APL CEO: New transpacific loop could attract air shippers

The new Eagle Express X (EEX) service, scheduled to launch in July, will offer 11-day transits from Shanghai to Los Angeles, which BlueWater Reporting shows is faster than any other liner service.

   APL’s new Eagle Express X (EEX) service will be fast enough that it may be attractive to U.S. importers who have traditionally turned to air transport to ship their goods, APL CEO Nicholas Sartini said.
   The service, due to start the first week of July, will offer 11-day transits from Shanghai to Los Angeles and 12-day transits from Ningbo.
   Ships will arrive Tuesday morning. Containers will be totally discharged during the day onto APL chassis, then drayed overnight to an off-dock location where they will be ready for pick-up on Wednesday morning, beginning at about 6:00 a.m.
   Sartini said the company will make an announcement in the coming days about reaching a deal with a chassis provider and the location of the off-dock site where customers will be able to retrieve their imports.
   Similar to Matson’s China-Long Beach Express service, the EXX will use small ships. Sartini said the service will offer about 2,000 TEUs of capacity, using ships with a nominal capacity of about 2,600 TEUs.
   With higher operational costs than a typical transpacific service, Sartini said APL plans to charge a premium price for the service.
   The service will also have a second “head-haul.” After discharging cargo in Los Angeles, the ships in the service will sail to the seafood port of Dutch Harbor, Alaska, where they will load seafood before visiting Yokohama and Busan, before returning to Ningbo and Shanghai. A dual headhaul has also been key for Matson’s China service, which visits Hawaii and Guam on the return to Asia. As APL will not be carrying cargo from Los Angeles to Dutch Harbor, it will not have to use U.S.-flag vessels, Sartini said.
   He also noted that with a shortage of airfreight capacity from Shanghai to Los Angeles, prices have increased sharply to a level where moving the same amount of cargo by air that would fill a 40-foot container would amount to $25,000-$40,000. In contrast, the Shanghai Shipping Exchange’s Shanghai Containerized Freight Index pegged the spot rates for 40-foot ocean containers moving from Shanghai to the U.S. West Coast at $1,252 on March 2. That would leave plenty of room for APL to charge a premium for its service, but still offer a big discount when compared to the cost of airfreight.
   Of course moving a shipment by air across the ocean only takes a day, but Sartini said when the time to deliver and pick-up goods at the airport is folded in, air cargo moving between Shanghai and Los Angeles sometimes spends five days in transit. For some air shippers, the savings APL can offer may be attractive.
   APL has also expanded its Eagle Go service this month, in which it now offers guaranteed loading from 29 ports in Asia instead of just four. It also has a guaranteed rapid discharge product, Eagle Get, and an expedited intermodal service called Eagle Reach. The premium these services command varies depending on the contract and customer, but can be around 20 percent premium, Sartini said.
   CMA CGM acquired APL in 2016, but Sartini said the French owners “believe in the power of brands,” and decided to have APL operate as a standalone company with different products and a different customer service experience. He noted that ANL, a specialist in the Australia/New Zealand/Oceania trades, was acquired by CMA CGM about two decades ago and has remained an independent brand.
   “We have our own customer charter, we have our own KPIs (key performance indexes), we have our own way of working,” he said. “We believe that by offering two different brands in some markets, we are able to access a larger base of customers.”
   While customer service and sales remain independent at APL and CMA CGM, he said the companies were able to combine back office staff and reduce staff by 10 percent. They have also been able to reduce terminal costs because of their combined buying power.
   He said that APL’s service to the U.S. market grew 15 percent in 2017.
   Sartini was selected to head APL after CMA CGM bought the company. He had been CMA CGM’s senior vice president of Asia-Europe and Asia-Mediterranean Lines since 2008, and was also responsible for ANL and Cheng Lie Navigation. (Cheng Lie is an intra-Asia liner company).
   While the Asia-Europe trade involves calling many more ports and a great deal of focus on a feeder network, Sartini said what makes the U.S. trades “extremely complex is the intermodal component. This is huge and this is what makes it so interesting.” 
   At this time of year, when he is meeting with customers to discuss contracts, Sartini said price is always a major issue.
   This year in particular, customers are expressing concerns about constraints in the port and with the shortage of truck power.
   “They want to be reassured, they want to make sure that their goods are going to reach the shelf in good time,” he said.
   APL operates 120 services, some with its own ships, some with CMA CGM ships, some on other members of the Ocean Alliance, and some on the ships of independents.
   He said about 40 percent of the company’s business is in the transpacific, 40 percent is in the intra-Asia trades, and 20 percent in trades that serve Europe and Latin America.
   While CMA CGM did run an experiment with one of its largest ships, the 18,000 TEU Benjamin Franklin between Asia and U.S. West Coast ports in 2015-2016, Sartini said the company currently believes the largest ships to use in the transpacific are those with a capacity of about 14,000 TEUs.