Industry Collaboration is Essential Between Members of the Air-Cargo Community

Despite the predictable recession and increase in belly capacity, due to the reopening of some passenger routes, the industry remain positive, ready to face any challenge. In an exclusive to Cargo Trends, the leading air cargo professionals shared that digitalization will take centre stage in 2023 onwards which will have a positive impact along the supply-chain with greater transparency and visibility in the supply chain. Sustainability on the other hand becomes an integrated factor in business and in this sense, it changes paradigms. This is a long-term strategy and will require a number of baby-steps to be taken due to the difficulties in procuring SAF's and the high costs attached with it. Here are the details.....

What challenges and opportunities do you see in air cargo in 2023. How different this year will be from 2022 in terms of opportunities?

Sanjeev Gadhia - CEO, Astral Aviation Limited - We remain cautiously optimistic with the outlook for 2023 which is matched by the arrival of 2 x B767-300F from ATSG.

With the relaxation of the Covid rules in China, we expect exports to increase from April 2023 which will result in better airfreight volumes from China to Europe, Middle East and Africa.

We expect the exports of perishables to remain at a positive growth especially from East Africa to Middle East and Europe during the Valentines and Mothers Day.

The reduction in fuel will result in lower operating costs for the air-cargo sector, however, the effects of recession in Europe and USA will result in some challenges arising out of consumer demand due to the high interest rates and inflation.

Intra-Africa will continue to grow in 2023 due to a perceived increase in trade after the ratification of the African Continental Free Trade Area (AfCFTA) hence we expect strong growth on the intra-African sector.

Yossi SHOUKROUN, CEO, Challenge Group - Despite the predictable recession and increase in belly capacity, due to the reopening of some passenger routes, we remain positive, ready to face any challenge. After all, 2023 will mark the first 767 converted freighter flights of Challenge Group with the opening of new routes and with them, new opportunities.

Our expertise is well recognized and our reputation in handling complex verticals has been proven several times. More than 65% of the cargo carried by Challenge Group is non- standard and requires special handling. The same will be true in 2023. Finally, our approach to business is based on strategic partnerships, in line with the concept of the shared economy, and our mission is focused on our customers' success. This is why we trust the constant support of our business partners, as we have been able to create strong and lasting relationships over time.

Magali Beauregard Ta, CCO - CargoAi - After a year of conferences and discussions about sustainability and climate action, we feel the grassroots sentiment is that the industry overall is hungry for tangible solutions on combatting climate change.

While inflation currently presents an issue for governments to commit to the 2030 climate goals (for example imposing carbon taxes), we expect that environmental regulations will ramp up once inflation is under control, and companies should take care not to be behind the curve when this comes into play.

Predictably, supply chains will feel the brunt of this via the cost of importing goods throughout the world. With our Cargo2ZERO sustainability solution, freight forwarders can already optimise their procurement and make investments in SAF, which contribute to real climate action.

This conversation is playing an increasingly important role in business decisions, with shippers requesting full transparency on CO2 emissions per AWB and all players setting Scope 3 Science Based Targets Initiative reduction targets, which they are required to report on.

Will digitalization take center stage in 2023? What impact do you see in the supply chain?

Sanjeev Gadhia - Indeed as digitalization will take centre stage in 2023 onwards which will have a positive impact along the supply-chain with greater transparency and visibility in the supply chain.

Yossi SHOUKROUN - Digitization has been a key topic for some time now, and not just in our industry. Indeed, we are moving towards an app-driven society. We must not forget the lesson learned from the pandemic when digital tools saved us from the general inability of staff to get to the workplace for example. The e- business model should be seen as a guide to creating a digital environment that will facilitate the various interactions within the supply chain. But technology must not forget the human factor that it will ultimately serve. Efficiency is a goal for us and we have a coherent digital strategy in the pipeline... We will be making announcements in this regard shortly.

Magali Beauregard Ta - From our perspective, digitalisation is now becoming much less of a conversation topic and rather an integral way of running business.

