Episode Transcript
[00:00:00] Speaker A: We have gotten into a period of history now where a flashpoint could emerge almost from anywhere.
[00:00:06] Speaker B: This seems to be peak for some industries the whole year round.
[00:00:09] Speaker A: Yields are elevated well over last year, but it's primarily because of fuel.
[00:00:14] Speaker C: Another thing to watch is the growth of the AI infrastructure, semiconductors.
[00:00:18] Speaker B: Do I think it's going to be a traditional peak and we're going to see a surge? No, I don't.
[00:00:22] Speaker D: If I was you, I'd make sure your cargo was definitely insured. Triple check.
[00:00:26] Speaker E: And the third part is something that is not new, but it's the big unknown, right? Geopolitics.
[00:00:30] Speaker A: And we probably talk about it too much. I actually hate the word hyperscaler.
[00:00:43] Speaker D: Hello and welcome to Air Cargo Unpacked, a Freight Buyers Club production. I'm Mike King and with me as always is Neil Jones Shah.
[00:00:53] Speaker A: Thanks, Mike.
Coming up as always, the Neil Wilson Attack Index casts his eagle eye over the latest rate moves. And we'll be looking at the warning signs that soaring fuel bills are starting to hurt our industry.
[00:01:06] Speaker D: And that's not the only pressure. In fact, there's many, many, many disruptors out there at the moment. Airports are under attack in the Middle East. Ships are being sunk in the Strait of Hormuz. We've got port congestion in Asia hitting supply chains and creating new opportunities for air cargo. We're also going to hear today from some of the industry's leading figures on how peak season is shaping up and what to watch in 2027. And there's a new freighter on the market, so we'll have a little chat about that. But, well, the big story really, it's fuel. But there's two elements to this. I'm going to come back to that, Neil, because I think we've got to do peak season first.
I think that gives us the right business perspective before we get into some of the challenges people are facing. So just to get us started, from your experience, how important is the fourth quarter to forwarders, to shippers, to everyone else in this industry? How do you plan for it? Where are the profits? Where are the stresses? And how do you tell a good peak from a bad one?
[00:02:10] Speaker A: It's a good question. You know, Mike and I would say in the good old days of yore, and by that I mean pre Covid, peak season used to be sort of important.
You know, you would gear up for the fourth quarter, everybody would gear up for Christmas. This was pre E Commerce. Right. If you go back, remember pre E Commerce started booming post that. So peak season used to be important. And the way you planned for it, the way you negotiated the rates that the capacity you got access to in the last four months of the year sort of dictated how your year would turn out. We've for all intents and purposes thrown that out the window. You know, over the past several years. All year tends to be peak in, in some markets and in many other trade lanes there are many peaks all through the year.
[00:02:58] Speaker F: Right.
[00:02:58] Speaker A: And so there is less dependence on Q4 today than, than there has been. It is very important that carriers sort of have a very diversified supply strategy heading for the year. This isn't about peak season, it's for the year. And you have to have the right mix of spot versus bsa, long term procured capacity versus short term. This mix is really, really important to making sure that you have sort of stable earnings and profitability through the year. Carriers are not into making money in two months and losing money in 10 months. We just, that cycle has been broken and it's a really recipe for potentially for disaster. Right. If you get it wrong, I would say the exception to that is, is that if you have long term freighter contracts, right, you've entered into a five year, you know, ACMI lease with an Atlas or somebody like that, you're going to make hay in the fourth quarter, right. Because you know, you got pricing that is probably at 30 to 35% of market yields during the time of the year when prices tend to be the highest.
And so there is an opportunity there clearly if you have that sort of capacity to make quite a bit of margin during periods like this. But overall you got to balance it through the year. And this sort of dependence on fourth quarter has really been muted from the
[00:04:20] Speaker D: shipper's point of view, Neil as well. I guess you flip that round. So it's about trying to understand what inventory you're going to need and making sure you've got the capacity.
