Ronald Yeo, Senior Vice President, Cargo Services, SATS
Cargo volumes for SATS Group, including our overseas joint ventures, declined 1.5% for the nine months ended December 2014. Cargo volumes for our Singapore operations grew 5.5%, mostly reflecting our market share gain at Changi Airport. Global trade flows, which the market relies on, have stayed persistently weak, with growth of less than 4% in 2014, well below the pre-financial crisis average growth of 7% annually.
Amidst the general weak demand, perishables – including pharmaceuticals – and express cargo are two key segments supporting our cargo tonnage growth. Our dedicated on-airport perishable handling facility, SATS Coolport, handles 90% of the premium perishables coming through Singapore Changi Airport. In 2014, SATS Coolport handled over 240,000 tonnes of perishables, representing more than 14% growth from just two years ago. Asia’s rising middle class is a key driver of this growth, with greater demand for fresher, safer and more exotic food.
Pharmaceuticals, a sub-segment of perishable cargo, saw an impressive year-on-year growth of 30% in 2014. Part of this growth comes from Singapore’s status as a connecting hub between Europe and other regions, as well as the country’s move to attract pharmaceutical and biotechnology companies.
Given the high value and often extreme temperature sensitivity of pharmaceuticals, demand for a more secure cold chain by pharmaceutical companies has prompted SATS Coolport to set up a Centre of Excellence in pharmaceutical handling last year. The facility underwent upgrading, including enhancements to its dedicated pharmaceutical zone for acceptance and delivery of pharma shipments. It was assessed by IATA for its handling policies and procedures, in particular its adherence to the IATA temperature control regulations. Furthermore, staff at SATS Coolport have undergone a specialised training programme for pharmaceutical handling conducted by IATA. In November, SATS Coolport became the world’s first centre of excellence for independent validators (CEIV) in pharmaceutical handling, certified by IATA.
Early this year, SATS signed an MOU with Swiss WorldCargo and Cargologic to establish a quality alliance bridging Europe and Asia. This alliance will focus on providing superior facilities and specialised handling solutions for premium, care-intensive air cargo including pharmaceuticals.
As the value of a cold chain lies in that chain remaining unbroken from end-to-end, SATS is looking to apply our cold chain handling competencies across our Asian network. Our overseas facilities in Hong Kong and India have been GDP-certified, with those in Indonesia being next in line.
Turning to express cargo, its demand has been fuelled by the recent growth in e-commerce sales. Similar to perishables, the explosion in e-retail growth in Asia is partly attributed to the rising middle class population in the region, with higher consumer spending and rising disposable income levels. As such, SATS sees opportunities to further capture this growth by linking the cargo operations across our regional network to offer value-added express handling services.
David Ambridge, General Manager, Bangkok Flight Services – Cargo
Main issues and trends over the last 12 months: The issue for us has been growth! We recorded 8% growth in BKK in 2014, above the industry average. Some of this was due to 2013 being relatively weak, but we were happy to see this level of recovery.
Our response to this was to automate processes and become more efficient rather than adding additional manpower and costs. This has proved to be very successful and we are now working at over 18 tonnes/sqm, which is very high.
Main issues and trends expected over the coming 12 months: We expect to see further growth as we attract new business and flight frequencies increase. We also expect political stability in Thailand during 2015, which should help recovery even further, especially as we move towards AEC (Asean Economic Community) at the end of 2015.
How well are airlines’ cargo needs being served on the ground?: You should ask airlines, but we think BKK is either the highest-quality station in their network, or at least in the Top 3. We provide service of a far higher quality than SLA or C2K requirements of any airline customer that we handle.
Development plans: We have been trying to get additional land from the Airport Authority for the last four years to build our second cargo terminal, but that has not been forthcoming so far. Instead we have invested heavily in automation and process improvement to keep ahead of our growth.
Quality-improvement initiatives: Our programme of continuous improvement helps us to get better each year. We make fewer mistakes, we learn from each mistake, and we become better as a result of what we learn. We will never be perfect because we have human beings working for us, but we strive every day for service excellence.
