Podcast: PACTL’s Carsten Hernig shares insights on cargo handling in Shanghai

Carsten Hernig, deputy general manager, VP of sales and marketing and production at Shanghai Pudong International Airport Cargo Terminal, has implemented a flexible strategy for the cargo facility as the Iran war continues to shift trade volumes and cargo flight schedules, he says in this week’s episode of “Cargo Facts Connect.” With Shanghai (PVG) one of the major airports connecting the Asia-Pacific region to Europe, the war concerns Shanghai Pudong International Airport Cargo Terminal (PACTL), Hernig says. “Some of the main carriers who are serving this route from the Middle East are actually experiencing a disruption of their operation at the moment,” he says. “This has capacity impacts on the market, which means for us as a handling provider, that we have to be extremely flexible and react fast to schedule changes and also additional capacity.” In turn, Hernig says he believes the war is driving demand for dedicated freighters as passenger flights remain limited. “I think it will underline the importance of freighter aircraft being a practical tool to increase the resilience of the system of air cargo, as disruptions on the passenger side lead to capacity impacts,” Hernig says. The air cargo sector must “find quick solutions” for “non-controlled” variables — such as political tensions, tariffs and other factors — affecting the industry amid high global demand, and remain resilient, he says. Tune in to this week’s episode of “Cargo Facts Connect” to hear Hernig discuss the market’s outlook and PACTL’s role in handling air cargo at PVG with Senior Associate Editor Robert Luke. A transcript is available below. This transcript has been generated by software and some transcription errors may remain. Robert Luke Hello and welcome to another episode of Cargo Facts Connect, the podcast of cargo facts, the publication of record for the air cargo and freighter aircraft industries for over 40 years. I’m Senior Associate Editor Robert Luke, and it’s Friday, March 27th. I recently caught up with Shanghai Pudong International Airport Cargo Terminal Deputy General Manager, Vice President of Sales & Marketing and Production Carsten Hernig. Take a listen. Robert Luke Hi Carsten, how are you today? Carsten Hernig Hi, Robert, really pleased to meet you. Great opportunity to talk to you and yeah, looking forward to your questions and hope can give you a little insight in the industry developments and our business. Robert Luke Well, thank you. It is a pleasure to have you and I look forward to learning about what it is you're doing over there in Shanghai and the and the latest developments that are taking place. So without further ado, I'll start off with the first question as we look at today's current events. How has the war in the Middle East changed, and how will it change air cargo networks, supply and demand globally, Carsten? Carsten Hernig Well, first of all, of course, Shanghai being one of the major airports of the world, linking in particular Far East to Europe, obviously we are concerned and affected by the situation in the Middle East. Because some of the main carriers who are serving this route via the Middle East are actually in a disruption of their operation at the moment. So this has capacity impacts on the market and this means for us as a handling provider that we have to react extremely flexible and fast to. To schedule, schedule changes and also additional capacity which is coming in because the scheduled operation, which is a passenger operation as well as a freighter operation on those routes, is disturbed. Schedules are changing, flights are cancelled. Certain flights are replaced by additional freighter capacity. So we have to react to this and I think what we feel here in Shanghai locally is probably also the fact which others are feeling when we talk about the network effect. When it comes to the long term consequences of this conflict, I think it's really too early to give any statement about what the long term outlook of this is going to be. I think the key message at the moment is to watch the dynamics to react fast. And most importantly, to find solutions for the market and for the customers. Robert Luke As you indicated, shift in flexibility is is key. How would this war make carriers rethink the balance between belly capacity and dedicated freighters? Carsten Hernig I think it will underline the importance as of of freighter aircrafts being a practical tool to increase the resilience of air cargo, of the system of air cargo disruptions on the passenger side, they lead to capacity impacts. Now if you want to react, the tool to use for the airlines is most likely freighter aircrafts, be it their own aircrafts, be it leased aircrafts, charter aircrafts, whatever capacity is available on the market and I think this is. Then the leverage which the airlines are having to implement on what has also been discussed in depth and presented in depth on the IATA WCS conference that the resilience of air cargo as a system has grown over the past years. And again, I believe that the freighter aircraft are playing an essential role in this building up of resilience. Secondly, and again, here we are coming to the ground. It requires ground handlers. Like us, like others, especially the large ones, who are able to react fast and quickly to significant changes in a freighter aircraft schedule because additional freighters mean significant additional volumes in your warehouse. And this obviously has a