[00:04:31] Speaker A: Absolutely. And shippers now don't just rely on Christmas season to make their year right. And as a lot of the, a lot of the big shippers, you know, they're publicly traded companies, they can't tell their stakeholders, you know, we lose money for 10 months and make it in two months, you know, so everybody's sort of year is more balanced now I think than ever before. E Commerce has played a big role there. But just people's shopping and buying patterns have changed a bit. So I think just like, you know, the, the industry has adjusted, they've adjusted because shippers have adjusted. Right. And their whole business is different. And less dependent on three weeks of the year, you know, November to early December.
[00:05:12] Speaker D: Thanks, Neil. I've been traveling a fair bit the last few weeks.
Not all of it for work, a bit of tuk tuking in Cambodia.
Message me if you want to know more.
Maybe we can flip up a picture of that here. But I was over in Liege, I was over in Singapore and I was asking people wherever I went about what their views were on or what their expectations were on the Q4 peak season. So let's have a listen some of those people. First up is Elaine Lowe, Area Managing Director, Southeast Asia at maers. Then we've got Peter Kerrin, CEO of Magna Aviation. And finally Henk Venema, Global head of Air Freight at DHL Global Forwarding. To be honest, this year's peak season
[00:05:51] Speaker B: is a little bit hard to predict when it's peak and when it's not peak because it seems to be peak for some industries the whole year round because of all the changes and disruptions going on. And do I think it's going to be a traditional peak and we're going to see a surge? No, I don't think so. I think what we're seeing, I will say though, over the past week or so, just on ad hoc flying, we've secured probably 18 to 20 flights into October. That's a good sign. But normally that's booked up in August. We're holding off seeing what capacity was going to do, seeing what their own volumes are going to be like. But it's shown a small sprout of life.
[00:06:24] Speaker E: I don't think we can talk about a traditional peak season anymore. The traditional peak was basically China driven, China to us, China to Europe. Obviously with all the things that have changed in the industry, it's more scattered on certain corridors. It will be extremely busy, but it was already busy there the whole year. It will just add a little bit more pressure on other corridors. We're looking at it more, I would say, relaxed. I mean, if there's going to be a big peak, it's going to be on certain corridors and it's going to be in some cases also capacity driven.
[00:06:49] Speaker D: Yeah, some interesting views there. I've also caught up, Neil, with an old friend of yours, Simon Milne, CEO of Solid Freight Services based over in New York.
He passed me a few words of wisdom. His take at the moment on the market is the US is really strong and essentially South America isn't as strong as he was expecting. So what that means is Asia, South America, demand is down, rates about the Same as Asia, Chicago. But carriers are much preferring to fly into the U.S. miami to Columbia has too much capacity heading and Chile has been hit by bad weather which puts the Ailey cherry crop for China at risk. What's your thinking Neil and what are you hearing about there about how the peak season's going so far this year?
[00:07:31] Speaker A: Good old Simon. Good to good to hear his views on the market. And I would largely sort of agree with some of the comments he made. I think peak season is shaping up like a lot of peak seasons are. They're winners and losers, right? Some trade lanes do better than others. And then you get some macroeconomic weather events and all that that throw a twist in to things like the Chile cherry season, right? That's typically something carriers gear up for a year that how are they going to get the capacity in the Chile routing planes back to Asia and then bringing traffic back. So that does throw networks a bit into flux. But I think overall, I think the peak season's decent. We've started to see the data volumes are up quite significantly in September, so things are starting to roll. Yields aren't moving that much. I mean yields are elevated well over last year, but it's primarily because of fuel and we're going to get to that topic in a second. But demand seems to be, seems to be okay. I think there's some big drivers, right, Hyperscalers, we can talk about that a little bit more. But I mean, Jesus, I mean you talk about volume, I mean, you know those guys are taking every scrap capacity they get their hands on.
