Cargo value chain needs much improvement: IATA
Oct. 17, 2013, Singapore - The International Air Transport Association (IATA) called on all participants in the air cargo value chain to work together towards the common goals of improved quality, increased efficiency through e-AWB and e-freight and more effective security.
Combined, these measures will improve air cargo’s competitiveness in the face of stagnant demand growth and unfavorable market developments.
Air cargo is suffering from a prolonged slump that has seen falls in yields, revenues and market share. Since 2010 world trade has grown by 12 per cent whereas air cargo demand growth has been basically flat with only a 2 per cent increase. A divergent trend in passenger demand, with growth continuing in the historical 5-6 per cent range, has complicated the situation. As airlines grow fleet capacity to meet rising passenger demand, capacity has been introduced into weak cargo markets, putting considerable downward pressure on yields. Cargo revenues in 2013 are expected to be $59 billion, some $8 billion below the 2011 peak.
“No business or business model survives over the long term without evolving. Air cargo is being buffeted by forces for change. These include changes in the economics of just-in-time manufacturing, longer delivery lead times, innovation by alternative modes of transport, and environmental pressures. In the face of these challenges, air cargo needs to work together as an industry to improve competitiveness and protect its value proposition,” said Tony Tyler, IATA’s Director General and CEO, speaking to the Air Freight Institute at the World Congress of the International Federation of Freight Forwarders Associations (FIATA), in Singapore.
“By working together we have made global air cargo safe, secure and reliable. So reliable, that it is often taken for granted. It is the unsung hero of the global economy—underpinning global supply chains and delivering products to markets. But if we are to return the business to growth, the industry must collectively embrace an agenda for enhanced quality, efficiency and security,” said Tyler.
IATA announced that it will work with FIATA and the Global Air Cargo Advisory Group to enhance the Cargo2000 (C2K) master operating plan to measure the service promise of the industry to shippers. C2K is an industry initiative working towards embedding benchmarked quality standards across the industry.
“We need to see air cargo through the eyes of our customers who have high expectations right across the value chain. Air cargo is a premium product. Customers valuing speed or a 100 per cent cool chain need to be certain that their goods will be delivered on time and be handled appropriately. By working together, I know that we can generate real momentum in the race to drive up quality and reliability,” said Tyler.
IATA reiterated its commitment to improve competitiveness by modernizing industry processes with the e-freight program. Replacing paper process with electronic documentation will drive both efficiency and quality improvements. It will also improve customer service by enabling shippers to have the the same level of data about their shipments that they get from the integrated delivery companies.
“E-freight will improve the competitiveness of air cargo. Delivering it is a mammoth task involving a complex chain of stakeholders which includes governments and Customs. Progress has been slower than expected. Even the e-air waybill (e-AWB) penetration—a critical enabler of e-freight—has only reached 9 per cent,” said Tyler.
“Airlines alone cannot deliver e-freight, but we can do a lot on e-AWB. It is encouraging that the whole air cargo industry is aligned behind the target of 100 per cent e-AWB adoption and there are some excellent examples of success in markets like Hong Kong, Singapore, Seoul and Dubai. But more airlines and forwarders need to sign up. We cannot build a better, more competitive future for air cargo without individual contributions and leadership,” said Tyler.
Governments in the EU and US have imposed new directives tailored to managing air cargo’s security risks. An example is the EU’s ACC3 regulation. By 1 July 2014 all carriers transporting goods into the EU from selected non-EU countries will need to have their operations from those states independently validated as to the security standard of their cargo supply chain.
“My message to the airlines, ground handlers and forwarders is two-fold. First, make plans to get validated as soon as possible. Second, look for areas to cooperate. There is only a limited number of validators, so it makes sense for certain markets to coordinate requests to be validated. This should maximize efficiencies and minimize costs, as well as increase the chances of the industry meeting this very tough deadline,” said Tyler.
Partnership for cargo growth
“Air cargo is facing some big challenges to its competitiveness. The only way to resolve them is by working together. The relationship between carriers and freight forwarders needs to be a much more equal partnership. That is the premise of the Cargo Agency Modernization Program which we are developing in close cooperation with FIATA,” said Tyler. The proposal is expected to be announced at the eighth World Cargo Symposium in Los Angeles, March 2014.
“I am a cargo optimist. If it can adapt, air freight has a competitive future – potentially a very bright one. Emerging markets around the world—Asia, Africa, Latin America, Central Asia, Russia and many others—offer enormous potential for growth. By working together, we can deliver the solutions that will position air cargo to meet the needs of tomorrow’s world,” said Tyler.