Industry Trends Track

Industry Trends Track Chairman’s Opening Remarks  Andrew Herdman  Director General of the Association of Asia Pacific Airlines (AAPA) World Carg...
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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