Service matters in an automated future

We’ve spoken before about the need for an investment in technology to bring the air cargo business into the 21st century. But it’s also worth considering what kind of changes that technology will bring to the industry, and how it will impact possibly the single most import aspect of all the work we do – the service we give to our customers.

A look ahead

So how different will the air freight industry look in five years’ time? What impact will an increasing investment in cutting technology have had on the way we all work? And what opportunities do the trends in the industry present for those companies looking to get ahead of the competition?

An automated future?

A recent survey by online booking portal Freightos of nearly 70 freight forwarders has provided some intriguing answers. Many of the respondents asked – 75% – thought that future of air cargo looked very much like the revolution that has transformed banking. The model for many banks today is build on a high degree of automation, with a personal touch when it matters. Many of the freight forwarders suggested that processes will become largely automated, and that much of the physical process of actually moving goods from A to B will be handled by technology like automated stowage and self-driving forklifts.

It’s a picture of an industry that’s very different from today – but one that holds many opportunities.

Service will define us

Ignazio Coraci comments: “As our industry becomes increasingly digitised and automated, those real-life touchpoints between the customer and the forwarder will become ever more critical. Good customer service will be a key differentiator for people choosing between different air cargo operators – and that is a real opportunity to gain a business advantage for those companies who invest wisely.”

Investment in technology is key

It’s fair to say that the air cargo isn’t noted for it’s rapid adoption of technology to make systems and processes more efficient and less costly. And according to Dheeraj Kohli, vice president and global head of travel and transportation for Unisys Corporation, the industry may soon start to pay the price, if it doesn’t get up to speed rapidly. Speaking to Air Cargo News, Mr Kohli wrote about how inefficiencies are now starting to hurt the bottom line.

Growing concerns

“Respondents to a 2015 air cargo survey stated that process inefficiencies are leading to a widespread inability to optimise revenues,” says Mr Kohli. “Three out of four air cargo executives said that this has contributed to revenue leakage and over half surveyed believe it has led to problems with pricing integrity and consistency.

“In an increasingly complex economic landscape and highly competitive global marketplace, the airfreight industry must reassess how it can use technology to create more innovative and adaptive business models. Not only that, it must abandon a previously conservative approach to IT investment.”

Slow to catch on

To make matters worse, many of the solutions that could streamline the air freight industry are already available – the issue is that many companies have been slow to adopt them. The picture isn’t all bad however – Mr Kohli points to IATA’s hard work on promoting the “e-freight” campaign as a positive first step.

“While current e-Air Waybill (e-AWB) penetration is on track to hit the 2016 year-end target of 56% set by IATA, it is only the first step towards a more technologically-integrated future for air cargo,” he says. “There are a multitude of other technological innovations that the industry has so far only briefly flirted with.”

Investment needed

These include everything from an automated system that classifies cargo as soon as shipment data is available through to an integrated cargo pricing system, but the industry needs to invest and approach the technology with an open mind.

Ignazio Coraci comments: “Technology offers boundless opportunities for us to streamline our business – but the will to adopt and invest in these innovations has to be there. As an industry we all need to work more closely together to find ways of integrating new technologies into our systems and processes.”

A positive outlook for the US

While this year has been a politically volatile one for the US – with a new president and jittery markets – the North American air cargo industry has got off to an encouraging start in 2017. There are some caveats to the good news, with indications that cargo demand rates haven’t improved as rapidly as last year and that revenues per cargo tonne have taken a hit – but overall the picture is encouraging.

Top performers

Take the performance of the three major US carriers, United, American and Delta. A snapshot of their numbers shows that they’ve seen rapid increases in cargo demand in April. with the largest of the three – United – showing an impressive 19.5% year-on-year increase in demand during April with 265m cargo ton miles (CTM).

The global picture

The positive start has been matched by global growth overall in the industry, hailed recently by Alexandre de Juniac, the International Air Transport Association (IATA)’s Director General and CEO.

