Eric Joiner's Freightdawg.com - The Logistics and Supply Chain Blog!

Additional Video of FedEx MD-11F crash at RJAA

Here's an additional video of the tragic crash of FedEx Flight 80 inbound to Tokyo Narita airport on March 23rd, 2009.    The initial video I posted was from CNN and contained some uninformed speculation on what happened.   I post this here just for purposes of clarity.  I again wish my condolences to the FedEx family on this loss.

Coverage is based on Japanese news agency film and commentary.

The FedEx press release can be read here.

Eric

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Give me Liberty...(or at least less regulation!)

My friend Rob Mark runs a great aviation related blog called jetwhine.com.   Rob is an authority on both general and commercial aviation as well as a pretty good writer. Yesterday I got an email from him that was positively "agitated".   It seems our friendly Transportation Security Administration (TSA) has decided that the same security standards that apply to commercial jetliners should also apply to your neighbors Cessna 172. 

The TSA considers both potential weapons of mass destruction and they have issued intent to create rules to impose screening of all general aviation flights, cargoes and passengers just like the big jets.   This is utter nonsense.   Rob thought so too, so he asked all his blog roll participants to write about the issue.   Whatever noise the blogosphere generates has to help the general cause right?

The cost of the program would approximately $44 dollars per flight to every general aviation flight in the United States.  In return, general aviation passengers, pilots and crew and FBO operators will have to contend with unnecessary inspections,  delays in flight time, and other unnecessary expenses.    Face it, a general aviation airplane, even if fully loaded with explosives, and crashed into a building is not the same threat as a 350,000 lb B767 fully loaded with jet fuel.   Terrorists just do not use GA airplanes in this way, otherwise, they would have already!  Access is much easier and there is no current security screen.

The TSA has shown no capacity to understand the General Aviation market, therefore some "rebellion" from those of us who are AOPA members and general aviation fans, is necessary to make the former Burger King employees at the TSA pay attention.  If you are a pilot or user of General Aviation, write your congressman and do it today.  This is an important issue.  The Obama administration has shown no capacity for understanding or prioritizing transportation issues.  Your voice needs to be heard.

Eric

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Kalitta Air Crash: Bird Strike/FOD

On May 26th, Kalitta Air B7470200F  N209CK crashed on an aborted take off from Brussels Belgium enroute to Bahrain.  The aircraft was on charter to DHL Express.   There was no loss of life, but the aircraft was a complete loss, having broken its back in multiple places. 

European air safety authorities have now ruled that the crash was a result of ingestion of a bird into the number 3 engine.  The resulting loss of power created an overrun of the runway and loss of the aircraft.  

Belgian authorities reported the bird as a Kestrel, a common small bird of prey.   In this case, the little raptor destroyed one of the largest birds on earth.

Kalitta Airways has had a particularly rough year.  Two weeks following this crash, another Kalitta jet crashed in Colombia, while later in the year dragster driver Scott Kalitta, son of Kalitta Airways founder Connie Kalitta, was killed in a racing related accident.

Kalitta has also sufferred the same economic issues as other global freight carriers, recently grounding almost half of their 21 aircraft fleet due to weak market conditions.  The air carrier also laid off approximately 200 workers.

Eric

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Air Transport: Hard Times Now? Just wait until the Fall.

Best of Freightdawg.com article

Now that fall is upon us, the airlines are cutting back capacity.  While fuel is cheaper than expected, capacity is still being restricted.  I published this article back in June, 2008.  The impact shown here will now hit us in unexpected ways. 

One of which is pressure on airline upgrades for frequent flyers.   With fewer flights, there will be more platinum elite business customers competing for the available first class seats.  I saw that one personally last week on a flight to Newark.  Over 100 platinum customers on the same plane as me.  Despite my Y class ticket and status, I was number 24 for an upgrade!

Anybody who follows the airline business in the US reads daily about job cuts, capacity cuts and grounded aircraft. Anybody actually flying feels it in delayed flights, reduced amenities and increased fares. Face it, its not a fun time to be in the airline business. It has to be absolutely horrible for airline employees and their families.

Here's a snapshot of some of the major North American airlines and the impact that the weak dollar and higher fuel are having. Frankly it is a fiasco. Once the peak season this summer is over, the following cuts in people, planes and capacity have been announced.  No doubt more will be coming.  

