Tuesday, March 10, 2015

IATA Boss Identifies How Air Cargo Can Win Back Market Share from Ocean Shipping and Rail Freight

Pharma Trade Must Expand and the Dangers of Lithium Exposed
Shipping News Feature

WORLDWIDE – At this year's World Cargo Symposium, the International Air Transport Association (IATA) identified three vital aspects of the air cargo industry where further action is needed in order to recapture some of the lost market share from the ocean shipping and rail freight sectors as well as increase carriers’ revenues in line with the recent growth seen in volumes. Speaking in Shanghai at the opening of the 9th World Cargo Symposium, IATA Director General and CEO, Tony Tyler, said:

“Air cargo has had a challenging few years. 2014 saw the first significant boost in volumes since 2010, a trend we expect to continue this year. Revenues, however, are still down from the 2011 peak, and yields are falling for the fourth straight year. I am a cargo optimist. But business improvement will only come by constantly improving the value of cargo. There is a long haul ahead to recapture lost revenues, nevertheless the prospects for the future are bright because the industry is really starting to act strategically and plan for the future.”

The three priorities highlighted by Tyler in his speech, were the transitioning to a paperless freight processes, a focus on global handling standards for pharmaceutical freight, and tough action to ensure the continued safe transportation of lithium batteries by air.

The transition to paperless freight finally saw lift-off in 2014, as the industry exceeded 24% global e-Air Waybill (e-AWB) penetration. Key to the improvement was enhancing collaborative work across the air cargo chain and with customs authorities. A growing number of routes around the world now have the necessary regulatory approval. The industry is aiming to achieve 45% e-AWB penetration in 2015 and 80% in the following year.

While the spirit to implement the digital process has been willing, the practical implementation has been weak, much of which, according to Tyler, has been due to the fragmented, multi-layered nature of the industry. The struggle to adopt the e-AWB, demonstrated that even though airlines have the lion’s share of the responsibility for driving implementation, a partnership of the entire supply chain is required in order to make progress.

The second point that Tyler outlined was that global handling standards for pharmaceutical goods will be an essential step towards air cargo improving its share of the $60 billion a year pharma logistics market. The industry needs to meet customer demands for the integrity of their goods, while complying with increasing amounts of regulation from global authorities.

In addition to the pharma-industry’s usual expectations for reliability and speed, customers need adequate facilities and handling procedures that guarantee a constant temperature range, and the absolute integrity of the package. Regulators have proposed or implemented a vast array of requirements with which the freight industry must comply and if these challenges are not overcome, air cargo risks losing the opportunity presented by this huge market to modal competitors which are also working hard to win this business.

To help foster air cargo’s competitiveness in this growing segment, IATA has developed a new initiative, the Centre of Excellence for Independent Validation in Pharmaceutical Logistics (CEIV Pharma). CEIV Pharma assesses and validates cool-chain processes and provides training to guarantee that they comply with all applicable standards and regulatory requirements.

The last point Tyler raised was improving the handling of dangerous goods, with focus on the continued safe transportation of lithium batteries which remains a key concern for the industry. Robust regulations and guidance exist, but these are not being fully adhered to by all shippers. China is the largest producer of lithium batteries and therefore a key market. IATA has developed the Lithium Battery Shipping Guidelines in Chinese to raise awareness on this vital issue, but the issue is also one for government authorities. In his speech, Tyler called on regulators to ensure that retailers and shippers are in full compliance with the rules and regulations surrounding the handling of dangerous goods. Summing up his view of the future of the air freight industry, Tony Tyler said:

“We have talked in the past of cargo being at a crossroads, but I believe that is no longer the case. Air cargo has chosen to go down the road of transformation and there is no going back. I am excited about the future for this industry. There is a long haul ahead to recapture lost revenues, but in the years to come, I think people will look back on this period and say, ‘this was when the nettle was grasped’.”