Issue 386, February 6, 2003
Operating in a global environment requires businesses to be flexible in order to overcome the unexpected. The threat of war in the Middle East may have a disruptive effect on the supply chain of many businesses. Of particular concern is the impact of war on the availability of commercial air freight capacity and on the cost of securing critical lift.

We want to take this opportunity to inform you of recent discussions with our Airline Partners, providing an overview of the current situation. In addition, we wish to share some of the contingency plans that Danzas would implement to ensure your goods move in a safe and timely matter.

We anticipate that main-deck capacity operated by U.S. flag carriers will be reduced in order to accommodate a U.S. government military action. Thus, U.S.-based all-cargo air carriers such as FedEx and UPS will be disproportionately impacted by government utilization. However, the impact for Danzas and our Customers will be minimal because Danzas has the flexibility to book cargo on freighters operated by non-U.S. flag carriers, which would not necessarily be affected by the situation in the Middle East. Additionally, much of the freight tendered to Danzas moves in the lower deck compartments of passenger planes. There is ample belly capacity in virtually every global market, and we expect this surplus to remain on most lanes even if military action is required.

However, since the Middle East is the primary flight path between Asia and Europe, it is possible that flights scheduled to move via Middle Eastern air space will be re-routed through Russian, Siberian or African airspace. This could result in higher rates and increased surcharges should aircraft be forced to fly these more circuitous routings.

As the largest customer of our preferred carriers, we have been assured by our Airline Partners that they will honor our existing blocked space agreements. Danzas will also have boarding priority for any additional space requirements. These measures will be extremely important should there be a substantial reduction in capacity, should rerouting costs become excessive or should Asian and European flag carriers be forced to carry additional traffic if U.S. flag aircraft are withdrawn from the market.

There may also be instances where demand cannot be met by available scheduled services. In that event, we are working closely with DHL Airways to ensure the availability of charter or non-scheduled lift on affected trade lanes.

At this time, it is impossible to provide a firm outlook on pricing. Rates are likely to fluctuate depending on origin and destination. Rate increases can be expected on lanes most heavily impacted by military conflict . Fuel and war risk surcharges may be imposed, and transport insurance premiums could increase as well. We will work with our Airline Partners to mitigate the impact of these measures.

We are as committed to the safety of your cargo as we are to its timely delivery. Please be assured that the highest security protocols would govern the movement of your goods across the entire supply chain, and Danzas is ready to act swiftly and decisively to protect our Customers' cargo.

In closing, we would like to emphasize the importance of communication. We will provide you with regular communications from your local representatives. In addition, we will continue to use our electronic newsletters and website to keep you abreast of changing conditions and of our contingency plans. Danzas is grateful for your support and understanding during what may be another period of pronounced uncertainty for our industry, and for global supply chains at large.

Please note that due to the complex nature of the subject matter, DHL Danzas Air & Ocean cannot be responsible for actions taken by the reader in reliance on the information contained herein without prior consultation with DHL Danzas Air & Ocean.