Qantas Freight Enterprises executive general manager Grant Fenn spoke to Australasian Freight Logistics magazine about the key factors that will influence the industry in general and Qantas in particular.

The emergence of China and India as world economic powerhouses has provided a welcome boost to air freight volumes in the past few years. At the same time, however, competition, fuel prices and environmental concerns are clouding the otherwise blue skies.

The state of play
Air freight accounts for around five per cent of the volume but over 36 per cent (USD 3.25 trillion) of the total value of goods traded across international borders. The revenue to air freight operators is around USD 50 billion, and prior to the recent troubles in the financial markets the International Air Transport Association (IATA) took the view that the industry will grow at an average rate of just under five per cent for the next three to four years. The highest growth, as you would expect, from China with 10.8 per cent, India 8.3 per cent and overall the Asia Pacific region 5.4 per cent.

Qantas air freight is the largest operator into Australia, and ranks 24th by freight revenue tonne kilometres (FRTK) in the world. Last year, the airline carried more than 340,000 tonnes of freight, an increase of around 100,000 tonnes since 2003.

As with all non-freighter specialist airlines, Qantas’ core capacity comes from the belly space of its and subsidiary Jetstar’s international aircraft. In addition, three 747-400 freighters circle the globe on scheduled freighter services and charter operations, which carry around 110 tonnes at a time to anywhere in the world. Qantas also has four 737-300 freighter aircraft that operate on the AaE overnight network.

Air freight contributes around ten percent of the Qantas Group’s annual revenue.

Technology
It’s a curious fact that while modern aviation relies on highly advanced technologies and sophisticated systems that track people and their personal goods around the world, air freight and related systems languish somewhere in the early 1980s – and that’s being generous, said Mr Fenn.

“Doing business in air freight is unnecessarily complex, it relies on a myriad of historic paper based processes that seem to cling to life,” he said. “Paper airway bills, quarantine certificates, manifests, dangerous goods declarations, and all printed in what seems like faded triplicate. The industry has been planning the funeral for paper for many years but the undertaker has yet to be called,” he said.

“In simple terms, the industry has failed to deliver the required level of performance for the end customer and that can’t continue. But it’s not all bad news. Things are starting to happen. IATA has two key programs underway with E-Freight and Cargo 2000 and
Qantas Freight has already begun a project to replace our legacy systems, some of which are over 25 years old.

“Our ‘Freight Futures’ program is a significant multi-million dollar investment to replace core applications and introduce highly sophisticated customer relationship management and reporting tools,” Mr Fenn said. “It will revolutionise our processes, meaning faster terminal throughput, and better service to our customers.”

What goes where
Air freight is all about high value, fast moving consumer goods – plasma TVs, mobile phones, computers, critical technology components, pharmaceutical products, cosmetics – items whose production requires manufacturing skills and a globally competitive labour market. The future of air freight will be substantially shaped by shifts in the direction of trade flows for these items – who makes these products and who buys them. Emerging powerhouse economies like China and India have become increasingly prominent as manufacturers and they will continue to be central to the air freight story over the coming years. And they will be joined by the next generation of emerging manufacturers like Vietnam.

“Certainly, from the Qantas perspective, we see our future growth as primarily in the Asia Pacific,” Mr Fenn said. “Around half of Qantas air freight revenues already come from Asia. Our head of sales is based in Singapore along with the majority of our sales team. We recently purchased DPEX, which has an express network covering eighteen countries across Asia.”

The Asia Pacific already accounts for nearly 50 per cent the world’s air cargo volumes. According to IATA, IT products currently make up nearly 40 per cent of all air freight exports from Asia.

Perhaps most importantly, growth in the region over the coming three to four years is predicted to exceed the global average. One of the key issues that the industry faces in tapping these markets, however, is the significantly higher demand on the outbound leg from Asia than on the return leg, requiring the airline to adjust its operations to include charters and multiple stops on the return leg to supplement loads.

“Qantas to date has been very successful in sourcing markets to offset the imbalances which are most prevalent out of Australia,” Mr Fenn said. “So we are positioning ourselves to be in the right markets for the future of air freight and to take advantage of the opportunities those markets provide.”

Carbon concerns
There is no question that climate change will grow as an issue, and that aviation will continue to come under close scrutiny. This may result in some form of carbon cost being imposed on the industry. It’s worth noting, however, that while global transport accounts for 14 per cent of global greenhouse gas emissions, road transport accounts for 76 per cent of the total, versus air transport which represents a modest twelve per cent.

Qantas has put in place a range of performance targets over the coming years. By 2011 the group aims to achieve:
> A 2 million tonne saving in greenhouse gases (when compared to a ‘do nothing’ approach).
> A 7.5 per cent improvement in fuel efficiency/RTK (revenue tonne kilometre).
> Significant reductions in consumption of water, electricity and production of waste.

“Last financial year, Qantas saved 130,000 tonnes of carbon dioxide through its fuel efficiency program alone, which equates to the removal of 30,000 cars from Australian roads,” Mr Fenn said. “Clearly, the key to an environmentally sustainable air freight future is the employment of advanced technologies and there is much to look forward to here.

“Under the Qantas fleet program, billions are being spent to take advantage of the latest airframe and engine designs. The new A380 and B787 will deliver around 20 per cent improvement in fuel efficiency and reduced emissions. Further improvements will come with improved airport, runway and air traffic control infrastructure and systems.”

Infrastructure
Qantas sees big potential opportunities through improved management of its freight terminal facilities. The airline currently owns terminals in Sydney, Melbourne, Brisbane, Perth and Los Angeles.

Mid-last year Qantas established a second Sydney freight terminal, off-airport. This facility was the first of its kind in Australia, and is already handling around 75-100 airline pallets per day after just over seven months of operation. Qantas claims that truck waiting times have been reduced by more than 30 per cent, compared to their waiting times at the on-airport facility.

Mr Fenn believes off-airport facilities are the way of the future, particularly in space constrained and expensive airports like Sydney, which is Australia’s air freight gateway.

What’s ahead?
Grant Fenn is positive about what lays ahead. “No one can ever guarantee the future, but at Qantas Freight we are working hard to position ourselves to take advantage of the opportunities,” he said. “We are operating in the most exciting region in the world, we are investing in strategic acquisitions and valuable alliances with strong businesses here in Australia and overseas, we are investing millions in the latest and best technologies and infrastructure improvements, and, last but not least, we have an appetite for expansion and growth.

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