Where next for the Air Cargo Industry?

The online World Cargo Summit hosted by Euroavia International on 25-26JAN22, covered a broad selection of topics together with a great many industry experts – 49 in total, in fact. The final panel on the last day discussed “Looking Ahead – Where Next for the Air Logistics Industry?” Moderated by Joachim von Winning, Executive Director of the Air Cargo Community Frankfurt, it featured Jessica Tyler, President Cargo & VP Operations Innovation and Delivery at American Airlines, Andrés Bianchi, CEO of LATAM Cargo, Denis Choumert, Vice President of the European Shippers Council, Dr. Ulrich Ogiermann, Chief Commercial Officer of AlisCargo Airlines, and Sebastiaan Scholte, CEO of Kales Group.

Where next for the Air Cargo Industry?
The online World Cargo Summit hosted by Euroavia International on 25-26JAN22, covered a broad selection of topics together with a great many industry experts – 49 in total, in fact. The final panel on the last day discussed “Looking Ahead – Where Next for the Air Logistics Industry?” Moderated by Joachim von Winning, Executive Director of the Air Cargo Community Frankfurt, it featured Jessica Tyler, President Cargo & VP Operations Innovation and Delivery at American Airlines, Andrés Bianchi, CEO of LATAM Cargo, Denis Choumert, Vice President of the European Shippers Council, Dr. Ulrich Ogiermann, Chief Commercial Officer of AlisCargo Airlines, and Sebastiaan Scholte, CEO of Kales Group.
Almost two years into the pandemic, and the consensus is “the only certainty is uncertainty,” as Sebaastian Scholte put it. Nevertheless, despite all the variables, the panelists were in line with the prediction that the second half of this year should see improvements in passenger operations and thus a return to more belly capacities again. As Jessica Tyler summarized: “Our teams need to stay really agile and make decisions with best info we have.” She predicted a “continued struggle” in the first quarter of 2022, “building up to better rest of the year.”

Four budget scenarios – pick what fits!
Andrés Bianchi revealed that LATAM Cargo had presented 4 budgets suggestions for 2022, depending on different possible scenarios. “All of us are trying to figure out what will happen in 2022. It keeps changing!” he emphasized, pointing to all the variables: passenger growth, cargo operations, the effects and developments of Covid-19, political situations, the influence on the economic environment. Though he was very pleased with his airline’s decision on its freighter fleet that it had already begun building up again 2018/19, having previously downsized. “Freighters are very handy!” he exclaimed, announcing that LATAM Cargo would be doubling its freighter fleet over the next few years. “A freighter fleet helps to match supply and demand better when overlaid with passenger fleet,” he concluded.

Freighters practically sold out!
Which is all well and good if you can source them, however. Ulrich Ogiermann, described what it was like starting a very new airline one and a half years ago in the midst of a pandemic. “We would have loved to start much earlier, but were caught in pandemic turmoil,” he stated. “We are currently forced to operate with P2F, which is not ideal, but the market warrants it for now.” Demand was not a problem but sourcing proper aircraft for expansion was so much more complicated these days. “[We are] looking around for any type of freighter aircraft at the moment – if you guys can spare anything, let me know, we’ll take it!” he pleaded.

Fragility and cartel risks…
Which led on to the question of how shippers saw the developments in air cargo over the pandemic and where the industry was heading. Denis Choumert summarized the situation: “The last 18 months were hectic and messy. We were used to work with steady rates and a steady flow of info, and had to enter into short-term planning, rerouting every day, and renegotiating rates every day.”
He predicted that the first half of the year will be same, but also pointed to two main trends: smaller freight forwarders had been penalized over the past year and a half, as they had been unable to access capacity on freighters in the same way as the larger freight forwarders had been, which led to shippers having to source capacity themselves. Also, the larger freighter forwarders were now “very rich” and even buying their own planes. Was this a short-term back-up or a long-term disruption in the industry, with a move to greater end-to-end trade control in both sea and air freight, he wondered? The risk was there of cartel situations developing, and against the current backdrop of rates being ten times higher than in 2019 at a vastly downgraded service quality, this would spell a lose-lose situation for shippers, he warned. Trust and resilience were important.

Changes in behavior
“The market has become a little bit more patient about disruptions because they are a continuous thing these days,” Sebastiaan Scholte observed. The pandemic also brought customers and airlines closer together. Jessica Tyler declared that at American Airlines, “[We are much more] open-minded about making decisions based on partial information, making them faster, and making sure we’re listening with big ears to what our customers need.”
Andrés Bianchi spoke of having a long-term view to short-term decisions, pointing out that LATAM Cargo had followed a 2-fold approach: being “very deliberate about protecting our customers from the supply chain challenges” by flying aircraft even though they were only marginally profitable, with the express decision to “allow customer to keep their contracts and avoiding them losing out to competitors,” and by ensuring that all rate and network decisions were “stress-tested on 2019 load factors and rates,” never on 2020 or 2021. This was to ensure resilience for “when there is a down-turn along the line.” He also advised listening and understanding customers regarding “where they want to go and why.”

Challenging decision-making models
Jessica Tyler spoke of “poking at old decision-making models.” While they had not expected to be operating preighters for so long, they were optimizing assets all the time and working much closer with network planning. She illustrated that the airline had seen huge growth in its truck services – “over 600 truck flights a day!” – which it was feeding into destinations “where we have widebody services,” but also talked of the challenges of forecasting. “We have changed our models of planning,” she declared, emphasizing that the recruitment and preparation of staff had to get much faster. “Staffing challenges are like none we have ever seen before. Recruiting, sourcing, onboarding, training” all took far too much time with regard to all the complex back-ground checks. This was definitely an area for urgent improvement.

More interest in logistics!
Yet, because “air cargo has been put a lot more on the map” (Sebaastian Scholte), becoming “more sexy”, there was a much greater interest amongst students in enrolling in logistics at Uni. “Hopefully this will be the positive outcome of this pandemic,” he surmised.
Jessica Tyler agreed that the airline “brand pulls” and advised “we have amazing problems to solve, so we need to show our industry more” to get talent interested. Though Denis Choumert also brought up the flip side of the coin: the “dirty image of air cargo and environment” and pointed to the “FlightShame generation.” Andrés Bianchi countered “FlightShaming is one side of industry. It’s our job to show the other one,” talking about all the vaccine efforts that had brought a huge, positive impact on the LATAM Cargo brand. That said, the panel also agreed that while attracting talent into the aviation industry was becoming easier at academic level, it was still a major problem for “the most labor-intensive part of the air cargo chain: for the handling agent.”

Be flexible and agile
Closing the discussion, the consensus was that data-transparency and seamlessness were the next big topics to collaborate on. Sebastiaan Scholte commented that “technology is always faster than the willingness to change. [There] should be seamless open communication.” He deplored that “procurement departments focus on costs and yet essential parts of supply chain need to be seen as value instead of cost. Reward those who share errors!”, he urged.
As for the industry’s direction, the main prerequisites that had come up time and again during the discussion panel, were “flexibility” and “agility”. There has been a palpable and positive disruptive shift brought about by the pandemic, and the air cargo industry has shown its mettle.

Brigitte Gledhill

We welcome and publish comments from all authenticated users.