[00:08:44] Speaker D: That's a big change this year. Without a doubt.
[00:08:47] Speaker A: Everybody brings this up, of course, and we probably talk about it too much. I actually hate the word hyperscaler. Maybe I'll say something, I'll use a different word going forward, but they are fueling, they're priming the pump, right? And then you've got things like GLP1s and you know all of these things, right, you know, that are, that are pushing demand, keeping airplanes full and also keeping the freighter operators very, very busy. This isn't stuff that just get nickel and dimed into belly, right into the belly cargo. You, you, you need a lot of lift for this. You know these shipments come hundred ton increment. So it's, it's been a boon I think for the freighter carriers. But overall I think peak season's okay. I know I've been a little long winded here. Big season's okay. Some trade lanes much better than others and that opens up opportunities as well. If you have fewer freighters flying sort of Asia through the US Into South America, it opens up more opportunity for carriers in Miami to take that traffic south and you can split it up between two different carriers who can both benefit. E Commerce volume's still pretty strong in South America, even though traditional freight might be a little weaker.
So I think overall.
[00:09:56] Speaker D: Okay, thanks, Neil. Always opportunity for those who are nimble of foot.
Let's have a look at how this all looks in terms of freight rates. I caught up with Neil Wilson, editor of TAC Index, the calculating agent for the Baltic air freight indices to take us through the latest numbers.
China's factory shutdowns of Golden Week, the start of October tend to hit both ocean and air volumes.
So I started by asking Neil where the main global index stands now just after Golden Week, what it's telling us as we hit the traditional peak season, as we should probably refer to it.
[00:10:37] Speaker F: So the bioo, which is our global composite if you like, average of outbounds weighted, it did show a slight drop in the latest week, which was the golden week period, which is not unusual. Exactly, as you say, factor shutdowns. And there's less volume for a short period, but it shows that rates are still pretty firm. They're 24.3% up year on year as we enter the traditional peak season period for air cargo, which is in the run up to Thanksgiving in the US And Christmas in Europe.
So the signs are, I think that anecdotally capacity is pretty tight as we go into this peak season. Apparently E Commerce players have mainly booked their volumes going forward. Their space and product launches have. But some of the hyperscalers which have been big factor in the market recently have not yet done so. So the potential is for rates to spike further from here. And that's before we start talking about the impact of jet fuel, which I think we'll get to later.
[00:11:37] Speaker D: Yeah, we'll definitely be coming to that.
Okay. But last month we looked at how China to Europe has like China to the US since the EU essentially ended de minimis exemptions on 1 July introduced this new three euro regime for those types, low value shipments. But you found an even sharper way of illustrating this out of Hong Kong.
[00:11:58] Speaker G: Yeah.
[00:11:58] Speaker F: So we looked previously at the China Europe rates overall and I think just look at the most important lane, Hong Kong. Hong Kong US vs Hong Kong Europe will really illustrate this. And Hong Kong being the biggest airport in the world by cargo volume, so very important.
So coming to it, Hong Kong US is currently at 31.1% year on year. So pretty strong. In fact, it's as high or higher already than the previous two peak seasons as you can see on the chart there.
Whereas when you turn to Hong Kong Europe, it's only at 12.2% year on year. And that's despite what we think is about a close to 30% drop in traffic and volumes since July when that EU de minimis change came in.
And as I think Neil Jones Shah said on the podcast last month, the market had reacted pretty quickly by cutting capacity with freighters being shifted to other lanes. There was also some disruption because of cancellations through the Middle east because of problems there. And yet still the market's much, much weaker Asia Europe than it is Asia US on transpac and Interasia as well.
[00:13:09] Speaker D: There's been some talk of Asian cargo moving through Europe on its way to the us. This is definitely something we've covered on this podcast before. I mean, the US really keen on making sure this can't happen, but it doesn't mean it isn't happening. Is there any sign of this in the transatlantic numbers?
