Future looking positive for air cargo sector

Des Vertannes
Global Head of Cargo at International Air Transport Association


Post date: Monday, 13th February 2012

Last year shaped up to be an important one for air cargo, and I expect the developments we are now seeing to feed through into an exciting 2012. The most important advance recently was the formation of the Global Air Cargo Advisory Group (GACAG) as an industry force. Since we signed the agreement between the four main associations at the World Air Cargo Symposium in March 2011, the GACAG has agreed terms of reference and work programmes in four key areas, and I’m looking forward to GACAG becoming a real force for bringing the industry together as well as fighting our corner in debates with regulatory stakeholders in particular.

At a time when airlines are struggling with weakening demand, they are expected to show a profit of just $4 billion for 2011, the importance of cargo to keeping airlines profitable is something we should all be promoting. We are a $68 billion industry, occupying 2% of the global cargo market by volume. Imagine what just a single-digit increase in our market share could do for the profitability of our industry. Focusing minds on the value of air freight is going to be one of my key objectives over the year ahead.

At the International Air Transport Association (IATA), we have also seen some fresh developments, with a new Director General and CEO in the shape of Tony Tyler, formally of Cathay Pacific. Tony has taken the opportunity since being in charge to re-emphasise the importance IATA attaches to working with the whole aviation value chain to deliver results. Nowhere is that more vital than in cargo, and there are two issues in particular I would like to explore where mutual cooperation is essential. Firstly, the security challenge. The foiled Yemen bomb plot in October 2010, reminded us that security is an issue which is shared equally across our industry, and which can only be tackled collectively. It emphasised again the value of intelligence, and a whole-supply-chain approach. The second challenge is efficiency. We need to enhance our competitiveness in a very tough market. With fuel rising to an average of $110 per barrel during 2011, we need to utilise every possible productivity gain. The expansion of e-freight is giving the industry a tool to do just that.

With security, IATA is looking to expand the Secure Freight programme. During the past year we have been working with Kenya, Chile, Mexico and the UAE, joining Malaysia which is already up and running. GACAG has also been active on cargo security, lobbying ICAO and governments to strengthen supply chain security through the adoption of amendments to Annex 17 of the Convention on International Civil Aviation at the ICAO Assembly in September and October 2010. The Electronic Cargo Security Declaration was also embraced by ICAO.

 The Secure Freight programme raises important questions for States. They must accept that they have to be responsible for the auditing, and the maintenance of databases. We have not yet succeeded in getting this point across. For example, the EU is at present still insisting that airlines in 3rd countries must audit the known and unregulated shippers. This puts airlines in an uncomfortable position of being regulator and regulated – a potential conflict of interest.

The other big question over security is of course screening, particularly of high-risk cargo. We have already made progress on what screening means – in other words, it does not necessarily mean 100% physical screening – but there is still a crucial debate on the merits of physical screening versus intelligence. The only answer is to continue our engagement with the authorities at all levels. IATA has forged good links with the US Department of Homeland Security, and governments across the world need to be carefully briefed on the issues. At ICAO, we will continue to engage with the Group on Air Cargo Security.

On our second major challenge, efficiency, we have also made good progress, but we still have a long way to go. IATA has long supported the utilisation of new digital technologies to enhance air cargo efficiency. We believe that e-freight offers a clear vision for improving the security, efficiency and customer service of the industry. GACAG and other key players in the sector have also committed to this vision. Now we must all step up and make it happen. We need to make better use of existing trade lanes, to build on the market penetration that we currently have. We must be realistic – it is early days. IATA’s target was to reach 10% volume on live e-freight lanes by the end of 2011. As of July 2011 we were at 5.6%, with an expected acceleration of roll-out in the third and fourth quarters of the year.

In discussions with industry partners, we have fundamentally reviewed how to best take e-freight forward, and have developed three principles:

• Establish a GACAG Taskforce for e-freight, to ensure best practice is spread throughout the industry.
• Focus on the ten biggest trade lanes and send in a taskforce of industry talents to deliver real results. This is a model other businesses used to drive the adoption of new technologies and techniques. For example, Xerox used taskforces to cement the use of fax machines.
• Articulate the benefits of e-freight. In particular, we need to focus on the benefits that exist for the freight forwarders. These need to be better understood and communicated.

Finally, aside from e-freight, an honourable mention should certainly be given to the e-AWB, which although an element of e-freight, is a strong first step, and driver of efficiency gains in its own right. We were aiming for 6% global penetration of the market by the end of 2011. If this figure has been achieved – and we expect it to will have been achieved – this will create significant benefits for the industry.

The combination of the strides taken in 2011 – on industry cooperation, freight security, and efficiency – will drive improvements for us all not only going into 2012, but deep into the decade beyond. I am more positive about the future of air cargo than ever before. I think we have an exciting programme of change, and a great opportunity to exercise influence commensurate with the strength and importance of our business sector. I am excited by the work of GACAG, and the possibilities to expand its mandate to become a real force for telling the great story of air cargo. I look forward to working with you all to write the next chapter of that story in the year to come.

This article first appeared in International Freight Yearbook 2012. To read the entire publication, click the ebook.

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