CargoConnect magazine TIACA special issue 2016 by Surecom Media

TIACAâ&#x20AC;&#x2122;s AIR CARGO FORUM 2016 ISSUE

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SPECIAL FEATURE

The Changed Code

the

AIR CARGO VISION 2020 E-Business in Air Cargo The Time Is Now

Smart Air Cargo Hubs In The Making

The Brexit Hammer Strikes Global Logistics

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Contents

TIACA’s AIR CARGO FORUM 2016 ISSUE

Editor and Publisher Smiti Suri Principal Correspondent Ritika Arora Bhola Special Correspondent Sana Husain Feature Writer Nikhil Mishra Tariq Ahmed Nicin Varghese

14 COVER STORY

The Air Cargo Vision 2020

8 SPECIAL FEATURE The Changed Code

FEATURE

Director Marketing Ajeet Kumar Manager Marketing Niti Chauhan Marketing Executive Chetan Pathak Rajesh Basu Asad Mohammad Mehuli Choudhury Marketing Support Sheetal Singh Administration Vipin Marwah Lavish Thakur

E-Business in Air Cargo .....................30

IATA Cargo Agency Program turns IATAFIATA ...........................................54

Designer & Visualiser Shaique Ahmad Mayank Bhatnagar

Assuring security with RFID ...................58

INTERVIEW Sanjiv Edward, Head of Cargo Business, Delhi International Airport; Chairman, Board of Directors, TIACA ......................64 Smart Air Cargo Hubs in the Making ......................................40

Michael Gill, Director-Aviation Environment Resolution, IATA ..............66 Halit Anlatan, VP of Cargo, Turkish Airlines ......................................................68 Ramesh Mamidala, CEO, Celebi Delhi Cargo Terminal Management Private India Limited......................................................70 Srinivas Sattiraju, CEO, Delex ..................72

The Brexit Hammer Strikes Global Logistics .....................48

OUTLOOK ......................................74

All material printed in this publication is the sole property of CargoConnect All printed matter contained in the magazine is based on the information of those featured in it. The views, ideas, comments and opinions expressed are solely of those featured and the Editor and Publisher do not necessarily subscribe to the same. CargoConnect is printed, published and owned by Smiti Suri, and is printed at Compudata Services, 42, Dsidc Shed, Scheme–1, Okhla Industrial Area Complex, Phase–II, New Delhi-110020, and published at 6/31-B, Jangpura–B, New Delhi-110014. Editor–Smiti Suri

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FOCUS

TIACA: Taking Air Cargo to New Heights

he International Air Cargo Association (TIACA) represents, supports, informs, and connects every element of the global supply chain. The Association champions every size of business, and helps shape the policy which affects all of its members, providing a unifying voice for the industry, working for global standards, and raising the profile of air cargo. TIACA’s 28th Air Cargo Forum (ACF) in Paris, France, from the 26th to the 28th of October represents a unique opportunity to network with specialists from the world’s leading air cargo companies, grow business, and learn from the experts. The Forum, which takes place at the Porte de Versailles, will include practical workshops pn new legislation, as well as debate on industry trends and innovation. “With a raft of new legislation on the horizon and a dramatically changing business landscape, our three-day Forum will provide executive with the practical tools they need to stay ahead of the curve,” said Doug Brittin, Secretary General, TIACA. The Forum’s “Air Cargo Vision 2020” program includes a workshop explaining

the new EU Customs Code, a session on the latest Advance Data legislation, a look at cargo hubs of the future, and a debate on the benefits of embracing the Cloud. TIACA Board members from across the supply chain will chair the sessions, including Vladimir Zubkov, Vice President, Volga-Dnepr Airlines, Essa Al-Saleh, CEO, Agility Logistics, Member of the TIACA Board, and John DeBenedette, Managing Director, Worldwide Information Network (WIN). Seventy-five industry leaders from Boeing, Accenture, Amsterdam Airport Schiphol, and Panalpina, as well as from ACF hosts Groupe ADP and Air France KLM Cargo, will take part in the 15 sessions looking at important issues that are shaping our industry’s future. Shippers are centre stage for this year’s event with the European Shippers’ Council (ESC) and the Global Shippers Forum (GSF) both exhibiting and hosting their own briefings covering quality and how to improve collaboration in the supply chain. “The GSF represents the interests of shippers globally and campaigns on the issues that most affect them,” said Chris Welsh, Secretary General, GSF.

“The GSF has taken the lead in air cargo industry cooperation and was a founder member of the Global Air Cargo Advisory Group (GACAG), established to enhance the air cargo product and to jointly campaign on key issues with regulators and key international organizations such as ICAO and WCO,” he added. “We greatly value our cooperation with TIACA and the ACF is an ideal opportunity for our members to network with suppliers and peers, and take part in practical workshops which will help them run more efficient supply chains.” Shippers will also take center stage in the ACF speaker line up, with Pascal Meyer, Head of Tra nspor tation a nd Customs for CHANEL Fragrances and Beauté, and Lars J.T. Droog, Manager Supply Chain and General Affairs, Tosoh Corporation taking part in a discussion on new manufacturing trends amongst other sessions. Shippers from a cross section of global industries have joined TIACA’s recently formed Shipper Advisory Committee and the group will be holding a meeting during ACF. The new council complements exist-