“It’s been a good start to the year for air cargo. Demand growth accelerated in January, bolstered by strengthening export orders. And that outpaced the capacity growth which should be positive for yields. And, longer-term, the entry into force of the Trade Facilitation Agreement (TFA) will cut red tape at the borders for faster, cheaper and easier trade. The onus is now on the industry to seize the opportunity to accelerate the modernization of processes to make air cargo an even more compelling option for shippers.”

A platform for growth

SW Italia’s Ignazio Coraci comments: Clearly, the US market is one that is very important to our business. It’s encouraging to see that the numbers bear out what we’ve experienced so far this year – a positive increase in cargo and a great base to build on for the rest of the year.

A threat – or an opportunity?

It’s been called the ‘New Silk Road’ – a massive infrastructure programme, led by the Chinese, that will bring together the economies of the Asia-Pacific region through new roads, pipelines, ports, high speed rai links and fibre optic cables. The project – formally known as One Belt, One Road (OBOR) – is set to transform the region and create a new economic powerhouse.

A growing pattern

It’s within this context that DHL’s recent addition of another rail connection to Belarus and the establishment of the first regular connection between Shenzhen in China and Minsk has important implications for the air cargo industry. The new route follows a pattern of investment in rail services between the Far East and Europe over recent years, and will make use a rail system that now connects a number of cities in China with Europe. So what does this mean for the air freight business?

A threat to air cargo?

Clearly the new boom in rail links poses a threat to the air cargo industry: rail is quicker than shipping, and can be around 80 per cent of the cost of air. There will be a growing challenge to the air cargo industry in the coming years as customers see the opportunity to take advantage of the lower costs but slower transit times of rail versus the higher costs but faster turnaround of air freight.

An opportunity for all

ASC Cargo‘s CEO Ignazio Coraci comments: “As an industry, we should see vast infrastructure projects like the OBOR as an opportunity for everyone. While it’s clear that the growing capability to move freight by rail could be seen as a threat to the air cargo industry, I believe firmly that there will still be a role in future for the fast turnarounds and efficient service that air cargo offers. The growth that projects such as this will bring to the region with its booming economies, will ultimately benefit everyone – our industry included.”

Simplifying the Business

IATA’s flagship Simplifying the Business (STB) programme has transformed the passenger airline industry – now it’s time for cargo.

The passenger airline industry has transformed over the last decade or so – think electronic ticketing, barcoded boarding passes, mobile boarding passes and self-service check-in. But it’s also fair to say that the air cargo industry has sometimes struggled to keep up with the pace of change.

An inefficient process

The air cargo business is a complex one – and there are multiple points along the journey that a piece of freight takes that can cause issues for our customers, from inefficient and complex paper-based systems to a lack of transparency.

The industry transformation programme announced by IATA is all about improving two key areas – the service that air cargo carriers provide, and the efficiency of that service. The stated aim of Simplifying the Business (StB) for Cargo is to make air cargo easier, smarter and faster.

Areas of focus

Celine Hourcade, head of cargo transformation at IATA, laid out some of the key issues that the new programme will focus on – the areas of visibility, creating modern processes and making the booking procedure faster.

To achieve these aims, Hourcade explained that the project would be looking at five projects that, if implemented properly, could transform the industry –

These were e-freight, which uses electronic documentation; digital cargo, which would create a shared digital record; interactive cargo, which would share data and improve visibility; smart facilities to drive excellence and an air cargo incidents database.

The right approach

Ignazio Coraci of SW Italia comments: “The Simplifying The Business programme already has a great track record in the passenger industry, and it’s to be hoped that the successful approach taken to transform that area of the business can be just as successful with air cargo. The key is for everyone in the industry to approach the future with an open mind – the opportunities are huge if we go about this the right way.”

A time to transform

The annual CNS Partnership Conference is an important date in the air cargo calendar, and this year’s event was a chance to reflect on the pace of change in our industry.

Air cargo is a hugely complex business. It’s a $100 billion industry that can sometimes seem to move incredibly slowly, particularly where technology – and change in general – is concerned.

Slow to adapt

These concerns were touched on recently at the Annual CNS Partnership conference. The event – one of the premier events in the air cargo year – is an opportunity to bring together hundreds of the world’s leading air cargo professionals to discuss the latest developments in the industry.

