Although used purely for its shock value, senior members of the IATA cargo team at the recent World Cargo Symposium in Rome took the wake-up call and elevated the awareness of the negative impact of ULD damage highon their work agenda for 2008.

Rightly so, ULD damage through inadequate handling and storage has reached totally unacceptable levels. Airlines are spending in excess of US$130 million a year repairing ULD damage. At the same time up to 5 per cent of the world's total ULD fleet is out of service at any point in time awaiting repair. At the same time damaged ULD are contributing to personnel injuries, damage to cargo, and damage to aircraft holds and loading systems.

This simply cannot go on, one can think of no other item of airline property where it would be so acceptable for such abuse to take place without any consequence against those responsible.

This abuse of ULD seems to have become so common that people take it for granted. ULD stacked two or three high raise no comment, the use of forklifts to move loaded ULD doesn't even raise an eyebrow, and the smashing of a ULD is treated as “ just one of those things,” something that happens in the line of duty, notto be taken seriously.

Requirements for the proper handling of ULD are laid out in the IATA airport handling manual, and other documents. Th ere is no secret here, no hidden agenda, just the total unwillingness by many parties in the ULD handling chain to pay sufficientattention to industry standards.

The offenders roll
Starting at the top airports simply do not take into account the need to increase ULD storage as they add new airlines and more flights, Asia is well populated with spectacular airports, both state and privately owned, but few pay no more than lip service to providing adequate space for ULD storage.

Next in the chain, ground handling companies. Insufficient and/or substandard dollies and other ULD transport and storage infrastructure is common across the region. If one recognises that ULD, empty or full, should never be sitting on the ground, nor should be stacked, then one quickly will recognise just how few ground handling operations achieve a reasonable standard. Up next are the cargo terminals.

Again with a few notable exceptions the vast majority are still highly dependent upon the use of forklifts to move full and empty ULD around and lack sufficient storagespace for loaded and empty ULD

And finally the freight forwarding community rarely has adequate facilities at off airport locations to store ULD in compliancewith IATA recommended practices.

Pity the poor ULD
What chance does a ULD stand today? Very very little indeed. Th e average ULD needs to be repaired every seven to eight months, some last just a few days between repairs. Annual costs for keeping just a single LD3 in condition is around US$ 350- 450. Further it's never anybody's fault, nobody comes forward to put their hand up and off er to pay – it all just happened.

Forklifts are clearly to blame for a lot of the damage but the reality is the forklift operator's are the real culprits here, a forklift in the hands of a bad or angry or tired – or all three – driver can result in some very extensive ULD damage.

Asia Pacifi c is one of the great growth markets for cargo and yet it contains some of the worst examples of inadequate ULD handling capability, it's time for airports, airlines, ground handlers, air cargo terminals, and freight forwarders to all get their act together to stop what amounts to vandalism, and start living up to their responsibilities in regards to ULD.

Attitudes need to change
Airlines need the industry to pay attention here. With current fuel costs threatening the very viability of the airline industry it is tragic to recognise that the current attitude towards ULD is preventing further weight reduction which could save theairlines millions of dollars.

As an example of this, every B747 freighter takes off carrying 3.6 tonnes of air cargo pallets, with improved handling of ULD's pallet weight could probably be reduced by between 25 and 50 per cent taking up to 1.8 tonnes off every747 freighter flight. Yet ridiculously, this remains a totally elusive dream under thecurrent circumstances, simply becauseULD are daily subjected to abusive treatment.

You have been warned, capital punishment for ULD damage may not be with us yet, or in the immediate future, if indeed ever, but most certainly the negative effects of the current abusive environment are with us now and need to stop immediately.

Bob Rogers is VP for Asia/Pacific at Nordisk, a major manufacturer and repairerof air cargo containers.

In the past, airlines were reluctant to outsource this function partly because they considered ULD management to be mission-critical to their operation and hesitated to allow others to handle it.

According to Ludwig Bertsch, chairman of the board of directors of Unitpool AG, a company that supplies and manages a global fleet of ULDs, airlines did not outsource ULD management partly because the actual cost of managing the ULD inventory was not transparent within most airlines and hence it was not necessarily perceived as a 'big ticket' savings item that could have a signifi cant immediate impact on the bottom line.

