Air transport and the economy of disaster

April 8th, 2011

The effects of the March 11th earthquake and subsequent tsunami in Northern Japan are still accumulating as the country sifts through the debris of entire communities while struggling to contain deadly radioactive material from the critically damaged Fukushima nuclear power plant. The death toll has surpassed 10,000 with speculation that the figure could triple when all is accounted for.  The journey back to normality for countless families will be long and arduous, and in many cases will never truly reach a positive conclusion. There is no consolation for loss of life that a disaster such as this brings, but this forum is perhaps not the place to attempt an explanation of the emotional cost of disaster.

Japanese earth quake damage

Northern Japanese infrastructure was heavily damaged

Economically speaking the scale of the destruction is immense. Houses, cars, businesses and infrastructure are all left in ruins. While it may seem logical to think that this devastation will have a permanent impact on the economic strength of the region, economists Eduardo Cavallo and Ilan Noy have suggested that in developed countries even massive disasters like this are unlikely to affect the economic growth rate of the country in the long run. Prime examples of astounding post-trauma economic growth recoveries are the Northridge, California community after the 1994 earthquake, the port city of Kobe, Japan after its 1995 earthquake and the Sichuan Provence in China after its 2008 earthquake. All of these well developed comparatively wealthy regions returned to somewhat higher economic growth rates than were being experienced pre-disaster.

Economists Mark Skidmore and Hideki Toyo attribute the phenomenon to the fact that the regions take the opportunity to move away from older, less productive industry and upgrade technology and infrastructure. It is much easier to change dramatically when you have to start from scratch. Disasters catalyse an accelerated depreciation for slow and failing industry, giving it a chance to either cut and run, or start over new.

Skidmore and Toyo also point out that the rate of economic recovery is highly dependent on the mode of natural disaster and the type of economy the disaster is affecting. If an economy that has the ability to redistribute resources (through insurance, government aid, manageable infrastructure) is hit with a geological disaster like an earthquake, it will typically regenerate quickly out of necessity. If that same geological disaster was to hit an economy incapable of redistributing resources (perhaps because adequate resources are scarce in the first place, such as that of a third world country), the economy will typically suffer and perhaps never regenerate to pre-disaster economic growth.

Japan Airlines Freighter

Japan Airlines domestic services were briefly crippled by the disaster

Damage to infrastructure and supply businesses will always directly impact the air transport industry, irrespective of the economy it is operating in. While the region affected by the earth quake and tsunami only accounts for a small proportion of Japanese industry (roughly 12.4%), figures from IATA suggest that the impact of the momentary holt to industry on the Japanese transport industry (both passenger and freight) has propagated to significant percentages of air transport industries worldwide, as these fractions are driven by the Japanese market. Most significantly 23% of China’s transport industry has suffered, with South-East Asian countries experiencing a similar impact. The USA 15%, individual European nations and Australia 6-7% and 3% of the UK air transport industry has been affected by the downturn in supply from Japan.

Japan is also a significant refiner of jet kerosene on the world stage, commanding around 3-4% of the global industry. Until the slack is picked up by other regions, upwards pressure on the jet kerosene margins over crude oil prices can be expected.

The losses incurred from this unavoidable natural disaster are significant, especially for the air transport industry, more so for Japan. But as history has shown Japan will reconstruct and absorb the losses, it will return to normality, so too will the growth rate of its economy and the economies effected by its initial downturn.

Toll Group grows freight business in W.A. and Asia-Pacific

March 26th, 2011

Toll Group logo

Toll Group - integrated logistics specialists

Toll Group, the biggest provider of integrated logistics solutions in Australia and the Asia-Pacific region, has made some announcements this month indicating exciting growth for the near future.

Toll Global Forwarding announced that it intends to capitalise on the strong growth forecast for air freight sector in the Asia-Pacific region. In the past Toll Global Forwarding has been synonymous with ocean freight, but recently investments have been made to strengthen its strategic acquisitions in Asia-Pacific air freight. CEO of Toll Global Forwarding, Hugh Cushing, said that “Toll Global Forwarding has its headquarters in Hong Kong and our roots are in Asia Pacific. We see the forecast growth in the air freight sector in Asia as an exciting opportunity for Toll to expand its presence. Globally we have made several key acquisitions in the US, Europe and Middle East which will strengthen our air freight network.” Toll Global Forwarding is aiming to offer greater range of services to its customers with the addition of air freight its armada of logistics solutions.

To manage the development in the air freight division, Cushing said that  “We have made some key international appointments to our senior management team on the air freight side which will enable us to build our business globally.”

The sea-air service that Toll is planning to provide in the Asia-Pacific region is aimed at giving its customers in the European-Asian and Asian-Australian trade lanes an easy choice between timely logistics solutions and more cost effective ones.