Mark Whitehead, CEO of HACTL:
Main issues and trends over
the last 12 months
Aviation security continues to evolve and become more onerous, particularly at the handling level. We are entirely supportive of the drive to maximise security, but it does add costs and introduce delays that could be detrimental to the airfreight sector, and our challenge is in constantly finding new ways to maintain service standards and pricing.
The e-commerce revolution is really beginning to re-shape the air cargo industry, particularly in Asia, with the growth of Alibaba and the Chinese consumer market’s burgeoning appetite for genuine western goods. There is a great opportunity here for Hong Kong, with its unparalleled connections from every key global origin point: but we are not alone in wanting to pursue this potential market, and competition is growing. Appropriate, suitably located warehouse space to handle e-commerce will be a great challenge and opportunity.
What have you done to respond to these developments?
Hactl has invested in more state-of-the-art scanning equipment to improve cargo flows, while ensuring its systems and processes are fully compliant with all global regulations, as a minimum. In mid-2014, we achieved EU ACC3 status, both to anticipate possible future tightening of requirements, and to ensure through external auditing that Hactl is capable of satisfying the most demanding of security standards.
Expected issues and trends for the coming 12 months
The current turmoil in the Eurozone has yet to be resolved, although Hactl’s large customer base and our carriers’ diversified markets will reduce the impact of any tightening in European consumer demand. Employment in Hong Kong continues to be a challenge, with several major industries competing for blue-collar and manual workers. Hactl has successfully avoided reliance on temporary agency manning (uniquely among handlers here) by continuing its advanced staff retention programme – a combination of fair remuneration, and focus on worker welfare, career progression and intensive company-funded vocational training. This has minimised our workforce churn.
Should fuel prices remain at their current low, and when this feeds through to forward buying, it will be interesting to see what impact this has on freighter operators. It could give a new lease of life to ageing, less fuel-efficient equipment that would otherwise be retired.
How well are airlines’ cargo needs being served on the ground
We have a 37-year tradition of innovation and investment designed to keep us ahead of the world in efficiency and service standards; so, I would contend that our carriers are provided with the best possible service. We also try to anticipate their future needs and present them with added-value services and specialist facilities that will help them to capitalise on all market opportunities. Examples are our growing Hacis RFS system, which effectively expands the market for our carriers’ air services to and from Hong Kong, and our recent investment in systems, equipment and compliance (the first GDP handler in Hong Kong) to accommodate pharma traffic.
Recent innovations include the introduction of mobile phone apps that enable visiting drivers to check the status of their cargo on inbound flights, and pre-book door slots accordingly. Hactl can also plot the progress of incoming vehicles, and adjust handling priorities; the aim is to minimise vehicle dwell time at our terminal.
Hactl currently has ample space to accommodate growth from existing and new customers. Any expansion is most likely to be seen in our product portfolio.
Willy Ko, CEO – AISATS
(Air India SATS Airport Services):
Issues and trends in the last year
AISATS has witnessed exponential growth since its inception in 2008. We are committed to continuously enhance our operations and last year invested more than INR 430 million in ground support equipment (GSE). In June, we inaugurated our Dangerous Goods Regulation (DGR) training facility at Trivandrum, becoming one of the few airport service companies in India to be granted approval to provide training for staff and for external customers. We also recently obtained ISO 9001:2008 certification for our Delhi operations. We will progressively obtain both ISO and ISAGO certification at our AISATS locations.
We have also implemented a community system, which serves as a platform for seamless electronic data interchange. This is the digital foundation for AISATS’ e-freight initiative, which will increase agility, cost effectiveness, efficiency and further speed up customs clearance in our cargo operations.
How well are airlines’ cargo needs being served on the ground?
In 2013-14, all operational airports in India taken together handled over two million metric tonnes of cargo (including domestic and international cargo), registering a 4% growth over the previous year. While the growth rate is a positive trend and service providers have been matching up to growing market demands, inadequate infrastructure remains a major bottleneck impacting the efficient movement of cargo. Although in recent times the sector has witnessed increased investment, evolving regulatory policies, mega infrastructure projects and several other initiatives, there is still a need to significantly accelerate the pace of such developments.
What could be done to improve this?
