002

0.95

2003

1.03

2004

1.18

2005

1.31

2006

1.39

2007

1.34

2008

1.10

2009


Logistics Cost as a Percent of GDP

10.3

2000

9.5

2001

8.8

2002

8.6

2003

8.8

2004

9.5

2005

9.8

2006

9.9

2007

9.3

2008

7.7

2009


Total U.S. Business Inventories

$ billions

2300

2100

1900

1700

1500

13002000 2001 2002 2003 2004 2005 2006 2007 2008 2009

12/1/2007

to 7/1/2009

3/1/2001

to 11/1/2001

U.S. Recessions




No sctor o th transportationinustr was hammr harror th last ar than th

$25.6 billion lss-than-truckloa (LTL)sctor. Whn inustr lars such asFe Fright an Con-Wa bganposting quartrl losss an laing o workrs or th rst tim in thir com-panis’ histor, that pro tims wr

tough.Battr b th twin mons o ha-ing high costs an man l-ls that ll narl 30 prcnt uringth pak o th rcssionlast ar, most LTL carrirssimpl hunkr own anwr in “surial mo,” ason carrir cuti put it.

Som analsts stimatthat thr was as much as 25prcnt orcapacit in thLTL sctor last ar. Making

mattrs wors, analsts sa,was th prcarious nancialposition o yRC Worlwithat hols about a 20-pr-cnt LTL markt shar.Som rial carrirs, sns-ing yRC was on its last lg,wnt on an all-out pricingwar, ropping rats as muchas 80 prcnt o th listtari pric.

Fast orwar on arlatr: yRC is still in businss, an also

still losing mon. But shipmnt ol-ums ar rising, orcapacit is asing,an som LTL carrir cutis arrporting brisk man or thir sr-ics.

“It’s airl strong an has bnsinc th bginning o Fbruar,” sasCharls Hamml, prsint o PittOhio eprss, a laing LTL carrir.“Rnu, shipmnts, an tonnag arup with tonnag bing up th most.”

But is it sustainabl? “Th jur is

still out on that qustion,” Hamml

sas. “Businss in th marktplactoa woul suggst that it is, sincw continu to b bus with noslowown in sight.”

But Hamml an othr inustrcutis an analsts sa thr arstill unanswr qustions about thconom. For instanc, what happnsto th U.S. conom atr th gorn-

mnt stimulus mon ns? Anothrunanswr qustion rols arounhow tight th crit markts will bgoing orwar.

Howr, a major carrir bank-

ruptc or cssation o businss is notout o th qustion. Man analstsbli banks wr rluctant to shuttryRC bcaus o th low man orus trucks uring th rcssion. Howwill lnrs ract i th us truck markt bouncs back, as it appars tob oing?

No shippr or carrir knows th pr-cis answr to all thos qustions. Butcarrir cutis an analsts sm toagr that LTL rats ar rising. Th

almost ha to. As th accompan-

ing chart illustrats, LTL rnu prhunrwight has clin or ightstraight quartrs. Thos clins hit 6.7prcnt in th rst quartr o this ar.

But analsts sa a combination o incrasing right olums, bttr car-

rir isciplin, piring contracts, anconcrns or capacit ar all cratinga bttr orall pricing nironmnt inLTL.

“Th LTL inus-tr has shown a littlmor pricing isci-plin,” sas SatishJinl, principal o SJConsulting. “Th’takn som rirs outo th ntwork whichhas hlp balanc.

dman is up in thlow-singl igits ancssi orcapacitis coming out. Thris still orcapacitbut not so such that itwill limit thm sk-ing som marginal ratincrass btwn 2prcnt to 4 prcnt.”

That jibs withHamml’s aic or

shipprs. Noting that most shipprs

ha rats lock in through con-tracts, Hamml sas h’s pctingLTL rats to ris btwn 3 prcntan 5 prcnt in th coming ar.

“I woul ais shipprs to lock inth capacit th think th will nmoing orwar in thir contract,”Hamml sas. “What goo ar gratrats i our carrir can’t or won’t giou th capacit that ou n?”

