Industry Trends Track
Chairman’s Opening Remarks Andrew Herdman Director General of the Association of Asia Pacific Airlines (AAPA)
World Cargo Symposium 2015
Make your customers happy: Just do it!
What do Customers Want? Moderator Celine Hourcade, Manager Cargo Industry Affairs, IATA Panelists: Jason Frerich, Director, Global Logistics Infrastructure – Sustainability, Nike Inc. Robert Mellin, Head of Distribution Logistics, Ericsson Essa Al-Saleh, CEO, Global Integrated Logistics
World Cargo Symposium 2015
Why do customers choose air?
Average score for the 316 customers using air What are the 3 main advantages of using air cargo over other modes of transport? World Cargo Symposium 2015
How satisfied are airfreight customers?
7%
very unhappy customers
7.08
Average score for the 316 customers using air How satisfied are you with the air cargo services that you have used in the last 12 months? (1 = not satisfied at all -- 10 = extremely satisfied) World Cargo Symposium 2015
What’s wrong with air cargo? Too complex!
Lack of transparency Painful experience Weak value proposition
Poor customer service Very old-fashion No real-time information
Inefficient processes
World Cargo Symposium 2015
How satisfied are airfreight customers?
7%
very unhappy customers
7.08
Average score for the 316 customers using air How satisfied are you with the air cargo services that you have used in the last 12 months? (1 = not satisfied at all -- 10 = extremely satisfied) World Cargo Symposium 2015
How airlines better serve their customers? With simplified processes! k
From booking to billing: How SAS Cargo simplifies the process to improve customer experience Leif Rasmussen President and CEO, SAS Cargo
World Cargo Symposium 2015
9th IATA World Cargo Symposium 2015, Shanghai
SIMPLICITY IN THE AIR FREIGHT SUPPLY CHAIN Leif Rasmussen President & CEO, SAS Cargo Group A/S
© 2015 SAS Cargo Group A/S
Globalization Environment
IMPACT ON OUR INDUSTRY
MEGA TRENDS
Industry Megatrends and Implications Technology
Financial instability
Security
Transparency
Increasing competition
INDUSTRY CHALLENGES
Profitability
Complexity
Understanding customer needs
DEMAND FOR TRUE INNOVATION
© 2015 SAS Cargo Group A/S
© 2015 SAS Cargo Group A/S
© 2015 SAS Cargo Group A/S
ARE THERE FEWER CHALLENGES? DO WE SEE MORE SIMPLICITY? IS THE NEED FOR DELIVERING VALUE REDUCED?
© 2015 SAS Cargo Group A/S
NO NO NO
We All Experience Challenges in the Value Chain INACCURATE WEIGHT/VOLUME
INCORRECT / MISSING SHIPMENT DETAILS
INCORRECT PALLET SIZE
OFF LOADS
LATE SUBMISSION
SCREENING & RESCREENING
INCORRECT / MISSING DOCUMENTS
+50 TOUCH POINTS!
© 2015 SAS Cargo Group A/S
INVOICING ERRORS
VARYING CUSTOMER EXPERIENCE
PRICE QUOTING IS TOO TIME CONSUMING TOO MANY PHONE CALLS TOO MANY EMAILS TOO MUCH WAITING TIME LACK OF SIMPLICITY
© 2015 SAS Cargo Group A/S
COSTS COSTS COSTS COSTS PRICE QUOTING IS TOO TIME CONSUMING COSTS COSTS COSTS COSTS COSTS COSTS COSTS COSTS TOO MANY PHONE CALLS COSTS COSTS COSTS COSTS TOO MANY COSTS COSTS COSTS COSTS EMAILS COSTS COSTS COSTS COSTS TOO MUCH WAITING TIME COSTS COSTS COSTS COSTS COSTS COSTS COSTS COSTS LACK OF SIMPLICITY COSTS COSTS COSTS COSTS
© 2015 SAS Cargo Group A/S
BILLING
BOOKING
© 2015 SAS Cargo Group A/S
BILLING
BOOKING
© 2015 SAS Cargo Group A/S
YOU CAN PLAY THE ORDINARY GAME
© 2015 SAS Cargo Group A/S
OR YOU CAN CHANGE THE GAME © 2015 SAS Cargo Group A/S
IN SOME INDUSTRIES THE GAME HAS CHANGED COMPLETELY © 2015 SAS Cargo Group A/S
IN OTHERS!