huge impact on your business planning, on your production planning, on your shift planning, your resource planning and so on. So again, I think freighter aircraft is a key to establish resilience if I sum it up. Robert Luke Well said, Carsten. I I couldn't agree with you more. Apart from the war, where do you see the biggest operational challenges in the global air cargo system today and how can the industry address them? Carsten Hernig Well, I think at the end of the day, every industry lives from demand. If there's no demand, there is no deploy. And I think we have a situation in which the demand globally is pretty high. We have, however, an environment of our business in what I would call the non-controllable factors, which is highly dynamic, be it political tensions, be it duty and tariff discussions or whatever else you might have. So I believe one of the challenges and at the same time opportunities for our industry is to manage these extremely fast dynamics, to build up this resilience, to be able to find quick solutions, because at the end of the day, air freight to a large degree lives off speed and lives off. The fact that we are able to resolve logistical problems which other transportation modes are not able to solve, not or at least not to solve that quickly. So this is the one thing I see. Second challenge which I actually see is the complexity of the goods which we are transporting. We are getting increasingly e-commerce shipments, we are getting high sensitive cargo in the sense of pharmaceuticals, semiconductor products and so on. So we are seeing a trend to cargo which is more complex to handle. Be it physically, which is self-explanatory I think when we are talking about pharmaceutical goods, but also on the information flow side, when we are talking about e-commerce, e-commerce might be relatively simple to handle in terms of physical handling. But there is a large obligation in terms of customs requirement data flows, data which need to be presented to customs in real time and even before departure of the flight and so on, which creates again a certain complexity. Which we have to handle, which individual players in the supply chain have to handle, but moreover, and even more importantly, which has to be handled as a whole along the supply chain, because at the end of the day, the information has to be available at all points of the supply chain. So that's a challenge and I think this is something which also is being addressed, which can be resolved through digitalization. I have a big hope in the one record project of IATA and when it comes to the complexity of handling goods, I think this is something where. At least we as a handling agent, we are very well prepared. We have achieved all the CEIV certifications of IATA which give a neutral industry proof that we are able to handle such complex businesses and at the same time when we on the ground are able to handle such business, at the end of the day, we are enabling our customers to basically promote and develop their business because as a handling agent we cannot generate business, we can only provide the processes and the infrastructure to enable our customers to be successful. Robert Luke And thank you, Carson. You indicated e-commerce and pharmaceuticals, two of the main time critical shipments that are starting to accelerate in demand and quantities or should I say cargo volumes in addition to digitalization. How should airports and cargo hubs evolve to accommodate these express deliveries? And what are some potential new technological breakthroughs that will enable airports and cargo hubs to to kind of implement and accelerate the movement of these products? Carsten Hernig LI think digitalization is one of the key things because all the aircrafts are flying at the same speed, so the difference definitely is made on the ground. On the digitalization part, I think we have a huge opportunity to increase the speed of customs clearance and other processes which are, let's say, beyond the direct control of the inner circle of the air freight system. Secondly, within the inner circle of the air freight system, I think it's all about processes. We can improve processes. We can also improve certain physics, which when when I mean physics, I'm talking about the packaging of the goods. The better the packaging, the less trouble you have during palletization, the less rejections you have. That means you are significantly improving the speed of the ground handling process and I believe also that again the basis for that will be digitalization, but the further integration in the whole supply chain in the sense of early exchange of information which leads to better planning of the supply chain will then also lead to faster delivery times and speed in this process. When it comes to pharmaceuticals in particular, I believe one of the significant factors of success here is the availability of infrastructure, infrastructure which enables an unbroken pool chain. This is the most important because we are talking about highly sensitive goods and it doesn't help if they've been transported 13 1/2 hours in perfect temperature condition and then somewhere on the last mile they're exposed to to the wrong temperature even if it might be only for a few minutes, but that spoils the whole success of the entire transport. So here infrastructure is key. We have to have buildings in place and processes which secure the integrity of the temperature guided supply chain. And luckily and here can only speak for us, we have this