Category Archives: Cargo News

What can the industry learn from KLM’s new air cargo e-commerce strategy?

The pace at which we all respond to the demands of our customers is critical – and recent investments made by some of the world’s leading air cargo operators suggest that the industry is finally getting the message about e-commerce.

Prime position

The sector is booming within the air cargo industry and KLM Cargo have now invested in a combination-carrier-operated sorting system at its Amsterdam Schiphol airport site that is able to handle package-level air freight. It’s been designed specifically to handle post, express and pharmaceutical cargo.

That means that KLM Cargo should now have the systems in place to fully take advantage of the growth in e-commerce traffic. Marcel de Nooijer, executive vice president of KLM Cargo explains: “E-commerce is a fast-growing branch in the cargo industry. This innovative system allows us to keep pace with the rapid increase in post and express consignments. The system is faster and smarter, allowing us to offer better service to our customers.”

Same-day revolution

KLM Cargo have described the new facility as a world first, and it’s clear that it should now allow the business to make more use of its air freight capacity. KLM Cargo have teamed up with Netherlands-based Parcel International to run 12Send, a new same-day delivery service for Europe. They’ve already piloted the service on routes between Amsterdam and Barcelona, and have held successful trials in London, Madrid and Stockholm.

A lesson for the sector

Ignazio Coraci comments: “This is a sign of things to come. No industry can afford to ignore their customers. The investment made at Amsterdam Schiphol is an indication that businesses are slowly beginning to listen to changing customer needs, and I feel that we are starting to move in the right direction. This kind of investment is essential if carriers want to survive as new markets develop.”

Hong Kong sees a surge in growth for first half of 2017

It has been a truly impressive start to the year for Hong Kong International Airport (HKIA), with growth in traffic right across the board. In terms of air cargo business, HKIA has handled an impressive 2.3 million tonnes of cargo already this year in the first six months to June – that’s up a remarkable 11.3% on the same period last year.

Booming exports

So what has been behind HKIA’s great start to the year – and more importantly, do the experts think it will be sustained? Well, in the latest figures from June, 410,000 tonnes of cargo passed through the airport, up 11.4% on 2016 – and there are indications that a 17% year-on-year increase in June exports from the airport led to the high growth in cargo tonnage for that period. That bump in export figures has certainly contributed then to the airport’s positive performance in the first half of 2017, but HKIA has also benefited from an improved global outlook. And with the Asian markets leading the way in air cargo growth, HKIA is in prime position to take advantage of a global economic performance that is looking positive in terms of consumer and business confidence.

Investing for the future

HKIA isn’t standing still, with work starting last August on a third runway to help accommodate future growth. The airport is also making further investments to ensure it meets the needs of customers.

“On the cargo front, HKIA continues to develop its ability to serve fast-growing segments of the high-value cargo business, such as fresh produce and temperature-sensitive pharmaceuticals that require specialised handling,” says an airport spokesperson. “The airport authority and local industry stakeholders are working closely together to pursue the IATA Centre of Excellence for Independent Validators in Pharmaceutical Logistics (CEIV Pharma) accreditation on airport community basis and HKIA is expected to be recognised as an IATA CEIV Pharma Partner Airport by the third quarter in 2017.”

A sustainable future

Ignazio Coraci comments: “Clearly Hong Kong is an important site for both our ASC Cargo and SW Italia businesses, and so the news that air freight handling is continuing to grow there is great to hear. I’m also really encouraged by the investment in infrastructure that is being made at HKIA – it will go a long way towards making sure that the performance we’ve seen so far this year is sustained.”

Is blockchain technology the answer for air freight?

We’ve talked in this blog before about the need for the air cargo industry to begin to move away from the paper-based systems that so often clog up many of our processes. As our customers become accustomed to services that deliver more responsive, flexible solutions and with the higher service expectations that have grown out of the increasing use of mobile technology, we need to respond quickly.