Mitchell Corp

Toll Global Forwarding to acquire Mitchell Corp

In other news from the Toll Group, Toll Global Resources has announced plans to acquire Mitchell Corp, the second largest mining services provider in Western Australia.
Mitchell Corp is one of the major suppliers of transport and logistics services between the mining sites of Western Australia.

CEO of Toll Global Resources, David Jackson, has said that “Mitchell Corp has a strong reputation as a quality innovative resources transport provider. It has a premium customer base and a unique range of well maintained assets.”

Toll Global Resources is attempting build a solid infrastructure in the Western Australia mining industry that will combine bulk resources, hydrocarbons, dangerous goods, oil, gas and iron ore transport solutions to move these products throughout the growing Asian market and further.

Air cargo market in the Asia-Pacific region set to grow fast

March 16th, 2011

Growth of Air Cargo

Forecast of air cargo growth

According to statistics published by the Boeing aircraft company, the growth rate of the air-cargo market in the Asia-Pacific region will surpass the world growth rate in the market over the next twenty years by an average of 1%.

Findings published in Boeing’s World Air-Cargo Forecast indicate that the world air cargo industry will grow at a rate of approximately 5.9% per year for the next twenty years.

Map of Asia Pacific Economy Pairs

Economy pairs of the Asia-Pacific region

Intra-regional air cargo traffic in Asia is by far growing the fastest. Nearly half of the top ten economy pairs are made up of Intra-Asia air cargo routes. Intra-Asia air cargo traffic has an expected growth rate of around 7.9% per year and the average growth rate for the entire Asian region (excluding the domestic Chinese air cargo traffic) is around 6.9% per year.

Growth in Asia Pacific

Intra-Asia Air Cargo Growth

The point of Boeing’s research becomes clear upon the discovery of fact that the abundant widebody passenger aircraft provide the lower-hold capacity equivalent of, on average, more than fifty weekly medium widebody freighters in the top ten economy pairs. Further evidence also points to a reduction of over two thirds of the cost of carrying cargo in the lower-holds of passenger aircraft compared to freighter aircraft. This means it is becoming increasingly difficult for freighters to compete in the Asia-Pacific region, and as such, it becomes clear exactly which aircraft market Boeing needs to be targeting.

The long term baseline for annual air cargo growth in the Asia-Pacific region is expected to be sustained by strong regional economic growth, coupled with continuing demand from North America and Europe. Whether the air cargo growth falls short or exceeds this baseline largely depends on the development of China’s economy.

In any case, business in the Asia-Pacific region is booming, and in the coming years the air cargo market in the region is forecast to be at the world’s forefront.

Earthquake and tsunami devastate Japan

March 14th, 2011

Town destroyed by tsunami

Town of Minamisanriku was completely destroyed by tsunamis

At 2.46pm (JST) on March 11 there was a massive release of energy in the Japan Trench, where the Pacific tectonic plate pushes westward beneath the Eurasian plate. This resulted in an earthquake of magnitude 8.9 approximately 130 km (80 miles) East of Sendai, and 373 km (231 miles) North-East of Tokyo, Japan.

Map of wave propagation

Tsunamis propagate the entire Pacific Ocean

The tsunamis generated by the earthquake have propagated over the entire Pacific Ocean. Islands throughout the Pacific were immediately put on high alert and even evacuated. The warnings are still current due to risk caused by high magnitude after-shocks. There are reports of tsunamis lashing the Western coast of the Americas with a reported fatality in California.

Of course, Northern Japan has suffered the most severe destruction. Japan is precariously situated on the Pacific Ring of Fire and has a long history of seismic activity. As such, most of Japan’s infrastructure and architecture is built with earthquakes in mind. Due to the scale of the tremors produced by this massive quake, no amount of planning was able stave off the destruction of roads, bridges and buildings.

Destruction Map

The destruction caused by the earthquake

The tsunami and enormous swells have caused the vast majority of the devastation. 10m surges of water have ploughed inland and destroyed entire towns. There are reportedly thousands dead, and many thousands more still missing.

On top of the destruction that has already occurred, the threats posed by a potential nuclear meltdown in Fukushima at Tokyo Electric’s Dai-Ichi Power Plant are very real after the explosion in one of its reactors on Saturday 12th March. Thousands of residents of the nearby townships have been evacuated for fear of fatal radiation exposure in the event of a meltdown.

More than fifty countries from around the world have scrambled to mobilise emergency response teams and resources to provide aid to the Japanese. Google has set up a crisis response website, dedicated to collecting donations, streamlining links to important alert information and aiding people to locate and contact their loved ones.

The extent of the destruction is unclear. It is clear that the toll on Japan’s people and economy will be immense.  The Japanese economy was expecting to resume growth for the first quarter, but due to the gravity of this disaster the growth might be delayed to nearer the end of the year. It will take time for Japan to recover from this horrific disaster.