infrastructure, we are able to handle this business and again we are able to enable our customers to be successful full in this business segment. Robert Luke Thank you. There was one thing that stood out in your support of one record, which definitely everybody is aligning with and that was discussed heavily in Lima. How important is it for air cargo carriers, airports, freight forwarders, logistics supporting companies? To have transparency and prioritize that more so than the competitive, the competitive drive to be successful within the industry? Carsten Hernig I think availability of information in a supply chain, especially in an air freight supply chain, where it's all about speed and by the way, also all about safety is is crucial. And it is not that we are not having information at the moment. We have information, but we have information. Information on what within the industry we call on the master airway bill level. So the information which we have is on a highly generated level if we want to optimize the flows on a door-to-door perspective on a shipper to receiver perspective. We have to move away from the air waybill or the master air waybill and we have to look into the piece level because at the end of the day, a consignee receives an individual box or a shipper sends out a box and whether or not it's being consolidated during the transportation is of little interest to the two key players in the supply chain, which is the shipper and the consignee. So in order to have this logic of the one-to-one transparency in in information on the piece level from the shipper to the consignee, we need to reach this level and I believe one record is the right tool to do that. It changes dramatically the approach which we are having in our information exchange in the industry. At the moment what we are doing is all messaging based. We are trying to fill information gaps by exchanging messages. Which is extremely complex because at the end of the day, if you imagine a big marketplace where people are whatever, negotiating prices for oranges or whatever, you have everybody talking to everybody else. So there is a huge communication going on and this has to be somehow channeled differently. And this is where one record comes into the game by producing digital twins of at the end of the day, each and every box. And then we are reaching this level. Technologically, we are getting close to making this possible. I think in terms of mindset and readiness of the industry, there is still a way to go, but that's what we are there for. I think this is an industry responsibility which each of everyone has apart from his or her own business interests. I think this is something which really brings the industry forward, which increases speed, which increases customer benefit, and increases also safety and security. Robert Luke As we expand on the digitalization, which is definitely a technological advancement to it not only accelerate the delivery of air cargo traffic globally, but to accelerate the industry overall as far as modernization. How do you see emerging aircraft technology such as electric, hybrid or hydrogen propulsion changing the cargo sector over the next two decades? Carsten Hernig Of course, as a ground handler, we are not directly into aircraft development or aircraft design, but I believe that sooner or later we will also see a technological breakthrough on the engine and aircraft technology. At the moment what we have is purely fuel based. We know that, but research is going on and at the end of the day it has also taken the automotive industry quite a while to come up with relevant engines. For the demand of the market in terms of electrical engines and sooner or later, I'm very optimistic that we are getting there also when it comes to the design and the construction of aircrafts, it will take some time, however. Until then, we probably have to accept the fact that we will rely to a large degree on fossil based fuels and at that point of time, I think the only option is to increase the staff part in the fuel consumption. Of course there is a cost discussion. But I remember 1 presentation in the during the IATA WCS conference where someone said I think it was a representative of Lufthansa if I'm not mistaken. He took the example of a sporting shoe and said that at the end of the day if you add the cost of the self fuel. The price of this particular sporting shoe, if I remember correctly, would just go up by a few cents. So what looks much in terms of percentage maybe is not really relevant in terms of additional cost when it comes to the individual product. Which the consumer is going to buy. So my hope is having said that, that there is a market chance for stuff which at least will cover, let's say the time until we have alternative engines in the market. Robert Luke As we look at SAF and you definitely answered that question before I could ask it, so thank you. As an airport, have you begun looking into what kind of support would be required for this new technology, whether it's SAF or these new developments in the cargo market as far as emerging technologies and what it would take to sustain them? Carsten Hernig Well, as a cargo handling agent, we're not dealing directly with the operation of the aircraft. Robert Luke Gotcha. Carsten Hernig But on a smaller scale, what I can say is yes, you will have to set up an infrastructure once the fueling of whatever engines you are using is changing. We have seen that, as I said, on a smaller scale, we have exchanged all our forklifts