First steps

The International Air Transport Association (IATA) have already made a number of steps towards doing this, not least through their support of the e-freight digital process transformation programme.

“Our customers are telling us that they expect more,” said Alexandre de Juniac, IATA’s Director General and CEO. “Complicated and convoluted paper-based processes that are basically unchanged from the 16th century are still being used in air cargo today. Our customers pay a premium to ship by air and they rightly expect modern processes and high quality services.

“Shippers today want responsive services based on intelligent systems able to self-monitor, send real-time alerts and respond to deviation. Technologically speaking, this is totally possible. The key to this and other innovations is using data efficiently and effectively. Finding solutions to unfulfilled (or even unrealized) expectations creates value for customers. And that propels a business forward.”

Is blockchain the answer?

Blockchain is often talked about as being just the kind of innovative technology that supports these aims. But what is it, and how can it be assimilated successfully into the processes and systems of a 21st century air cargo industry?

Well, simply put blockchain technology uses a shared digital ledger to record transactions across a number of computers. The advantages for users are that everyone can see any changes made to public blockchains, creating a more transparent process. Every single transaction made on a blockchain is also immutable – so it cannot be altered or deleted by anyone. A blockchain also creates a single ledger, seen by everyone, that any new transactions are added to – cutting down on any complications and removing the need for lots of different ledgers.

Air freight applications

So what would this potentially look like in an air freight operation? Using blockchain technology within this context creates a cloud-based system that is essentially more secure way of recording shipments. And because of the way that blockchain technology works, it’s also secure from hacking – as well as being a permanent record of transitions that is shareable between multiple users.

While blockchain has yet to really be tested thoroughly within an air cargo setting, it’s already made an impact with marine shippers. Here’s what Jody Cleworth, CEO of British freight forwarder Marine Transport International Limited (MTI) has to say: “Blockchain has the ability to empower our industry into a true digital age,” he said. “The sheer volume of containers processed per year means that safely decentralizing the management of these containers will radically reduce the complexities of shipping.”

Time to invest

Ignazio Coraci comments: “Blockchain technology is precisely the sort of innovative solution to age-old problems that we should be applying within our own industry. It’s important that other sectors aren’t allowed to steal a march on the air freight industry by adopting innovations that will serve customers in a way that we can’t offer yet – the time to act is now.”

Business continuity

Cyber attacks by hackers are becoming a huge problem in our increasingly connected and technology-driven world.

A growing threat

Recent examples include the global ransomware attack back in May that disrupted many critical systems – not least in the UK’s National Health Service, which was badly affected for a number of weeks, severely impacting patient care. Closer to home in – terms of the air freight industry at least – was the attack on marine container shippers AP Moller Maersk, that saw a large number of their critical IT systems hit by the so-called ‘Petya’ operation.

One of the key phrases that is usually heard in the aftermath of such attacks is the need for a more robust procedure around ‘business continuity.’ But what does this really mean, and what steps has the industry already taken to lessen the impact of similar attacks – or even global IT system failures such as the one that recently hit British Airways – in the future?

Plan B

A new system that has been implemented in the UK might give some clues as to the future shape of our industry’s response to this issue. The ‘CCS-UK Fallback’ system is intended to allow the UK air cargo industry to continue running in the event of any prolonged problems with the HMRC’s vital CHIEF (Customs Handling of Import and Export Freight) system. The new system means that traders will be able to continue processing Customs export declarations even with CHIEF down, and it has been designed to run for 30 days. The system’s development is a great example of collaboration between the private sector and government to safeguard an industry that’s worth billions.

“We have recently seen the horrendous impact of major IT system failures in aviation, and this cannot be allowed to happen to the UK air cargo industry which provides essential support to UK trade and industry, helps maintain our competitiveness on the world stage and supplies urgent commodities that are sometimes a matter of life and death,” says Steve Parker, DHL’s Head of Customs for Europe and Chairman of the CCS-UK User Group.

