Today's Pickup: Markets Update; VW To Cut Jobs; Global Slowdown

 

Good day,

U.S. equity futures edged higher alongside European stocks today, shrugging off losses in Asia as investors evaluated the global economy's overall strength, according to Bloomberg. The pound gained ahead of the next major Brexit vote. Contracts on the S&P 500 Index fluctuated before nudging upward, with those on the Nasdaq and Dow Jones gauges following in line. The Stoxx Europe 600 Index saw a modest advance as gains for oil companies and car makers helped offset a slide for retailers following disappointing earnings from Inditex, owner of the Zara chain, and Adidas. Treasury yields ticked higher along with those on core European bonds. The dollar is steady after three days of declines.

Going forward, FreightWaves had already been predicting slower consumer spending and retail sales in 2019, after impressive growth for nearly all of 2018. The combination of higher interest rates, reduced pent-up demand, and the fading effects of the Tax Cut and Jobs Act point to a deceleration in the retail sector. 

Did you know?

European authorities broke ranks with the U.S. and grounded Boeing's 737 MAX jet after two deadly crashes of the aircraft over the past five months.

Quotable:

"Hope is not a strategy."

--Jack Porter, Managing Director of the TCA Profitability Program, on making business decisions in a volatile market

In other news:

VW brand to cut up to 7,000 jobs in new savings drive

Volkswagen will cut up to 7,000 positions, aim to boost productivity and deliver 5.9 billion euros ($6.7 billion)of annual savings at its core VW brand by 2023. (Reuters)

Tesla exchanges $13.8M in stock for portions of car-hauling carrier

In exchange for nearly 50,000 shares of Tesla stock, the company has acquired portions of Central Valley Auto Transport's car-hauling fleet. (CCJ)

Duty free plan for no-deal Brexit

The government will not charge customs duty on 87 per cent of imports under plans to protect supply chains in the event of a no-deal Brexit. (Logistics Manager)

CMA CGM in partnership to trial bio-fuel on containerships

CMA CGM has joined hands with IKEA Transport & Logistics Services, the GoodShipping Program, and the Port of Rotterdam to test and scale the use of sustainable marine bio-fuel oil. (Seatrade Maritime News)

A bumpy ride for air cargo on the radar as global slowdown takes its toll

IATA has downgraded its projected growth figures for air cargo by nearly half, following a poor start to the year. (The Loadstar)

Final thoughts:

Carriers should be thinking about the odds of finding loads many markets in advance. If market dynamics change, which they appear to be doing, carriers will be in a poor position to take advantage. The knowledge that the trip to the West Coast will eventually hit a dead end should put upward pressure on rates even though the L.A. outbound situation is still quite strong. Deadheading out of northern California or Phoenix is an inevitability that should be factored into any current rates.

 Hammer down everyone!

 In the spring of 2013, IATA unveiled a multilateral e-airbill regime enabling a forwarder to sign one master agreement that would cover all 240 IATA-member airlines. The idea behind the program was to streamline the cumbersome and often-redundant bilateral compliance process. Brandon Fried, executive director of the Air Forwarders Association, said that a number of large forwarders have acted on the initiative, while most smaller forwarders have not. The gap between large and small is a microcosm of a larger problem, according to Fried. Forwarders with resources can avail themselves of the tools of progress. By contrast, smaller companies with shallow pockets say the costs of compliance are too great to offset the benefits. "No forwarders should be left behind," he said.

 Fried noted that most transportation management system software providers now embed customer and carrier EDI capabilities into their forwarder management products. Carriers are beginning to provide automated proof of deliveries, and more government agencies in nations around the world now accept electronic documents, Fried said.

Several factors could explain the slow adoption of e-bill protocols, according to Fried. One is the use of disparate automation platforms unable to easily communicate. Another is insufficient investment. A third is a lack of initiative on the part of one or both parties. Government regulations that require data targeting for security purposes will make it essential to digitize airbill information for security and trade compliance, Fried said.

 In addition, millennial consumers demand less paper and are accustomed to automation not only in their airfreight transactions but throughout their lives. "Forwarders and their airline partners who ignore this trend do so at their peril as automation will be essential to compete in the future," he said.

The goal established 13 years ago by the e-freight program was to cut delivery cycle times by 24 hours and eliminate nearly 8,000 tons of paper documents per year. Historical factoids abound to illustrate the mode's challenges. The typical consignment booked by a forwarder and shipped in the belly of a passenger airplane takes five to six days to reach its consignee, though it takes less than a day to fly it to the destination market. The remaining time is often spent sitting in customs waiting for processing and clearance, or hung up in the web that also includes ground handlers, customs brokers, truckers and importers. The time that a shipment languishes on the ground nullifies the benefits of air shipping for which a shipper often pays a dear premium.

Then there's the paper. According to an enduring factoid from IATA, each international air shipment required 30 or more paper documents to process and submit. Swedish telecommunications provider Ericsson, a big airfreight user at the time, caused a stir in 2013 when it said its annual required paper documentation could fill a Boeing 747.

 In his remarks, IATA's de Juniac said that process modernization will be critical to "efficiently meet the doubling of demand expected over the next two decades." Changes are already being demanded by customers of the industry's two most promising growth markets – e-commerce and the transport of time- and temperature-sensitive goods such as pharmaceuticals and perishables, he noted.

 Another area of needed improvement lies in upgrading airfreight facilities, he said. "The e-commerce world is looking for fully automated high-rack warehouses, with autonomous green vehicles navigating through the facility, and employees equipped with artificial intelligence and augmented reality tools," he said. The average cargo warehouse "is an impressive sight. But there is a huge gap to fill," said de Juniac.

 The freight that moves in the bellies of passenger airplanes has been likened to the bar at a restaurant. It can't generate all of the restaurant's revenue, but it rakes in a goodly amount of profit. That's because the aircraft needs to fly anyway, and the bulk of the revenue, and cost, is derived from passenger services. Yet unlike all-cargo carriers such as FedEx Corp. FDX, UPS Inc. UPS and DHL Express, airline cargo departments play second-fiddle to the demands, schedules and, most importantly, the safety of travelers. That will never change.

 "It's exceptionally tough to drive change in a global industry with a huge number of stakeholders, and where safety is top priority," de Juniac said in his remarks. "But it is not mission impossible. I challenge stakeholders to find ways to drive critical change at the speed our customers expect."

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