B John d. Schulz,

Contributing eitor

28 L O G I S TI C S MA N A G e Me N T WWW.LOGISTICSMGMT.COM | Jul 2010

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LTL:Carrirs upbat on rats

Average YOY % change -LTL revenue per hundredweight% change

1.8%

Q12008

-0.3%

Q22008

-1.5%

Q32008

-4.3%

Q42008

-2.0%

Q12009

-4.4%

Q22009

-5.4%

Q32009

-5.5%

Q42009

-6.7%

Q12010

*Weighted average for public LTL carriers

Source: Company reports and SJC estimates



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Th truckloa (TL) sctor, whichaccounts or mor than 90 pr-cnt o th $542 billion trucking

ustr, is rbouning rom its thr-ar right rcssion. In act, it alloils own to this: Shipprs shoul brpar to pa mor as th TL capac- tightns.

In its rcnt Businss epctationur, Transport Capital PartnrsTCP) oun that 88 prcnt o TLarrirs sur pct ol-ms to incras or th ntar an 84 prcnt pctt incrass or th sam

rio.“Th clar mssag rom all

h rsponnts was that thirutlook or our inustr has

mpro trmnousl,” saschar Miks, a partnr at TCP,

aing transportation mrgrsn acquisitions aisor irm.

Whn it coms to rats,s important to rmmbr

hat about 75 prcnt o TLight mos unr contractr unr icat sricrrangmnts. Man o thosontracts, usuall a ar long,a not pir t. So thos shipprsill likl rtain th bargain rats thgotiat whn olums wr low.

But whn thos contracts pir,shipprs can pct carrirs to look or1 prcnt to 3 prcnt rat incrass,pning on gographic lan, olum,an othr actors. At prss tim, spotmarkt rats wr alra rising romwhat analsts sa wr unsustainabllow lls last ar.

Fright man or TL srics hascontinuall grown sinc it hit bottomin th scon quartr o 2009. Both

larg an small TL carrirs ar rport-ing brisk man or srics, anconcrns about tight capacit ha

alra start. Mor importantl,U.S. businss is starting to stock inntoris, which hit rcor highlls last ar as both manuactur-rs an rtailrs wr unsur howp th rcssion woul b.

In hr 2010 Annual Stat o Logistics Rport, analst RosalnWilson nots that th inntor-to-sals ratio bgan “skrockting”rom 1.26 in lat 2007 to 1.48 arllast ar. B th n o last ar,th ratio ha rturn to 1.26. Thmost rcnt inntor-to-sals g-urs aailabl show that it ha

ropp to 1.23—a low numbr thatsignals gratr man or trucking sr-

ics. Truckloa carrirs ar showing a“high ll o optimism that is rfctin th gnral upwar swing o thconom,” sas Lana Batts, managingpartnr or TCP an a longtim analstan TL inustr ocial. Rnu, tons,an mils ar all incrasing, accoringto arious inustr sourcs.

Th TCP sur in th most rcntquartr show that 45 prcnt o TLcarrirs ha rais rats, comparwith onl 9 prcnt in th priousquartr. Finall, analsts sa, suppl anman namics ar lining up in aor

o th carrirs onc again.“It’s asir in th TL

sctor than th LTL sc-tor which has highr costs so that whn th LTLinustr liminats r-nu, th on’t ruc thircosts,” sas Satish Jinl, aprincipal o SJ Consulting.“In TL, ou mo point to

point. Rats ar going toar b rgion, but i ship-mnt olums continu asth ha or th nt wmonths, I woul pctils to b 1 to 2 prcnthighr in TL than LTL.”

Th rasons or this arnumrous, analsts sa. Th

orall conom is improing. Gorn-mnt stimulus mon is fowing. Thhousing markt, whil not robust, is o

th foor. Auto sals ar rising. Plus, thrar sasonal issus hlping TL, as ol-ums usuall grow squntiall throughth thir an arl ourth quartrs.

As th construction markt impros,that coul acrbat th rir short-ag, which coul limit TL capacit, ana-lsts sa. Alra on laing transportconomist, Nol Prr o FTR Asso-ciats, is pricting rir shortagsbginning this ar an continuing into2010—raching 400,000 nt ar.

B John d. Schulz,Contributing eitor

Truckloa:Bargain rats isapparing

Average YOY % change -TL revenue per hundredweight% change

0.1% 1.0%1.9%

0.3%

Q12008

Q22008

Q32008

Q42008

-1.1%

Q12009

-4.1%

Q22009

-6.1%

Q32009

-4.9%

Q42009

-2.4%

Q12010

**Weighted average for public LTL carriers

Source: Company reports and SJC estimates



Compar to a ar ago, olumsor all mos o right transpor-tation currntl look halth an

ncouraging. But whn ou think aboutjust how ba th conom was last arit puts things into a irnt prspc-ti—that’s particularl tru whn itcoms to th right railroa inustr.

