Air cargo hopes for takeoff
The International Air Transport Association anticipates that airlines globally will transport 51.8 million tons in 2013, a small jump after two years of stagnation at 51.4 million tons in 2011 and 2012. Despite these lackluster numbers, Des Vertannes, IATA’s global head of cargo, sees a major turnaround for air freight in the coming years.
Tonnage for 2013 will only represent a slight increase over 2010’s result of 50.7 million tons. That year, the global economy was recovering from the recession — retailers were filling inventories and generating an aberration in cargo activity, so the reality is that cargo has been flat since the economic crisis of 2008 and 2009.
“So we’ve had six years of pretty flat growth,” Vertannes said during a recent conference call with reporters.
Along with flat growth, cargo revenues have dropped. IATA measured a $67 billion air cargo trade in 2011 and has predicted a decline to $59 billion this year, which mirrors revenues last seen in 2007 but with nearly 20 percent more cargo in the skies.
Vertannes pointed to dwindling consumer confidence in Europe and the United States as the main culprits of air cargo’s current struggle. But he sees investments worldwide, along with a burgeoning middle class in new markets, playing into the future of air cargo.
In a June update on China’s middle class, McKinsey & Co. projected “more than 75 percent of China’s urban consumers will earn 60,000 to 229,000 renminbi ($9,000 to $34,000) a year,” putting Chinese citizens in between the income averages of Brazilian and Italian consumers. To drive home the huge growth potential in China, the firm found that only 4 percent of Chinese consumers were in that earnings range in 2000.
As China tries to mold itself into a domestic economy instead of an export-based one, more Chinese consumers will demand high-price goods from manufacturers based in Europe and America, Vertannes said. This will help propel air cargo revenues and increase volumes. Growth will also occur in India, Africa and Latin America, altering the balance of transport as it happens.
“We can see a shift in balance. We used to always be critical of the freighter balance when it came to air cargo — all the flights were full coming east to west, but going back, not,” Vertannes said. “I think in years to come, we will be looking at a far more balanced trade flow between east and west.”
More consumers in these countries will move to large cities and demand a huge air cargo presence to handle high-value inbound merchandise.
“In terms of air cargo’s growth, it’s got a very, very good future,” Vertannes said.
And despite the growth of passenger bellies and the increasing troubles faced by airlines operating freighters, Vertannes said all-cargo planes will share in some of this coming demand. Just look, he said, at the Middle Eastern airlines that are expanding in the current market — Qatar Airways, Emirates Air Line and Etihad Airways.
“As they extend their networks and bring in more passenger planes, they are still investing in freighters to be able to draw freight in from specific markets” that are either not served by passenger routes or happen to need services not within the specific times served by passenger planes, he said. “You’ll always need freighter capacity because you’ve got to furnish a growing network.”
Pressing E-freight. To handle an expanding air cargo network, IATA has been trying to move the industry to paperless transactions, mirroring the earlier change in the passenger industry. While the e-freight discussion has been on the drawing board for a number of years, Vertannes said slow progress is the name of the game because of all the moving parts in the cargo arena.
The air cargo industry has an array of IT platforms that need to be updated, with some airlines and forwarders even running their own systems.
To push e-freight forward, governments need to be prodded. A number of countries still need to sign the 1999 Montreal Convention and move away from the Warsaw Convention, which doesn’t let users completely reject paper confirmations. Recently, though, the International Civil Aviation Organization declared all its members should sign the Montreal Convention.
Signing the new convention, however, is just the first battle, Vertannes explained. “Even those countries that have signed the convention… have got customs regimes who have yet to embrace customs capability,” he said. This occurs because of a lack of funding, but also because some customs authorities remain set in their demands to see paper confirmations for air cargo.
IATA is still sticking to its e-freight rollout plan, hopeful that self-imposed metrics will be met on time. By the end of the year, the organization wants to have 20 percent penetration on the electronic air waybill, with an aim toward full implementation by 2015. Then, it’s on to the next electronic document.
Cold-Chain Performance. No matter what happens with e-freight, IATA is always looking to boost the stature of air cargo and make the transportation of goods flow more seamlessly. The association’s latest quest is solving ground-handling issues in the cold-chain industry and getting handlers to raise their standards. To do this, Vertannes said, IATA will work to implement a ratings system for ground handlers at airports that would allow airlines and forwarders to spot potential issues in the supply chain.
Vertannes noted that this system is still in the very early stages, and the IATA still has to gather the correct experts in order to develop a set of criteria for the program. But he said this system has the potential to change the cool-chain experience.