[00:13:27] Speaker F: Well, the numbers are strong and I think again we've been keeping an eye on this chart last couple of months. And if you look at Europe us it's a very cyclical market. Typically it has a pronounced peak season period and a quiet period through the summer when there's more passenger volume and so there's more belly hole capacity.
It's very cyclical, but it's really been rising quite sharply already. And it has, you know, compared with the global average 24%, it's currently at 48.9% up year on year. That's, that's really quite strong, you know, so transatlantic is strong. Whether that's to do with some pass through trade, you know, people talk about it, you know, who knows. But anecdotally, yes, then Europe China is the other one we were looking at. So we, we talked just now about how the China Europe or Asia Europe volumes had dropped and the market was pretty weak. But when you look at it the other way, as I think we touched on very briefly last month, Europe China is looking very strong and continuing to rise. It's not really typically a cyclical market, doesn't really have a typical peak season because it's just the traffic flowing back the other way. But if there's a 30% cut in capacity, Asia Europe, then maybe it has an effect the other way around. And you can see it in the Europe China rates currently at 45.6% up year on year, again, much more than the global average.
[00:14:49] Speaker D: And on those costs, never good for airlines or anyone in transport. Brent crude oil has been settled at around US$100 for much of the last month. Not a great thing for jet fuel and carriers indeed.
[00:15:04] Speaker F: So obviously we keep an eye on this very closely. The jet fuel price has continued to edge up, so it's not just the crude oil. So there's a crack spread as well. And there's been the hit on refining capacity in places like Russia as well as places in the Middle east and the disruption in getting the crude products, the jet fuel and the diesel out. And jet fuel was up another 3% in the latest week.
The latest one to this recording was to 9 October on the IATA jet Fuel price monitor, and that leaves it 111% up year on year. Now, obviously, as we said before, jet fuel is only maybe about a third of the total cost of running the business. It depends on the efficiency of the planes.
The more fuel efficient planes last, less fuel efficient planes more. And so this probably knocks out, as I think again, Neil Jones Shah said last month, the profitability of some of the less fuel efficient planes. But it also puts pressure on a hard floor under rates. As long as that situation continues. With peak season coming already, the market's looking pretty tight.
[00:16:12] Speaker D: Neil Wilson, thanks as always.
[00:16:14] Speaker F: Thank you again, Mike.
[00:16:17] Speaker D: So everyone where we are on rates is around about where we'd expect them to be for peak season, pretty much as Neil predicted, but actually lower than earlier this year. Obviously, though, this is due to what happened earlier this year, which of course was conflict in the Middle east, which despite claims about Ukraine from the White House, is also why all our fuel bills are so high. Mr. Wilson talked about how high jet fuel prices are right now.
So, Neil, how is all of this impacting air cargo at the moment?
[00:16:50] Speaker A: Well, let's talk a little bit broadly how it's impacting the industry and then it all flows, you know, and impacts air cargo as well. And yeah, I went back, Mike and I perused through our scripts and all that for previous podcasts, and I think we've talked about fuel every month since February.
[00:17:08] Speaker D: It's been impossible not to.
[00:17:11] Speaker A: Yeah, Every time we say, well, we probably might be over it, things are moderating and maybe we won't have to talk about it anymore. And here you go. I mean, this past month has been nuts, right? We've seen it go from sort of the low to mid-70s, you know, to 95 on WTI, well over 100 on Brent the Middle east is, is hotter than ever in terms of conflict. The conflict is spreading. We see the other choke point now threatened with the Houthi, Saudi Arabia conflict, you know, really flaring up. And now the attacks are not even, and Hormuz are happening up the Gulf, you know, and I know we'll talk about that a little bit later. But overall you start to see the impact that this additional fuel expense that people had predicted will have leveled off now starting to come through in earnings. Delta was one of the first to report very, very strong earnings, very strong revenue growth. I'm going to talk about that in a second. But you know, fuel is expected to be 6 billion more than they anticipated on the year, even though they had factored in quite a bit in the first half. And it's something that you have to overcome on the revenue line and that's not an easy thing to do. And I think what we're going to see as earnings come out from carriers is that there's going to be a tale of two cities here. If you have premium revenue, if the pointy nose of the airplane is where you generate 40, 50% of your revenue, you're going to be okay. I had a stunning statistic is that the 40% of Americans have become $40 trillion richer in the past five years.
