Dr Sally Dixon Aviation Consultant, Azimuth Associates
Whilst passenger air transportation is more widely understood, the freight industry is perhaps less visible and more impenetrable. It is, however, vital to the functioning of the UK’s import and export markets, and in safeguarding its supply lines. As the impact of Brexit, the Covid pandemic, and war have illustrated, resilience in the UK’s air freight sector is vital to the national interest.
Air cargo is generally more complex than passenger transport and has specific and invaluable social and economic benefits, facilitating trade, contributing to global economic development, and creating millions of jobs.
In 2021, more than 66 million tonnes of air cargo were transported worldwide, an increase beyond 2019 levels after a dip during the Covid pandemic. It is important to note the difference between the carriage of goods in the belly hold of passenger aircraft and on dedicated freighters. Whilst in the UK (pre pandemic), bellyhold dominates with around 70 per cent of the market, the role of freighters is vital for several reasons including:
• Passenger aircraft serve destinations people want to visit and may not serve key cargo trade routes
• Passenger airline schedules may not meet shipper timing needs
• Palletised cargo space is not available on single-aisle passenger aircraft
• Passenger aircraft cannot carry hazardous and project/outsize cargo
• Payload/range considerations on passenger aircraft may limit cargo carriage.
Whilst globally there has been an ongoing increase in cargo markets, the UK is not performing in line with other countries. As well as a lack of growth, the UK also has a much higher proportion of cargo carried as belly hold compared to its use of dedicated freighters. It also seems that trucking to and from northern European airports may be substituting for direct air connections, either due to a lack of suitable capacity at airports or to a lack of airline connectivity.
The role and evolving nature of integrators, forwarders, and cargo airlines are key to understanding the market. Developments include the move for forwarders and airlines to begin to act as integrators. This may be in response to capacity issues and high rates as well as to improve service to customers and, for airlines, to leverage assets.
Amazon’s business model – vertical integration in the supply chain through its purchase of a fleet of aircraft – has been a game changer in the sector. In 2019 and pre Covid, air freight rates and revenues had fallen due to the impact of global trade wars. However, during the pandemic the lack of cargo capacity compared to the continued demand for goods, congestion at airports and in other parts of the supply chain, combined with the growing demand for e-commerce shipments and transport of personal protective equipment (PPE), put significant upward pressure on air freight rates.
Forecasting air cargo is completely different from predicting passenger markets. This is for a number of reasons including the different seasonality between the two sectors, the need to combine weight and volume metrics for cargo, the importance of capacity not only on runways but in the supporting infrastructure and resources required for cargo, and, in the UK, issues around trucking air freight to northern European airports.
A key focus for the CILT is on sustainability and their views were set out in a COP26 Briefing Paper in November 2021. Based on 2019 figures, UK aviation was responsible for 38 MtCO2e of emissions, around 1% of domestic and 7% of UK transport emissions. CILT believes the key measures to achieve net zero by 2050, which can be applied to air cargo as well as passenger operations, are:
• Fuel efficiency improvements, overseen by improved ICAO Standards
• Zero emission aircraft, such as smaller, short haul electric types and larger, long haul hydrogen/electric-powered
• Sustainable aviation fuel
• Offsetting, controlled through ICAO’s CORSIA agreement
Additionally, the current NATS airspace modernisation programme is likely to make a considerable impact on reducing aircraft emissions. Airports can also play a role by switching to electric ground vehicles, ensuring buildings are net zero, and making better use of automation and ‘big data’.
Many opportunities exist and aviation will see radical change over the next century from new modes of transport, new power sources, and increased efficiency and sustainability. The crisis deriving from the Covid-19 pandemic has stimulated rapid growth in air cargo.
Unprecedented growth in e-commerce and the need for rapid deployment of PPE, vaccines, medicines, and medical equipment has driven modernisation and innovation in the sector. However, labour and skills shortages must be addressed if the UK is to maintain its global competitiveness.
Speed is an essential source of competitive advantage and is an important driver for the demand for air freight. Investment in high tech operations and innovations will be paramount to future-proofing the industry. The use of drones and eVTOLs for cargo would transform last mile delivery although brings considerable challenges in terms of technology, air traffic management, safety, and security.
The role of cargo-only aircraft as trailblazers in assessing and enabling the introduction of new propulsion systems, airframe designs, and aircraft types should not be underestimated.
Progress is never without apprehension and the freight sector can provide the industry and public with confidence in the innovations and changes that are vital to the future of the planet.
To read the CILT report, click here.