What an extraordinary year for air cargo was 1984, the year that Payload Asia was launched. Picture the air freight world as it was then. Reeling from the deregulation of the US airline industry in 1977, and the rise of FedEx and UPS, the US carriers were taking the revolutionary step of abandoning their freighter fleets. FedEx and UPS themselves were just taking their first tentative steps outside the US, settingup their first hubs in Europe.

In Asia, freighter fleets were in their infancy: European carriers still dominated the market, and a cargo manager in London Heathrow could still feel as if he was at the centre of the air freight world.

In the Middle East, Dubai was still little more than a village, where everyone knew everyone, and the only high rise building was the World Trade Centre.Dubai airport’s throughput was no more than 50,000 tonnes, and Emirates Airlineshad not yet been launched.

Whether you were based in London, New York, Hong Kong or Dubai, everyone agrees it was a friendly industry in those days, where business was done over a drink and sealed on a handshake. Stan Wraight, later head of AirBridge Cargo and now an independent consultant, remembers that at Heathrow, lunches lasted two and a half hours, and a head for the UK’s strange bitter beer was essential.

“If you were able, you went back to the office, and pretended to work while your mind cleared,” he says. “But in those days, London was a hotbed of air cargo professionals, and they were all such nice people.”

Des Vertannes, now executive vice president cargo at Etihad, who in 1984 was coming to the end of a long stint with British Airways, points out that one reason for the more relaxed atmosphere was that most carriers were still state-owned. “Staff were more like civil servants,” he points out. “It was British Airways in 1985 that started the privatisation wave.”

Enter the integrators
Over that beer in Heathrow, the conversation amongst air cargo types might well have centred on what to do about the new breed of express operators, the integrators – a problem that air cargo has been scratching its head about ever since. UPS had been around as a ground package delivery service in the US since the year dot, but Federal Express (it had not yet resorted to the abbreviation FedEx) had really invented the modern integrator concept in 1973, when it created a hub and spoke system at Memphis.

Europe and Asia had had its experience of the package business through DHL, which had expanded internationally right from its early days in the 1970s. But these big American express operators were something quite different – a scary proposition. FedEx started flying to Brussels and London, its first overseas f ight, in June 1985, and in the same year UPS created its European hub in Cologne. The Big Brown had only started US air operations in 1982, but it had a formidable ground network. Was it about to eat up the European air cargo business?

The omens were certainly not wonderful. Across the Atlantic, the early 1980s saw the once mighty freighter fleets of the US majors shrivel away in the face of the onslaught from the express operators. It is hard to imagine now, but AmericanAirlines, Pan-Am, TWA and United Airlines all started the 1980s with largeall-cargo operations. The shiny B747Fs ofAmerican Airlines were one of the iconicimages of air freight.

Yet in 1984 both United and American finally said goodbye to their freighters, and TWA followed in 1985. Only Northwest held on on the strength of its transpacific business via Japan. In 1984, it already had six B747Fs, which made it a giant on Asian routes.

The most shocking moment in the rise of the integrators – at least from the point of view of the mainstream air cargo business – came in 1989 when Federal Express bought US cargo airline Flying Tigers. The ef ect today would be the same as DHL buying Lufthansa Cargo (which come to think of it is not that unlikely).

Flying Tigers was by far the largest operator of B747 freighters in the world at the time, with 19 aircraft in its fleet, and by buying it, FedEx gained access to a wealth of Asian routes and traffic rights, including Korea, Hong Kong, Taiwan, Malaysia, Singapore, Th ailand. It was not until 1992 that the integrator moved its Pacific headquarters from Hawaii to Hong Kong, however.

Europe scrambles to cope
Back in Europe in the mid 1980s, airlines were scratching their head about how to respond to the challenge of the integrators. Meta Ullings, senior vice president cargo at Martinair remembers this being a big topic of discussion in the carrier at the time. It seriously considered off ering its own express product, but then decided it did not make sense. “What is the point of offering a time defi nite product if you are only flying twice a week on a route with a freighter?” Ullings asks.

But she also remembers that some other rival carriers did take this route. “In general, airlines in the 1980s were copying the integrators, but not copying them very well,” she says.

One example that might or might not have ultimately worked was an express airline called Air de Cologne, set up by SAS in December 2005 with two DC-9s. It aimed to create an express network covering all of Europe, but instead was bought by TNT in 1988. Owned by an Australian trucking company (“Th omas Nationwide Transport”), this newcomer to the express scene had started air operations out of Cologne in 1985, initially using aircraft wetleased from other European operators.

