REGIONAL REPORT: North America

posted on 4th April 2018

WFS acquisition of CAS set to transform US market
North America’s air cargo handling landscape is set to be transformed this year when one of the world’s two dominant global air cargo handlers, Worldwide Flight Services (WFS), completes its acquisition of North America’s largest air cargo handler, Consolidated Aviation Services (CAS).

CAS boasts around 250 airline customers served by a workforce of over 4,000 staff via operations at 52 airports – most of which include cargo handling. It currently handles around 1.6 million tonnes of cargo a year. WFS, which has accelerated its expansion since being acquired by Platinum Equity in September 2015, is thought to be present at 59 airports in the US, with cargo handling at 25 of these. Worldwide it handles more than 4 million tonnes of cargo per annum for 300 airline customers.

Both sides have declined to discuss details of the deal until it is completed.

Meanwhile, rival Swissport International – which has itself been on an acquisition spree over the last five years but is also under new ownership following its acquisition by China’s HNA Group – currently operates at around 60 airports in North America, with cargo handling at 19. Of those, 16 are in the US and three in Canada. Globally, Swissport handles around 4.1 million tonnes of cargo a year.

Asked what effect the planned acquisition of CAS by WFS will have on North America’s air cargo handling market, Swissport International’s executive VP of global cargo, Nils Pries Knudsen, says it is too early to say. “Consolidations within the handling industry are logical steps to further streamline businesses and achieve synergies from larger scale operations – it has happened before and it will happen again,” he observes.

In terms of the characteristics and performance of North America’s air cargo handling market over the past year, Knudsen says: “The West Coast port strike, which peaked in the first quarter of 2015, drove volumes from sea to air and naturally placed a lot of pressure on our existing facilities. It gave us a very promising start of the year, volume wise. During the rest of the year, we were back to a normal handling situation, with a slight upwards movement in the fourth quarter, but whether this will ramp off all through 2016 is too early to say.”

Improving processes
Ray Jetha, senior vice president sales and marketing at Consolidated Aviation Services, discusses the contribution of new technology and productivity initiatives in cargo handling

Recent developments

Inspired by IATA’s e-freight vision and promoting e-Cargo, since 2010 we’ve been implementing ePic, an air cargo warehouse management system developed in-house, comprised of five modules: ePic Office Suite, ePic Mobile Warehouse app, ePic Online Forwarder portal, ePic Airline portal, and ePic Camera app.

ePic gives carriers and their shipping agents 100% visibility of their freight as it comes in and goes out through our warehouses; provides our customers real-time, end-to-end status update from the point of cargo acceptance at the origin station to the point of cargo recovery at the destination; and allows instant picture taking of every single shipment at every key motion point throughout the warehouse space. Those pictures effectively minimize the future disputes and liabilities and therefore largely assure the service quality.

ePic makes our warehouses paperless; the mobile apps, via iPads on the forklift, constantly connecting cargo with data, speed up cargo processing and flight (de)manifestation; and one unified process for all airlines we handle under one roof gives us greater synergy within our workforce and optimize our processes to the fullest.

How do you see this developing this year and beyond?

We’ll continue to promote eCargo, pushing the paperless cargo handling transition not only in the documentation department, but also in the warehouse – a paradigm shift. We believe e-freight will refuse to arrive until the entire warehouse is free of paper.

We have an ePic global rollout plan in place, to transition every cargo facility into eCargo best practice; to put ePic at every corner of all our warehouses.

Breakthrough technologies being developed

We believe that next big thing is big data. Large pools of data that are captured, communicated, aggregated, stored, and analyzed, coupled by immediacy of information sharing across the board, will definitely unleash a powerful force we can only imagine now.

IATA process improvements such as e-Freight and Cargo 2000

Transition of warehouse management into eCargo best practice is key to sustaining a business such as cargo handling, with its ever-shrinking profit margin. Investment in technology is the only factor in “doing more with the same”.

Cargo 2000 is being redefined by IATA. We welcome that change of definition and change of attitude. It is time for C2K to be repurposed in the digital age. C2K has to answer the question the customer cares about most: Where is my cargo? Forwarders need real-time information more than ever; anything less is not acceptable.

Beyond the merger
American Airlines Cargo’s senior manager for cargo planning and compliance, Don Larney, discusses the carrier’s highlights of 2015 and its expectations for 2016

Highlights of 2015

We successfully completed the merger of the American Airlines and US Airways cargo departments in October 2014 and, while it was not without some challenges, we were able to begin to take advantage of the strengths of the two combined companies throughout 2015. This involved a greatly expanded network, investment in new equipment and facility improvements, and new technology in our warehouses that allow for a more streamlined operation.

