Air Cargo Supply Chain Security- Airlines perspective on changing security requirements and secure freight

Air Cargo Supply Chain Security- Airlines perspective on changing security requirements and secure freight

Deutsche Lufthansa AG Global aviation group 400 subsidiaries and participations Over 117.443 people / 149 nationalities / 300 countries In 2012 the group Performed 1 million flights Carried 103 million passengers, and 2.1 million tons of air freight & mail Revenue Eur 30.1.7 bn

Lufthansa Cargo Our figures 2012 at a glance Employees 4600 Freighters (McDonnell-Douglas MD-11F)18 Sales revenues in Euro Operating result in Euro 2.6 bil. 104 mil. Destinations worldwide Over 300 Transported air freight / air mail in tons 1.7 mil. Load factor 69.6 % Security cameras worldwide help ensure 6000 Safety every single day (800 in FRA)

Where do we stand in India? 55 84 50 45 40 35 30 25 20 15 (Frequencies Frequencies per per week) week 10 5 0 7 2 3 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 1959 1969 1979 1989 1999 2013 52 Pax / 32 Freighters ( 10 3S ) 10 25 15 47 36

Export Process Map After LEO Customer (Agent) Cargo Delivery Agents clubs the MAWB, location slip and consol Documents if any Carrier or GHA Goods Acceptance (R4C) Airlines accepts the docs after verifying the wgt on AWB /location slip Carriers plan the cargo as per to booking and Volume utilization Carriers manifest the shpts with built up details from Celebi Carrier prepares the final Manifest of cargo flown & submits data to ICS-EU Customs Customs clears the shipment and issue LEO Customs gives approval for release & gate pass of cargo as per planned flights Manifest hard copy & AWB copies are given to EFO as per flight. RA*/IRC* X-Ray-100% or physical check Cargo is built up after X-ray & Let Export by custom Built Up is done and data is fed in Handling agent system Pallets & cargo are released as per flights Escort Cargo is escorted to the flight by security personnel *RA - Regulatory Agent *IRC Indian Registered Carrier

All India Trend Analysis of Freight-International & Domestic Freight (In Tons) 2007-08 Growth % 2008-09 Growth % 2009-10 Growth % 2010-11 Growth % 2011-12 Growth % 2012-13 Growth % Intl 1146641 12 1149357 0.2 1270712 10.6 1496164 17.7 1467896-1.9 1406792-4.2 Domestic 567319 7 547932-3.4 688993 25.7 852198 23.7 812091-4.8 784399-3.4 Total Tons 1713960 11 1697289-1 1959705 15.5 2348362 19.8 2279987-2.9 2191191-3.9 * Source AAI Traffic Report

Handling Processes Shippe r Agent Airline Transit Airline Agent Consign ee Logistic Partner Lufthansa Cargo Logistic Partner Cargo coming from shipper directly at the airport (ready for carriage condition) can save one step, wherever and whenever possible Focus on cargo loaded on ULDs and Thru units helps us for faster loading/unloading of the aircraft, and saves transportation and transit time.

Activities for Cargo Security Customers Communication Presentations, Round Tables Consulting Security Conferences, Media Authorities Liaison EU-COM, TSA partly in cooperation with Corporate units (CP and CG) Associations Support BDI, VACAD,BCAS,MOCA Operations Deployment of own x-ray and ETD technology or by warehouse operator Evaluation of demand of individual stations Processes Current maintenance of handling and sales processes Quality Management System and Quality Assurance (Audits and Inspections) Research Research on new technologies in cooperation with leading industry partners Promotion of new technologies and industry applications (ULD x-ray machine)

