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Answers to air cargo's problems still elusive?

By Martin Roebuck on April 28, 2014

The challenges facing the air cargo industry are well understood and much discussed. A pessimistic conclusion from The International Air Cargo Association’s (TIACA) Executive Summit in Istanbul might be that the solutions remain as elusive as ever.

Michael Steen, executive vice president and chief commercial officer at Atlas Air Worldwide, told the meeting of the enormous pressure increasing e-trade volumes put on integrators last Christmas. One of them had admitted to Steen that fulfilling online orders cost it US$150 million (108 million euros).

“Infrastructure and forecasting could not cope,” Steen said. His conclusion was that even the smart, fastest-growing end of the industry was not dealing adequately with consumer behavior that is changing globally at a rapid rate.

However, not everyone agreed with one TIACA delegate’s view that the world’s growing middle class is less price-sensitive and “wants it tomorrow.”

Andrew Herdman, director general of the Association of Asia Pacific Airlines, reminded the conference that FedEx is seeing more growth in deferred than in overnight services.

“People want value, not immediacy,” he said.

Analyst Brian Clancy, managing director of Logistics Capital & Strategy, foresaw the three big integrators scaling back their networks and handing off more parcels, creating a counter-intuitive “renaissance” for airlines, as they look to manage price decline and reduced demand for next-day delivery.

Despite this, modal shift is likely to continue. Airfreight will lose its “insurance” function as shippers get smarter at forecasting their requirements, Clancy predicted.

Steen, who is also chairman of the Global Air Cargo Advisory Group (GACAG), said average shipment transit time, at six days, has not speeded up in 30 years.

“The general cargo industry has bottlenecks and has not streamlined in the way the integrators have,” he said.

Traditional air cargo is not meeting customers’ service needs, claimed Joost van Doesburg, airfreight policy manager at the European Shippers’ Council.

“In meetings with shippers, it’s clear they have no knowledge of who is best or most reliable. They go solely on price. They would pay more for better service, but we need to give them more insight,” he said.

One of the few, elusive shippers in Istanbul, Robert Mellin, head of distribution logistics for Ericsson, recounted the shocking story of a flown consignment, the last in a multi-million dollar project, that simply disappeared after the airplane landed.

The airline, its handler and customs searched for several hours without success.

“Even the customer got involved, which is the last thing you want to see,” Mellin said. “Next time, I know it’s going to arrive faster by boat.”

The International Air Transport Association’s soon-to-retire global head of cargo, Des Vertannes, told the conference that the industry still depends on freight status updates, with each carrier setting its own standards, to find out whether cargo is on the plane, has been offloaded, is in the warehouse or on a truck.

If the information is not there, the customer picks up the phone, Vertannes said.

“Yet a supermarket has known for 20 years how to replenish a can of baked beans as soon as it goes off the shelf. What does that say about our industry?” he asked.

Vertannes is encouraged that many elements of E-freight are now in place and said an increasing number of countries are accepting electronic advance data.

This has an important security dimension as well as improves freight flow. Kester Meijer, chairman of the Association of European Airlines’ Cargo Security Workgroup, said, “We must go ‘E.’ It provides a higher quality of data than regular freight. We have the infrastructure in place – let’s use it.”

Vicki Reeder, deputy assistant administrator at the Transportation Security Administration, said the TSA is making slow progress in its effort to harmonize data requirements with the European and Canadian security authorities.

Asked whether an incident such as the Yemen printer cartridge bomb plot 3.5 years ago, could be averted in future, Reeder said some countries have still failed to come up with a definition of high-risk cargo.