Another strategy – adopted by Lufthansa and Japan Airlines in 1990 – was to buy a 25 percent stake in DHL International (the non-US part of the company). It was never really clear what this investment was for, however, and the two carriers eventually sold out to Deutsche Post in 2002.

Was the fear of the integrators misplaced? The jury is still out, but Ned Laird, founder and owner of consultants Air Cargo Management Group in Seattle, and more knowledgeable about the integrators’ business than most, reckons that the FedEx/UPS model has never in fact been as potent outside the US as it is inside it.

“Americans are impatient, and are prepared to pay to have something tomorrow. Siemens or Toyota see no problem with taking three days to ship something,” he claims. He also gives European and Asian airlines and forwarders credit for providing a high quality freight service that is comparable to that offered by the express carriers. “It is a huge frustration for FedEx that the rest of the world has never embraced their high value, just in time express delivery concept to the extent that US corporations have,” he says.

The rise of Asian cargo carriers
But in any case, while the European giants were worrying about the integrators, another challenge to their dominance was quietly emerging behind their backs. As early as 1984, Japan Airlines had eight B747Fs and Korean Air had four. Cathay Pacific only had one, but was already a major cargo player. Nippon Cargo Airlines and China Airlines had acquired their first B747Fs too.

But in the mid 1980s in that Heathrow bar you might barely notice. “In the late 1980s and early 1990s, most of the Asian carriers you see today were not big players,” says Vertannes. “Qantas was pivotal, and Singapore and Cathay had lots of codeshares with European carriers, but it was the European carriers that were the powerhouses.”

Wraight thinks the European carriers were guilty of complacency towards Asia, with only Lufthansa getting praise from him for their early entry into China. “When I went to Asia for the first time in the early 1990s, all the passenger business originated in Europe, so airlines only had customer service centres in Asia,” he recalls.

“Cargo was the exact reverse. Even then there was a lot more coming out of Asia than going in. But the Europeans didn’t get their act together. By contrast, for the Asian carriers, who had relatively small passenger businesses, cargo was a big opportunity. It was only low value goods in those days, but at least it was moving by air.”

Certainly the 1990s were the decade of the Asian carriers, the ten years in which their B747F fleets really started to grow. By 1992, Korean Air had ten of the aircraft, JAL nine, NCA six, Cathay four, Singapore and Air Hong Kong three apiece, and Air China one. Th at was a total of 39 B747Fs, already more than the 26 deployed by European carriers at the time, and the Asian fleets just kept on growing.

Asian ambition was seen most clearly in the B747-400F. Launched in 1989, the first of these freighters was supposed to go to Air France in 1992. In the event the 1991 Gulf War and the early 1990s recession led Air France to cancel, and Cargolux took the aircraft instead. Iteventually ordered five of the freighters in 1990, but was the only airline in Europeto do so. The others regarded the -400F asan expensive white elephant, whose costcould never justify its improved operationalperformance over the -200F.

But Asian carriers disagreed. They piled into the B747-400F, taking deliveries (often after delays due to the Gulf War and early 1990s recession) rapidly from 1993 onward. The early pioneers were joined by others such as Asiana, EVA Air, China Airlines and China Southern. The B747-400F became the quintessential Asian cargo aircraft.

In 1997, an American ACMI operator called Atlas Air, which had started in 1993 with one B747-200F, caught the wave and daringly ordered ten of the aircraft with ten options. Headed by the charismatic Michael Chowdry, it became one of the most talked about air cargo companies of the late 1990s, until Chowdry was killed in an aircraft accident in 2001.

While Atlas narrowly managed to survive the crisis that followed – the downturn of 2001 and the events of 9/11 which plunged the air cargo industry into shock – question marks still remain over the wetleasing model. To this day, Atlas is the only wetlessor that has ordered new freighters, and only time will tell whether it will make a success with

The Gulf carriers take off
While the Asian carriers have changed the landscape of the air cargo industry, another category of operators could prove even more of a challenge in the years to come. Going back to 1984, one can imagine a youthful Ram Menen arriving at the dusty desert airport of Dubai, having just finished a stint in a shipping company in Kuwait.

