Episode Transcript
[00:00:00] Speaker A: Hello and welcome to the Lodestar podcast. I'm your host, Charlotte Goldstone. I'm reporting to you now. Finally back in the UK after a very, very busy few days in Munich for transport, logistic and air cargo Europe. And that is putting it lightly. I think I racked up a total of about 75,000 steps over the three days. I need to plan my interviews better next time. I think I had one in Hall B6 and the next one was in Hall A1, and they're about four, four miles apart if you were there in Munich. You know exactly what I mean. It was very hectic, but I really, really enjoyed it. It was very interesting and really useful to have everyone from all across the supply chain, air, land and sea, all in one place. And I spoke to lots of different people, I recorded a few clips from the event and so I've put together a little compilation of what people were talking about. So if you couldn't make the event, don't worry because this is going to feel like you were there on the trade show floor. So, without further ado, let's get into the episode.
First, spoke to Maersk's global head of trade and customs consulting, Lars Carlson, and he was explaining the importance of getting the right codes when it comes to customs compliance. It all sounded very complicated. And here is what he said might be a consequence of getting the wrong code on your shipment.
[00:01:13] Speaker B: Well, first of all, it could be totally different tariff. So of course you could pay 20% in tax instead of zero.
Then secondly, it could be, there could be regulations on it. So one, there is a regulation on that you're not allowed even to export it or import it, or if you do that, you have to do fulfill other obligations. And if you don't do that, you're breaking the law, basically.
So there's a lot of things at stake if you have the right code or not the right code. And these are the things we work on every day. But it's also important because as I said, when it's getting more complicated and we hear now US administration as an example, they are signing deals, deals with countries they want to have a deal with eu, they have one with UK and so forth. That deal is really a small free trade agreement. What they're agreeing on is that we should have these and these tariffs on, but not on everything on some products, steel for instance, is very much more high tariff than extra tariffs right now. So when as an example, US now said they would have 30% on China, 30% in general, then if it's steel 55% because they have another 25% of steel which is now going up to 30.
So of course if you put that on the wrong code, you will get 20% or 30% or 0%.
[00:02:30] Speaker C: Not good.
[00:02:31] Speaker B: If they're supposed to be 55 and you get caught, you will not only have to pay that duty, but you also get penalized, maybe even not allowed to do the export into that market.
So it's dangerous.
[00:02:42] Speaker A: Janis Las Bruhn, chief cargo officer at Etihad Airways. You recently announced your summer freighter schedule. Which markets are you focusing on and where have you seen less demand?
[00:02:54] Speaker D: When you look at the recent evolution in term of demand and destination, we believe that China remains one of the main demand. That's why, I mean we continue to increase and we are just inserting a new freighter this week out of China. At the same time, Vietnam is a growing destination.
So this is the main increase of capacity we are doing in terms of freighter.
[00:03:20] Speaker A: And is this capacity coming out of China and Vietnam? Is this E Commerce?
[00:03:23] Speaker D: If you look out of Vietnam, it's not E Commerce, it's mostly high tech. When you look at China, it's a mix. We focus on E Commerce like everyone, but we never focus too much. We always keep a balance chair in terms of capacity for I mean the all type of cargo. Originally from forwarder on the top of E Commerce.
[00:03:44] Speaker A: Rolf Haben Jensen, CEO of Hapag Lloyd.
[00:03:46] Speaker E: The projections for the second half of this year, a lot of them are like 0% to 1% growth, whereas the first half of the year has been a lot bigger. Is that a worry for you? That volumes are just going to drop off?
[00:03:58] Speaker F: No. I don't know. Yeah, I mean I think everybody predicts that volumes are going to fall off a cliff. But I hear that prediction already since five years. Yeah. And of course, and it has never happened so far, but of course at some point in time we'll see quarters where there's not going to be such stellar growth. I personally would expect that in the second half it's going to be less growth and in the first half but in all honesty, the real reliable indicators that we have for that are very few.
[00:04:22] Speaker E: Something that keeps coming up is board is complaining that there are so many GRIs that are being implemented and that carriers kind of control the market and there's nothing they can do. What's your opinion on this?
[00:04:33] Speaker F: When I speak to them, they, they normally don't say that. Yeah, yeah. I think, you know, the reality is because this is all about the spot market.
The reality is the spot market these days also because everything that's happening on the geopolitical front is very volatile. And that means sometimes the rates go through the roof and sometimes they go down very quickly. We've also seen that, for example, when China and the US agreed this pause in the tariffs that especially the forwarders were placing a humongous amount of bookings with us to try and secure capacity. And of course that then has the effect that if there is huge demand and there's fixed supply, in the end the rates go up.
[00:05:14] Speaker E: And what are you seeing in terms of contracting at the moment? Are people a bit skeptical to take long term contracts in case they get booted off if the spot rates go higher?
[00:05:23] Speaker F: No, I think we've closed more contracts this year than we did last year and we've seen the contracting behavior fairly similar to 2024.
[00:05:31] Speaker A: Ashwin Bhatt, CEO of Lufthansa Cargo Lufthansa Cargo released some really great Q4 results. Do you expect to see the same results again this year?
[00:05:39] Speaker C: I can only talk about last year, but can also talk about this first quarter which was a good year. We did around 60 million EBIT profit plus 80 million something compared to last year.
