Tag Archives: Air Cargo

Cargo News, Ignazio Coraci

Is blockchain technology the answer for air freight?

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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.”

Cargo News, Ignazio Coraci

Business continuity

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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.”

Cargo News, Ignazio Coraci

The outlook for 2017

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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.”

Cargo News, Ignazio Coraci

Poor weather and volcanic ash are affecting flights

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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.”

Cargo News, Ignazio Coraci

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

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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.

Industry-wide

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.”

Cargo News, Ignazio Coraci

Is digitisation an opportunity – or a threat?

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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.”

Cargo News, Ignazio Coraci

Customer insight is key

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The future of the air cargo industry will depend on our ability to listen to customers – and to then apply the insights we gain to create systems and processes that put their needs at the heart of the way we all work. That was the main focus of a speech made by Alexandre de Juniac, Director General and CEO of the International Air Transport Association (IATA) when he spoke at this year’s 11th World Cargo Symposium in Abu Dhabi.

Progress required

Mr de Juniac made the comments on the back of a positive start to the year for air cargo markets around the world – which has seen growth on the up after a number of years of stagnation. However it is clear that much of this growth has happened despite – rather than because of – the systems that the industry uses. This needs to change, says Mr de Juniac – with the focus falling on two key areas where real progress can be made – firstly introducing simple, modern electronic processes, and secondly looking at how our businesses can quickly and flexibly meet specific customer needs.

Time to listen

“Listening to the customer has never been more important,” he says. “The positive forces currently supporting growth are good news. But our customers are telling us that they expect more. 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.”

Rapid response

“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.

Time to work smarter

Ignazio Coraci comments: “Technology offers so many potential solutions to problems that are currently detrimental to the experience that air cargo customers are having. Much of this technology already exists – or will do very soon – and it’s absolutely critical that as an industry we doing everything we can to embrace this and improve the service we provide.”

Cargo News, Ignazio Coraci

Encouraging growth continues

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Growth in air cargo demand is often a sign of better economic times to come – as companies focus on restocking their inventories quickly. So, the recent news that air freight markets around the world are reporting increased demand in April 2017 is certainly welcome, although the picture isn’t completely positive.

Demand is up

But back to those figures – according to the International Air Transport Association (IATA), demand rose for air cargo rose by 8.5% in April this year. The report explained that while this figure is down from the 13.4% year-on-year growth that we saw in March this year, it’s much better than the average annual growth rate of 3.5% that we’ve experienced as an industry over the past five years. However the report from IATA also said that growth in freight capacity, measured in available freight tonne kilometers (AFTKs), slowed to 3.9% in April 2017.

A positive start

Despite this, it seems that the overall state of the industry is in reasonable shape, and the good numbers continue to build on an already positive start to the year. Every region – with the exception of Latin America – has seen year-on-year increases in demand so far this year. This has been driven in particular by the very healthy freight volume figures seen in Asia-Pacific – which has expanded by 8.4% in April 2017 compared to the same period in 2016. Capacity in the Asia-Pacific region has also increased by 3.7%.

More work needed

The report from IATA sounded a note of caution however. They have suggested that there is still plenty of work to do in the air cargo industry if it going to turn these encouraging figures into a sustained upturn.

Seize the moment

Ignazio Coraci comments: “While the growth rates we’re seeing are very encouraging, we really need to make sure that we take this opportunity as an industry to look again at our processes. Modernisation is key here – let’s make sure that we use the growth and progress that we’re seeing at the moment in air cargo markets worldwide as a catalyst for change across the industry.”

Cargo News

What next for Amazon and air cargo?

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Amazon is nothing if not ambitious. The online retail giant has made great strides in recent years into new business areas – spreading its influence and using its huge leverage to build new revenue streams in areas as diverse as fashion, loans, drone technology, physical shops and groceries. And when Amazon brings its influence to bear on a particular industry, the existing companies operating in that area need to take notice. So, is air cargo and logistics next on the Amazon wish list? And if so, how should the rest of the industry respond?

Strong  signals

Amazon’s recent moves in China, which reports suggest include developments in its air forwarding operation, certainly have interesting implications for the rest of us in the air cargo industry. While the extent of Amazon’s new investments are not yet clear – for example whether this freight forwarding offering is actually the start of a process that will end with Amazon ultimately flying its own air cargo between the US and China – it can certainly be seen as a sign of the US giant’s growing ambitions in this area.

A striking trend

Amazon has been growing its influence over its logistics operations in recent years. It has recently invested heavily in facilities in the US, with a new centralised air cargo hub at Cincinnati/Northern Kentucky Airport costing around $1.5bn. Amazon will base a proposed fleet of 40 aircraft at the hub and the huge investment fits with a growing pattern of Amazon’s increasing interest in air cargo, logistics and forwarding.

A challenge for the industry

Ignazio Coraci comments: “Amazon’s investments in freight forwarding services in Asia and its plans for Cincinnati/Northern Kentucky Airport are ambitious, as you’d expect from a company known for its innovation and readiness to push into new areas. However these initial moves suggest that long haul air freight isn’t their immediate focus – rather it may be that they’re looking to save on domestic deliveries. Whether this changes in the future is hard to predict – but it’s a challenge that the whole industry must be ready for.”

Cargo News, Ignazio Coraci

Investment in technology is key

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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.”