© 2015 SAS Cargo Group A/S
WE NEED A BETTER TOOLBOX
© 2015 SAS Cargo Group A/S
IMAGINE A NEW BEGINING
© 2015 SAS Cargo Group A/S
Just imagine
IF YOU COULD SAVE MORE THAN 90% OF NORMAL BOOKING TIME? © 2015 SAS Cargo Group A/S
Just imagine
IF YOU COULD BOOK ANYTIME, ANYWHERE? © 2015 SAS Cargo Group A/S
Just imagine
IF YOU HAD FULL TRANSPARENCY FROM BOOKING TO BILLING? © 2015 SAS Cargo Group A/S
Just imagine
IF WE COULD PROVIDE YOU WITH MORE OPPORTUNITIES TO MAXIMIZE CUSTOMER VALUE? © 2015 SAS Cargo Group A/S
SAVE 90% BOOKING TIME
ALWAYS AVAILABLE
FULL TRANSPARENCY
MAXIMIZING VALUE
© 2015 SAS Cargo Group A/S
SAVE 90% BOOKING TIME
ALWAYS AVAILABLE
FULL TRANSPARENCY
MAXIMIZING VALUE
© 2015 SAS Cargo Group A/S
© 2015 SAS Cargo Group A/S
23
THANK YOU WE MAKE AIR FREIGHT BUSINESS EASIER
© 2015 SAS Cargo Group A/S
How airlines better serve their customers? 1
Through transparency! 1
Getting individualized carbon footprint reporting Milla Nyholm Manager Marketing & Sustainability, Finnair Cargo
World Cargo Symposium 2015
Emissions reporting
Milla Nyholm, Manager Marketing&Sustainability
Finnair Cargo - the largest Nordic air cargo carrier, with cargo logistics hubs in Helsinki & Brussels - Specialized in air cargo traffic between Asia and Europe
We want to serve better our customers! • They asked for more transparency on environmental performance • We developed an innovative reporting tool for them to get individual carbon footprint reports (at shipment level)
Emission reporting / Milla Nyholm
16/03/2015
Initial development • Need to combine data on customers’ monthly shipments and fuel consumption/emissions data with proper identification and data security
Fuel data
CO2, other emissions? AWB data
No data?
NEW!
Emission reporting / Milla Nyholm
Automated Finnair Cargo emissions reporting (phase 1) 16/03/2015
Looking for a global reporting standard A common & global approach as a MUST for airlines, customers, regulators
To speak the same language To align with other players To ensure that the nature of air transport is taken into account Emission reporting / Milla Nyholm
Benefits of a global approach • Fairness&air cargo specifics: – cargo vs. passengers – round trip model?
• Regional differences need to be out of scope Finnair Cargo part of IATA working group Emission reporting / Milla Nyholm
16/03/2015
Adoption of IATA RP 1678 methodology Option 1 – Leg-based Shipment weight (kg) * Leg-based emission factor (kgCO2/t)
Route specific (but in kg)
with the leg-based emission factor is calculated as follows:
Average total fuel burn for legx (tonnes) * 1000 ---------------------------------------------------------------- * 3.15 = Legx emission factor (kgCO2/t) Average total payload for legx (tonnes)
Option 2 – Network-based Shipment weight (kg) * Distance (km) * Network-based emission factor (kgCO2/tkm) with the network-based emission factor is calculated as follows:
Emission reporting / Milla Nyholm
16/03/2015
The tool: Emissions reporting Scope: CO2, SO2 & NOx
https://emissioncalculator.finnaircargo.com
Monthly updates & changes due to OPS Emission reporting / Milla Nyholm
Availability: • For forwarding agents who can further distribute the information to their own customers -> opportunities for new product offering and joint environmental efforts? 16/03/2015
XXXX YYYY YYYY ZZZZ ZZZZ 16/03/2015
The reporting tool helps in...