"This is also because ULD management is often spread across various functions and cost centres, so many costs are often forgotten or not considered," he adds. Peter Ahnert, director business development at Jettainer, another ULD management company, says that ULD outsourcing is becoming established as a true alternative to the traditional in-house model. He estimates that there are close to 90,000 ULDs which are already being managedby ULD outsourcing specialists.

While costs are a very important issue, qualitative and strategic advantages of outsourcing must be considered too when deciding about the future of airlines' ULD management, he says.

Two players, two approaches
While Jettainer and Unitpool are the two main players in the market which currently off er ULD management service to airlines, both businesses have fundamentally different business models.

Jettainer, a unit of Lufthansa Cargo, owns and manages the fleets on behalf of the airline, whereas Unitpool, as the only airline-independent ULD-outsourcing company, operates a joint ULD pool for its customers.

Bertsch explains that Unitpool's expertise and benefit to its customers lies in the synergies that the company can generate by overlapping the airlines' networks to optimise the number of units required at common stations. By doing so, airlines which would normally keep a high buff er stock to off set delays in unit turnaround, repair downtime, and equipment going out to third parties, could keep their buff er stock at a minimal level and also cut the unit numbers an airline needs to operate.

Expanding fleets = more ULDs
As many airlines are investing in larger and more economical aircraft, this means there will be a need to replenish ULD fleet and in some cases, major changes are required with additional capital expenditure. "Before more money is spent on assets (especially one that is so difficult to manage), the airlines are starting to take a closer look at the possibility to outsource ULD management," Ahnert says.

Th e International Air Transport Association (IATA), estimates that there is a global fleet of some 800,000 ULDs in operation today. Based on the ageing fleet and given that the majority of aircraft today use LD3 containers, and 88"/ 86" pallets with an average market value of €500-600 per unit, the global fleet would be worth somewhere in the area of €500 million.

Bertsch says considering an average 10-year life span and minimum average replacement value of US$1,000, airlines spend about US$80 million on ULD purchases per year, and an additional US$150 per ULD for repairs.

As to where ULD growThis coming from, Bertsch says it is primarily where airlines add wide-body aircraft, like China, India and the Middle East, for instance. Growth also comes from airlines increasing their aircraft utilisation and expanding their networks, as well as in the more mature airline markets, like Europe and North America.

Evolving requirements
Regarding the impact of the US security requirements on their business, both Jettainer and Unitpool say the US security regulations do not directly affect ULDs for the majority of carriers. But, Bertsch adds, there are some exceptions which require the use of solid door ULDs, and if this should become a requirement for all carriers, it would have a huge impact as most operators flying into the US do so with baggage bins that have curtains.

"If this happened, this would, in turn, create an opportunity for Unitpool as it would force carriers to evaluate their stock and alternatives," he says. Both Jettainer and Unitpool agree that there is a definite move toward "light" and composite ULDs due to the constant pressure on fuel cost and a desire to be perceived as environmentally friendly by lowering their carbon footprint. However, less obvious is the rising cost in aluminium which is pushing-up the price of new ULDsand the cost of repairs, Bertsch says.

He says there are three models on the market which Unitpool was considering as "light" alternatives and expected a decision to be made on one of them before the year end as a preferred product, but declined to elaborate further.

When asked how the rising fuel price impacted the ULD industry, Ahnert says that for ULD manufacturers, it has led to a run on lightweight containers. "In general, we expect airlines to demand a gradual switch to lighter ULDs, especially for fuel-intensive long-haul services," he adds.

According to Lufthansa Consulting, for some countries in Southern America and Africa ¨C like Sudan, for example ¨C more than 80 per cent of their total exports consist of fruit orflowers.

Other countries would like to become more engaged in the production of perishable products for export but for now lack adequate, competitively priced air cargo uplift capacities. However, the trend towards such production is, nonetheless, growing.

Market trends
Ram Menen, Emirates SkyCargo divisional senior vice president cargo, says the perishables market is growing for Emirates, as well as industry wide. "Th is is in keeping with the increasing demand worldwide for fresh foods all through the year," he says.

"Whereas previously most fruits and vegetables were seasonal, today you can buy strawberries, for example, from your supermarket all year round."Th ere is also a fast growing pharmaceuticals market segment of the perishables sector, he adds.