Plug and Play solutions are here to stay and are the key to unlock user adoption in each organisation's digital journey. They are quick to integrate and simple to use; given the past experience of needing to pivot behaviours drastically during the pandemic, intuitive applications and ease of use are going to be a crucial consideration for organisations. As a complement to Plug and Play, solution customisation will also remain essential. Organisations have digitalised at different velocities in air freight and adopted different solutions for their own needs. This fragmented landscape will reduce but not disappear overnight, and therefore will not aid in the industry progressing forward together, as it will be a barrier to collaboration. CargoAi recognises that customisation to the different solutions currently in existence, is still necessary to enable a truly connected ecosystem - while keeping in mind that customised solutions must still result in intuitive processes enabling quick adoption and this is how we plan on leveraging our strengths and skillset in 2023.

The scale of such strategic technological partnerships will only increase in 2023; not only for CargoAi but also for other like-minded organisations who see immediate and actual business value in an interconnected ecosystem.

How sustainability can be the game changer in the air cargo industry?

Sanjeev Gadhia - Sustainability in the air-cargo industry is being relevant now more than before and will remain a topic of importance at various boards.

This is a long-term strategy and will require a number of baby-steps to be taken due to the difficulties in procuring SAF's and the high costs attached with it.

Yossi SHOUKROUN - It is well known that aviation is under the spotlight when it comes to emissions and that the EU has set an ambitious target for 2050. Like all stakeholders in the industry, we are taking this issue very seriously by following a holistic approach in line with the UNSDG guidelines, investing in this area and involving all our staff and business partners. Sustainability goes beyond the environment. It is about our people and the relationship we have with our partners. Sustainability becomes an integrated factor in business and in this sense, it changes paradigms.

Magali Beauregard Ta - As with digitalisation, there is an increased pressure for all organisations to embed sustainability into their product. With influence from regulatory bodies and shippers coming into play, forwarders must take action now to manage their ESG risks, seize new opportunities and carve out a competitive advantage. It is so much more than a trend.

At present, we see most of the SAF deals being announced in cargo at present involve the larger forwarders purchasing tonnes of SAF from the airlines. However, it is harder for small to medium players to be able to make investments in SAF. More often than not, there isn't a clear focus, let alone resources from small to mid-size players, resulting likely in no action.

We need to come together to orchestrate an unprecedented change. Our CargoZZERO solution is designed to get small and medium forwarders involved and informed about this process. It includes:

  • A carbon calculator, which is based on the IATA RP1678 methodology approved by the Global Logistics Emissions Council (GLEC). * A CO2 Efficiency Score based on the calculator, which allows forwarders to filter capacity offers according to the greenest routes. This means forwarders can evaluate a shipment's potential CO2 emissions in the same way they would evaluate a shipment based on the schedules and rates that come up during a search of the portal.
  • A CO2 Efficiency Dashboard which is the sum of a forwarder's booking decisions reporting every booked AWB and its respective CO2 emissions.
  • SAF purchase add-on to each booking

What are the new opportunities the industry can expect from cargo airports? What challenges do you see in the coordination between the airlines and airports?

Sanjeev Gadhia - Cargo airports have been fast to support the air-cargo sector with a well- defined cargo policy The success of a cargo hub relies on a large number of stakeholders operating together - including shippers, freight forwarders, ground handlers, truckers, customs, airlines, integrators, regulators and airports. Each of the cargo chain actors has a specific role and responsibility, yet they are all partners within the local cargo community; the airport's leadership is central to the success of the cargo community's strategy. By facilitating the local cargo ecosystem and enabling collaboration, airports can ensure that the planned developments materialize. In addition, using their innovation capabilities, airports can play an active part in responding to emerging cargo challenges such as digitization and sustainability - which are greatly rising in importance.

Yossi SHOUKROUN - We have a successful story here which is our main hub in Liege. We have always believed, since the beginning more than 20 years ago, in a close and fruitful cooperation with the airport and we can see the results and benefits of it today. It is essential to have the right synergy between the infrastructure provider and the end user. Is well known that as part of our growth plan we want to duplicate this successful story in the US. Regarding sustainability, we are working together with Liege Airport on the noise and emissions reduction program on one side, and on the other hand, given the global trend of banning four- engine aircraft, we have decided to build our fleet expansion plan on twin-engine aircraft, either B767 or B777.

Magali Beauregard Ta - Cargo airports also have the opportunity to accelerate their digitalization and harness their data for greater efficiency and to support the industry decarbonization which remains the number 1 objective. Decarbonising the ground operations remain a top priority for the industry and a very massive lever where data analytics and predictive technologies will propose optimisation processes, thereby not only improving their ESG performance AND their customer experience, but also their bottom line.

