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The e-cargo conundrum

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Air cargo is falling behind in an e-commerce world.

There were two interrelated themes that emerged over and over again at the 2014 IATA World Cargo Symposium in Los Angeles: 1) Air cargo is hurting and 2) the air cargo industry is shockingly behind much of the rest of the business world—including the passenger airline business—in terms of automation and electronic processing.

Even as there has been a slight uptick in air cargo traffic in recent months, yields have not improved. “We’re shipping more for less,” one airline cargo executive told me. Everyone at the IATA WCS agreed that air has lost market share to ocean transport. Increasingly, shippers are deciding to pay 10 times less to ship goods by other modes—particularly ocean but also rail and road—rather than pay the premium price to move cargo by air. “Ocean transport has become more reliable with more sailing frequencies per lane offered by carrier alliances,” FedEx chairman and CEO Frederick Smith explained. “Combined with improved shipment information, fuel-efficient slow-steaming container ships allow products to be landed at the destination port with great predictability.”

IATA global head of cargo Des Vertannes said bluntly, “Shippers believe they’re not getting premium service for the premium price of air cargo.”

Vertannes noted that the average end-to-end time for air cargo consignments is around 6-7 days, which is exactly what it was in the 1960s. Ocean shipping may take 30-40 days, but with a little pre-planning shippers can save a lot of money moving cargo by sea rather than air—and be reassured by ocean shipping’s improved reliability. Vertannes believes air cargo end-to-end delivery time needs to be cut by about two days by the end of this decade for air to regain its value proposition.

A big reason air cargo moves so slowly is that the whole process continues to be extremely overburdened by paper in an e-commerce age. Air cargo often sits idle, or gets held up, because of paperwork. The air cargo industry is struggling to automate even the most basic piece of paper—the air waybill, which is roughly the equivalent of a passenger air ticket.

The air ticketing process is now almost entirely paperless. No so for air cargo, which achieved just 12% e-air waybill penetration in 2013, not even close to the global industry’s modest goal of achieving 20% penetration.

Part of the problem is that the air cargo industry—aside from the express operators—is made up of multiple players. Whereas the big integrated delivery companies—FedEx, UPS and DHL—largely handle their express packages end-to-end, traditional air cargo is passed from shippers to forwarders to ground handlers to airlines and back to forwarders again at the arrival airport. As a result, everyone seems reluctant to invest the necessary money to transform paper processing to e-processing.   

Henrik Lund, director of global airfreight for forwarding giant Hellmann Worldwide Logistics, said, “The goal for us is to have true e-freight end-to-end … What we want is a seamless e-cargo supply chain. The word ‘seamless’ has been used [in the air cargo industry] for about 15 years, but it hasn’t happened yet … It’s about all the players working together … It’s all about harmonized processes and messaging across the whole supply chain.”

Global Shippers Forum secretary general Chris Welsh said shippers are frustrated by the air cargo industry’s inability to move forward with e-freight. Paradoxically, this means many shippers are not investing in the necessary IT to help streamline the air cargo process.

Forwarders and airlines would like shippers to “key in” reliable data that could accompany the shipment from the start of the whole process. But shippers point to the fact that airlines and forwarders haven’t even been able to manage making the air waybill electronic, casting doubt on whether data provided by shippers would even technically be allowed to remain in electronic form throughout the airfreight transport process.

“The frustration is that the [air cargo] industry hasn’t been able to grasp this when the benefits to everyone are so obvious,” Welsh said during a WCS panel discussion. “What’s advisable first is for airlines and freight forwarders to sort out the e-airway bill, to make sure that’s doable. Shippers are not going to invest in new [e-commerce systems and processes] until they know what the [air e-cargo] architecture is. They are waiting for signals from the [air cargo] industry to see what the architecture is.”

Vertannes said, “Once shippers see that we’ve been able to transform our infrastructure, then the value proposition [for air cargo] will be become more obvious.”

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