The interesting thing is Southwest. Southwest will be growing their business by 4% as they take advantage of abandoned markets. Southwest has always been very aggressive on fuel hedging and is benefiting from that practice yet again. All carriers hedge fuel to some degree, but buying fuel on forward contracts takes cash.  With so many major carriers fighting just to make payroll every week, the liquidity isn't what it used to be. JetBlue and Airtran stand to also benefit though those carriers have made steps to delay delivery of new aircraft to help manage the stress.

Some of the ways the airlines are attempting to cope with the crisis are

• Increased fares! 
• Increases in peak season fares and surcharges. 
• Increased fees for baggage 
• Eliminating older aircraft 
• Increased use of Regional Jets 
• Postponed or canceled receipt of new aircraft orders 
• Eliminating unprofitable domestic routes 
• Eliminating less profitable international routes 
• Employee layoffs 
• Urgent work to convert to biofuels when possible 
• Fewer and fewer on board amenities 
• Increased service to higher margin international routes 
• Reduced number and hours of operation of Airline Clubs

Its not just the carriers here in the US that are struggling.  Qantas is having major problems in Australia and the Pacific as well. They've eliminated a number of routes between Asia and Australia as they refocus their aircraft on more profitable markets.

The Cargo Airlines aren't flying above the clouds either.

CargoItalia has returned it's aircraft to the leasing company. They may not return. Other carriers like Polar, Air Canada Cargo and Cargolux have reduced their capacity to Europe.  Singapore Airlines, EVA, Northwest Cargo and Air China have all cut capacity on the Asia to US tradelane.  Even on trades with high demand like the Latin American trades, carriers like Arrow and Centurion have been reduced to flying only on the weekends.

Air Freight Forwarders are receiving letters almost daily on new peak season surcharges and increases in fuel surcharges from the air carriers. These get passed along to the customer who in turn either has to adjust his sales price on his goods or seek alternative modes of transport. Any wonder why the ocean carriers are completely FULL?

For folks like me, there is opportunity and pain in this mix. The pain comes from my weekly air travel. I hate getting beat up every week just like the next guy.The benefit however is that shippers are more willing than ever to consider new supply chain ideas. Creativity and opportunities to shift the status quo are always fun. Lately that has taken the form of modal shifts to ocean freight and expedited LCL, strategic placement and allocation of inventory. Considerable focus takes place on green use of trucks/trains and planes as well as how to balance speed, shipment size and transit times across multiple supply chains within a conglomerate environment.

How are you managing both the stresses of fuel prices and the weak dollar in your business?

Eric

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A Full Moon and a String of Pearls

I hate to admit it, but I really do love business travel. I enjoy the fact that after 25 years of running around America and beyond, that there are cities outside my own where I am very comfortable navigating and getting around.  I love people and different environments. 

This week I visited northern Mexico to customer sites in Mexicali and elsewhere. That meant a four hour flight from Atlanta to San Diego then a 120 mile run out into the Imperial Valley desert of California.  I made the customer visit, then drove back to San Diego. Mexico is pretty easy to get into, but I didn't love the 90 minute wait to get back through US Customs and Border Protection.

I love the desert and the amazing mountainous rock formations that you have to go through on I-8 headed east through the desert toward El Centro. It's just different from what I am used to. It is  refreshing to me to get out of the office out where the business really lives.

This morning, after some other meetings, I drove from San Diego to LA. That is normally a gorgeous drive. Its not only the scenery, it's the adventure.  

This is wild fire season in Southern California.  I found that out today.   The trip from San Diego to LA is a beautiful run up the I-5 to the 405 of about 110 miles. Today, with the fire season in full swing, I spent 2 hours in Oceanside, California at a dead stop.   By the time I got past Camp Pendleton, I saw that they had the traffic stopped for a grass fire.  I'd never seen that before, but can appreciate the risk that these fires bring to peoples homes in southern California.

All that was cool, but here's what I loved.

We get a pretty good rate at one of the hotels near LAX. This particular hotel is on Century Boulevard. It is near LAX and our office.  That puts the hotel right on the flight path for the several parrallel runways of LAX.  

Being in the air freight business and a major transportation geek, I loved the fact that on one side of my hotel room, I had a ninth floor view of the LAX runways.   On the other side, I had a view of the inbound aircraft landing at LAX.  