A targeted approach to improve infrastructure and appropriate regulatory policy will aid the predicted upturn in the air cargo industry. It is clear that the Indian air cargo industry will witness exponential growth. Although this paints a positive picture, the scope for improvement in the Indian cargo handling sector is substantial, but is on the road to being on a par with global counterparts. The growth in the air cargo industry in India calls for a more focused approach to improve infrastructure as well as an increase in the number of dedicated cargo terminals. Safe, secured and speedy delivery of cargo will be crucial to a smooth and efficient logistics network.
The air cargo industry in India was given an impetus with the government’s renewed focus on increasing air connectivity across the country. Recently, the government identified 24 airports to develop dedicated air cargo terminals and create a national logistic network for faster movement of goods. In addition to this, policy measures to address the burden of high taxes on ATF and the increasing airport related levies will significantly facilitate the viability of the industry.
Quality-improvement initiatives and development plans
With India working to become the global pharmaceutical manufacturing and processing hub, it is imperative to have the relevant infrastructure and adopt complex logistical methods to maintain the shipment’s integrity. AISATS operates a 210,000-tonne capacity airfreight terminal in Bangalore that caters to general, perishable, transhipment, express courier and special cargo handling. There are cold room facilities with different temperature variations, and AISATS continually endeavours to enhance its infrastructure by making further investments in cool chain facilities to safeguard product quality and optimize shelf life. Recently the Bangalore facility received its Good Distribution Practices (GDP) certification, a system that ensures that the quality of a pharmaceutical product is maintained throughout the distribution process. By being the first airfreight terminal in the country to get this certification, AISATS demonstrates its commitment towards providing world-class and industry-recognized quality standards in its facilities and services.
We were also the first to introduce Automated Storage and Retrieval Systems (ASRS), Very Narrow Aisle (VNA) trucks with high-rise racking and COSYS software in our operations. AISATS also pioneered the use of the carton clamp for our forklifts at the Bangalore air cargo terminal to minimize damage and improve efficiency in the handling of loose cargo.
Going forward, we plan to undertake more initiatives to build specialized perishable handling centres and automated tracking solutions to optimize shipment processes and provide smooth and safe transportation services.
AISATS’ ambitions are not limited to the five airports that it is currently operating in. We are keen on expanding our local footprint in new and emerging markets.
Lutz Grzegorz, Vice President of PACTL:
Main issues and trends over the last 12 months: We were able to exceed our positive expectations with a record 1.5 million tonnes of air freight handled in 2014, growth of 16%, supported by the positive development of our customers’ business, an ongoing increase of our operational efficiency, and we were able to continuously expand our client base by signing with several new customers – further increasing our market share to 48% of the air cargo handled at Shanghai Pudong International Airport (PVG).
Responses to these issues and trends: It is essential for us to ensure that sufficient capacities and the highest quality standards are in place in order to meet the increasing requirements of our customers, supplementing their overall product portfolio as well as supporting any enhanced services. For example, as we saw a significant growth in temperature-sensitive freight throughout the last years, we decided to build a new end-to-end perishable centre at one of our terminals.
Main issues and trends expected over the coming 12 months: PVG will remain the strongest air cargo hub in mainland China. Generally, cargo volumes are expected to continue to increase. This development will, for instance, be driven by the e-commerce sector. The new e-AWB will take a big share as it is fully supported and pushed by all stakeholders. There’s a strong focus from Chinese customs.
Development plans: We are busy building a new end-to-end cool chain facility – the first one of its kind in mainland China – for the handling of temperature-sensitive goods such as perishables, pharmaceuticals and other healthcare products. We not only see a rising demand from our customers; Shanghai has also developed to be the most important research and development centre for the Chinese pharma industry. We therefore plan on establishing a pharma gateway at PVG. Furthermore, we plan on developing a joint e-platform for all stakeholders at PVG including airlines, agents, customs, trucking companies and warehouse terminals.
Quality-improvement initiatives: We permanently monitor and evaluate relevant quality key performance indicators and we emphasize extensive staff training as well as direct feedback sessions with all customer airlines. In addition, we have a strong focus on process efficiency and continuously push innovations.