SkyTeam Cargo-US Joint Venture

SkyTeam Cargo-US Joint Venture

Chief executive

www.skyteamcargo.com

The winds of change are gaining momentum, and will continue unabated into 2004 and beyond. Change, when it comes, will be far-reaching and the driving force which will clearly define our future direction. Those changes revolve around two principal axes: security and consolidation.

The reinforcement of security programs, already under way, will further infiltrate every aspect of our business. We will see increased harmonization of carrier, forwarder and shipper regulations and greater integrity of inspection processes. The need for more advanced technology, including new scanning equipment, will grow, and electronic interface between all players in the transportation chain will be an integral part of our future planning and investment. The costs of increased security measures must be borne equally by all users, so surcharges will remain in force. Fuel costs, an unknown at this juncture, will continue to be determined by index variations. Consolidation will continue, and what we see now is but the tip of the iceberg. The trend is evident in what we see today in the carrier arena with former competitors joining forces seeking even deeper levels of synergy.

Simultaneously, the trend toward forwarder mergers will intensify. All indications are that the GDP will continue its upward trend, resulting in sustained demand for air cargo. Asia - and China, in particular - will outpace Europe, which will remain relatively stagnant in terms of its economies. The reversal in the comparative values of the euro and the dollar will finally cause the pendulum to swing in the direction of stronger U.S. exports, and as a further consequence, a decrease in imports. Carriers will deploy additional capacity on trans-Pacific routes to meet increased demand, but the trend toward trans-Atlantic fifth-freedom rights will put more capacity on this route, thereby diminishing the opportunity to increase yields, which reached unprecedented and perilously low levels in 2003.