Specifically, we greatly benefited from a significantly bigger European network, with service in over 21 destinations and over 300 weekly departures between Europe and the US. This also includes 42 departures per week out of Germany — and even more served via truck. And we can now more effectively reach our 55 cargo destination in Latin America, accessible from Europe and Asia through our Miami, Dallas and New York hubs.

Even with those benefits, low fuel prices and added capacity at both passenger airlines and freighter companies continued to put pressure on us to continue full steam ahead — with increased focus on industry growth and evolving the way we do business for our customers.

Completing the final large milestone in our integration is to merge our Flight Operating Systems (FOS), which will happen later this year.

After the merger, we were also able to develop a world-class international hub in Philadelphia (PHL), which is an incredible location for our pharmaceutical product offering, ExpediteTC. This facility enables us to extend our commitment to the product by opening a 25,000 square-foot (2,300sqm) space in this critical area of the country for cold-chain shipments.

Pharma and other developments in 2016

There is a project in the works to have our active and passive checklists automatically and instantly available online for customers. We will also be looking for stations where it might be beneficial to add dedicated ExpediteTC (or cold chain) pharmaceutical space around the network

In addition to our most recent addition of Los Angeles (LAX) to Sydney (SYD), which utilizes our most cargo-friendly aircraft, the Boeing 777, American has announced plans to open year-round service to Tokyo Haneda (HND) and Auckland (AKL).

Air cargo industry in 2016

We really need to control costs by streamlining processes and being more efficient. The industry needs to have a sense of urgency to identify, develop and implement industry standards more quickly. It’s all about automation and more consistent, effective communication between all supply chain partners.

Improving productivity

2016 is all about working together to ensure the e-freight initiative remains a focus for both air carriers, like us, and our forwarders. This path to a sustainable, paperless operation is key in ensuring we improve productivity—within our operation and for our customers. It may seem like a simple task, but sending all shipments through a location via electronic-AWBs (eAWB) means greater visibility for customers, and accurate, easily accessible information at every point in the supply chain. This year, our biggest challenge is getting all of our key players up-to-speed and comfortable with these new, improved processes.

eAWB penetration

We expect continued eAWB penetration for the industry in 2016. Overall, as the industry approaches and exceeds the 50% penetration level, it will be a significant milestone to have more shipments traveling as eAWB than not. This will help to further accelerate growth.

Admittedly, we got a late start on eAWB due to the focus placed on our integration, but made great progress to exceed our 30% goal by the end of 2015, which put us on par with the industry adoption average. We now rank among the top 15 carriers in eAWB adoption.

CAS sees quick return on Miami perishables investment
Consolidated Aviation Services (CAS) is seeing an immediate return on a US$2.5 million investment to expand its perishables handling centre at Miami International Airport (MIA), with throughput climbing to 70,000 tonnes in the first nine months of 2015, a 400% increase on its volumes before the investment.

CAS more than doubled the size of the facility in 2014 with the addition of a new 1,600sqm (18,000 sq ft) cooler alongside its existing 1,100sqm (12,000 sq ft) perishables building, which opened in 2009. As well as increasing the building’s handling capacity to up to 90 ULDs at one time, the investment added further 5-metre-wide airside doors to expedite shipment handling, and introduced a refrigerated dock to handle trucks within a temperature-controlled environment. A new agriculture inspection facility and walk-in freezer also form part of the latest expansion as well as multiple cool chambers for fish, flowers and produce that need to be maintained in specific temperature conditions.

Miami is the perishables gateway to and from the U.S, handling 85% of all perishables air imports into the US and 80% of air exports. This adds up to over 720,000 tonnes of fresh fish, vegetables, fruits and flowers per annum for the US consumer market as well as for customers in Europe, the Middle East and Asia.

CAS’ perishables handling capability at the airport also includes its Cool Time Arrivals (CTA) service for the specialist handling of fresh fish and other commodities requiring bespoke handling on their journey to markets or distributors in the US. It also provides dedicated perishable handling services for American Airlines and IAG Cargo.

The new cooler handles a wide variety of cargo, including fresh cut flowers from Colombia and Ecuador, fresh salmon and trout from Chile, asparagus from Peru and other fruits and vegetables from various origin points in Latin America and the Caribbean.