In 2008, whn most right trans-portation businss was witnssing arn-ings an olum rall, th railroasmo own th lin with strong pric-

ing powr an nancial rturns intact,n though olums ipp comparto th rcor-braking ars o 2006an 2007. But in 2009, it was clar thatmarkt conitions ha chang an thrcssion ha in caught up to thrailroas.

Howr, in th rst hal o 2010,it appars to b a irnt stor, withstrong rst quartr arnings sring asan inication that th railroa inustris kicking back into highr gars. But

n though 2010 olums ar ahao 2009, th ar still lagging 2008 l-ls b roughl 10 prcnt to 12 prcnton th carloa si an 7 prcnt to 10prcnt on th intrmoal si.

“A ar ago, th biggst issu was not just th olum rop but th lack o is-ibilit in trms o how ar it was goingto rop,” sas Anthon Hatch, principalo Nw york-bas ABH Consulting.“An it appars that now, with olumsrturning, railroas can plan or th

intrmiat trm bcaus custom-rs ar inicating that thr is going to

b at last cnt improing olumstrning towar prious lls. Thar still wll o o th pak, but thar haing in th right irction.”

Whil olums ar not raching thsam lls rom rcnt ars, it apparsthat th railroa inustr is on soli oot-ing, with Class I railroas taking thrquir stps to inst in thir opra-tions an inrastructur, as inc ba $9.95 billion cumulati instmntb Class I railroas in 2009, accoring toth Association o Amrican Railroas.

Ths instmnt tallis arimprssi, consiring that 2008was a rcor ar or Class I inst-mnt at $10.2 billion whil 2006 an2007 hit $8 billion an $9.4 billion,

rspctil. Whil imprssi, thsinstmnts ar also ital as rail car-rirs ar inanciall rsponsibl ortrack upgras an impromntswhil barl arning abo thir costo capital.

dspit this situation, th railroasar not gtting an smpath romshipprs, man o whom ha main-tain or th ars that rail ratsar too high, coupl with low sriclls. “W har continu complaintsor scalating railroa pricing an poorsric,” sas Bob Szabo, cuticounsl or Consumrs Unit or Railequit (CURe). “Popl ar continu-ing to ha troubl with th railroasan complaining about robust pricing.”

But as has bn th cas in th past,rail carrirs ha ma it clar thatprior to th last si ars, rail rats wrlargl fat or own ar-or-ar sincth inustr was ctil rgulatin 1980.

Whil man o th irncs

btwn railroas an shipprs larglrmain th sam, lgislation ocusingon STB r-authorization, known inth inustr as “railroa r-rgula-tion,” ma n up paing th wa orshipprs to gain rat rli an mortransparnc rgaring rat isputsas wll. But with sral mor wll-known pics o lgislation aha o it in lin, it rmains to b sn howthat will pla out.

B J Brman,Group Nws eitor

3 0 LO G I S T I CS MANAG eMe NT WWW.LOGISTICSMGMT.COM | Jul 2010

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Rail:volums on track

23.5%increase

from the first five months of 2009

U.S. rail cargo volumes

Source: Association of American Railroads (AAR)

Total carloads18%

decreasefrom 200813,812,989

2009

otal lo

81

Total intermodal loadings 14.1%decreasefrom 20089,880,602

otal in al l i

Total carloads

10.3%increase

from the first five months of 2009

January-May 2010l c l

Total intermodal loadings

): A s i t

g

ion

tal

s (

in

ro

o

ll

l

i

l

ii

in

r

r

5,923,332

4,333,559



Shipprs ar scrambling or spacan ma b squz or highrrats whn th n it. Accoring

to th Paris-bas containr-shippingconsultanc Alphalinr, th shortag o containrs has rach critical lls,with lins blaming th shortag on th“cptional” high man that l-op sinc th Chins Nw yar inFbruar.

A rcnt Alphalinr nwslttr statsthat prics or nw containrs hasoar to thir highst lls in almost

20 ars as both carrirs an containrlasing companis rush to plac rshorrs to mt th nw man. Thrport as that th currnt pric or20-oot r containrs has rach$2,750/unit compar to lss than$2,000/unit at th n o last ar.

en at ths highr prics, manwill still outstrip suppl or th currntpak sason. In th mantim, con-tainr manuacturrs ar acing icul-tis in rstoring ull capacit ollowingth halt in prouction o r containrssinc Octobr 2008, th rport stats.Total capacit at th main containrproucrs ha bn cut back signi-

cantl sinc lat 2008, as pro-uction lins wr shut antwin-shit oprations ructo singl shits.