LAX gets a wide variety of aircraft as well as international airlines.   I watched everything from A330's from Air Tahiti Nui to numerous 747's take off and land.   European flights take off in the early evening just as the FedEx heavies are landing.  Meanwhile Singapore Airlines and other freighters for Asia take off even later.  Moving heavy iron is a magical thing to me. Ships, heavy aircraft, rail engines and trucks are all just a big toy set to me.

As evening comes, inbound aircraft turn on landing lights.  The lights illuminate the separation of inbound aircraft.  Air Traffic Controllers call that line of inbound planes flying the ILS a "String of Pearls".  That's what it looks like too.  A beautiful line of lights perfectly formed up over a 12 mile approach.   

Tonight, rising to the east of Los Angeles was a full moon. That moon, turned orange by the smog of the city, made a perfect backdrop to the orchestration of commercial aviation.  I sat in the room tonight and just enjoyed the beauty of the business I am in.

Call me a geek, but I love the transportation business.  I used to get the same buzz watching 1000 foot container ships maneuver in Oakland or San Pedro.

Eric

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Old School Air Cargo

Once upon a time, back in the 1960's, my grandmother, my granddad and my father all worked for Lockheed Georgia Company in Marietta, Georgia.  In those days the premier products coming out of Lockheed Georgia were the C-130 and the C-141.  By 1970 that also included the mammoth C-5A.

The Vietnam War was raging and Lockheed couldn't produce enough airplanes.  The parking lot at what had been the "Bell Bomber Plant" in the 40's, and became "Air Force Plant No.6", was full. 

My father worked in international aircraft sales.  Amongst the derivative products of the C-130 was the L-100.  The L-100 was a civilian version of the venerable and well proven C-130 Hercules.  I loved it as a kid.  Simple reason.  Dad had a desk model of the L-100 in Delta colors.  Any airplane I could play with had to be cool.

Delta and Alaska Airlines operated the L-100 along with Southern Air, which had its connections to the CIA.  I wish I still had that desk model...

At the time the L-100 was introduced with Delta, the main customers were "Aerospace customers". Guess what?   The main customers that would have fit Delta's route structure then would have been Lockheed California Company and Lockheed Georgia. The CEO of both Lockheed companies was Dan Houghton.  My Grandmother happened to be his executive secretary.  (she was a bar certified lawyer to boot.)

What is ironic is that Delta abandoned specialized air cargo aircraft when they developed belly capacity in then new, wide body aircraft like the 747, L1011 and DC-10.  Delta abandoned the 747 in  1976 because it didn't fit their network.  The L-1011 was a workhorse and handled the majority of domestic air cargo.

Today, airlines are using regional jets and smaller commercial jets to service longer distances.  This has killed the domestic air cargo market because there is no excess belly space for freight.  Perhaps an aircraft like the L-100 would have found a niche today?

As for "Air Force Plant No. 6"... Lockheed produces a new product called the F-22.  Along side the C-130J!

clipped from blog.delta.com Forty-two years ago this month, on September 15, 1966, Delta launched the world’s first scheduled service of the all-cargo, turbo-prop Lockheed L-100 Hercules.  It was the commercial version of the military C-130 Hercules, famous its ability to land on unimproved short strips, yet carry bulky loads and vehicles. This photo of the rear of the boxy L-100 fuselage shows the loading system.  Cargo pallet transporters, pulled in a train by a tug, were wisked from the Delta freight facility to the Hercules.  The palletized freight was then moved over the roller bed surfaces of the transporters and the floor of the plane.  Here, you see a T-shape option for complex loading/unloading where the pallets are moving from side position onto the main line of loading.  According to Delta press releases from 1966, three men could unload and load a full Hercules–45,000 pounds–in less than 30 minutes. The Hercules was suited to Delta’s relatively short haul, small shipment operation in the 1960s.  With this plane, we offered the first single-carrier cargo service between California and the Southeast, filling a big gap between the aerospace industries in those regions. When our first widebody passenger jets–the Boeing 747 and Douglas DC-10–arrived with their speed and large underfloor “belly bin” capacity, we did not need a fleet of specialized cargo aircraft any longer.  Delta’s last L-100 flight operated thirty-five years ago this month, on September 1, 1973.