And the numbers I know, but it's not yet for public consumption. But April and May look good. But cargo is always a short term business. It's unlike passengers. We don't have a booking curve of six months. It's for two weeks.
So we can only forecast what is going to happen in the next two weeks. So to forecast what will happen in 2025 is crystal balling and I would not like to do it short term. There will be disruption of what's happening in global trade, but in medium to long term, globalization will still continue.
Globalization is not dead, it's just changing. And if that is the case, if it's changing, every company who's a part of supply chain and part of global trade has to adapt. But whatever happens short term, we will need to take tactical decisions to manage that uncertainty.
But as Lufthansa Cargo, we are here for the long term. So we are focused on our medium to long term strategical goals which we have defined for ourselves.
[00:06:46] Speaker A: Roger Samway is Vice President of Commercial for American Airlines Cargo. The first half of the year has seen lots of external market shocks and uncertainty. So how has this impacted American Airlines demand levels and areas that you're seeing this demand?
[00:07:00] Speaker G: Well, in summary, it's been a great year so far. Probably better than we anticipated to be Honest, we've outperformed our expectations and we set at the beginning of the year volumes up single digit versus last year revenue. Similarly, what's changed is perhaps where some of that business is moving to and from. So we're seeing less volume moving across the Trans Pacific from China and Asia to the US Transatlantic is pretty strong and then a lot more volume into and out of Latin America. So that's kind of, that's been the market that seems to have benefited most over the last month or two. Honestly, I think there's a risk that volume is impacted in the second half of the year. So what we think we're seeing in the States right now is continued evidence of front loading. And so we're continuing to see customers import business into the US to try and get ahead of tariffs or ahead of increases in tariffs. And so inventory levels, you know, for a number of different product sectors are growing, particularly consumer products. And so the risk that brings if inventory levels grow and consumer spending doesn't keep pace and it isn't right now you reach a level where inventory levels are so high that either manufacturers don't have anywhere else to store goods or there's just too big of a risk of the cost of carrying those inventories is too high. And so the volume of goods, flow of goods into the US both ocean and air, slows down. And so you see a slowdown in volumes. And the question is, when does that happen and how quickly is that drop off?
[00:08:23] Speaker A: Edward Door VP of E Cargo Portfolio for Champ Cargo Systems where is the air cargo industry currently at with IATA's one record?
[00:08:31] Speaker H: It's very early days. It's going to take quite a long time to scale.
I think right now people are very reticent and confused. It's very technical. So what we're trying to do as well is provide a sandbox environment.
So a handler could take the sandbox, they could put their live data in it. They could, if there's another user in a sandbox, an airline, they could play with them and they could do something in parallel to what they're doing today, not affecting operations. And just get a feeling, how does all of this technology work? Because it isn't that simple, you know, with APIs. And so I describe it, it's like you've driven an automatic for 50 years and then you get in and there's a clutch and you're told to drive. So there's going to be a lot of change in IT systems in, in the way of working than we're used to.
[00:09:30] Speaker A: Mark Drusch, Chief Cargo Officer at Qatar.
[00:09:33] Speaker E: Airways what are you seeing in terms of contracting at the moment? I've heard that people won't go past like three months contract.
[00:09:39] Speaker I: It's so funny sometimes we're the one that doesn't want to go beyond six months and someone to go longer and we say no, no, no, we want to wait. So it all depends when and to whom you're speaking.
[00:09:51] Speaker E: And why is that? Why wouldn't you want a longer contract?
[00:09:53] Speaker I: I actually think after this is all resolved, I think there will be a very strong resurgence to catch up for what we've missed over the last 90, 120 days. It's not just China US that's put a crimp on everything. And I think once, once it gets settled, I think you'll see everything go back not only to normal, but there's that pent up demand that you'll have to satisfy.
[00:10:17] Speaker E: So you want people on the spot market for that. You don't want long?
[00:10:20] Speaker I: No, I want to see how it moves.
[00:10:22] Speaker A: Richard Fawson, CEO of cargolux what are.
[00:10:25] Speaker E: Forwarders asking for from Cargolux at the moment or just from airlines in general?
[00:10:31] Speaker J: I think they all want lower rates.
Okay. Because of the uncertainty that everybody faces at the end of the day. But at the same time I think they also understand the market and it's in everybody's interests that freighters continue to be sustainable, the operations of freighters, because if they were to disappear, it would be extremely difficult then for forwarders to satisfy the needs of their customers at the end of the day.
So no one is independent on their own.
Everybody is dependent on someone else on the logistics chain.
[00:11:11] Speaker E: Do you think that by securing long term block space agreements they can get these lower rates? Do you think that's.
[00:11:16] Speaker J: Well, that's the whole thing about a block space. You get a more favorable rate than coming at the period where you want capacity, but capacity is limited and then you're going to pay top dollar. And I think during the COVID period we were one of the few airlines that we kept our block space agreements in place. We did not say, sorry, we cancelling everything, we're giving you the notice in terms of the contracts. No, we kept to our word and we maintained the block space and the additional capacity we put in. Yes, that was at off rates but we honored all of our block space agreements and we do that now anyway.
[00:11:57] Speaker A: So there we have it. Transport, logistic and air cargo Europe are behind us for two years.
Thank you so much for joining me. I hope you enjoyed the episode and we will be back on Monday, as always, for a News in brief. I'll see you next time.
