Challenges in air cargo industry set to continue, IATA

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IATA's global head of cargo, Glyn Hughes

This year has been a turbulent 12 months for the air cargo industry with yields under pressure, demand weak and growth flatlining, but the “challenging environment will be the norm” moving forward, according to the International Air Transport Association’s (IATA) head of cargo Glyn Hughes.

He was speaking at the association’s annual Cargo Media Day in Geneva (Switzerland) today, where he also explains that IATA is looking to simplify the governance of cargo, which will be completed next year.

He says the air cargo industry has to “reposition” itself and get the structure and processes in place and effectively support the changes.

The media day also saw presentations by leaders of a number of cargo programmes IATA runs and the event started with a economic briefing by senior economist, Julie Perovic.

She explains that 2015 has been a rocky year for air cargo as it was affected by poor performing world trade, low industrial production rates and a lack of business confidence, but despite this freight tonne kilometres have risen up to October by 2-2.5 per cent.

The freight load factors have also dropped to around 40-45 per cent, the lowest levels the industry has seen for six years.

Perovic put this down to the increasing amount of available freight capacity, brought on by rising bellyhold space and also due to a weakness of demand.

This year’s poor performance she says also comes despite oil prices dropping to around $40 a barrel, which is a 45 per cent fall since 2014, but Perovic expects this to rise: “Financial markets are saying oil prices will rise and be around $60 a barrel in 2019.”

Perovic explains the performance of cargo compared to the passenger side of aviation since the global recession in 2008, and were polar opposites during the period.

In the last six to seven years, she says the passenger segment has grown by 42 per cent, or 5-6 per cent a year, where as air cargo as only grown by eight per cent across the same time frame. “There is a huge divergance between the two businesses and the growth in them,” Perovic notes.

IATA’s head of cargo e-business management, Guillaume Drucy also gave a presentation and explains the electronic air waybill (eAWB) penetration target of 45 per cent for 2015 will be missed and he expects it to come in at between 38-40 per cent.

Drucy is optimistic for 2016 and says IATA is aiming to get penetration of eAWB up to 56 per cent. He says 70 per cent of the world can process eAWB and the target next year will be hit by getting 80 per cent penetration of that 70 per cent.

Drucy also says IATA is to run a new programme called ‘eAWB 360’ which will aim to simplify and synchronise eAWB in the marketplace and boost penetration.

IATA’s cargo safety and standards assistant director, Dave Brennan also spoke about the ongoing battles with lithium battery cargo and dangerous goods in general. He says governments need to enforce regulations better on lithium batteries and explains IATA is working to increase this compliance.

Brennan says a lot of problems come from “non-traditional” lithium battery and dangerous goods shippers and notes IATA is seeing an increasing number of incidents.

He says the issue is not connected with high-level manufacturers, but more small and medium sized shippers who are “not complying with regulations”.

Brennan says there is sub-standard production of lithium batteries and companies are not testing, packaging, using the right materials and considering the regulations in place, which is leading to incidents.

There has been calls for banning lithium batteries from the bellyhold of passenger aircraft, but Brennan says he was in favour of it and in making future legislation, we must be careful not to “penalise people in the industry that are complying”.

IATA’s senior manager for special cargo, Andrea Gruber also spoke about the associations CEIV pharma certification. She says 18 operators have completed their certifications, 45 are in progress to receive the certification and a further 97 are in discussion about completing the scheme.

Gruber notes: “The problem (with damaged pharma goods) is at the arrival point of the pharma cargo and destination – and not so much with the origin of the products (at the start).”

IATA’s head of cargo border management, Gordon Wright also spoke at the media day and says the association is waiting the outcome of the report on the inquiry into the Metrojet crash in Egypt last month, before making a call on air cargo security.

Wright also says IATA is “extremely concerned” about any possible amendments to the Mutual Recognition air cargo screening agreement between the European Union and the US, which he says is in ‘jeopardy”.

He explains any measures to change it must be “proportional” and hails the agreement as says operators get benefits from it. He says the US Transport Security Administration wants to makes changes as there is “not enough oversight by regulators”.

Wright also says IATA is lobbying for more countries to sign up to the World Trade Organization’s Trade Faciliation Agreement. He explains 53 have ratified it, but there needs to be two-thirds of the 162 WTO’s members signed up before it can go ahead.

He says IATA backs the trade agreement as it will reduce delays for cargo at borders, and support expedited systems and automated systems, all which the association supports.