Glyn Hughes Director General, The International Air Cargo Association
The air cargo industry is influenced by almost every aspect of global economics, geopolitics and society evolution, and just like the weather in the UK, whatever the prevailing conditions are, wait five minutes and it all will change!
The immediate pre-Covid timeframe saw significant over capacity, extremely low freight rates and a slowing global economy coming under pressure from protectionist measures impacting US/EU, EU/China and US/China trading conditions.
But as we all know, Covid shook the planet to its core and dramatically impacted all aspects of how we lived, worked, travelled and consumed. Air cargo became the only effective mode of transport to move the urgent PPE and then latterly the urgent vaccine and then as economies reopened it became critical in supporting manufacturing resumption. The dramatically reduced belly capacity meant that freighters became the vital workhorse for the industry.
Air cargo rates escalated to record levels and as 2021 closed the world was eagerly anticipating a 2022 with reopened air space, resumption of global growth and buoyant consumer behavior. Unfortunately, Feb 2022 saw yet another factor influencing air cargo and many other industries, the Russian invasion of Ukraine. The spike in energy costs, the closure of air space, the sanctions impacting some trade lanes and some air cargo capacity providers all conspired to completely smother the optimism of just two months prior.
As inflation spiked to records levels, central banks resorted to raising interest rates in an effort to curb the runaway inflation. The subsequent increased housing, food, energy and other costs resulted in discretionary spending dropping significantly. And as we entered 2023, we saw subdued demand continuing but with passenger capacity returning we are now in a less pressured capacity situation and consequentially we are seeing yields dropping, although rates still remain significantly above the pre-Covid levels.
So, what next? There is some optimism as the industry is in a much better place now than it was in 2019. Investments in technology and innovation has seen enhanced digitalisation which has brought increased levels of efficiency, transparency and much wider spread distribution capabilities. These combine to support increased levels of optimisation for when the current macro-economic conditions improve.
With a greater number of distribution channels available, the air cargo industry is easier to deal with and access today is better than it has been. We have also seen significant investment in the area of autonomous vehicles which will play an increasing larger role in the future of air cargo, enabling alternative and new supply chain solutions.
The level of investment in advanced automated solutions within cargo facilities is another area which will support enhanced industry growth and optimisation. This will also support the continually growing ecommerce sector as B2B and B2C supply chains will necessitate new in and off airport solutions.
Sustainability is also a factor which has grown in prominence since pre-Covid times as the world focuses to a much greater extent on the environment, people and the need for more equitable global prosperity. The air cargo industry and aviation in general has been leading the way in so many aspects of sustainability, from the use of Sustainable Aviation Fuel (SAF) to enhanced electrification of ground vehicles, more efficient operations and the development of green buildings to name just a few.
With regards to emissions reduction, the aviation industry has adopted a net zero target by 2050. This was endorsed by members states of ICAO when, in October 2022, it adopted this target within a Long-Term Aspirational Goal (LTAG). This consensus approach will need significant public/private partnership to achieve as the net zero objective assumes SAF usage to account for roughly 65% achievement of the target.
Infrastructure improvements, such as integrated and better usage of air space to account for approximately 3 per cent, with new technology, focusing on new propulsion systems accounting for around 13 per cent and the remainder of the target, 19 per cent, achieved through accredited carbon offsetting and capture programmes.
But much needs to happen soon. In 2022 there was the capability to produce 125 million litres of SAF produced for aviation usage, with investments in place to expand that to five billion litres by 2025. Further governments incentives could expand that capability to 30 billion litres by 2030. However, to achieve the 2050 goal nearly 450 billion litres will be required. Further investment is therefore needed sooner rather than later.
Sustainability isn’t just about the environment, it’s also about how we as an industry support the 17 United Nations Sustainable Development Goals which encompass other aspects such as people, community and global prosperity.
The air cargo industry has also been developing significantly in these areas as we need to reflect the global community to which we serve. We strive to create an inclusive and diverse workforce, well trained and empowered to innovate and create the solutions required for an evolving world.
In order to achieve this, we have to throw away the traditional recruitment and employee handbook. We have to recognise the needs and expectations of the next generation workforce who value contribution, benefits and self-development differently than previous generations. Technology has to be embedded in how we work and we need to be more flexible in how we establish the working environment.
The Covid-era graduating workforce finished studies remotely with technologically enabled communities so we need to reflect these new realities in how we work. Traditional approaches to training will also need to evolve with greater focus on flexibly delivered modular micro courses rather than full week-based classroom courses, although this will bring additional challenges in how to effectively deliver technical skills trainings. We can anticipate increased usage of virtual reality and 3D immersive training tools on this front.
As an industry we also need to adopt a more proactive approach to recruitment. We need to attract not only the next generation but also the return to workforce personnel and industry changers. Long term employee relationships with the same employer are anticipated to be more challenged and we need to be far more aggressive in presenting the complete value that air cargo provides.
This industry supports the global economy; it enables developing nations to access global markets; it supports small business expansion and enhances consumer choice. It saves lives, it enhances recreation and provides opportunities to innovate and support the global community.
For more information, visit: https://tiaca.org