1 CARGO AIRLINES & THE INDUSTRY ISSUES Air Cargo India 2008 Stan Wraight Chairman - Cargoitalia

2 Message Forwarders and shippers want low cost and high quality Airports are one of the biggest cost items for an airline Reason is security, congestion, facilities, environmental penalties. Sea freight is becoming faster while Air freight faces new dynamics which further slow processes.

3 What can we do about it? What does the shipper or forwarder want and how can we deliver that? What do we need and want as an industry to deliver according to client demands?

4 All Cargo Airlines go where the market dictates In a world of commoditization and ever lower prices for retail goods, the use of air freight becomes a luxury, yet effective distribution can be the only unique selling point when every other avenue of cost saving has been exercised and your product cannot differentiate. Competitive pressure from global companies on forwarders means continued pressure on rates and service for the operators, so how can the highest cost provider (freighters are expensive!!) compete. Consolidation in the forwarding industry leads to super hubs unfortunately usually located at passenger airports which are linked to the past, not the airline cost efficiencies needed today.

5 Facts affecting all cargo airlines ability to compete 1.Traffic Rights and governmental regulations, usually restricted and tied to passengers. 2.Slot constraints, penalties, and noise bans for older aircraft (typical freighter types) e.g.. Narita/ Frankfurt/ Shanghai/ Beijing/ London/ Amsterdam. 3.Night bans on flights, financial environmental penalties on all cargo flights. 4.Monopoly or near monopoly on ramp and ground services in major passenger airports, usually by decree and in control of the government or national carrier. 5.Lack of Interline or services to address traffic imbalance if not home carrier.

6 Can all cargo airlines survive in this enviroment? YES - IF ; Acceptance by the forwarders that we have a mutual problem, they want the services but it must remain profitable if they really want all cargo airlines to survive. A platform to discuss this major issue, hopefully lead by forwarders and Airlines (IATA, TIACA, FIATA?) but also involving local governments or authorities. Yet it is not addressed, why? Do legacy carriers have too much influence in these forums because without cargo on passenger flights they are unable to generate profits on most routes? Incentives from local authorities to forwarders and suppliers to locate at regional freighter friendly airports are never seriously considered, why?

7 All cargo Airlines – Require Freighter friendly Airports 1.Full facilities for forwarders and ultimate clients needs - offices - own warehouses if desired - self handling if desired - duty and tax free bonded airport, free trade zone status - access to labor and services required No noise bans or restrictions at night. No restraints due to slots. 24/7 operations by all needed authorities such as customs, agriculture, security. Maintenance facilities including services by reliable vendors., 24/7 Сlose to major rail and road connections, geographically located close to major air cargo markets.

8 2.Hub operation for major air cargo trucking facility, including same day and over night LTL service to all major destinations. 3.In addition to self handling possibility, neutral 3rd party handling for ramp and warehouse. 4.Support of authorities with lowest possible landing and other fees. 5.Multiple fuel suppliers, competitive pricing. 6.Ideally, operation of feeder aircraft services already in place. 7.Security systems in place to meet full screening requirements TSA and others.

9 The Benefits are for all parties Forwarders : 1.Continued secure capacity, from preferred all cargo airlines, on cargo friendly schedule, shorter lead times for delivery, less dwell at airports 2.Ability to manage supply chain more effectively through process control and handling at airports 3.Lower cost operations base than existing today in major airports 4.“Partner” airlines can pass along cost benefits 5.Ability to complete with integrators in process control will add competitive edge to airline/forwarder partnerships

10 The Benefits: For all, but especially needed by our industry! 1.Savings on landing fees, ramp & warehousing, maintenance, crew costs, fuel, general overheads. 2.Improved utilization of most expensive asset, aircraft - Lower costs through less block hours required for taxi, waiting times for take off or landing. - No night bans means more time in the air, less on the ground, better utilization and lower unit costs. - Competitive services for ground, ramp and fuel means lower costs. - Less time on the ground, more in the air, more chance of for profits! For Airlines:

11 The Benefits are for all parties Local Authorities: 1.Economic Development around airport will create employment and tax revenues, from airlines and ancillary service providers 2.Reliable and competitive air services attract industrial development in clean industries such as logistics and distribution. 3.Underutilized, but geographically well located facilities will develop if right steps are taken

12 Conclusion If the clients truly want all cargo airlines to survive as a hedge against passenger driven capacity constraints and crisis management, the time is slowly running out. Global alliances in passenger airlines will be the death of all cargo airlines unless USP’s can be secured and lower costs achieved. Can all cargo airlines survive, yes they can! The market will ensure that in light of upcoming legislation on security and environmental pressures at major passenger hubs, change will be accepted. Authorities must look at tax incentives, lower cost facilities and where needed, infrastructure development as a means to attract all cargo airlines and retain global competitiveness. All cargo airlines are able to go where industrial development dictates unlike passenger services, so it is the authorities to decide based on their economic development plans. Airlines will go where our clients, the forwarders, can guarantee us a profitable return on investment. Change process requires mutual understanding, are we up to the challenge?

13 THANK YOU