WCS Preview: The value of air cargo

As we put a challenging 2015 behind us and look forward to 2016, work here in IATA naturally focuses on preparations for the 10th World Cargo Symposium (WCS). The theme we have chosen for this year’s event in Berlin is “the value of air cargo.” This is a wide ranging theme that can be explored in many ways, but I would like to focus on two: 1) a stronger approach to safety, and 2) the value of innovation.

Some of the sobering events of 2015 – the Metrojet incident, the terrorist attack in Mali, the cargo plane crash in South Sudan and other incidents – remind us that we can never relax our focus on our top priority of safety. The value of air cargo is worthless next to the importance of protecting our people.

In that context, we face a particular challenge with lithium batteries. The numbers of these cells being manufactured is staggering – around 400 million a week, many of which are shipped by air. The value of air cargo is that we can deliver swiftly to every corner of the earth, satisfying sudden consumer demand, facilitating global supply chains, and fulfilling urgent medical and aid requirements. Lithium batteries are embedded in everything, from medical equipment and children’s toys to fitness aids and household gadgets. They are an indispensable part of modern life, and preventing their shipment by air would create a significant negative impact on the global economy. Although lithium batteries are classified as dangerous goods, properly manufactured and correctly packed batteries can and are air freighted safely in their millions. The problem lies with a small, but significant, number of poorly manufactured, incorrectly labeled and illegally packed shipments.

The focus should not be on penalizing high-quality manufacturers and fully compliant shippers, or making lithium batteries harder to export or utilize. Our priority in 2016 must be to focus governments on the need to apply the full force of their laws to crack down on sub-standard manufacturing and noncompliance with the dangerous goods regulations. We cannot allow gaps in jurisdiction, or bureaucratic inertia, to put aircraft, ground staff or the public at risk.

Aside from lithium batteries, another huge growth area for air cargo has been cold-chain and pharmaceutical freight. The market for cold-chain logistics has grown exponentially and will exceed US$10 billion in the next couple of years. Despite this growth, air cargo’s share has been declining, from 17 percent in 2000 to 11 percent in 2013. What is the value of air cargo to a shipper if his product is ruined by a temperature excursion while the pallet sits on the apron? This is an all-too common consequence of a lack of harmonized SOPs. The value of air cargo resides in its innovative responses to these challenges.

It is vital that the industry invests in processes, facilities and training, which can guarantee to shippers that their time- and temperature-sensitive goods will be delivered reliably and in perfect condition. Many airlines, forwarders and ground handlers have invested heavily in cold-chain solutions as part of a collective industry commitment to patient safety.

To support and recognize these industry developments, IATA launched the CEIV program. At the end of December, some 17 entities had been certified as CEIV-Pharma, with 40 more in the process. The key is to build complete airport communities and end-to-end shipping lanes so that the transport chain is guaranteed and forwarders have the confidence to use air cargo for these high-value shipments.

Innovation in air cargo is not restricted to the cold chain. An area of particular importance is the adoption of digital processes. This remains a huge challenge, but we have seen progress. In November 2015, the take-up of the e-air waybill (e-AWB) was 35.4 percent, against a 2015 year-end target of 45 percent. In 2016, IATA will launch e-AWB 360, which is a market- and community-driven approach to align to the IATA Board of Governors 2016 e-AWB penetration target of 56 percent. The e-AWB 360 program will target an initial list of nine airports from which to roll out this initiative.

For 2015, total freight volumes edged upwards by only 900,000 tonnes, to 51.3 million. While this is an absolute record, FTK growth was probably around 1.9 percent, which was less than global GDP growth. For 2016, we expect FTK growth to improve slightly – perhaps by 3 percent – but yields are set to decline for the fifth year in a row, due to lower fuel costs and increased widebody belly capacity in the passenger fleet.

The value of air cargo for driving social and economic development is not universally recognized by governments or even by all stakeholders in the supply chain. We have a challenge to re-establish the industry as an innovative force, which can adapt to evolving and increasingly sophisticated customer demands. At the WCS, our discussions will be aimed at raising the awareness of the need for industry transformation. I look forward to seeing many of you there.

Pictured: Glyn Hughes