What next do you see pharma trends in air cargo? How sustainable pharmaceuticals will be in air cargo in 2023?

Sanjeev Gadhia - Pharma logistics in 2023 will involve an extended use of AI, Blockchain and real-time temperature loggers. What is important is to have visibility on the temperature requirements and flexibility with processes to enable greater turnaround in pharma logistics. Pharma will continue to be an important source of revenue for cargo airlines especially in emerging markets.

Yossi SHOUKROUN - The pharmaceutical industry has one of the highest standards in the logistics environment. For this reason, we were one of the first airlines and handlers to become CEIV Pharma certified. Due to high value and commodity specifications, the pharmaceutical industry is working very hard on a sustainable mode of transport to reduce emissions and waste when it comes to special active containers and packaging. We want to be STRAL aligned with this practice, that is why we keep up-to-date with any new tools or equipment on the market and continue to revise our operational process to provide our customers with efficient and high standard value propositions. Pharma procurement experts predict a growth in the production due to easing restrictions and consequently, more exposure to infections.

Why is industry collaboration a must in air cargo? What needs to be done to enhance quality and efficiency?

Sanjeev Gadhia - Industry collaboration is essential between members of the air-cargo community, as it is with greater industry collaboration, that we will achieve scalability and sustainability during the recession and the post-covid period.

Quality is an important aspect of any airline and the role of a Quality Manager is of strategic importance for any airline, hence information sharing on quality and efficiency. should form an important part of collaboration.

Yossi SHOUKROUN - The supply chain is a collaborative environment by definition. We need to ease the communication flow between all the different stakeholders as first instance, to avoid deviations during the different "handshakes" under their own operational control (scope 1) or those from the purchase of electricity, heat, and steam (scope 2). For the industry, scope 3 emissions (upstream and downstream of its own operations) represent the majority of greenhouse gas emissions. Thus, for carbon reduction efforts that significantly make an impact, a transformation of collaboration and transparent communication with fully vetted non-financial reporting must take place from start to end of the supply chain, air cargo included. This cannot be achieved without digitization as a backbone.

How global trade will make an impact on air cargo and affect the global supply chain?

Sanjeev Gadhia - Global trade is an important requisite for the development of air-cargo. Sadly the trade-war between US-China and the consequences of a deepening recession has resulted in a slow-down of global trade. The invasion of Ukraine and the sanctions against Russia is being felt by every citizen due to high. commodity prices including Fuel.

The world is divided more then before which are signs of difficult times ahead for trade and economic integration.

Yossi SHOUKROUN - We are living in a volatile economy where, due to different reasons, geopolitical or emergency crisis, global recession is around the corner. This uncertainty pushed us to have a flexible organization which can easily adapt to changes to answer our customers' needs and to base our business model on the shared economy concept where, together with our business partners, we shared our unutilized resources to be more efficient and financially sustainable. In addition to that, to avoid the risk to be out of stock, many manufactures are redesigning their production strategy based on two key elements: not depending on a single supplier and get the production site closer to markets. As a result, the supply chain might have multiple origins and shorter routes where the B767F is the ideal and more efficient aircraft.

Magali Beauregard Ta - Not unexpectedly, the relationship between global trade and air cargo and the supply chain will continue to be an integral relationship.

Based on information extracted from our business intelligence tool, CargINTEL, we saw the new export orders remain below the 50 line for major economies in December 2022 which is a worrying factor for air cargo. In 2023 we can expect the softening in demand to continue, which in a way, recalibrates the immense surge brought about by COVID influenced trends.

Inflation will have a severe impact in the responses of the supply chain. Major European economies expect their economies to grow by less than 1% in 2023, reflecting a globally decreasing trend in export, tracking its way towards a demand and supply imbalance. Improving operational efficiency and cost reduction will still be the name of the game in 2023. Real-time visibility into operations and processes will be critical to ensure that logistics and supply chain players remain agile and adaptable to unforeseen changes in order to come out ahead in 2023. Hence digitalisation will still be a key topic, and perhaps even more urgent, in 2023. We expect to see more like- minded companies such asTMSs, forwarders, airlines and other savvy supply chain partners come on board with platforms like CargoAi.