Wrap your brain around that number. That's so it's crazy. These people are resilient, sort of inelastic demand, okay. And they're paying more. Air ticket prices are up 22, 23%.
Okay? These are big jumps. And they're going to go up again over the coming few months.
Still not enough to offset all of the fuel, but, but a lot of it. But carriers that have a premium sort of thing, the Deltas, United's in the U.S.
you know, you're going to see Lufthansa, IAG, Air France, KLM, Cathay, Singapore. If you have a big premium revenue component, you're going to weather the storm, you're going to be okay because that's demand is inelastic if you are dependent on the back of the airplane. If you have very elastic demand, very price conscious travelers, this is going to hurt. And we saw Spirit go out of business. There are many more. I think Airbaltic filed for bankruptcy. I mean there are many, many more carriers are going to go under if this stays sustained. They're all going to be sort of in the low cost sort of model. I don't see any legacy carrier going out of business.
[00:19:56] Speaker D: But you know, there's still belly hold Implications, right?
[00:19:59] Speaker A: Absolutely. I mean all of these have belly hold implications. Now a lot of these are narrow body quick turn operations where cargo isn't a big piece of their, of their revenue. But you will start to see some of even the lower cost long haul operators probably get into trouble and at a minimum start to cut their network. Right. You just got to cut all the non profitable flying and there are a lot of, you know, legacy carriers that are vulnerable to this fuel bill. So I think every month it continues, it is putting more carriers in jeopardy of not being able to climb out of what is a pretty significant nosedive for several of them. And then the other carriers will be just fine and will be will weather the storm. And in fact on the other side of it they may keep a lot of this yield that they have. They've been able to push pricing up. When fuel falls, they'll probably keep a lot of it because they've learned that a lot of their customers are pretty inelastic due to pricing. But let's see how this all still fresh, you know, 45 days of much higher pricing. Let's see how this plays out. But if, if we're talking about this again in January, I will, I am certain that we will be talking about more bankruptcies.
[00:21:10] Speaker D: Yeah, well, well let's, I think we might be talking about this in January but I, I want to come to the midterms a minute because I think that that could be the turning point on how all of this plays out through to January. But I just want to zoom in a little bit if I might on what's going on in the Middle east because I think sometimes it doesn't always make all the news but for our industry it couldn't be more important.
Just a few things I'll throw out there. Riyadh's King Khalid International.
It was struck four times in five days earlier this month by the Houthis. Hundreds injured, scores killed. World ACD data showed that international outbound cargo capacity would drop like a third in a day, something like that. At sea as well, things aren't any better. Singapore flight container ship GFS Pride was hit by a projectile in the Strait of Hormut on 13 October and sank. All 21 crew got off safely. The GFS Giselle and other container ship was also hit the next day. There's all sorts of implications and I just want to say something to anyone who's got cargo going through the Red Sea. I'll put up a graph here, what you can see here from BIMCORP is we're seeing a lot more cargo on ships going through the Red Sea. Now I was over talking to insurers and I know container lines are doing all they can to make sure these vessels are safe and your cargo is safe, but if I was you, I'd make sure your cargo is definitely insured. Triple check. Because at the moment the Houthis are simply choosing not to attack these ships. There's, I spoke to a load of insurers. They said there's not really any change in terms of how they view risk in the Red Sea and up to Suez Canal. So for those seafarers and for that cargo going through there, we're talking about a flip of a switch. And all of this looks very different and hopefully it won't. But really the Houthis are deciding not to attack these ships, but their allies are attacking ships in Hormuz. So you can see what the potential danger is.