Safeguarding our customers

Ignazio Coraci comments: “The CCS-UK Fallback system is a real step forward, and I think it could be used as a model right across the sector. The service that we provide as an industry must have effective protection and we should all have business continuity plans in place – it’s the least we owe to the millions of customers who rely on us.”

The outlook for 2017

The air freight industry has made an encouraging start to the year – at least compared to 2016 – and while the picture isn’t completely rosy it’s clear that the outlook for the coming months is looking healthy.

A positive forecast

We’re basing this on a couple of key pieces of information – IATA’s air cargo stats for the three months ending in April, and recent comments made by IATA’s director general at their annual general meeting in Cancun in June. But how about those figures? Well, all of the key indicators that suggest a more buoyant market are heading in the right direction. The seasonally adjusted figures saw cargo yields rose by 4.5%, while Freight Tonne Kilometres (FTK) were up 10.5%. Add to that the news that air freight now has an increased market share and the signs are there that we’re currently on the upward portion of this particular economic cycle. Other indicators such as consumer confidence, export orders, trade, silicon and semi conductor sales are also looking good, suggesting an industry in good shape.

Improved profits

IATA director general Alexandre de Juniac made his comments in the light of overall airline industry figures that suggest expected profits of $31.4 billion for 2017 – that’s $1.6 billion better than the $29.8 billion IATA projected in its last forecast of the year ahead. Discussing the new projections, de Juniac pointed to the more robust recent performance of the air freight industry.

“Strong demand is driving profitability,” he says. “That includes air cargo, which has awakened from a six-year coma. 7.5% growth is being powered by e-commerce and pharmaceutical shipments.”

Clouds on the horizon?

So far so good then. But there are a couple of caveats to the positive outlook for the rest of the year which are worth bearing in mind. The first is the threat of rising costs, while the differential in profitability between regions is also a cause for concern.

“Margins are being squeezed by rising costs for fuel and labour,” says de Juniac. “Moreover, profitability is not equally spread across the regions. Half the industry’s profits are being made in North America. Asia, Latin America and Europe are generating sustainable profits, but only just. And Africa and the Middle East are struggling.”

A chance to prepare

Ignazio Coraci comments: “The outlook for the rest of 2017 is certainly encouraging, especially compared to last year. It’s great news – however we also need to be mindful of how we will maintain the standards of service we currently offer in the light of any rising costs to come.”

Poor weather and volcanic ash are affecting flights

Bogoslof Island might be small, but the impact it’s having on transpacific air freight operations has been significant in recent months.

A major impact

The volcano is located in Alaska and is a part of the Aleutian island chain that arcs between the Asian and American landmasses. It first erupted back in May, and has remained active ever since – with serious implications for the many transpacific routes whose flight paths cross the region. Eruptions in late June sent a huge amount of ash and steam into the atmosphere to a height of around 36,000ft – right into the path of many crucial air freight routes.

Experts say that the disruption could continue for a while yet.

“The volcano remains at a heightened state of unrest and in an unpredictable condition,” says the Alaska Volcano Observatory “Additional explosions producing high-altitude volcanic clouds could occur at any time.”

Major disruption

The volcanic activity at Bogoslof has led many air freight operators in the region to adjust their schedules, with a number of flights being cancelled as a result of the ash cloud. It’s a situation that puts increased pressure on a region already suffering as a result of poor weather in Shanghai and Hong Kong. It means that space is tight and that capacity is down for some companies.

Bad weather in China has also affected flights to the EU, once again seriously impacting the amount of space available. “Airlines are increasing rates to the EU, and bad weather meant about 20 flights in and out of Hong Kong have been cancelled,” one forwarder told The Loadstar, “So space to the EU is really affected.”

Hard to predict

Ignazio Coraci comments: “Natural events are hard – if not impossible – to see coming. However I believe that we can all try to build the capacity into our business models to ensure that the impact of these events is lessened in the future. Unfortunately the pressure that these situations put on our industry mean that it’s likely to have an impact not just on capacity, but prices as well.”