GRI = Global Reporting Initiative CDP = Carbon Disclosure Project Emission reporting / Milla Nyholm
16/03/2015
Future opportunities Reporting as basis for:
2022
”green” cooperation between airline and forwarding agents to serve environmentally conscious shippers Air cargo industry joint projects to improve public awareness of air transport industry’s efforts to mitigate environmental impacts Emission reporting / Milla Nyholm
16/03/2015
In the pipeline – Finnair First European carrier to introduce the next generation Airbus 350 XWBs (October 2015) •Fuel consumption & CO2 emissions 25% lower •Flight noise levels significantly lower •Increased cargo capacity with 16-20%
Reporting development & improved results
Emission reporting / Milla Nyholm
16/03/2015
In the pipeline – globally Huge investments in fleet renewal & biofuels Global offsetting mechanism Cooperation within/across transport modes •Modal initiatives •Global Logistics Emissions Council (GLEC) Emission reporting / Milla Nyholm
16/03/2015
Informing customers
Emission reporting / Milla Nyholm
16/03/2015
Thank you!
Finnair Cargo - Smooth transport for your goods. 15 Asian & North American long-haul destinations and over 60 destinations in Europe. New A350 XWB entering fleet from 2015.
16/03/2015
Q&A
COFFEE BREAK In Exhibition
World Cargo Symposium 2015
Air Cargo Trends – A long term view through the Airbus 20 years forecast Nicolas Barrault Head of Freighters, Customer Affairs, Airbus
World Cargo Symposium 2015
Air Cargo Trends
March 2015
Nicolas Barrault Head of Freighters
Air Cargo Trends A long term view through the Airbus 20 years forecast
Air Cargo Trends
March 2015
Agenda
Air cargo market today
Page 2 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.
Industry trends
Airbus Cargo Global Market Forecast 2014-2033
Air Cargo Trends
March 2015
Signs of life – again! Monthly YoY air freight traffic evolution
+4.5%
FTK % (Freight tonne kilometres)
FTK growth in 2014
Strong fluctuations
-
Air freight is finally recovering after 3 years of flat growth
30% 20% 10% 0% -10% -20% -30%
2008
2009
2010
2011
2012
2013
2014 Source: IATA
Page 3 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.
Air Cargo Trends
March 2015
Drivers behind the current air cargo growth Air cargo growth
-
Some markets have outperformed others Emerging economies
Express market
Regional traffic
Source: IHS Global Insight, Seabury, IATA, Airbus
Page 4 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.
Air Cargo Trends
March 2015
Still a challenging situation for larger freighters Stored widebody freighter aircraft*
High number of large freighters parked
144 a/c
180
-
160 140 120
26%
Mid-sized freighters
100 80 60
Mid-sized freighters have been less hit by sluggish demand
74%
Large freighters
40 20 0
A
S
O
N
D
J
2014-2015 Source: Ascend
Page 5 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.
Air Cargo Trends
March 2015
Jet fuel price has plunged Jet fuel price US$ per bbl. 150 135 120 105
2014-2015
-37%
A strong decline
-
Cheaper jet fuel has lowered operators’ input costs
90 75 60 45 30 15 0 Source: IATA, Platts
Page 6 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.
Air Cargo Trends
March 2015
Cheap fuel: A second life for older large freighters? More capacity might re-enter the air cargo market
-
Further pressure on yields
Page 7 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.