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AeroLogic signs with Boeing for after market services

AeroLogic is a joint venture company between DHL and Lufthansa Using a fleet of Boeing 777-200F freighters, they will jointly serve markets in Europe, North America, Asia and other destinations as needed starting in 2009.

AeroLogic is based in Leipzig Germany, which is a joint freighter hub for both carriers. Their fleet will eventually consist of 11 x 777-200F freighters.

Boeing will provide after market support.

clipped from www.marketwatch.com Boeing and AeroLogic Partner to Streamline Carrier's Maintenance Operations MADRID, Spain, Sept 25, 2008 - Boeing announced today at MRO Europe that AeroLogic has adopted the airplane manufacturer's Web-based solutions, Maintenance Performance Toolbox and Airplane Health Management, as foundations for the carrier's 777 Freighter maintenance documentation platform when deliveries begin in 2009. Maintenance Performance Toolbox, including the Library and Authoring modules, will help AeroLogic, based in Leipzig/Halle, Germany, streamline an array of maintenance activities, including managing technical publications and training and customizing online maintenance manuals. A total of 14 European carriers now use this innovative maintenance tool. AeroLogic will use Boeing's Airplane Health Management to monitor its 777 Freighters, giving the airline a real-time fault management tool to identify maintenance needs and communicate with ground teams to enable proactive, planned and timely maintenance operations and address potential issues. AeroLogic GmbH is jointly owned by DHL Express and Lufthansa Cargo AG, with each company holding a 50 percent stake. The airline, which was founded in September 2007, developed from the joint venture set up by the two partners in 2004. AeroLogic's cargo capacities will be used primarily by DHL Express and Lufthansa Cargo. The two partners also will be responsible for sales and warehouse handling.

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Airline Fuel Hedging is Risky Business

Airlines buy fuel hedges in an effort to balance current cost of fuel against what they think the price of fuel will be in the future. That's an excellent strategy when the price of fuel goes up.  Southwest Airlines and Alaska Airlines are both famous for doing this very well.  In a number of fiscal quarters SWA has claimed that the only reason they made money was that they had a competitive advantage in the price of fuel because they hedged well.

Typically airlines hedge by buying forward contracts on kerosene, or home heating oil because Jet fuel isn't actually a traded commodity.  Kerosene however moves at about the same price levels as Jet Fuel.

Now, while aviation fuel remains high, the price for crude oil is falling.  United, Northwest and Delta are feeling the pinch and stand to lose money on their hedges.   Hurricane Ike took a number of refineries off line so supply is keeping the price of Jet A high even while the kerosene or heating oil the airlines used for hedges falls. 

clipped from seattletimes.nwsource.com By JOSHUA FREED The Associated Press MINNEAPOLIS — Airline bets that oil prices would rise looked like a no-brainer this summer. But with oil prices falling, those hedges against rising fuel costs are getting expensive. United Airlines said today it is on track to lose $544 million on fuel hedges this quarter. That included $72 million in realized losses and another $472 million in unrealized losses. Those positions forced United to put $400 million into restricted cash for the parties on the other side of its oil price bets. Other airlines have not disclosed their hedging losses or gains for the third quarter, but it is likely that United was not alone in underestimating oil's dramatic fall. Oil settled at $97.16 a barrel on the New York Mercantile Exchange today, down from a July peak of $147. Northwest Airlines said in July that its hedges require it to pay if crude falls below $108. Its hedge for 10 percent of its fuel for next year requires it to pay if crude falls below $112. Of course, rallying oil prices could make those hedges look smart again. And — importantly — even if United loses money on fuel hedges, it will save money because the fuel itself is cheaper. JPMorgan analyst Jamie Baker wrote in a note that oil's fall over the space of just one week will save airlines $3 billion. Fuel has become the biggest expense at the big airlines. United's 2007 fuel bill was $5 billion, which was reduced slightly by an $83 million hedging gain. "Yes, hedgers are under water on their hedges, but they are seeing some relief on the cash market side. That's how it should work," said Jonathan Leak, a senior vice president for risk management at World Fuel Services, which puts together fuel-hedging programs for airlines. However, fuel prices have not fallen as much as crude in the short run because refiners are at capacity. Hurricane Ike made that worse because 12 of the 14 jet fuel refineries in its path are still shut down because the power is out, Leak said. Those 14 refineries make 19 percent of the nation's jet fuel.