which used to be gas or fuel driven forklifts by electrical forklifts. If you run an operation which handles more than two million tons of cargo a year, you have quite a number of them, which means you need to set up quite an infrastructure for charging their batteries. You need to have the respective power lines. You have to have the infrastructure providers who are able to deliver power in such huge quantities on a regular basis 24/7 and so on. So that yes, there is quite quite a number of activities behind the curtain. Which are the necessary enablers in order to make any kind of operation happen which is based on non fossil fuels because till date to a large degree the world still is completely designed by dependency on fossil fuels. But I can also say that here in China where we are based, the development of electrical vehicles and let's say environmental friendly machinery in general is already very much advanced. So I think if there is a place on the planet where you can really see. How fast a transition from fossil burning engines to electrical engines can be practically implemented in daily life, then Shanghai is a good place to go to and you will see that most of the cars here in the city are already electrical vehicles. And at one point of time when we have the technology on the aircraft market, this gives me hope that also then we are getting into a rather fast turnover of whatever kind of engine power we're going to have by then. Robert Luke And as you mentioned, you did the electric forklifts and you've transitioned to those. Have you noticed a difference in performance when comparing those to the old fossil fuel burning forklifts? And if you are able to, what are some of the? New advancements for cargo supporting or when it comes to equipment you're looking to implement or acclimate into your day-to-day operations? Carsten Hernig Well, first thing in terms of day-to-day performance, we didn't see a big difference. Yes, you have to adapt some processes and infrastructures as I mentioned before, but complete smooth transition, I can confirm we had certain limitations when it came to the big forklifts, the 10 ton forklifts, the one which can carry the heavy weights because there for some time the the the performance of the battery driven vehicles was not sufficient, but also this has by now been resolved through modern technology. So also for this there is a solution. When I look further into the future, what I would like to see is more employment of automated and autonomous vehicles. That means driverless vehicles, because this will actually enable us at one point of time to further increase our efficiency. To be more flexible, if you remember the beginning of our conversation in terms of shifting demand and so on, because then we have to steer less resources. So the complexity is less because the the vehicles can adjust automatically and of course in times of cost efficiency. And also difficulties to find sufficient labor in the market. I think automation in this regard is also going to be increasingly important. Robert Luke In closing, name the top two or three things that you feel must be addressed or improved this year to move the industry forward, Carsten. Carsten Hernig Well, the first thing when we talk about the industry, it's digitalization A because as discussed earlier, it is a need in itself for the industry to have a better product and a higher customer satisfaction. But secondly, also because the entire world is changing so fast in terms of digitalization and A I, and I believe this is something where as an industry on which large supply chains of this planet are dependent on, we have to also follow this path. Not only have to follow this path, I think we have to take leadership in this path because our business is actually living off speeds and living of solving problems faster than anybody else can. That means also on the information flow alongside with us, we have to be frontrunners. Second thing for us, when I look in terms of priorities for ourselves as a ground handling agent, we are modernizing one of our terminals, the the the biggest ones of our terminals, which is PACTL West. And here we are going into a process of automation and also digitalization, which again, purely looking into my own books, that's the key priority for this year. Robert Luke And on that note, Carsten, I thank you for taking a few minutes out of the start of your Thursday to enlighten the audience as well as myself on the day-to-day operations and the latest developments at your cargo handling facility facility at Shanghai Pudong International. Thank you again for coming and hopefully we'll get you to stop in again real soon so we can find out what's the latest and greatest happening in Shanghai. Carsten Hernig Cool. Thank you very much and it's always a pleasure to talk to you. Robert Luke That was PACTL General Manager, vice president of Sales & Marketing and Production, Carsten Hernig. And that’s all the time we have today. For more coverage of the freighter aircraft market, visit cargofacts.com. Thank you very much for tuning in, and join us again next time. Subscribe to Cargo Facts Connect on iTunes or Spotify , or download the episode on Transistor . The inaugural Cargo Facts Routes and Airport Conference will take place April 27-28 in Brussels at the Marriott Hotel Grand Place, along with Cargo Facts EMEA 2026, taking place April 28-30. To see the agendas and register for the events, visit CargoFactsEvents.com .

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