Issue 393, March 19, 2003
Given the current unpredictable nature of our global political environment, it is important that we keep you as regularly updated as possible with regard to air and ocean freight routings to the Middle East. Please find your first update below, and keep in mind that this information may change at any time. Danzas AEI Intercontinental has an infrastructure that is flexible and adaptable, and we will continue to work as expeditiously as possible within this potentially restrictive logistics environment to secure and deliver your shipments safely and on time.

Air Freight Update
According to Reuters, war with Iraq could discourage demand for travel and have far-reaching implications for U.S. and European carriers. Airlines are already reporting a fall in demand, including lucrative business routes between Europe and the United States, as travelers shun flights ahead of a possible war.

Weaker demand along with rising fuel prices mean that airline margins, already hit by competitive low fare rivals, are being squeezed further. This has spurred carriers around the world to cut costs by eliminating certain flight routes, announcing job cuts and parking aircraft. Most analysts are looking at a 10% to 20% reduction in passenger traffic. The real question is how long it will last. A prolonged war with Iraq would force Europe and the U.S. to slash capacity by similar amounts.

Given the unpredictable situation, some Middle East airports are likely to close with short notice. If this happens, Danzas AEI Intercontinental plans to route Jordan and Syria shipments via Beirut. Shipments destined for Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and Yemen could be routed via Dubai, if necessary.

Kuwait City: The situation in Kuwait City today (March 19) is calm with the airport operating normally. Emirates Airlines (EK) is operating three (3) extra flight in and out of Kuwait today to protect mainly passenger demand. We understand some coalition troops have already crossed into Iraqi territory north of the city.

Kuwait Airways will move their entire operation to Dubai later today. We anticipate airport and airspace in and around Kuwait area may be closed during the coming night. Kuwait Airways tells us that this will not affect any of their flights from carrying regular business.

Emirates Airlines: EK contingency plans call for flights to be rerouted around the conflict zone. Currently their flights do not operate out of Iraqi airspace and therefore they only expect routes west and north of Dubai to be affected. Routes to/from Europe will be routed more southerly and routes to northern Middle East, i.e., Lebanon, Jordan and Syria will be rerouted as necessary.

As a direct result of the above, EK anticipates payload restrictions resulting from increased fuel payload. However, their contingency plan included provision for capacity to be supplemented with freighter service, if necessary.

Emirates Airlines are not planning (at this time) to reduce or eliminate any services and there are no backlogs at this time. Regular traffic and pre-bookings will be given absolute priority over non-regular ad hoc traffic. Surcharge increases will only be applied if driven by the market.

Ocean Freight Update
With much longer lead and transit times than Air Freight, it is more challenging to predict any impact for Ocean Shipping to the Middle East, as the situation could change daily (if not hourly) over the next few days and weeks.

As of today, March 19, all shipping lines are accepting bookings to all destinations in the Middle East without any changes or deviations to their regular schedules. We are not aware of any disruptions and delays at this time, but we think it is prudent to expect some delays to cargo currently in transit and cargo that is about to sail from the United States because of higher activity through the Suez Canal.

The only exception so far is Hanjin Lines, who have announced on March 10 that they will temporarily stop accepting bookings to and from Kuwait.

Shortly, we do expect to see announcements of implemented War Risk surcharges, more Bunker increases and possibly Suez Canal surcharges. These charges may vary from shipping line to shipping line.

We also recommend to check with your marine cargo insurance providers to check if they have introduced War Risk surcharges to your premiums.

Our LCL services to the Middle East will continue to be shipped via Dubai from where we have an extensive network to distribute your cargo to the final destination.

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.