FedEx axes Freight Jobs

September 22nd, 2010

FedEx Aircraft

The economic downturn has taken its toll on the freight industry

FedEx has just announced that it will cut around 1,700 freight jobs and 100 service centres in the United States in an attempt to offset losses incurred during the financial crisis.

The freight segment of FedEx lost over US $16 million in the 1st quarter of this year and proved to be unprofitable for 3 consecutive quarters before that.

The financial outlook for FedEx overall was looking skyward in the 1st quarter, with its net incoming doubling. This growth was powered predominantly by international air shipments, which raised the international revenue by some 24%. The predictions for the 2nd quarter and the year ahead were grimmer however; which is believed to be the primary motivation for this week’s announcement.

By the 30th of January 2011, FedEx will have combined its freight and US ‘less-than-truckload’ operations, in the process axing the predicted 1,700 jobs and 100 service centres. This represents around 5% of the employees of the FedEx freight division.

FedEx has remained tight lipped about the facilities and personnel that will be affected by the cuts, but there is speculation that the Australian and international operations may receive similar treatment in the following months. No specific mention of Australian based service centre closures has been made, but we will sure keep our ears to the ground.

Freight recovering, but slowly.

September 4th, 2010

New figures from IATA appear to indicate that air freight in Australia is improving with the important figure being the FTK Growth (actual freight traffic) and AFTK Growth (available total freight capacity).

Compared to July 2009, international scheduled freight traffic was up 22.7% with the Asia/Pacific Region showing a 25.3% improvement.

“The recovery in demand has been faster than anticipated. But, as we look towards the end of the year, the pace of the recovery will likely slow. The jobless economic recovery is keeping consumer confidence fragile, particularly in North America and Europe. This is affecting leisure markets and cargo traffic. Following the boost of cargo demand from inventory re-stocking, further growth will be largely determined by consumer spending which remains weak,” said Giovanni Bisignani, IATA’s Director General and CEO.

Cargo

  • July global cargo demand was 4% higher than pre-crisis levels in early 2008.
  • A slowdown in air freight markets is expected in the second half of the year as the economic cycle moves into a new phase. Extraordinary freight growth rates in late 2009 and early 2010 were supported by businesses re-stocking their inventories. With the re-stocking cycle completed, air freight demand will be driven by consumer spending and business capital expenditure. Weak consumer confidence in Europe and North America will be a negative factor. But strengthening corporate profits are supporting an increase in capital expenditure that could continue to drive robust freight growth.
  • The two-speed recovery continues to see weak growth by European carriers of 12.1% in July, less than half the 25.3% increase by Asia-Pacific carriers or the 27.1% growth recorded by North American carriers

Although the results look promising, there are obvious worries within IATA about the current state of the aviation industry.

“Costs are a critical element. This year has been marked by strikes and threats of strikes at airlines, and with airports and air navigation service providers. Avoiding strikes at BAA and AENA, Spain’s provider of air navigation services, were major accomplishments. We are all in this together—including all our partners in the value chain and those who work in this financially fragile industry. It is not the time for strikes. We must work together to secure our future by finding solutions to reduce costs,” said Bisignani.

http://www.iata.org/pressroom/pr/Pages/2009-08-27-01.aspx
By comparison, IATA Press Release for 2009.

Courier and Freight in Australia

August 24th, 2010

When was the last time you wanted to send a parcel and thought to yourself:

  • “Who do I send this with?”
  • “Why is the post office always closed?”
  • “Can I trust super fast freight?”
  • “Can I trust super cheap freight?”
  • “Am I being over charged? Surely it can’t cost $100 to send this $10 parcel”

These are possibly some of the most common questions consumers face every time they wish to send anything, anywhere.

The internet has made life a lot easier by making the consumer marketplace a lot more accessible, however there is still a divide between our online trading capacity and our ability to physically send and receive our wares with ease.

It is difficult to quantify the issue of trustworthiness in the freight industry as well. As mentioned in another article on this blog, price fixing is an example of an all too real issue that is felt at the consumer level.

Online discussion forums and industry based blogs have been integral to the development of the safe online marketplace sphere, as they are an excellent way of providing mediating feedback to both consumers and merchants. Comparisons and reviews of products and merchants provide critical advice to consumers as to whether or not they can trust what they are buying or who they are buying from.

Through a similar evolution to all forms of web based commerce, blogs like Beyonder are hoping to play a crucial role in the development of a consumer driven e-freight environment, where future consumers will be capable of making informed decisions about the trusted companies they send their freight with.

It is hoped that one day these questions will truly be an echo of the past.

Packing a Box

August 18th, 2010

Packing valuables in a box to protect them in transit is a simple yet surprisingly little known art.