There's a whole load, bunch of knock ons for air cargo as well. We've got a whole separate from the Middle east here. We've got a really big delays over in Asia. Port congestion tying up about 8% of the world's container fleet. Rebecca Jeffrey, Air Cargo News reports for to suspect that congestion and tariff uncertainty to push more cargo into air as the quarter goes on. There's a lot of things that are up in the air there, Neil, in terms of demand for air cargo for charters. Isn't there in the next few months even?
[00:23:31] Speaker A: Yeah. And typically, Mike, everything you talked about, when things are up in the air, when travel by sea is continuing to be very risky, typically spells good times for air cargo because you just need a little bit of sea to air conversion. Right. To really turn things upside down and really put a lot of cargo potentially on airplanes. The issue with this sort of crisis is that the airspace is getting constricted as well.
Right. So it's not just the threat to the, to the ocean.
Saudi Arabia. The airspace over Saudi Arabia is effectively shut down. Most crews aren't transiting Saudi Arabia. That used to be the big point between Asia and the US because you didn't want to fly over Afghanistan, didn't want to fly over Iraq or Iran or Syria. How do you get there? Right. I mean, where are you going to fly now? Now there's like this thin corridor on the Afghani Syrian border and all of that that some crews are taking, but it's a narrow corridor and you can't fly push everybody through there. So I do think that it's Putting pressure clearly on, on Asia, Europe. Saudi Arabia itself is not a big transshipment hub. You know, it's not Dubai or Doha. It's not.
So just shutting down Riyadh and places like that aren't going to have an impact on, on, on transshipments and volume that much. But it's the broader sort of impact on the region and on air traffic control over the region. Right. That, that really could have a.
And make that conversion of sea to air not as impactful as it was, just because air capacity may also be quite limited, particularly in this corridor. But overall, you know, disruptions on the ocean mean good times for air cargo. And I suspect that air freight will continue to benefit from this. Even if they can't capture it all, they'll be able to capture some of it and maybe the yields, you know, we'll head a little bit higher and so there'll be a little bit of a windfall there.
[00:25:34] Speaker D: Neil, US consumers are so important to all of these freight markets. US politics, it's looming very, very large.
Higher fuel prices aren't playing well ahead of the midterms on the 3rd of November.
Iran stepping up tax, its attacks ahead of those, it would seem, according to cnn. Anyway, what's your read on this? How much do the midterms matter for this administration's ability to keep setting trade policy and tariffs in terms of what this means for US economic sentiment more broadly as well as the international trading environment?
[00:26:08] Speaker A: Yeah, really, it's a big question.
You struck a bit of a nerve and I'm going to be very careful in how I respond. But look, the midterms are critically important for many reasons.
First and foremost, you want these to go off without a hitch because there'll be a lot of issues if they don't. So I'll just make that one comment. You know, I think voters here in the US are very disgruntled.
They are very upset about the inflation overall at the gas pump primarily. But you saw the U.S. latest inflation print was up significantly 3.7%. You know, we were down to like 2.2, 2.3.
[00:26:49] Speaker F: Right.
[00:26:50] Speaker A: So this has really started to move north and it's going to continue to move in that direction.
It is going to be, I think, one of the most energized elections, midterm elections that we've seen. If you look at early voting and all that, people are voting as if it's a presidential election, which typically gets 35, 40% more participation than a midterm. Lots of opportunities here for if you're a Democrat to pick up a number of seats, maybe flip the House and the Senate. We'll see how it all plays out. Polls have tended to be wrong in the last few election cycles, so I wouldn't put a lot of faith in them. But people are disgruntled, people are upset, and it's going to depend on which voters are more energized. But in the scenario that this administration loses the House and the Senate, they will effectively have handcuffs on them, right? They won't be able to get legislation through, they won't be able to confirm appointees, they won't be able to do a lot of things and potentially could be under subpoena for the next two years, you know, which could keep them very busy. So we'll have to see how all it plays out. None of this is good for the American people.
