E-freight’s gradual ascent
Last year, air cargo industry groups, likely fed up with an all-or-nothing approach to e-freight that was getting nobody anywhere, introduced a piecemeal approach aimed at easing the air cargo industry into the 21st century.
Starting with the air waybill, the plan was to get carriers, airports, forwarders and shippers slowly on board with electronic data transfer, convincing them of the benefits of an electronic way of life while inching toward full implementation.
The International Air Transport Association needs to hit a target of 20-percent acceptance of the e-AWB by the end of the year to stay on its published track of 100-percent implementation by 2015. That means 20 percent of all industry shareholders have to see the benefits, believe e-freight is the right way to go, and make significant investments in new infrastructure by Dec. 31.
The global target moves to 50 percent by the close of 2014.
As of April, the most recent data available shows a global e-AWB penetration of 8.5 percent, up 4.2 percent year over year, according to IATA. With eight months to go, that seems like a steep hill to climb.
The bulk of the electronic activity for the month originated out of Hong Kong, the United Arab Emirates, Korea and Singapore, with the United States having the fifth highest adoption rate. The United States came in second to China as the top destination by e-AWB volume. Zeroing in specifically on airports, no U.S. airports rank among the top 10 originators of e-AWB flights; Los Angeles International Airport ranked sixth according to e-AWB flight destinations. The top airlines using e-AWBs include Cathay Pacific, Emirates, Korean Air and Singapore. Delta Air Lines, the only U.S. carrier in the Top 10, placed sixth.
April also marked the start of IATA’s multilateral e-AWB agreement. Vastly simplifying the process, the agreement calls for a single document that airlines and forwarders can all sign, creating an e-freight bond among the parties. There’s no longer a need to create separate air waybill agreements between each new entity.
IATA’s Michael White pointed out that the 20-percent goal has been set for global acceptance of the e-AWB, but he would really like to see 25-percent acceptance by the end of the year. With acceptance currently hovering below 5 percent in the United States, 25 percent looks difficult to meet, but with a few big users, White said, the goal can be reached.
“The U.S. is getting ready to really take off. April numbers were still at 3 percent, but in the last few weeks, we have been working closely with many carriers to get the multilateral agreement signed, and we had DHL Global Forwarding sign last week from the forwarder side,” White said in early June.
He added “with the energy we are seeing putting into the effort we feel hopeful in making this important target.” He said there are several major forwarders nearing review of the agreement. Carriers atop the global list — Cathay, Delta, IAG, Emirates, Lufthansa and others — are all starting up their activities in the United States, which should help boost results, he said.
This focused concentration on making sure carriers, forwarders and airports are able to handle the e-AWB represents a change for IATA, which had simply been pushing for e-freight as the next new frontier. This all-at-once approach was getting nowhere; the new piecemeal strategy has a greater chance of success, said Brandon Fried, executive director of the Airforwarders Association.
“I think that we’ve probably turned the corner, and we’re going to see more progress now that IATA has adopted a more pragmatic approach,” Fried said recently.
Concentrating on simply one piece of the e-freight puzzle – the air waybill is one of myriad documents IATA would eventually want to transmit electronically – also makes the case for e-freight easier to understand, Fried maintained. This will help IATA snag small and midsized forwarders, the players that will be the hardest, he thinks, to get up to speed.
“Getting the intergalactic forwarders,” Fried said, “that won’t be much of a problem because those guys have the resources to adopt it and they’ll rise to the occasion.”
According to Fried, the larger the company the more ability they have to see the benefits of e-freight, which requires an up-front investment with a payoff down the road. Smaller forwarders don’t necessarily have the resources to put money into what they might think is an unclear proposition.
“The smaller guy, it could be argued, ships most of the cargo because there are a lot of them,” Fried said. “Those guys, the future is not as clear to them, and they have to be very careful on how they make their investments because of limited resources.”
Fried called the 20-percent goal “ambitious but probably doable.” He noted it hasn’t been easy, so far, convincing all the stakeholders of the benefits of e-freight. If IATA came to industry players with specific examples of how, when and where they would see the benefits of e-freight, the process might be moved along a little faster. He noted IATA officials are working tirelessly to make progress on the programs, but they still have a steep hill to climb.
“This is going to be difficult. I do think, though, that once they get critical mass and once they demonstrate the value proposition that people will see that this is the way to go,” he said. “Not adopting e-commerce in the forwarding industry will put you on the wrong side of history.”
Even if 2015 rolls around and IATA is close to hitting its final goal, Fried thinks there will always be a few forwarders who don’t want to embrace e-freight. No airline is going to turn down freight simply because a shipper or forwarder isn’t electronic, he said.
“As time progresses, paper will be more of a piece of history,” Fried said. “I think that 100 percent is an illusive target, but the vast majority is certainly attainable.”