This year’s keynote address was given by Ryan Petersen, the CEO of Flexport. His is a business that reflects the changing face of our industry – a software-driven freight forwarder that is at the forefront of modernising the business. Yet, as he pointed out in his speech, the industry is sometimes slow to change.

“Airlines offer something nobody needs,” he said – they “move cargo from airport to airport, but every single piece of cargo must go door to door.”

A patchy service

Petersen’s comments were echoed at the event by Blake Bowlin, global transportation procurement manager at Caterpillar. “The quality of supply chain is hit or miss,” said, adding that “Airport to airport is fine, but we look at it from a door-to-door perspective.”

This goes to the heart of one of the major issues facing the industry – that while shippers are looking for a door to door service, the complexity of air cargo with its multiple hand-offs makes this incredibly complicated.

A digital future

Unsurprisingly, given Flexport’s software-driven approach to the future of forwarding, Petersen used the speech at the CNS Partnership event to look ahead at how technology might transform our industry for the better. He talked about the potential impact of technology that can reroute cargo in transit, and autonomous, programmable freight that can even make its own decisions on the best route to the end customer.

An open approach

Ignazio Coraci, CEO of SW Italia comments: “The way that we adapt and integrate these new technologies into our industry, simplifying the complex processes and ultimately improving the quality of service for our customers is critical. We need to be flexible and open, while creating a robust network of interconnected systems that help our experts on the ground to do their jobs even better.”

Hong Kong keeps top spot

A vital part of ASC Cargo and SW Italia’s business – Hong Kong airport – has once again been named the world’s busiest cargo hub. Ignazio Coraci comments.

There were many uncertainties in 2016 – the Brexit vote, the election of President Trump and a generally more protectionist approach to global trade – but the second half of the year still marked an upturn for air cargo markets.

A positive outlook

Airports Council International – who run an annual review of the world’s 20 leading cargo hubs – have released figures that point to a confident mood in the industry. According to their latest study, much of this positivity is down to inventory build-ups and increased export orders – something that should last for the short term at least.

Leading light

There’s nowhere that this confidence is more evident than in the airport named as the world’s busiest air cargo site – Hong Kong. While the rest of the air cargo industry saw throughput increasing by 3.3% last year – up to 47.4m metric tonnes – Hong Kong saw traffic increase by 3.5% to 4.6m tonnes. The impressive figures for Hong Kong were one of the highlights of Airports Council International’s report that ranked the top 20 cargo airports for 2016 along with the preliminary world airport traffic rankings.

Strong signals

Ignazio comments: “Importantly for ASC Cargo and SW Italia’s business – and for the air cargo industry as a whole – Hong Kong’s continuing strong performance has shown that businesses are feeling increasingly confident about the future. In addition to the encouraging figures for Hong Kong, airports in the crucial US market also appear to be performing strongly, with Memphis, Louisville, Miami, Los Angeles and Chicago all appearing in Airports Council International’s top 20 for 2016.”

A more agile future?

With proposals for new regulations on the use of small drones for commercial use in the pipeline, Ignazio Coraci gives his thoughts on the implications of this technology for the future of the air cargo business

The future may very well be unmanned. Whether drones will ever replace the full scale aircraft used by air cargo operators like ASC Cargo and SW Italia is doubtful, but the development of drone technology is already having an interesting implications for our industry.

Big business

One early sign of the growing importance of drone technology has been the recent deal between DHL and Chines consumer electronics exporter, Shenzhen Youkeshu Technologies. DHL’s Global Forwarding air and ocean freight specialist business has agreed to manage shipments of the Chinese company’s drones and unmanned vehicles to over 100 countries – and while DHL won’t be using drones to make their own deliveries just yet, the quantities of the products being transported are a sign of the rapid growth of this area of technology.

The shape of things to come?

Take another recent development – the release of pictures of a prototype unmanned vehicle that could soon be running up to 315 kilos of cargo between Los Angeles and Hawaii. It’s early days of course, but the start up business – called Natilus – is interesting, because the vehicle they’ve created would be able to integrate into the kind of infrastructure that already exists in the industry. The prototype would be able to dock at a traditional maritime port slip – and the team behind it plan to have it up and flying by 2020.