He remembers a simple airport, with basic sheds for cargo facilities, but even then says he was impressed by the speed with which Customs clearance took place. “In Kuwait, average clearance time was six to eight days. In Dubai, people walked out with their cargo in 20 to 30 minutes. Everything worked, and there was no bureaucracy. It was the perfect environment to breed trade.”

The canny rulers of Dubai, the Maktoums, thought so too, and in October 1985 started Emirates Airlines with one A300B4 and a 737-300. Gulf Air, the dominant carrier in the Gulf at the time, did not exactly welcome its rival with open arms, and so from the start Emirates was forced to fly to Karachi, Delhi and Bombay, rather than on the local routes it had fi rst intended.

While it was still a small place, where a handshake was a contract, Dubai was not a complete backwater in those days. Menen remembers how important the creek was as a port then. “It was already an entrepot for the whole region, for the Indian Subcontinent and East Africa, and they were building Jebel Ali Port which became the largest in the region,” he says.

Mainstream carriers also stopped there, but mainly to refuel. The fact that the UAE’s open skies policy and oil exploration activities allowed carriers to offload some cargo in Dubai was an added bonus.

Carriers needed to stop in Dubai because they were still flying B747-200s for their passenger business. So when B747-400s came into service in the late 1980s, some people thought Dubai’s role as an air hub was over.

“But they did not realise the power of geocentricty,” says Menen. History also played a hand. The Gulf War of 1991 put Dubai on the map (“Before then, the Gulf meant Mexico.”) and the fall of the Soviet Union in the same year opened up the Central Asian states to the world. Dubai was the place they came to shop for Western goods, and in the mid 1990s, the city’s souk was full of signs in Russian.

The competitive pressure Emirates and the other new Gulf carriers are putting on the big European operators is one of the hidden factors in the current crisis, Laird reckons. One might also question whether the more complicated cargo strategies of the likes of Lufthansa and Air France-KLM have really delivered the competitive advantage they are supposed to.

In the late 1990s, both Lufthansa and KLM launched a barrage of new initiatives, ranging from time defi nite guarantees to premium products to cargo alliances as they sought to fight against the lower costs of Asian and Middle Eastern competition. How well these initiatives have worked is open to question. Does anyone now remember the WOW Alliance, or the bewildering product range of KLM in the late 1990sthat filled a whole wall poster?

Europe’s forwarding dominance
And yet, in one area, European companies have been triumphant. Scan the top ten forwarders in almost any country, and DHL, Schenker, Kuehne + Nagel and Panalpina jump out at you. Out of the wide range of famous American names that would have filled the lists as recently as the mid 1990s – Circle, AEI, BAX Global, Fritz, Emery – only one now remains: Expeditors.

Some of these were swallowed by Deutsche Post-DHL, which acquired AEI, Danzas and Exel (which itself took over MSAS), and some by the US integrators (farewell Fritz, Emery, Wilson). But it is notable that at least two of the top players – Kuehne + Nagel and Panalpina – have avoided the acquisition game and still remained on top.

As for why European names still dominate in this sector (with apologies to Kintetsu, Nippon Express and Yusen Air & Sea) both Stan Wraight and Ned Laird point to the greater professionalism found in the Netherlands, Germany and Switzerland.

Laird in his early years worked for both Swissair and US cargo operator Seaboard World Airlines, and says thedifference was night and day. “Swissair was all apprenticeships and career progressions,and you hardly ever saw thatin a US carrier,” he says.

Wraight points to the fact that in continental Europe, freight transport is still seen as a profession. “It was my luck to work for KLM in Canada in the 1970s,” he says. “It opened up my world. They were a great training school.”

Payload Asia started at an interesting juncture in the air cargo industry’s history, and it is celebrating its 25th anniversary at another. We are in an unprecedented downturn, one which – as Bob Dahl, managing director of Air Cargo Management Group points out – leaves both air cargo volumes and the world’s freighter fleet at roughly the level it was as in 2000.

Was the 1990s in retrospect air cargo’s golden decade of growth, never to be repeated? Or like the oil crisis of the mid 1970s, the Gulf War of 1990, the Asian currency crisis of 1997, the dotcom bust of 2001, and the events of 9/11 – all regarded as major threats to the air cargo business at the time – will this crisis soon fade into history, to be replaced by the surging growth those Boeing forecasts always predict?

For the sake of the next 25 years of the air cargo industry and the next 25 years of Payload Asia, let us all hope so.

Thanks to Boeing for their help in providing historical data for this article. Without them and their B747Fs, it would be a very different air cargoindustry.