One of the few aviation bright spots during the COVID-19 crisis is – Air Cargo. While passenger traffic plummeted and 50% or more of the passenger fleet were parked for much of last year, most cargo freighters remained in service with even higher levels of utilization, helped by a dramatic decline in the capacity of belly cargo. Most importantly, supply chain digitization took place quite rapidly. This emerging trend will decide and revolutionize the way the air cargo industry functions.
Short-term shipping demand fuelled by the pandemic mixed with the unabated growth of e-commerce, not to mention the congestion and capacity limitation experienced in other modes of transportation, has led to a structural logistics challenge that individual air cargo stakeholders can’t face alone. Movement of air cargo has to be integrated in a way that the processes. However, attempts at coordinating the different stakeholders have been frustratingly slow, inevitably failing to make a significant change with squabbles over who should bear the brunt of investment or who be the first in the chain.
It is believed that even a little bit of mode shifting from air cargo to ocean cargo would have a significant impact. Consider transpacific trade, it is estimated that maritime shipping handles 94% of trade by weight, with air cargo comprising the rest. Just a 1% shift to air cargo means 16% growth. Air Cargo has already taken 2 percent to 3 percent in the same cycle from ocean cargo/maritime. This shift is attributed to the shift from ocean cargo to air cargo where significant challenges as well as imbalances in container availability in maritime shipping.
While carriers across the globe experienced demand and capacity shortages, North American carriers seemed to fair the best, regionally: These carriers saw a 1.1-percent increase in demand in 2020 compared to the year ago period. However, capacity fell by 15.9 percent. African market stood as the only region to witness raised air freight demand right since 2019 with 1 percent growth and lowered capacity by 17.3 percent. In a nutshell, with the economic scenario improving, African Airlines are now setting an equal footing with their Latin American counterparts for international air cargo.
The demand and capacity imbalance only mean that the yield and revenue would’ve been on the high side. Even though vaccine is in place, it is not uniformly distributed across the world and the chances of, yet another outbreak is still high. That means the full return to operation of all the currently grounded passenger jets, along with their vital belly capacity, is going to take a while before levels return to pre-COVID levels. According to IATA, normalcy may not return at least until 2024 for the air cargo industry.
There have been some forward-thinking exceptions concerning supply chain digitization. Take Hartsfield-Jackson Atlanta International Airport. Atlanta International Airport launched the North America’s first airport cargo community system.
This cloud based platform went live on November 2019, which was just a month before the pandemic effects turned out to be rampant worldwide. It allows all stakeholders to communicate digitally with each other and others in the entire supply chain end to end. Atlanta Airport is now empowering other airports in the region to get benefitted out of airport cargo community system.
Airport Cargo Community System well streamlines movement of cargo and information in a lucid manner. This means, a disconnected air cargo industry can be well connected, and a proper communication can be facilitated among all stakeholders. Atlanta demonstrates it is possible to distribute the cost of implementing such a project, as long as airports act as a neutral hub that competing companies are willing to connect to. Due to this, additional benefits have emerged.
Virus stays on paper surfaces for 4-5 days because of which physical document exchange has to be reduced. Being forced to find an electronic solution to prevent transmission has accelerated the adoption of e-air waybills. This has had the knock-on effect of reducing delays in deliveries where truckers would be forced to queue to hand over physical documents. In addition, track and trace have significantly improved as well. Adversity may be uncomfortable, but it stimulates innovation. Earlier, digital transformation was sluggish and slow paced. But in the current scenario, the air cargo industry is rapidly transforming. Digitalisation has now become of prime importance in the air cargo industry. Also, with APIs, legacy system issues are becoming a thing of the past. Any user can now adopt technology and stay ahead of the game.