I think you want government to function. I think we're going to get government bottlenecked, which is what will happen. But sometimes doing nothing is better than doing harm.
And so, you know, you, you have to figure out what's the best alternative to here, even though even the best ain't great.
[00:28:23] Speaker D: Next week on the Freight Buyers Club, I'll just mention here I'll be speaking to Bill Cassidy at Journal of Commerce and the fantastic Dean Croker DAT to get a look inside that domestic trucking market and domestic shipping market and try and get a feel for how that affects international buyers at the moment. But I'm sure we'll be talking an awful lot at the cost of diesel at the pump right now during that discussion. And I just want to give it a quick plug here. A year ago on the Freight Buyer Club, we asked whether global trade was entering an era of chaos. In an episode last week, we looked in detail at many of the regulations and rule changes affecting people in air cargo. We cover the US's new stacked tariff regime, the EU's flat three euro duty on cheap parcels, US Customs paging importer records, those, all of these rule changes, they're all coming faster and faster, it seems.
It's another one of those big disruptors on the horizons for everyone who's listening to this podcast. So if you want some insight on that, I'll put a link in the notes at the end of this video. We don't really have the opportunity to get into the weeds of those sorts of regulations on this podcast, but do check it out. Now, looking forward, I've asked a fair few people where they think the market is heading in 2027 and what could drive it or spook it?
So a few thoughts from those interviews. First up is Peter Schulten of Air One, then Stephen Polman, Swissport's global head of cargo, and then once more DHL's Hank Venema.
[00:29:47] Speaker C: Well, I think a big trend in 27 air cargo is I think because E commerce is a massive commodity in the nowadays cargo scene. What is going to happen? What we've seen in the US after the de minimis, the demand recovered. Now the question is what will happen with the European? Will that follow the same trend or will there be a permanent decline of that or in demand?
Another thing to watch is the growth of the AI infrastructure, semiconductors. So that's what we should be looking at.
[00:30:17] Speaker G: I think that for me the most important in the next few months and I'm going to call to one the whole E commerce situation, how is it going to develop because we have a new fee, an additional fee coming up in Europe as of November. But for me the most important one is a geopolitical situation. Do we finally see some a bit more peace and a more stability in the world? Because I think that's what we're going to need to really start seeing solid and strong growth again in the market.
[00:30:44] Speaker E: Probably a little bit more of the same, to be very honest. Shortages in semicon but also huge hyperscaler demand will be a driver in 2027. That's a fact, but nobody is speaking. And that's the second one about good old industrial. We are always focusing on the new stuff but actually the legacy shippers are out there. They're also growing their business and that is also a dominating factor to keep in mind. And the third part is something that is not new, but it's the big UNKN zone, right? Geopolitics. What will happen with the midterm elections in the us? What will happen in Russia, Ukraine? What will happen in the Middle East? Will there be another zone that is opening up that we don't even speak about today?
[00:31:17] Speaker D: Neil, geopolitics keeps coming off and it's Hank's big unknown that that stands out. If history is any guide, the next disruption could easily be a conflict nobody's talking about today.
So how do forwarders, shippers and carriers plan around what we already know, the known flashpoint. But how do they think about what new ones could emerge?
[00:31:38] Speaker A: Yeah, I mean, look, I think these guys and Hank especially said it well is that, you know, we, we have gotten into a period of history now where a flashpoint could emerge almost from Anywhere, Right. And issues get created where you didn't think there was one. And I think that, you know, we learned a lot of lessons over the years in terms of not having a single source for componentry, not being dependent on one trade lane. Diversification became the most used word ever in terms of diversifying your supply chain, your supplier base, your mix between air and ocean, all of those things. And you have to keep doing it because you can do a lot of scenario playing, right? In general, what if something happened in this region or that region, the specific conflict? I think it's a little bit hard to put your thumbs on it, but I think that continuing to just be aware that we are not in a stable environment and that you need to be resilient, but also have the team that can react, this is about how quickly can you react.