It is important to correctly pack items you are sending via post or a courier service to guarantee the items safety, both from damage and prying eyes. Obviously the correct way to pack an item depends on the shape and size of the item, but for general small goods, a box is the most commonly used medium for packing.

Below is a quick guide and some tips for packing a box.

First, you will need some supplies:

-          A box
-          A marker
-          Tape
-          Scissors
-          Cushioning (Bubble Wrap is best, but crumpled newspaper will suffice)

These supplies can all be obtained from your local post office or office supplies store.

Try to find a box that is a suitable size for the item you are sending. If the box is too large, you will incur a higher fee from the courier to move the greater cubic volume. If the box is too small, you may not adequately protect your item if you cannot fit any cushioning inside the box.

There are restrictions on how big a box you can send with a courier service. Generally you will be fine to send the box if it is under 4 meters in length, and under 30 kg. If the dimensions of the box are bigger than this, you will have to consult the courier you plan to tranport your parcel with.

Dimensions of a box

The dimensions of a box

Try to use a box that leaves a 5-10cm gap around your item, on every side of your item.

If you managed to obtain bubble wrap, cut a rectangle out that is roughly 3 times the size of your item. The aim is to stop your item from being damaged by impact and to stop it from rattling around inside the box, so you may require more cushioning if your box is significantly bigger than your item.

With the bubbles facing inwards, firmly wrap the item so that it is suitably protected on all corners then use a strip of tape to secure. Be sure to not use too much tape as this will make it difficult for the recipient of the package to comfortably unwrap it.

Once you have ensured the item is safely protected within the box, securely tape it up. Generally you should need no more than 6 strips of tape to secure the box (one strip for every seam of the box).

If the item is fragile, ensure that you write the word FRAGILE in clear bold letters so the courier can exercise caution in the handling of your parcel.

Now that your box is securely packed, see our article on sending a package to learn how to organise the transport of your item to its new destination.

Sending a Package

August 18th, 2010

Internet market places such as eBay and Amazon are great places to pick up a bargain when you are searching to add to your collection of just about anything. You simply purchase what you are after and wait for it to arrive, wrapped neatly in a package addressed to you.

A Package

Sending a package

That is all well and good when you are the customer, but what happens when you are the seller? Do you know how to wrap and send a package so that it arrives at the doorstep of your customer safely and quickly?

Here is a quick guide to sending a package around Australia and overseas with minimum trouble.

Before you send your package, you will need some supplies:

To and From addresses! This may seem obvious to supply the address of the person you are sending to on the package, but it is also necessary to supply your own address as a ‘return address’ in case the package does not reach its destination for whatever reason.

A box. No matter what you are sending, you will need to wrap it up and place it in a box. This is necessary to avoid both prying eyes (temptation) and damage to the contents of the package. Your local post office or office supplies shop will stock a range of boxes to suit your needs.

Some scales. Courier companies need to know the weight of the packages they move. If you provide the exact weight of your package, it will help the courier define your quote.

A ruler. Similarly, courier companies require the dimensions of the packages they move. If you provide the exact dimensions of your package, it will help the courier define your quote.

Tape. You will need to firmly secure the contents inside packaging. This means that you will need to tape the box shut.

Once your item is packed safely in a box, the name and address of the person you are sending it to is neatly written on the top or side of the box and your name and address (prefixed with ‘Return Address’) is written neatly on the opposite side of the box, you are ready to organise a courier. Courier companies often provide consignment notes (via email, or physically via the courier) which you will have to attach to the box – this consignment note has sections for your to and from contact and address details.

Australia Post, Toll Express, DHL and FedEx are just some of the many companies that provide door to door courier services. The best way to contact these services is to call the company and have them divert you to their courier service. It can be a nightmare trying to track down the contact information of couriers themselves.

They will ask you for the to and from addresses, the dimensions and weight of the package and the possible value. It is important to note that insurance does not come standard with your quote for most general freight companies. If your item is valuable, you should consider paying a small fee to insure it for loss or damage.

Make sure you are available to meet the courier for the pickup! If you miss the courier you may incur a futile pickup charge.

Qantas retains partnership with Australia Air Express and Star Track Express

August 17th, 2010

StarTrack Express

After some speculation earlier this year that Qantas may divest stakes in its freight firms, it looks like Qantas’ latest announcement has quashed those rumours.

“They haven’t been giving us the returns we would expect. We think there’s a way of that occurring and there’s no plans to divest ourselves of those shares,” Joyce said.

Although whether Toll Holdings as the lloyds list article hints at, might still have interest in the companies, remains to be seem.

Especially following the announcement in June that Qantas had sold DPEX Worldwide to Toll Holdings the Age, SMH.

Update:

Further speculation indicates a possible merger between StarTrack Express and Australia Air Express:
Qantas tipped to merge freight flyers to cut costs.