But it's not all coming up roses, as Niek van der Weide, executive vice president commercial of Cargo B Airlines says that while there is still a modest increase in perishable traffic on some routes from South America and Africa, sea freight is becoming a serious competitor, even for flowers.

Despite this he says there is still increasing movement of foodstuff s and African flowers from markets such as Zambia, Tanzania and in particular, Ethiopia.

Cargo B, which mainly flies flowers, is absolutely up-beat that more fruits today are now being transported by ocean shipping than previously in the markets that it serves.

"New techniques and faster ships can, in the future, become a bigger threat to air cargo," says van der Weide.

However, Robert van de Weg, senior vice-president, sales & marketing of Cargolux, sees it differently. He says the perishables market is still increasing, but does not see ocean carriers as competitors.

"It does not mean necessarily faster, as loading/unloading at already congested ports goes slower. Furthermore, we have understood from public information that certain shipping lines are actually reducing their speed in order to save fuel costs. But of course, sea is always an alternative," he says, adding that packing and temperature control becomes even more crucial during the longer voyage.

Perishable growth areas
Cargolux, which transports all kinds of perishables from flowers, vegetables, cheese, fish to meat, is seeing its new growth coming from Kenya. Th e airline is also eyeing Ethiopia and China as new markets for perishables.

Growth for Cargo B is still coming on routes from Johannesburg and Nairobi to Europe and from Ecuador and Colombia to Europe. Th e airline, which is seeing growth mainly from flowers, says Peru may become an option in the future as well. "We still see good opportunities from these areas to Europe with transit via Europe toother areas," says van der Weide.

Menen says Emirates is experiencing good growth in business flying fruit and vegetables from Africa. Th e airline operates freighters to Nairobi, Eldoret, Entebbe, Lilongwe, Johannesburg, Khartoum and Djibouti to cater to the perishables traffic from the region, on top of the belly-hold capacity the airline provides in wide-bodied passenger aircraft flights to the continent.

South America is also looking to be a promising market for Emirates. "We have also seen excellent perishable loads on our Sao Paulo flights since we launched the route six months ago. We transport a lot of Brazilian meat as well as hatchling eggs from Sao Paulo to the Middle East and onwards to Asia, mainly Japan and China," he says.

Environmental concerns
Both Cargolux and Cargo B say that the environmental concerns are not having signifi cant impact on their business despite the increasingly high media profile the issueof so-called 'food-miles' is getting.

"People talk easily, but changing real behavior is something else," says van de Weg. "More importantly, it is not clear if, for example, vegetables and flowers grown far away produce more carbon dioxide (CO₂) in comparison to production in green houses closer to the market." Menen says Emirates is undertaking a number of environmentally friendly initiatives ¨C within the airline and amongst the suppliers and manufacturing partners with whom it works ¨C to minimise the impact on the environment. Th ese include on-ground and in-air efforts.

At its home base in Dubai, Emirates has reduced vehicle movements around the airport and it already operates one of the world's youngest fleet, with an average age of 63 months. It continues to invest in new, technologically-advanced aircraft which produce fewer emissions.

Future growth for perishables
Asia is Emirates SkyCargo's biggest market in general and, in terms of perishables, the airline transports a great deal of such items, especially salmon, beans and other vegetables to Japan. In addition, the airline carries more perishables traffic during certain times of the year. For example, in the 2008 Chinese Lunar New Year a freighter was chartered to transport 42 tonnes of fresh produce from Bangkok to Hong Kong.

Cargolux sees Kenya as its largest market and in Asia, Thailand is the largest market for the airline for handling orchids, vegetables and fish. Th e airline believes that the China perishables market will grow in the near future as certain areas fi t flower production well.

Cargo B, on the other hand, sees its future growth from the in-bound flowers business from South America, and also flowers, vegetables and fruit from South Africa and Kenya. It estimates perishables contribute to 50-60 per cent of the airline's revenue.

Typical of the specialist airports is Vatry, which has had a 4,200 square metre perishables centre ever since it opened in 2000. The airport touts its rapid handling times, and easy trucking links to major European wholesale markets such as Rungis nearParis.