Growing complexity and disharmony of security regimes EU and USA as pacemakers 2014 2013 2012 2011 LCSM/9 2010 LCSM/8 LCSM/7 2009 LCSM/6 2008 2007 2006 2005 LCSM/5 LCSM/4 LCSM/3 LCSM/2 LCSM/1 Flugbetrieb VO (EG) 185 NEU VO (EG) 185/2010 K(2010)774VO (EG) 573/2010 VO (EG) 272/2009 K(2008)4333 VO (EG) VO (EG) 300/2008820/2008 VO (EG) VO (EG) 831/2006781/2005 VO (EG) VO (EG) 2320/2002622/2003 VO (EG) 1138/2004LuftSiG EA 1546-10-06 EA 1546-10-07 MSP XX EA 1546-10-07 EA 1546-10-06 EA 1546-10-07 MSP 12A MSP 12B EA 1546-10-06 MSP 12 EA 1546-10-06 EA 1546-10-07 MSP 9 MSP 8A MSP 8 ACISP 2007 MSP 7 LFSP/7 LFSP/6A LFSP/6 LFSP/5 LFSP/4 LFSP/3 LFSP/2 LFSP/1 LSP/1 LSP/2 EU US Handling LSP/3 LSP/4 Impact on the Supply Chain: Decreasing number of Known Consignors in the EU due to complexity of certification 100% screening inbound USA effective 03Dec2012 Shipper Built Unit concept at risk for USA traffic EU introduced mandatory airline approval as Air Carrier 3 rd Country. Validation of 3 rd Country Handling Facilities and carrier driven 3 rd country Regulated Agent and Known Consignor regime to be implemented by July 1st, 2014.

Todays key Global issues of Security Requirements imposed by regulators increase in volume and complexity. Is 100% screening on piece level the final goal for cargo & mail. (Indian scenario). The recent efforts of the Commission in favour of EU air carriers in their discussions with the US TSA are highly appreciated! But there is still a long road ahead: Since most EU carriers operate a hub and spoke system, one stop security starting at the first point of loading is of paramount importance. Additional screening at the Last Point of Departure as required under the new EU Latest EU Commission drafts policy: - Export of own security regime to 3 rd countries instead of bilateral or multilateral recognition. - Consequence: Interruption of logistics processes i.s.o. one stop security! - Implementation of 3 rd country RA/KC through EU air carriers is not a feasible solution. - Validation of 3 rd country handling sites is an additional requirement. The target may be 3 rd country air carriers but EU carriers will be also affected although they already safeguard security through their Aviation Security Programmes. Probably we are already there. New technologies recommended by TSA and followed by EU for air cargo screening is a challenge. BLR & HYD already asked for IV certification. Limited IV on global basis is a big challenge.

Todays Indian security scenario for air cargo BCAS circular no. 8/2008 on Comprehensive security procedures in respect of cargo, express cargo, mail and courier bags is valid which allows four categories of security measures : 1. Account Customer for freighter class cargo 1. Known consignor (original producer or manufacturer of goods) 1. Regulated Agent concept warehouse operator at or OFF the airport 2. Airlines Security Measures Cargo can only be forwarded on aircraft after 100% X-ray screening. In case cargo is not good for x-ray then physical check by qualified person becomes mandatory. Security function at the aircraft can only be performed by Indian Air carriers having international operation from that airport.

Challenges related to security at Indian Airports Cargo coming in loose condition rarely on skids or in ULDs. Cargo coming to airport during a short duration due to traffic restrictions and consolidation at agent premises (24/7 not in full use). Packages required for examination are identified after entry in examination area which itself is a threat (DEL exception). Multiple agencies performing the X-ray and therefore causing delay. Insufficient well qualified security staff with cat.12 qualification. Old warehouses not designed according to 100% X-ray requirement. Transportation chain is not linked with certification (open entry for Truckers). Various agencies involved in truck dock, examination & bonded area. Validation by EU commission by 30Jun14 itself is a challenge. (MOCA/BCAS).

Proposed recommendations for improvement Creation of strong links between Customs and Security at one location AFS is answer to above if one agency is missing at any location then chances of opening of packages and handling loose becomes imperative. Introduction of RMS by Customs can assist in restricting the examination at the airport and advantages of certified under known shipper concept can be availed. Sniffer Dog or any other technology without heavy investment (x-ray machine) should also be recognised by the security agency in India. In HKG 98% cargo comes under BUP/SLU concept and therefore just one airport is able to manage 4.0 mil tons p.a. from a single location. Installation of CCTV in parking, truck dock, examination, bonded, ramp area and transportation road to ramp side with full coverage is highly recommended. Installation of video surveillance with 30 days recording time of footage is required in built-up area. Participation from shipper trucking co forwarders H/A Carrier GHA in entire supply chain is required with responsibility to have secured freight.

Thank you for your attention! Vipan Jain Regional Manager Logistics, South Asia and Middle East www.lufthansa-cargo.com