Leading airfreight forwarders revealed

DHL Supply Chain and Global Forwarding were once again top of the pile in 2016 – even in the face of a down turn in air cargo traffic of 1.3% year on year. The confirmation of yet another great year for DHL came in figures released by consultant Armstrong & Associates, whose annual top 25 Global Freight Forwarders list is based on estimates by the firm’s analysts and reported figures – and represents a useful overview of the state of the industry for airfreight forwarders.

Maintaining their positions

So what does the list tell us about the current state of air freight? The top four air freight forwarders from the 2015 list all kept their positions, with DHL Global Forwarding, Kuehne+Nagel (K+N), DB Schenker and UPS topping the list. The picture in 2016 for DHL Global Forwarding was an interesting one, as the figures revealed that the company has maintained top spot despite experiencing contrasting trends within the market. The company were operating in an environment that saw airfreight volumes actually go down year on year in 2016 to 2m tonnes, but they also ultimately felt the benefit of a big surge in airfreight demand right across the industry in the fourth quarter of the year, with demand going up by 5.7% to 578,000 tonnes.

Demand is up

The figures from Armstrong & Associates also suggest that the top 25 airfreight forwarders might actually be pulling away from the rest of the pack. Overall demand for air freight in the industry went up by around 2% in 2016 – yet for the top 25, demand went up 5.6% year on year, hitting 14.5m metric tons.

While the picture in terms of demand is a bright one, the numbers around revenues are less encouraging. Air and ocean freight rate pressure, currency fluctuations and lower fuel surcharges all contributed to a drop in overall revenues of 8.8% to $172bn – compared to 2015 levels.

The pressure is on

Ignazio Coraci comments: “The increasing demand we’re seeing reported is encouraging, but the decrease in overall revenues for the leading freight forwarders last year is indicative of the pressures that the whole industry is feeling.”

Solid growth continues in Asia in May

The news from Asian markets shows once again that the industry – in that region at least – has got off to a very positive start to the year. New figures were recently released by the Association of Asia Pacific Airlines (AAPA) and reveal that the region’s airlines are still enjoying the robust growth in international air cargo demand that has been sustained over the first five months of 2017.

Capacity is up

Measured in freight tonne kilometres (FTK), growth was up 12.2% compared to May last year. And with freight capacity across the region going up by 4.3%, the average international freight load factor also rose quite considerably – up 4.7% to 65.6%.

These figures come on the back of a strong start to the year for the air cargo industry in Asia, which has already seen an impressive 10.5% surge in international air cargo demand through to May.

A better outlook for the global economy

So what are the reasons behind this encouraging trend? And does the longer term outlook seem as positive as the current figures suggest? Andrew Herdman, AAPA Director General, hints that it does – but is also keen to add a number of caveats.

“The ongoing pick-up in the global economy, accompanied by increased consumer and investment spending has provided a boost to both international air passenger and air cargo markets. Asian carriers are major players in the global air cargo market, and continue to benefit from the upswing in trade growth.

A challenging environment

“The outlook for both air passenger and air cargo markets remains positive, supported by broad-based expansion across sectors. However, airline profitability remains constrained by competitive yield pressures and higher operating costs. Fuel prices, in particular, have risen by 38% to average US$53 per barrel during the first five months of the year. Given the still challenging operating environment, airlines remain focused on disciplined cost management efforts throughout the business, whilst pursuing further growth opportunities.”

Focus on the basics

Ignazio Coraci comments: “Although the figures out of the Asian markets are encouraging and fit into the wider picture of a more positive global economy, it’s important that as an industry we remain focused on getting the basics right. The growth will only remain sustainable if we put customer needs at the heart of our operations and invest in the technology required to be agile enough to meet their expectations.”