But, admits communications manager Laurent Delarue, the only regular user of the facility at present is Avient, a UK-based carrier that operates ten DC- 10 freighter flights a week from Lagos and other West and Central African destinations. Still, he insists that the perishables centre is a good promotional tool for Vatry. "Not all airports have this, so it is a good way to attract carriers,"he says.

Mixed success for Vitoria Another all-cargo airport that has promoted its perishables facilities heavily is Vitoria in northern Spain. Its 4,000 sq metre temperature-controlled terminal handles around 28,000 tonnes of perishables, mainly fish, a year ¨C but these daysonly 4,000 tonnes of that is air freight.

In the early 2000s the figure was much higher, with Vitoria a regular stop for B747 freighter operators such Cargolux, British Airways, and South African Airways on the way back from Africa and South America. VIA, the promotion agency for the airport, also tried to develop other charter traffic from Canada and Africa.

But, admits Enrique Gutierrez, managing director of VIA, this traffic has now largely dried up, with a weekly MD-11F flight by Air Canada being the only survivor. "A lot of fish is now fl own in passenger bellies to Central European hubs and then trucked back here," he says. "Belly cargo can off er lower rates, and perishables exporters are happier to split their loads between several passenger flights than risk it all on one freighter."

Schiphol sees sector growth
Th is trend has also been seen by Kuehne& Nagel, one of the few global forwarders to take a serious interest in the perishables business. Late last year it opened a new 3,500 square metre facility at Amsterdam¡¯s Schiphol airport, which as well as servicing other specialist cargoes, gives it five times more space than previously for processing perishables imports.

Edwin Stuik, perishables sales manager for Kuehne& Nagel in the Netherlands, says the business is growing across the board, and is regarded as a strategic focus for K&N in its drive to be a global player in all freight sectors.

He too says belly cargo has become increasingly important for perishables in recent years, simply because more belly capacity is available from the key perishables exporting markets. However, he says there is still a big capacity gap for freighters to fi ll, pointing to nearby Maastricht which attracts perishables flights from Cargolux, and the B747F flights of Belgian start-up Cargo B to Johannesburg, Nairobi and Latacunga in Ecuador as evidence.

Stuik also says that Amsterdam¡¯s dominance in perishables is undiminished. "It is to do with the expertise of the airlines here, and also of the forwarders," he says. "We of course also have the flower auctions, and in general this is a really good transit point for perishables."

Tough decision for Hahn
All of this leaves an investor at Hahn airport in Germany wondering if it is worth investing in a perishables centre or not. The airport has recently become the European hub for Egypt Air, which has 7-10 A300 flights a week into the airport with flowers, vegetables and seafood. Qantas also flies meat into Hahn, while Air Armenia imports shellfish.

Udo Preissner, director sales and marketing for the airport, says it would be happy to have a perishables centre to accommodate this traffic, but says the private investor which would build the terminal is still researching the market to see if it would be viable.

"We already provide a good service for perishables through our existing facilities," he points out. "We have rapid handling and it is very easy to transport food shipmentsquickly onwards."

For the pharmaceutical and biotech sector, the increasing value of individual products in terms of development and replacement cost, as well as their intrinsic value, is also placing a further element of potential 'risk' that all participants within the supply chain must adequately deal with. In addition, the continuing threat posed by counterfeiting is causing manufacturers to constantly review the distribution-to-market processof their products.

There are of course many 'guidelines' and 'recommendations' for the safe transportation of temperature sensitive commodities, but what is becoming increasingly clear is that consumer safety (particularly as seen by the WHO, FDA,& EU) is placing clear responsibility on producers and manufacturers for effective management of their cold chain.

Manufacturing growth & globalisation
A recent assessment of the global pharmaceutical market by Ernst & Young forecast that it will grow to US$897 billion by 2011, equivalent to a cumulative annual growth rate of 6.9 per cent. Furthermore, strong growth in the 10 European markets commodities, but what is becoming increasingly clear is that consumer safety (particularly as seen by the WHO, FDA,& EU) is placing clear responsibility on producers and manufacturers for effective management of their cold chain.

