Ashok Rajan, senior vice president and head of cargo and logistics at IBS Software
Air cargo has undeniably stepped into the spotlight since the start of the pandemic. Traditionally sidelined by airlines, the sector has been responsible for providing the world with medical, safety, fresh produce and other vital supplies throughout the Covid-19 crisis while passenger transport ground to a halt.
Crucially, with cargo yield at unprecedented levels, it’s been a lifeline for the aviation industry: airlines with a strong freight focus were able to quickly and efficiently adapt once the pandemic hit and grounded passenger fleets, adding new freighter schedules including more stopovers in existing schedules, translating into more revenue, and giving them a major head start in the race to capitalise on the critical profit generating opportunity that cargo presents.
Covid-19 restrictions forced passenger airlines into pivoting to adopt a cargo focus over the past year as a means to stay afloat. And despite being late to the freight game, many have started to use new innovations in the sector to get ahead of traditional cargo-focused airlines who are stuck using older technologies.
Although air cargo has been a roaring success during the pandemic, and its value has been demonstrated by the likes of the Suez Canal blockage, it’s possible that the sector will be relegated from its elevated status when passenger travel begins to open up again in earnest. But to feel the full benefits cargo can offer, airlines should be seriously re-evaluating their business models, and keep freight in the boardroom long-term.
Given cargo’s traditional status, keeping cargo’s seat at the boardroom table and achieving investment in sector innovation and practices may be easier said than done. Maintaining momentum rests largely on these three factors:
Creating a mindset shift on the value of air cargo
The air cargo industry needs to demonstrate that the true value of cargo is not limited to mitigating risk and maintaining revenue during a time of crisis. As an industry, we must prove that cargo is deserving of greater investment – that it’s a long-term strategic source of growth and innovation and a core profit engine rather than simply an ancillary service. Only a comprehensive mindset shift that ripples across the aviation industry with enough impact to reach the c-suite and, crucially, investors, will allow cargo to step well and truly into the limelight as we head into a new post-pandemic era for travel. Establishing a positive differentiation for cargo will hinge on elevating customer experience, providing transparency and incorporating purpose-built products that will ultimately benefit the business as a whole.
Enhancing profits and pricing
Creating the mindset shift towards cargo requires evidence of value. The vital role of cargo during the pandemic has prompted a re-examination of the traditional pricing model: by evaluating the value of shipments rather than focusing on passenger capacity alone, airlines can increase overall yields and profits. What’s more, switching to a more dynamic pricing model will allow them to deliver a more innovative service that is able to react to real-time market demands.
Prioritising digital over legacy
Ultimately, the efficacy of providing the evidence for a mindset shift rests upon having the right systems to deliver real insight. Digitalising and automating air cargo systems, and moving away from the traditional, more antiquated paper-based processes means airlines can gain actionable insight from how their operations are running and make genuinely informed business decisions that serve customers better and impact the bottom line.
The pandemic has been the much-needed catalyst for airlines to open their eyes to the true value cargo has to offer. But to unlock its full potential, the sector needs nurturing long-term. Companies that keep freight at the top of boardroom agenda will be able to extract healthy profits from a supplementary revenue stream when passenger travel reenters the priority list. Those that fail to give the sector sufficient airtime might make it back to recovery on passenger income alone – but will be missing out on a golden opportunity for growth.