Issue 476, July 5, 2005

Peak Season 2005 is shaping up to be one of the most intense and capacity constricted years since 1999/2000. There are several drivers contributing to what we believe will be a very challenging high demand year for air cargo export capacity from the Asia Pacific region.

Economic Growth is Driving Airfreight Growth

Economic growth in Asia/Pacific continues to be robust and the outlook for the remainder of the year is very strong. This stimulates demand within supply chains for faster cycle times, resulting in high demand for airfreight capacity.

Asian Cargo Markets Continue to Lead the Industry

The strongest growth markets are in China, specifically Shanghai and Hong Kong. In addition, Bangkok is expected to stay robust while other markets exhibiting strong seasonal growth as trans-shipment points are Seoul, Singapore and Taipei.

Escalating Fuel Cost & Exchange Risk Driving Up Airfreight Rates

Jet-fuel consumption comprises, on average 30 to 40% of operating cost of the aircraft, depending on the model, age and fuel efficiency. Therefore our industry and customers are feeling the impact of today's $60 market price for a barrel of oil through escalating fuel surcharges, which have almost doubled since the beginning of the year. Contrary to popular belief, and as evidenced by their poor results, airlines are not able to recover all of the additional costs through the fuel surcharge.

Lack of Increase in Airfreight Capacity in 2005 = Capacity Doesn't Fulfill Demand

Even though the Asia/Pacific region's economic growth in 2004 was stronger than in 2005, capacity growth is more restricted this year. Both new freighters and converted passenger to cargo deliveries are very limited this year, resulting in capacity increase less than the increase in demand.

Consequences: Increase in Tonnage Demand and Market Rates

Peak season 2004 was dramatically stronger than it was in 2003, and we expect the peak season for 2005 to increase by the same percentage over 2004. In short, strong economic growth in Asia Pacific is spurring supply chain demand for extra airfreight capacity. Fuel and production costs, currency fluctuations, imbalanced demand and highly restricted capacity growth during 2005 will further aggravate the situation, leading to significant increases in market rates for the remainder of the year.

As a result of these market forces, DHL Danzas will be imposing Peak Season Surcharges as a freight accessorial charge on the HAWB, as per the schedule table below.

Sincerely yours,

Brian Lindholm Executive VP & COO North America

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.