Tag Archives: Growth

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

March figures build on a great start to 2017

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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.”

Cargo News, Ignazio Coraci

Growth of Global Middle Class to Benefit Air Cargo

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Figures indicate that globally, the middle class is larger than previously thought. Ignazio Coraci explains why the expanding international middle class could prove a valuable asset to the air cargo sector.

Driving trade

The global air freight sector depends on international trade to drive revenue, as when consumers buy goods from other countries, they generate business for the industry. Cross-border e-commerce is a particularly strong driver of air-freight growth, as it creates robust demand for air cargo services, and with this sector due to record strong long-term growth, the future looks bright for air freight firms.

The middle class, meanwhile, serves as the engine of the global economy, driving trade forward. These consumers have enough disposable income to execute big-ticket transactions on regularly, while the middle class is sizeable enough to ensure that they generate serious revenue for businesses. It is key that we have a strong middle class to spur global economic growth, and this appears to be the case.

Ignazio coraci air cargoGrowing middle class

The global middle class was estimated to measure 3.2 billion people – around half the world’s population, in 2016. But according to Global Trade Mag, an industry publication, this could be inaccurate. A paper published by Homi Kharas, a Senior Fellow at research group The Brookings Institution, suggests that the middle class could be up to 500 million larger than previously thought.

The Senior Fellow decided to re-visit his middle class calculations, due to four important developments. First, a poll of purchasing power parity prices has drastically changed, providing an improved understanding of relative economic strength. Also gross domestic product (GDP) data has improved, weakness in global economic growth has continued, and there are now new polls which provide a greater understanding of income distribution, leading to the change in middle class figures.

Moving into the future

By re-examining these factors, Homi gleaned some interesting insights. The Senior Fellow noted that Asian and African countries “were estimated to be far richer, compared to other countries, than previously imagined… Asian households in particular, are now thought to be much richer, relatively speaking, than before.” The research also showed how the global middle class will grow in future.

According to the study, the middle class is estimated to expand by 0.5% to 1% annually in advanced economies, but by 6% per year in emerging economies. Continuing, Homi wrote in the report: “Within a few years… based on current forecasts, a majority of the world’s population could have middle-class or rich lifestyles for the first time ever,” as middle class growth accelerates in the next decade.

Benefitting air cargo

Commenting on these findings, Ignazio Coraci said: “The projected growth of the global middle class during the next decade could prove beneficial to the air cargo industry. It will hopefully provide carriers with a lot of new business, especially as international e-commerce growth picks up steam, allowing them to rack up more revenue and chart a brighter future across the next ten years.”