The Value of Air Cargo

Is the industry able to recognize and learn from its mistakes?

In his opening address in Berlin he reminisced shortly on what he saw as the very first value of air freight; that being the Berlin airlift 68 years ago when a concentrated, motivated and logistically well-organized Berlin airlift carrying fuel and food for West Berlin’s population, saved many lives.

All well and good looking back in history he indicated, but where are the answers and ways forward for the future to ensure that air cargo remains as an important logistics tool in the world of cargo transport. During the past ten years, more than 450 million tonnes of cargo have been transported by air. Air cargo accounts for a third of the global trade value and is worth around $6 trillion each year, Tyler told his audience.

But, things have changed since the famous Berlin airlift in 1948 and although the value of air cargo transported is enormous, Mr Tyler made it clear that the shippers are adamant that they are not getting value for money from aviation’s air cargo sector. Volumes continue to remain more or less steady, but revenues and yields for carriers and handlers alike, continue their downward trend. This is another pressing problem for the industry as when yields fall there is less motivation in some areas to invest in ensuring that the supply chain is watertight.

A recent Global Shippers Survey revealed that air freight was rated at 7 out of 10, and that says Tony Tyler, "is not good enough for what we in the industry proclaim is a premium service." His message to those attending was in this respect that the service quality has to increase a lot. He stated that there are two main elements to achieve this.

Safety and an industry transformation as the top priorities
On the safety issue he mainly directed his remarks towards the lithium battery debate and emphasized that on the whole the industry has done much to try and ensure that this sometimes volatile cargo be carried safely. Most is produced, packaged and documented strictly according to regulations, but there are still too many loopholes for non-serious producers to circumvent the rules and governments must be much stricter in ensuring that these are adhered to.

Mr Tyler sees safety as being the top priority but also sees the urgent need for the transformation and modernization of processes and technology. Only then will the air cargo industry be in a position to improve its services to shippers, he added. A new IATA air cargo transformation program is being set up to tackle this issue with the primary aim of what Mr Tyler states as “shaping our response to this challenge.”

In this respect, one of the main points of concern is the lack of quality in the air cargo supply chain. If one or more of the links are faulty, which is apparently often the case, then the supply chain itself is worthless to the shipping industry as a whole. IATA pleas for a concentrated team effort on the part of all participants to ensure that the real value of air cargo is dramatically improved.

We can only hope that the aforementioned transformation program will quickly be set up and more importantly, be recognized and be equally acted upon by all in the air cargo industry.

Maybe we’ll see the first positive results of this at next year’s WCS which will be held in Abu Dhabi.

At the four-day World Cargo Symposium, we asked some of the attendees about their impressions.

Here are just a few comments:

Thomas L. Hoang, Boeing Commercial Airplanes, Regional Director Cargo Marketing & Environmental Strategy:
IATA’s WCS was a great event becoming clear in many respects, be it industry solutions presented and debated at conferences, the opportunity for abundant bilateral talks or to establish new or re-establish existing contacts. Air freight is an indispensable cornerstone of the supply chain, adding great value to it. However, innovation still takes too much time. The industry has to drive processes much faster forward, speeding up the flow of goods and needs to take action instead of reacting to new market developments.

The classic cargo industry is in a difficult situation in many ways.  Airlines and freight forwarders need collaborate more closely to the benefits of not just one but both parties.  Then there are the integrators who have been able to sell the value of air cargo through their product offerings but now with new competitors like Amazon appearing on the horizon, moving people from shopping malls to online purchase behavior, thus revolutionizing consuming habits. Now it appears that they step into the air transport business themselves. 

It’s time the cargo industry adapts best practices in packaging, handling and transporting goods, inspired by integrators that are extremely efficient. 

Alexis von Hoensbroech, Executive Board Member Product & Sales at LH Cargo:
It's the first time I attended any IATA-held World Cargo Symposium and my overall impression was quite positive. Generally speaking, this industry event not only tables pressing issues at conferences and panels worth being further discussed and pushed forward but is a most welcome opportunity to meet and speak bilaterally to a large number of business partners because most of them attended the Berlin-held WCS.

Many discussions in the formal parts of the conference circled around the uncertainty where the classic air freight is heading to and what future it might have in the years to come. In a way I had the impression, this industry is in doubts about itself. Volumes are stagnating, regulations and other burdens are piling up and the industry is nearly immune against innovation and digitalization.

The bitter truth is that door-door transports of cargo shipments still need six days on average as they did 40 years ago - and still require nearly the same amount and type of paper documents. So modernization and restoring the competitiveness of our industry was high on the agenda, dominating all WCS meetings and many bilateral talks.

In my view to acknowledge a problem is the necessary first step. However, I find that there are only a very few cargo carriers and forwarders which seriously drive innovations forward in order to automize processes, create data transparency across the entire transportation chain and ultimately speed up the flow of goods and increase the quality.

To me it is crystal clear: We have to get this process seriously started if we want our industry to stay competitive. And: We have to do this together with all parties across the value chain involved. I hope and I am also quite optimistic that many representatives from our industry agree and I am convinced that the IATA WCS has brought us at least one step further down the road.

David Ambridge, Worldwide Flight Services – WFS, Director Cargo Operations
WCS was really worth the money. It gave all participants the opportunity to voice our opinions. Again, it became very clear that developments in cargo happen to be way too slow. I came here mostly to participate in conferences, not primarily one-one meets. As speaker of the closing plenary, my message is very clear: People have got to wake up or else the business is moving away. The industry has been sleeping for too long. We urgently need a model shift to regain portions of this business. That’s my main message to the audience at WCS. So it’s a clear wakeup call.

John Mc Donagh  /  Heiner Siegmund