New rules

Finally, the recent legislative proposals by European Aviation Safety Agency (EASA) aim to address the safety issues around the operation of small drones, as well as privacy, security and data protection concerns.

A changing landscape

Ignazio comments: “The legislation shows just how significant this kind of technology is becoming. Whatever the ultimate implications are for the air cargo industry, it’s clear that drones and unmanned vehicles will almost certainly become an important part of the transport infrastructure – and as customers continue to demand delivery systems that are more rapid, more agile and more flexible, everyone in the industry needs to adapt to this changing landscape.”

March figures build on a great start to 2017

Air cargo showed continuing growth in March – here, Ignazio Coraci gives his thoughts on the figures.

In a blogpost earlier this year we reflected on a positive start to the year for the global cargo sector. Analysts WorldACD confirmed this in their latest market update, showing that the industry was building on the firmer foundations of an improving world economy. This story has now continued through March this year, with air cargo business showing double-digit percentage growth – with demand in chargeable weight terms increasing by 14.6% year on year.

Impressive results

The trends are particularly encouraging from ASC Cargo and SW Italia’s perspective, as the airports and regions we operate out of have shown some of the most improved figures. The WorldACD figures confirm that Heathrow, Milan, Hong Kong and airports in the US are doing particularly well, with growth figures over 20% – WorldACD points to sea-to-air shifts and the launch of new consumer products as contributors to this success.

A note of caution

There are a couple of factors to bear in mind however, when comparing these figures to last year’s. While the growth in 2017 is impressive so far, the numbers need to be viewed in the light of last year’s relatively weak growth. WorldACD also points to the way that Easter has fallen this year as having an impact. “Especially in Europe, volumes tend to be lower around Easter − last year Easter was in March, this year in April. Also, March 2017 had one more Friday, usually one of the top cargo days, than March 2016. We expect that April will be another very good month, but − in view also of the Easter-effect − year-on-year growth may stop around 10%.”

Guarded optimism

Ignazio comments: “Add to this worries about rising jet fuel prices and the picture is perhaps a more cautious one than the positive figures might initially suggest. However, it’s clear that our industry is continuing to build on a world economy that has stabilised somewhat and is now showing signs of improvement.

“The growth the air cargo industry has shown through the start of 2017 is encouraging, and we’re proud to see that many of the areas that ASC Cargo and SW Italia operate out of are leading the way.”

Post-Brexit future still unclear

As Britain takes its first steps towards leaving the EU by triggering Article 50, the effects of Brexit remain unclear. Ignazio Coraci comments.

The recent meeting of the British International Freight Association (BIFA), in Birmingham highlighted just how much uncertainty there still is around Brexit and its potential impact on our industry. Speaking at the meeting, Robert Keen, BIFA’s director general, reacted to Prime Minister Teresa May’s comments on the UK’s withdrawal from the European Union –  and explained that her speech left many questions still unanswered. While some basic principles have been clarified – for example that the UK will try to negotiate ‘tariff-free and frictionless trade’ between Britain and Europe – there is still a lot of uncertainty around the specifics that will directly affect our industry.

“BIFA is hoping that the government has a fundamental understanding of all of the possible permutations and challenges in regards to our future trading relationships with Europe and the rest of the world, post membership of the EU,” he said. “Freight forwarding executives are none the wiser on the actual mechanics of Britain’s future trading relationships and how they might affect the freight forwarding sector.”

A vital role

That much is clear – but as the negotiations for Britain’s exit get started in earnest, the implications of changes to transaction border controls should begin to emerge. Yet with so much detail of the mechanics of whatever will replace the current arrangements still to be decided, organisations like BIFA are fundamental to representing the concerns of our industry to government negotiators.

Joint responsibility

Commenting, Ignazio said: “It’s a developing situation, but it’s important for leaders within the industry to maintain pressure on the UK government throughout the negotiations. As a business, we agree with the Brexit Briefing ASM chairman Peter MacSwiney, who argues that maintaining a ‘frictionless’ border is still the highest priority –  the question now is what the negotiators, and we in the industry itself –  can do to ensure the UK gets just that.”