Airfreight needs to save $7.5 billion to stay in business
The International Air Transport Association
(IATA) called on the cargo supply chain to battle the current air cargo crisis by improving security, delivering a better product and boosting efficiency. IATA said the industry needs to save AUD7.5 billion with its e-freight initiative.
“The industry is in crisis and nobody knows that better than our cargo colleagues. Cargo demand has fallen off a cliff. After a shocking 22.6% decrease in December it dropped a further 23.2% in January,” said Giovanni Bisignani, IATA’s Director General and CEO in a recorded message to the 700 industry experts attending IATA’s World Cargo Symposium.
Air cargo represents about 10% of industry revenues. As 35% of the value of goods traded internationally is transported by air, air cargo is a barometer of global economic health. “The continued decline in cargo markets is a clear sign that we have not yet seen the bottom of this economic crisis,” said Bisignani.
In December 2008 IATA forecast 2009 freight volumes to fall 5%. Combined with a decrease in yields, this would result in a 9% drop in freight revenues to USD54 billion (AUD 81b).
“Unfortunately, the shocking fall in demand that followed is making these projections look optimistic,” said Bisignani.
“As we battle this crisis, we must look for opportunities that will build our future with a more efficient industry focused on meeting customer needs. Customers want a good price and a great product, delivered via the supply chain with speed and reliability. And in crisis, customers will only get more demanding. To meet their expectations and build a solid future for the industry, change is required,” he said.
Bisignani highlighted three priorities for the supply chain: security, e-freight and Cargo 2000:
Security: Air cargo security costs continue to rise. Screening technology is not being optimised and definitions, requirements and enforcement vary from country to country. IATA called for a strong industry effort to convince the US that its plans to implement 100% cargo screening in 2010 are misguided.
“Scanning everything loaded onto the aircraft is a waste of precious resources. To be effective, we must identify the risks involved with a supply chain approach. IATA’s Secure Freight strategy focuses on a risk-based approach with shared responsibility throughout the supply chain. Governments must remember that this is a global industry. We need a globally coordinated approach that looks at the entire supply chain,” said Bisignani.
Efficiency with e-freight: In the face of falling yields and demand Bisignani stressed that e-freight as a key driver for efficiency and savings is more important then ever. “Improving quality without reducing costs will not get us far. We need to modernise the old paper-based processes of air cargo with e-freight,” said Bisignani. Each freight shipment is accompanied by more than 30 documents. E-freight currently has the capability to convert 12 of these to electronic documentation. Already it is operating at 18 locations covering 26 airports.
“E-freight is not a theory. It is working and putting in place the basis to deliver efficiencies and cost reductions throughout the supply chain. By 2010 our target is to have the capability to remove 64% of the paper from 81% of international shipments. In other words, we will eliminate 20 documents and be live in 44 locations,” said Bisignani.
“To be successful, we need the commitment of the entire supply chain to generate economies of scale. The benefits are enormous: USD4.9 billion (AUD 7.5b) in cost savings for the supply chain, a 22% reduction in shipper buffer stock, a 25% reduction in customs penalties, an average 24 hour decrease in shipping time and a 1% increase in market share against sea shipments. Everybody benefits. Everybody needs to participate,” said Bisignani.
Quality – Cargo 2000: Bisignani also called for greater industry participation of the entire supply chain in Cargo 2000 to improve quality. “Cargo 2000 quality standards are even more important in this crisis. IATA is committed to Cargo 2000. It is part of our recommended quality standard. But to be effective, we need the whole supply chain to be aligned with a common vision on how to deliver quality. That is what Cargo 2000 is all about,” said Bisignani.
Cargo 2000 was established over a decade ago to simplify processes by reducing 40 steps in the logistics chain to 19 and to implement effective quality standards.
‘IATA e-freight initiative requires business, technical and legal frameworks to be in place to allow airlines, freight forwarders, customs administrations and governments to seamlessly exchange electronic information and e-documents instead of paper. IATA e-freight is ‘live’ in Australia. Progress to date, operational impacts and next steps.’