The rise and rise of the Electronic Air Waybill (e-AWB)

Our industry celebrated a quiet yet potentially very important milestone recently: in April, Electronic Air Waybill (e-AWB) penetration finally passed 50%. Figures released by IATA suggest that the industry processed more than 730,000 of the digital documents – up 1.3% on March’s figures. There’s still a way to go to hit IATA’s target of 62%, but the achievement is still a significant one.

A paperless future

Before we look at why, it’s worth looking again at the context around the introduction of the Electronic Air Waybill (e-AWB). The electronic documentation effectively replaces its paper counterpart – the Air Waybill (AWB) – which is essentially the contract of carriage agreed between the shipper and the airline. Changing the documentation is a key part of IATA’s industry-wide e-freight programme – which aims to make the entire transportation process for air cargo paperless. The idea is to do this through both regulatory and technological routes – and it’s fair to say that IATA has been extensively pushing the use of e-AWB recently.


When you consider that a single shipment can generate 30 different paper documents, clearly removing paper from this particular part of the process is critical and goes a long way towards achieving IATA’s 100 per cent e-freight vision. Other targets for IATA include eliminating paper document use from customs processes, as well as other transport paperwork and commercial or special cargo documentation.

An impressive start

A number of airlines and freight forwarders had particular cause to celebrate in April – both Kenya Airways and Flydubai used e-AWBs to process all of their air waybills, while Cathay Pacific and Delta Air Lines were not far behind, with 80.5 and 74.7% respectively. And it wasn’t just the airlines – freight forwarders Expeditors processed 69.4% of waybills electronically, while Hellmann Worldwide and Schenker were on 67.9% and 62.5%.

Something to build on

Ignazio Coraci comments: “The industry has made slow but steady progress on reducing the amount of paper created in our processes. It’s now vitally important that we build on this positive start to ensure that the entire system, end-to-end, becomes paperless.”

Is digitisation an opportunity – or a threat?

The air cargo industry has unfinished business when it comes to digitisation and the modernisation of its processes. That at least was the message from the International Air Transport Association’s (IATA) Director General and CEO, Alexandre de Juniac when he spoke at the IATA 73rd Annual General Meeting.

Time to move on

“Air cargo processes are stuck in another century. To ensure that air cargo is ready to benefit from the we need a major overhaul of industry processes,” he said. “The time is right for change. After several years of virtually no growth, air cargo demand is starting to pick up. We are also seeing new business opportunities with internet commerce and the global distribution of time and temperature sensitive cargo, especially pharmaceutical products.”

Customer first

The message then is clear – digitisation is essential in order to keep up with the rapidly transforming demands of customers, who expect a supply chain that is efficient, flexible and effective. A more customer-centric approach will see the development of an air cargo industry that will also be more responsive, with intelligent systems that are able to self-monitor, alert people in real time and respond to any changes in the delivery process.

The end for forwarders?

De Juniac’s vision is an exciting one then – and although it lays down a serious challenge to the industry to change, it seems to paint a picture of an air cargo industry that will thrive if it makes the investment in the necessary technology. But what are the implications of increased digitisation for freight forwarders? A recent article by McKinsey suggested that by 2025, 15 to 20% of air freight shipments will be booked directly by the shipper with the airline. Meanwhile one of those freight forwarders who may be looking at a potential drop off in work due to digitisation – Flexport – suggested in another article that “airlines are poised to bring freight consolidation in-house”. So does digitisation mean the end of the need for specialist freight forwarders?

An unlikely scenario

Not so fast, suggests Niall van de Wouw in the Loadstar. “Neither airlines nor shippers have the global capabilities to perform, for example, the customs activities that are required to move freight from one part of the globe to the next,” he says. “And I don’t see either building up these capabilities – and why would they? From the airlines’ perspective, it makes no sense to start competing with a client base that provides 80-85% of their revenue.”

Embrace technology

Ignazio Coraci comments: “The advantages of digitising and modernising our industry far outweigh any potential threats to individual operators within the industry. Any failure to move with the times – and to offer the kind of service customers now expect – is a far greater threat to everyone’s revenue streams than the latest technology.”