Global Logistics and Supply Chain Strategies - April 2008 - (Page 64)

Economy, Security, Fuel Big Issues for Airfreight Industry Traffic-flow imbalances and customer drift are among the effects caused by the continuing weakness of the American dollar and the high cost of jet fuel. Perhaps there are ways to rise above the challenges. No doubt there any number of issues that concern management of airfreight carriers every day—from introduction of new products to maintaining high customer service levels. But clearly three of the biggest issues affecting the air cargo today are the U.S. economy, the cost of jet fuel and security measures mandated by the Transportation Security Administration and other government bodies. American Airlines Cargo is no different from other carriers in having to deal with these issues, good and bad, according to Joe Reedy, vice president of sales and marketing. The freight division of American Airlines reportedly provides more than 100 million pounds of weekly cargo lift capacity to major cities around the world. On the good-news side, one of AA Cargo’s most recent introductions is an expansion of its Expeditefs express freight service guarantee to include its truck feeder service. On the downside, the cargo division has to deal with the economy and the spiraling costs of fuel and security just like everyone else in the airfreight industry. GL&SCS spoke with Reedy, who says he sees opportunities as well as challenges ahead. some weaknesses in the other direction, meaning that in the United States we’re not able to consume as much, so our volumes are down a bit out of Europe to the U.S. That’s probably the market that’s seen the biggest impact when we think about our flows of traffic. It’s certainly having some impact to some degree in all markets, but for us it’s more in the traffic flows from Europe. Q: Do you feel this imbalance is true for everyone that’s active in the North American market? Reedy: I would think that would be true for everybody, but you always have to factor in their capacities because people often change their capacities these days. So if somebody is adding a bunch or removing a bunch of capacity to market, you have to consider that. But if you neutralize for that, I would suspect that everybody is experiencing the same thing. Q: Do you have a sense of which geographic regions are generating the most traffic volumes these days? Reedy: I don’t know if I can give you an expert view generally [for all cargo carriers], but for American, in the past six months I would say the market that has had the best traffic in both directions has been Latin America. That’s really where we’ve seen the most strength. Obviously, American Airlines has a very strong schedule and presence throughout Central and South America. The trend in Europe—where, as we said, the traffic for the most part is going into Europe—that’s been going on for some months now. We have a couple of good markets in Asia that have been doing well for several months now as well. Business has continued to remain fairly strong for us. But the directions can change, as we have seen with these currency fluctuations. Q: The U.S. dollar has been very weak against some world currencies for some time now, and that continuing weakness has been a field day for some U.S. exporters whose products are more affordable and in demand. How is that being reflected in the traffic patterns that American Airlines Cargo has experienced? Reedy: Certainly, the volume of traffic, for instance, to Europe from major gateways in the U.S., like New York and Chicago, and all across the United States really, are very strong. They are probably as strong as any we’ve seen in years. And that’s largely because of the strength of the currencies in Europe to buy U.S. products. Q: What about in the other direction—inbound? Reedy: The flip side of that is that we’re seeing 64 APRIL 2008

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Global Logistics and Supply Chain Strategies - April 2008 Contents Editorial GL & SCS Exclusive Fast Forward Up Front Cover Story: Continuing to Add Ever More to Their Offerings, 3PLs Are - At Your Service Over the Long Haul Opinion: Freight Audit Bill Can't Show All Mistakes that Hurt the Bottom Line Opinion: The ‘Good-Freight’ and ‘Bad-Freight’ Trucking Customers Industry Voices

Global Logistics and Supply Chain Strategies - April 2008

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