How E-freight can restore industry’s profitability

  • April 3, 2013

Tony Tyler, CEO and director general of IATA, pulled no punches in assessing the challenges that lie ahead for the air cargo industry at the World Cargo Symposium opening plenary in Doha, Qatar.

“Since 2003, we have generated $5 trillion in revenues. And yet we struggled just to cover our costs and barely broke even,” he said. “The recent downturn has been particularly difficult for the cargo side of our business. The two-speed recovery has seen the Western economies struggle to regain lost ground, while the developing economies of the East forge ahead.

“Sea shipping has captured a larger part of the growth in trade—even for some goods that traditionally have gone by air. Speed is our biggest selling point. But it comes with a price that is many times more expensive than shipping by sea. So there is tremendous pressure to further improve our competitiveness.”

Air cargo accounted for about 12 percent of industry revenues, not far short of the 14 percent that is generated by business class travelers. “Improving the competitiveness of air cargo has the potential to impact positively our very thin margins,” Tyler said.

A rapid transition to an e-cargo environment would be an important step forward, he said. “We first launched e-freight in June 2004—nearly a decade ago. And we still have not realized the paperless airfreight system that I believe we all know is needed. There have been some false starts and dead ends. But I believe that we are on the cusp of taking some major steps forward.

“Most importantly, the supply chain is aligned. The Global Air Cargo Advisory Group (GACAG) endorsed an E-freight roadmap that reflects agreement on roles and responsibilities for pushing this critical project forward.

“IATA is committed to implementing the e-Air Waybill (e-AWB). We are targeting 20 percent penetration by the end of this year and 100 percent by the end of 2015. Sunday’s endorsement by the Cargo Services Conference of Resolution 672 on a Multilateral e-AWB Agreement will certainly help the process,” Tyler said. “In parallel to these efforts, the International Federation of Freight Forwarders (FIATA) and the Global Shippers Forum have agreed to push forward with the digitalization of the rest of the document pouch as the e-AWB comes into force.”

He admitted these targets were ambitious, with e-AWB penetration standing at just 6.8 percent at the end of 2012. But he credited Cathay Pacific, Emirates, Singapore Airlines Cargo and Korean Air for pursuing policies that would lead to 100 percent e-AWB from their hubs by the end of 2013. “They have demonstrated what is possible,” he said.

Turning to security, Tyler said it was more efficient and more effective to secure freight as it enters the supply chain than focusing all of our efforts at the airport—where time and space are limited. “IATA worked with ICAO to develop a framework for supply chain security for states to implement.

“In parallel, IATA developed Secure Freight as a ready-made template for states to use. It has been successfully trialed in eight countries. The first pilot scheme in Malaysia proved that it is an effective way to manage cargo security. And analysis of the trial provided the basic data to estimate that implementing Secure Freight principles in Malaysia would result in a $1-2 billion boost to its economy over five years.”

Air cargo, as a global network, would derive the greatest benefit of security initiatives when states mutually recognize one another’s security regimes, Tyler said. “That is why progress on the U.S. Air Cargo Advanced Screening (ACAS) program, the EU’s Air Cargo or Mail Carrier operating into the EU from a third country airport (ACC3) security directive and the e-Cargo Security Declaration are particularly important developments.”

The conference observed a minute’s silence for Roland Bischoff, senior VP, global airfreight at Kuehne + Nagel, who died in a skiing accident in December. Bischoff was prominent in IATA and closely involved with the Cargo 2000 quality measurement initiative.

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