Air Cargo Trends
March 2015
Continued pressure on yields Air freight yields US$/kg
-2%p.a. since mid-2011
2007
2008
2009
2010
2011
2012
2013
A steady decline for the past 4 years
-
Yields are under pressure due to overcapacity and rapid belly cargo growth
2014 Source: IATA CASS
Page 8 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.
Air Cargo Trends
March 2015
A new trend: Belly capacity will capture some market shares over main deck cargo operations Worldwide share of belly vs dedicated cargo traffic Passenger traffic is growing faster than overall cargo traffic
Estimated FTKs (billion)
500
Dedicated freighters Belly cargo
400
-
Cargo traffic
Belly capacity will capture market shares
growth 4.5% 300
200
56% Belly traffic
100
51%
growth 4.9%
0
Source: Airbus GMF 2014
2013 Page 9 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.
2033
Air Cargo Trends
March 2015
Belly cargo traffic growth is particularly fast on long haul routes Share of belly vs dedicated cargo traffic Strong impact on larger freighters
Estimated FTKs (billion) Medium haul 1,500nm< & 80t
Page 14 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.
Source: Seabury, IATA, Airbus GMF 2014
Air Cargo Trends
March 2015
The future freighter fleet distribution will reflect the growing influence of emerging markets World fleet
452
2033: 2645 2014: 1605
977
337
798
Europe & CIS
775
170
North America
303 Asia Pacific
67 Middle East
162 74 Latin America
86 49 Africa
North America fleet is mainly a replacement market Page 15 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.
Asia Pacific fleet is set to triple as growth market
Source: Airbus GMF 2014, ASCEND
Air Cargo Trends
March 2015
Asia-Pacific freighter fleet will increase to almost 800 aircraft over 20 years Asia-Pacific freighter fleet
A strong market
70% of
900
798 800 700
Growth 495
600
Conversion 500
deliveries stem from growth
500 400
303
300
Replacement 224
200
Stay in service 79
100
New built 219
0
Beginning 2014 Page 16 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.
2033
Source: Airbus GMF 2014
Air Cargo Trends
March 2015
Conclusion
Air cargo is recovering - Robust traffic recovery in 2014 after 3 years of limited growth
Page 17 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.
However, the industry remains fragile
Emerging markets’ influence will grow
- Risk of overcapacity - Low yields ; pressure due to low fuel prices and belly cargo growth
- New trade flows and air services to more remote regions - A growing need for mid-sized freighters
Air Cargo Trends
March 2015
© Airbus S.A.S. All rights reserved. Confidential and proprietary document. This document and all information contained herein is the sole property of AIRBUS. No intellectual property rights are granted by the delivery of this document or the disclosure of its content. This document shall not be reproduced or disclosed to a third party without the express written consent of AIRBUS S.A.S. This document and its content shall not be used for any purpose other than that for which it is supplied. The statements made herein do not constitute an offer. They are based on the mentioned assumptions and are expressed in good faith. Where the supporting grounds for these statements are not shown, AIRBUS S.A.S. will be pleased to explain the basis thereof. AIRBUS, its logo, A300, A310, A318, A319, A320, A321, A330, A340, A350, A380, A400M are registered trademarks.
Page 18 © AIRBUS S.A.S. All rights reserved. Confidential and proprietary document.
Adapting Business Models and Fleet Moderator: Didier Lenormand, Head of Marketing Freighters, Airbus Panelists: Liana Coyne, COO, Coyne Airways Mark Sutch, General Manager Cargo Sales & Marketing, Cathay Pacific Airways Bruce H.X. Li, Vice President, China Cargo Airlines Ltd Mike Duggan, Director Charter Sales, Saudi Airline Cargo
World Cargo Symposium 2015
Chairman’s Closing Remarks Andrew Herdman Director General of the Association of Asia Pacific Airlines (AAPA)
World Cargo Symposium 2015
Thank you For more information Visit our website www.iata.org/cargo Subscribe to Cargo Tracker www.iata.org/optin Follow us on Twitter http://twitter.com/iata
World Cargo Symposium 2015