How sort of lazy are we about our supply chain rather than continually monitoring and being resilient. And I think we got a little bit lazy over the past pre Covid and we didn't think about it as much and we didn't staff these departments with the right people who can really step in and problem solve when they needed to. And that's what hurt a lot of companies. But I think we're just going to have to continue to do that and invest in the people and resources to give yourselves the ability to react and problem solve when problems arise and they can come from anywhere. I mean, honestly. And we've seen that now.
[00:33:31] Speaker D: Thank you, Neil. Let's finish on a positive. I think it's a positive anyway. Airbus A350F flew for the first time on the 29th of September.
Reports suggest Kalita Air is behind an order for eight of them. Boeing has also had good news. An FAA exemption to keep building the 777F despite new emissions rules.
Neil, what does this. Well, this new freighter, but this FAA ruling as well, what does it mean for capacity? Any relief on the capacity front?
[00:34:00] Speaker A: Yeah, I mean, you know, relief on the capacity front. It's early, right? I mean, you know, premature question.
It was great to see the airplane fly the A350. It's a beautiful. It's a beautiful machine. Really excited to see it in the air. And I think that whoever's ordered those are going to be very pleased with those airplanes. And as well as the 777 8F, I'm sure it's going to be great as well.
It's good to see progress there on the OEM side. Again, these are going to dribble in, you know, over the coming years. It's not like it's going to solve any capacity crisis and you're going to have a lot more capacity exiting, you know, before these are able to make up for it. And we mentioned the 747-400s are getting really long in the tooth.
A lot of them have to come out, the MD11s, obviously just a few flying now for FedEx. Those will have to be retired, you know, before all this replacement capacity comes in. But again, a bright spot, really nice, puts a smile on everybody's face seeing that aircraft take to the skies and hopefully deliveries in the not too distant future. So really nice idea to end on a positive note there, Mike.
[00:35:13] Speaker D: Thanks, Neil. Another positive note for anyone out there who's sick of listening to me droning on. I've been writing again. Nice to get back to do a bit of writing.
I'm in the latest Cargo and Airports and Airline Service magazine edited by the excellent Will Waters covering Asia Pacific. And I had a chat with Robert Van Der Weg, CEO of Mexican carrier Mass. Always pleasure to chat to Robert. So please check it out. Neil, what have you got in the diary?
[00:35:38] Speaker A: I've got teaca coming up and so that's in Miami. Should be a big show. I'm hearing a lot of folks are going to be showing up for that, so. And Miami beach is always, always fun at that time of the year. The temperatures cool down a little bit so you can actually enjoy the weather. So that's, that's what's happening in my near term schedule as, as well as a quick trip to Hong Kong next week. So, yeah, so it should be a busy month of travel for me, you know, to end the month of October.
Well, I wanted to thank this month's contributors. Elaine Lowe at Maersk, Peter Karen's at Ed Magna, Hank Venema at DHL Global Forwarding, Peter Skolton at Air1, Steven Polman's at Swissport, and Simon Milne at Solent Freight Services.
[00:36:22] Speaker D: Thank you, Neil. And that's us, guys. Thanks as ever to Neil Wilson, Tacindex and the Baltic Exchange for exclusive access to the best data in the business. Big shout out to Karen Ball for her brilliant production efforts. Next month we'll be joined by David Shepherd, MD, of IAG Cargo for more from the Freight Buyers Club. Subscribe wherever you get your podcasts and follow us on LinkedIn and YouTube. And if you like what we do, please share and comment. I'm Mike King.
[00:36:49] Speaker A: And I'm Neil Jones Shaw. See you next.