Manufacturing growth & globalisation
A recent assessment of the global pharmaceutical market by Ernst & Young forecast that it will grow to US$897 billion by 2011, equivalent to a cumulative annual growth rate of 6.9 per cent. Furthermore, strong growth in the 10 European markets that joined the European Union in 2004 will help boost European sales over the next fi ve years.

The market also remains polarised between 'big' and 'small' organisations with the top 10 companies accounting for almost 75 per cent of total global sales. Furthermore, mergers, acquisitions and partnerships have been a clear strategic growth tactic within this sector and are likely to remain so.

Growth of this nature as well as other market factors means the pharmaceutical industry faces continued pressure upon its cost structure - perhaps not surprising given the huge investment in the development of new products and the need to maximise the return on that investment before patent expiry. Outsourcing production to contract manufacturers is a signifi cant part of many major pharmaceutical companies' strategy.

The most 'popular' regions for outsourcing include India - where there are more FDA approved sites than any country outside the USA - China and increasingly, Eastern Europe. Asia-Pacifi c is now the third largest production regionbehind the US and Europe.

Compare this to the top regions for sale of pharmaceutical products - North America followed by Japan and Europe - and the logistical challenges of efficient distribution to distant markets, whilst maintaining product integrity and efficacy become much more apparent.

Transportation and distribution of temperature sensitive products - and across an increasingly wide thermal span - will therefore need to remain at the very top of the agenda, particularly since it is forecast that by 2011, the market for contract manufacturing will have grown to US$45 billion.

Air cargo connection
For pharmaceutical products distributed by air, there is still too much mystique about how the air cargo world operates, particularly its complex process and procedures which need to be de-mystified, especially given the pressure upon manufacturers to be using a qualified shipping solution. Th is was clear from the recent work by the International Air Transport Association (IATA) when it formed an industry-wide committee to devise a new set of regulations specific to the pharmaceutical sector.

Manufacturers showed considerable misunderstanding about how airlines operate, particularly in areas such as outsourced ground handling and the potential for increased risk. For airlines, there were some clear and wrong assumptions about the temperature sensitivity of specific products that needed to be addressed.

Through its Pharmaceutical Cold Chain Interest Group (PCCIG) the Parenteral Drug Association (PDA), has taken the initiative to create a document known as TR39 which sets out to clarify the responsibilities of supply chain participants. Rapidly gaining ground as a leading reference, its aim is to harmonise the many global, country and state specific guidelines for distribution.

Shipment value & risk
One of the key drivers for the use of air cargo over other modes is naturally the weight to value ratio of shipped goods. For the pharmaceutical and biotech sector where product research and clinical trial phases take an average 7-8 years to complete, the development cost of these products is extremely high. In addition, a natural desire for production cost savings, together with the recent spate of merger and acquisitions within the pharmaceutical industry, can lead to larger shipment sizes and it is not unusual for a single LD3 aircraft container's contents to be valued well in excess of US$8 million.

But with these products, risk is not just about the costs of research and production. Many pharmaceutical and biotech products have a correlated sensitivity to temperature and high value which diff ers with individual commodities. Protein based products, for example have a high temperature sensitivity and signifi cant value.

The risk of failure must therefore be mitigated by a logistic process that takes boThelements into account and this can sometimes be exacerbated by the location of manufacturing sites.

Risk assessment as part of a Quality Management System, should therefore not only include all the usual elements of the cold chain (manufacture, production, environmental thermal mapping, packaging, handling and transport etc.), but also incorporate an appraisal of the security processes being used by each and every participant in the logistic chain.

The way forward
For the air transportation of pharmaceuticals, what emerges is a common goal - to create a more coordinated approach and simplifying the complexity of the air cargo cold chain whilst also meeting regulatory and product efficacy requirements.

For some logistics providers, meeting the needs of the pharmaceutical business may seem a daunting challenge- but this need not be so if independent logistics knowledge of this sector is sought at an early stage.

The work undertaken for IATA on chapter 17 has undoubtedly opened the opportunity for greater dialogue between airlines, manufacturers and service providers. It must be grasped for the future benefit of all.

Tony Wright is MD of Exelsius (www.exelsius.co.uk), a cold chain management consultancy and a former executive of British Airways World Cargo & senior VP of Envirotainer. Mr Wright can be contacted at: tony.wright@exelsius.co.uk.