Although annual prouc-tion capacit at th two larg-st containr manuacturrs,CIMC an Singamas, is or3.5 million twnt-oot qui-alnt units (TeUs), ths twosupplirs ar pct to pro-uc onl 1.35 million TeUsthis ar. Th global output o nw

containrs is stimat at 1.5 millionto 2.0 million TeUS or th ull ar,wll own rom th pak o 4.2 million

TeUs prouc in 2007 an a globalcapacit o 5 million bos.

Manwhil, man has pick upsignicantl sinc th bginning o th ar. CIMC is rporting sals o 102,900 TeU o r an containrsin th rst quartr alon, compar to60,400 TeU in th whol o 2009.

In trms o rats, spot prics ortranspacic shipping srics hagrown b mor than 180 prcnt uringth past 12 months to rach a -arhigh. eprts scrib th incras as a

“mini containr-shipping boom.”

Shipping consultant drwr’s HongKong-Los Angls containr rat bnch-mark hit $2,607 pr 40 oot (FeU) con-tainr in Jun—19 prcnt highr thanth prious month an 182 prcnthighr than ar-to-at 2009. But dr-wr point out that th tra ha bnsuring with “srious orcapacit anpric iscounting” in 2009.

Analsts also not that th jump intranspacic containr rats rfctnw pak sason surchargs, r tightastboun transpacic ship capacit,an a shortag o bos that is bcom-ing an issu in China as wll as in thU.S.

drwr sas that astboun trans-pacic right rats, unr annual con-tracts sign in Ma an Jun or th2010/2011 sason, wr also mor thantwic th prious low lls o th2009/2010 sason.

“Th rboun in spot containrright rats has bn phnomnal,as rats now substantiall c

pr-crisis lls o about $2,000 pr40-oot bo,” sas Philip damas, i-tor o th drwr Containr FrightRat Insight Rport. “Whthr oulook at Hong Kong-to-Los Angls,Shanghai-to-Los Angls, Shanghai-to-Nw york or Shanghai-to-Chicago,all our wkl containr rat bnch-marks rom port to port or rom portto inlan point show ar-on-arincrass o mor than 60 prcnt.”

B Patrick Burnson, ecuti eitor o Logistics Managmnt

Jul 2010 | WWW.LOGISTICSMGMT.COM LO G I S T I CS MANAG eMe NT 3 1

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Ocan:Capacit comback

AxS-Alphalinr Top 20 oprat fts-2010Oprat lts as pr Jun 16, 2010

Rank Oprator TeU Shar1 APM-Marsk 2,067,734 14.6%2 Mitrranan Shg Co 1,675,777 11.8%3 CMA CGM Group 1,117,302 7.9%4 APL 595,269 4.2%5 ergrn Lin 571,201 4.0%6 Hapag-Llo 544,361 3.8%

7 COSCO Containr L. 506,268 3.6%8 CSAv Group 494,744 3.5%9 CSCL 451,790 3.2%

10 Hanjin Shipping 448,051 3.2%11 MOL 383,042 2.7%12 NyK 365,927 2.6%13 OOCL 359,764 2.5%14 K Lin 336,753 2.4%15 Hamburg Sü Group 335,464 2.4%16 Zim 320,461 2.3%17 yang Ming Marin Transport Corp. 317,197 2.2%18 Hunai M.M. 282,109 2.0%19 PIL (Paciic Int. Lin) 227,841 1.6%20 UASC 204,100 1.4%

All inormation abo is gin as guianc onl an in goo aith without guarant



All o a sun th airwas smto b calming or th airlins.Back in March, th Intrna-

onal Air Transport Association (IATA)rojct a $2.8 billion loss in 2010 or inustr. Th IATA now orcasts a

2.5 billion prot, with cargo olumrowth now projct to hit 18.5 pr-nt rom th priousl orcast 12rcnt. To top it o, IATA pcts air-n rnus to rach $545 billion, upom $483 billion in 2009.

“Si months ago thr was hop orstrong rcor,” claims Michalontgns, Luthansa Cargo spoks-an. “Now it’s a ralit.”