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Happy Labor Day USA!?

Today is one of my favorite American Holidays. A long three day weekend with nothing but backyard barbecue, good company and especially the return of college football to the air waves.  Life begins again in the South.   Unfortunately, once Tuesday gets here, it will be time once again to look at the tough times that will be immediately in front of those moving goods throughout the US and abroad.

This summer has been brutal for the logistics and transportation industry, as well as the passenger airlines. Fuel, the War and a weak dollar have challenged both carriers and shippers alike to think differently about how to move goods. Express carriers have seen increasing moves by customers to shift to either LTL or other slower modes of conveyance in order to stay within budgets. For multi-mode capable 3PL's and integrators, this has been a blessing on the heavy freight side of the business even as the parcel side has been challenged. Air cargo has been available, but capacity and rates have stayed a steady course headed upward. In fact in some industries, there's more cargo available than ever. The dollar is still weak and American products, especially in the infrastructure and technology sectors are in high demand.

Now that fall is here, many airlines are going to start withdrawing capacity from both the US domestic and in some cases, the international markets. This is going to put extreme pressure on air freight rates as capacity dries up, and is going to make passenger travel both more expensive and even more difficult than it is today. American, United and Northwest Airlines all have announced capacity reductions of up to 14 percent. Internationally, LAN and Polar Air Cargo both implemented substantial rate increases in August of between 25% and 50%.  Getting to Latin America is now extremely expensive.

Nippon Cargo Airlines ceased operations in JFK this past week and will now only serve Chicago from Asia. Gemini Cargo Airlines ceased operations all together. 

This Fall is going to be tough. Today, I'm going to enjoy a couple of beers and some barbecue and look forward to some football. Tomorrow its back to the grindstone.

Labor Day indeed.

Eric

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South American Air Cargo Challenges

I was in Mexico a couple of weeks ago pursuing business opportunities in Mexico as well as the rest of Latin America.  The Mexican link is important because of all the commerce done in Latin America, Mexico accounts for approximately 50%.

The potential for the rest of Latin America however is huge and growing.  Air Cargo World has a great article clipped below which high lights the markets opportunities and challenges.   LAN Chile has invested the most in terms of cargo capacity, but still suffers from an imbalance between north and south cargo mixes. Computers, auto parts, industrial equipment and consumer goods all head south, with produce and floral goods headed northbound.

LAN is expecting delivery of some of the first Boeing 777-200F freighters.  These present an opportunity to link South America directly with Asia based on long range freight movements.   Lufthansa also has designs for the Latin market based on their joint venture with DHL called Aerologic. 

The biggest opportunities coming appear to be in supply chain, where only Chile measures on a modern scale.  Other Latin countries lack both infrastructure and market sophistication to execute supply chains at a faster pace.

clipped from www.aircargoworld.com Southern Cargo Exposures South America remains largely untapped in terms of air cargo potential, but there are developments worth noting Michael Mackey Air cargo is developing in South America - albeit unevenly - despite myriad problems it faces. Chile's LAN Cargo occupies the pole position at the moment where its' emphasis is on further growth, having just announced the creation of a new cargo affiliate airline in Colombia. The carrier has nine 767-300 freighters and two wet-leased 747-200 freighters. These aircraft carry around two-thirds of the carrier's total cargo with another third being moved as belly cargo within the passenger fleet. What they're carrying is an interesting mix. Inbound, the big item is spare parts, mostly automotive as well as laptops, printers, mobile phone and mining equipment. Outbound, it carries perishables: fruit, flowers; salmon and spare parts from Brazil; leather out of Argentina; and horse meat bound for France. This imbalance, while it concerns LAN, does not deter the carrier. LAN draws a historical parallel to show how the airline is progressing. "What we want to do is link (South America) with the world. Five years ago it was with North America," said Tomas Silva, Lan Cargo´s vice president for global accounts and alliances. Nor is this wishful thinking as the carrier will have the necessary lift, starting with two 777 freighters in January and March 2009. A third aircraft will follow in 2011, a fourth in 2012. Proud though they are of these developments, LAN is less effusive on which routes they will fly, although the general feeling is it will be Miami as well as São Paolo, Buenos Aries and Santiago. Silva said most flights would probably touch three cities.

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