Rather than posing a threat, shipping lines are paying air freight “a wonderful compliment” by moving into their space, says TIACA director general Glyn Hughes.

Maersk and CMA CGM have pursued a fast-paced strategy that has transformed them from being largely box carriers into end-to-end logistics players, some would say integrators.

Today, they are also forces to be reckoned with in air freight – having set up their own airlines, acquired freighters and purchased forwarders.

In a recent podcast by Australia-based consultancy Logistics Executive Group, TIACA director general, Glyn Hughes described their diversification into air freight as “a fascinating evolution”, adding: “Some people say ‘should we feel threatened by this?’ and I’m thinking ‘threatened?’  – surely this is a compliment.

“These major maritime operators, which handle around 70% of global trade by volume and a significant chunk by value as well, saying, ‘we’re exposed, we’re light in air cargo’. Surely that’s them saying the future needs to be much more balanced-based (in terms of transport modes). And certainly air cargo is an integral part of the global economic supply chain scenario.”

Ocean carriers have brought a different approach to the airfreight industry which challenges the existing players, he added.

“They look at the relationship with the shipper differently,” said Mr Hughes, who cautioned that the extent that this could be translated to air could be limited.

“In the maritime sector there’s a smaller number of mega-customers that own a significant chunk of what’s moving. Air cargo tends to be much more proliferated in terms of the customer base, and I’m not sure you can be successful in trying to deal with every single customer in a direct fashion,” he explained.

So Mr Hughes believes intermediaries have a critical role to play.

“I think the role of the freight forwarder is incredibly important and will continue to be so. The notion of consolidation is critical when it comes to things like e-commerce. To move tens of millions of shipments of small individual items a day is going to be hugely complex and costly. So there needs to be much more focus on consolidated e-commerce and breaking down e-commerce at destination.”

As for the call to make supply chains more resilient, Mr Hughes noted that, as Covid highlighted an over-dependence on China – and whether more near- and on-shoring by manufacturers is the answer – there had been little interest in changing the manufacturing base.

He said: “The global economy has located production where it offers the best conditions, in terms of quality, value and the lowest unit (production) cost, as well as the easiest access to markets. I don’t think these particular mantras have been undermined; they will continue to play a significant role in the future.

“We might see some ‘split-shoring’, as shippers kind of diversify their risk in having multiple production sites, which works well for the supply chain and logistics industry. Certainly, there needs to be a lot more interaction between the logistics industry, governments and the manufacturing base.”

Asked how things are likely to play out between now and the end of the year, in terms of the return of passenger flights and the prospect of more belly capacity being available, Mr Hughes was more upbeat.

“Talking with many people from the airline side, and some from the regulatory side, there is the feeling that the summer period is as bad as it’s going to get, because ground staff that are coming back have not yet gone through the full certification and training programmes, etc. And so, by the time autumn comes, they think they will be in a much more balanced situation, and the same for flight crews. And then, obviously, they’ll be in a better position for 2023.”

Source: https://theloadstar.com/shipping-lines-move-to-become-integrators-a-compliment-to-air-freight/

There are “a huge number of challenges” facing the air cargo industry, and the broader aviation space, with staffing a major concern, according to TIACA director general Glyn Hughes.

In a podcast organised by Australia-based consultancy Logistics Executive Group, he began with a reminder of how, early in the year, air cargo continued to be buoyed by the “phenomenal” demand of 2021.

Capacity was still “woefully inadequate”, rates were “rocketing sky-high”, but the high value of goods to be transported by air meant such prices could be accommodated, he said.

“The industry was doing well and the global economy looking good, despite Covid. And then a certain event happened in Europe – the invasion of Ukraine.

This impacted energy costs, the price of fuel in the industry, the cost of production and consumers’ purchasing power, notably the cost of filling up with petrol, he said.

“All this led to economic activity slowing down pretty rapidly in Europe, and then pretty rapidly elsewhere. We’ve now got record-high inflation – and the number-one way governments and financial institutions address inflation is by increasing central bank rates.”

The upshot for the industry, he said, was that consumers had less to spend on things that are moved by air.

“Therefore, we’re seeing a curtailment of volumes, and at a time when we still have high fuel prices and closed airspace (as a result of western sanctions against Russia).”

While the slowing economy is impacting demand, staff shortages, across the entire aviation space, have emerged as a pressing issue, stressed Mr Hughes.

“At Amsterdam Schiphol, the government has mandated a reduction of flights during the course of the year – somewhere around 12%, the equivalent of 60,000, flights. London Heathrow and many other airports have had difficulties in re-hiring staff (post-Covid), which has meant the recovery in passenger traffic has been severely affected.”

He noted that air cargo players had been relying on the return of passenger flights, particularly on the transatlantic, where wide-body aircraft offer significant bellyhold capacity. This would have allowed the re-deployment of freighters that were being used on these routes (when there were no passenger services during Covid) to be moved elsewhere.

“Now that the passenger flights are not operating as they were initially intended, or hoped for, the question is, where is the capacity needed?

“Asia is still not open. So flight operations, let’s say to and from Hong Kong, China and many other places in Asia, are not as they were. And we’ve got a situation of staff shortages in places where it’s hampering recovery. Also, you’ve got the zero (Covid) tolerance policy in China as well.

“So when things start, they can suddenly stop because of a number of cases and then there is the prospect of a full lockdown. All-in-all, to use aviation terminology, it’s meant a lot of stalling. We’re doing climb-out, then we’re stalling; then we’re climbing out, then we’re stalling.”

Mr Hughes suggested that “when all the other conditions are back into the green-positive mode, the industry is going to be struggling because we are lacking handling, ramp and inspection staff and the certification process that allows workers to operate in a secure area takes a while (to obtain)”.

In other areas, such as technology, there are also staff shortages, he said.

“IT companies, which have done a tremendous job (in air cargo) in the past two years in expanding innovation and new solutions”, are finding it hard to recruit.”

The next generation of potential job candidates have spent the past couple of years “working from home, studying from home and socialising from home” – conditions imposed by Covid, said Mr Hughes.

“And if you were to say to those guys, ‘right, I need you to take this new job up and your shift starts is 3.30am, regardless of the weather, and then next week, you’ll be on ‘lates’, so you need to start at 5pm to 1am’.

“And the same with trucking, where drivers are faced with 180 days away from home each year.

“These are not attractive propositions, and we have to find new ways of enticing people which focus not just on the benefits, but on the value and the impact of the industry. We also have to look at technology.

“So there are a lot of challenges we have to address in order to attract and retain the ‘next-generation’ workforce.”

Source: https://theloadstar.com/air-cargo-industry-faces-huge-number-of-challenges-says-tiacas-hughes/