Still, IATA warns that rnu pro-

ctions ar blow th $564 billionchi in 2008.“Th rcor rmains ragil,” sas

oanni Bisignani, IATA’s irctor gn-al an CeO. “Nt margins hor aroun5 prcnt whil a major part o th globalustr is still posting big losss.”In europ, th stagnating conom,

riks, natural isastrs, an th euroisis ha lt carrirs struggling with an

nticipat $2.8 billion loss. For its scalar 2010 (April 2009 – March 2010),itish Airwas Worl Cargo (BAWA)ports commrcial rnu cras

8.2 prcnt, an, cluing th impact o orabl chang rat momnts, com-

mrcial rnus wr own 26.1 prcnt.“This shows th ragilit an criticalit

o air right,” commnts Brian Clanc,managing irctor o global transporta-tion analst rm MrgGlobal.

A numbr o issus such as mar-kt an currnc olatilit an scu-rit issus (TSA ruls or omstic airright an ports on passngr air-crat gos into ct August 1) con-tinu to b critical concrns or carrirsan shipprs alik. Thr’s also trac

irctionalit, th inustr’s rsistancto aapt -right, an continu ola-tilit or oil prics. “du to ths actorsI on’t think w will gt back to normal

or pak-ar llsuntil 2012,” sasClanc.

Ram Mnn, ii-sional snior icprsint o cargo oremirats Airlins, ssth air cargo marktgtting strongr in th

scon hal o 2010.“W’ sn particularstrngth on olumsout o China anInia,” sas Mnn.“Trac is strong ontransatlantic an Ari-can routs as wll.”

Accoring to Gont-gns, it’s th samor Luthansa Cargo,

which a sric to Tianjing c-

ti Jun 2010. “dman rom europ toChina is also incrasing,” sas Gontgns,who as that just about all routs ar pr-orming r wll or th carrir this ar.

Boosting th Luthansa group’s capac-it an sric fibilit is AroLogic, astart up compan that’s jointl own bdutsch Luthansa AG an dutschPost dHL through subsiiaris Lu-thansa Cargo an dHL eprss. Thisar, AroLogic will mplo a nw Boing777F that will join th ft o LuthansaCargo’s Md11 aircrat an Ja’s 747.Gontgns mphasizs that th groupwill b th onl carrir oring customrsthr irnt morn right aircrat.

Man carrirs ar also strngthn-ing intra-Asia businss whr marktsar intnsiing. Koran Air is makingChina its scon bas outsi o Koraan stablish Naoi, Uzbkistan, as ahub or cntral Asian.

“Naoi has grat potntial,” sas Ilk-

won (Justin) Jung o Koran Air’s CargoStratg an Allianc Tam. “Nooi iswithin si hours fing tim to europan Southast Asia an ors multi-moal transportation links to nighbor-ing countris.”

Still, U.S. and europan conomic con-ditions and th possibility o ovr capac-ity—th rsult o ractivation o grounddaircrat and th introduction o nwfts—rmains a concrn or carrirs.

But Nl Shah, ic prsint o cargoor dlta Air Lins, assrts that toa air

carrirs ar mor rational about capacit,as was ma int b th dlta-North-wst mrgr. dlta, or on, now orsa broar rang o mission capabilitis.It iscontinu th B747-200 rightroprations, continus to pan its globalootprint, an rcntl launch a num-br o nw high prol fights.

“Carrirs will continu to tak ma-sur actions, lik mrgrs, to maintainthat approach,” Shah sas.

Howvr, MrgGlobal’s Clancy con-

tnds that th industry acs structuralissus that will limit long-trm rightgrowth. In particular is th cost o airright rlativ to othr mods, compli-catd by diminishd pric points on tra-ditional air right commoditis such aslctronics.

A to this th trn towar nar-shor prouction. All manuacturrsar taking a har look at logistics costs,h sas. Consquntl, Clanc ssprss carrirs lik UPS an Febing th nt winnrs orall.

B Karn Thurmr,Air Fright Corrsponnt

2 LO G I S T I CS MANAG eMe NT WWW.LOGISTICSMGMT.COM | Jul 2010

0 1 0 | A N N U A L R e P O R T

Air Fright:Back up in th air

2006 2007 2008 2009

Strength of upturn variedsubstantially by market

C h a n g e o v e r

y e a r , %

Source: IATA

25

20

15

10

5

0

-5

-10

-15

-20

-25

Middle East/AsiaWithin AsiaNorth and Mid-PacificWithin EuropeNorth Atlantic

Documents

2010 State of Logistics