From L-R: Sebastiaan Scholte, Sanjiv Edward, Doug Brittin and Lars Droog

CargoConnect - FOCUS AIR CARGO

FOCUS ing shipper organisations by expanding the opportunity to include all sectors of the global air cargo community, according to Brittin. “We have representation from a wide range of industries who ship a significant amount by air globally to bring insight into shipper challenges, so that the industry can better collaborate and work towards slicker, safer supply chains,” said Chairman Lars J.T. Droog, Manager – Supply Chain and General Affairs from Tosoh Corporation. “TIACA represents all sections of the industry and we feel it is very important to provide this platform specifically for shippers to bring their concerns to the discussion table,” said Sanjiv Edward, TIACA Chairman and Head of Cargo Business, Delhi International Airport. “Collaboration is key to ensuring we add value to the industry.” Thousands of supply chain decision makers are expected to visit hundreds of air cargo suppliers at the ACF, with exhibitors including United Airlines, Emirates SkyCargo, Hong Kong Inter nationa l Airport, Unisys, and Jan de Rijk Logistics. New this year for the ACF is CargoLinx, TIACA’s on-line meeting scheduler, which will allow visitors to schedule up to thirty 25-minute meetings with 45 leading global air cargo companies, weeks in advance of the event. CargoLinX will be free to use for ACF visitors and exhibitors and meetings will

be scheduled for the first two days of the show. Hosts Groupe ADP and Air France KLM Cargo will bring leading French economist Matthieu Pélissié du Rausas, Director, McKinsey & Company to address a lunchtime briefing, as well as holding a TIACA Trustee dinner at the historical Hotel Potocki next to the Arc De Triomphe. “Groupe ADP and Air France KLM Cargo are delighted and very excited to welcome back this major cargo event in Paris,” said Frank Goldnadel, Chief Airport Operations Officer and Paris-Charles de Gaulle Airport Managing Director. Alain Malka, Directeur Général Adjoint Air France Cargo added, “We are convinced that the ACF 2016 will be a great networking opportunity for everyone in the global air cargo community.” Brittin said TIACA was looking forward to a week of lively and informative discussion and plenty of networking opportunities. “In these challenging times, it is vital that we have imput and representation from all stakeholders to ensure we have a successful and vibrant future. “With this ACF, we have taken an important step in the right direction towads a brighter future for the industry. “ACF provides a greta opportunity,not only to fully explore the issues that matter, but also to discovernew ways to collaborate and forge lasting relationships to drive business forward.”

Doug Brittin, Secretary General, TIACA

With a raft of new legislation on the horizon and a dramatically changing business landscape, our three-day Forum will provide executive with the practical tools they need to stay ahead of the curve.

FOCUS AIR CARGO - CargoConnect

SPECIAL feature

The Changed Code The Union Customs Code was enacted in order to modernise and simplify trade into and within the European Union. It also aims for harmonisation of Customs procedures across the Member States. Some additional goals of the regulation are to increase the safety and security of goods as well as to streamline processes. The key principle of the Union Customs Code is that all Customs declarations should be electronic TARIQ AHMED

CargoConnect - FOCUS AIR CARGO

SPECIAL feature

raders in the European Union (EU), along with North American companies having established trade relations with the EU, on May 1 this year, witnessed the beginning of the largest change to European customs procedures in the past 20 years with the introduction of the Union Customs Code (UCC). It brings an overhaul to the EU’s current customs framework, the Community Customs Code. It has introduced major changes affecting both customs administration and global trade. Most of the changes introduced by the UCC are aimed at facilitating trade and optimising processes, but these changes are also likely to result in additional costs and administrative burdens for businesses. However, the new legislation aims to facilitate legitimate trade, increase safety and security, and rationalise, harmonise and standardise the application of customs controls and decision-making processes across Europe. Moreover, under the UCC, all communications between customs authorities and businesses will have to be electronic, with

a number of new immediate or longer-term facilitations, such as: • The ability to make remote retail sales in a customs warehouse • Greater use of equivalence in all special procedures • Greater flexibility to move goods under Temporary Storage • I nt ro duct ion of E nt r y I nto t he Declarant’s Records (EIDR) • Reduction in the Customs Duty guarantee for a Duty Deferment accoun • Centralised clearance across the EU • Self assessment With the transitional period, UCC changes will be implemented at varying times across Member States, which will create challenges for any businesses operating customs procedures across the EU. One thing, however, is clear: All exchange of information between customs authorities and economic operators will eventually become electronic. An updated work program for major IT changes in the EU has just been finalised and there is, of course, the expectation that economic operators’ systems will also need upgrading.

the goal of creating a completely paperless customs environment across the EU. Pertaining to all these changes and factors, the EU has adopted the motto of Simplicity, Service and Speed to better describe their goal of the new UCC. Many traders are only just becoming aware of the implications of the new customs framework. This is largely due to the fact that final details were only negotiated and approved with the adoption of the Delegated Act and the Implementing Act in July and November 2015 respectively. As a result, many national customs authorities were clearly not going to have all of the systems in place to implement the changes immediately; therefore, in March 2016, a Transitional Delegated Act (TDA) was also released. This gives customs authorities and traders a phased implementation timeline that runs through 2020. This means that, as of May 1, many existing procedures may continue normally with changes implemented as national systems are updated or authorisations are reissued or reassessed. In other instances, businesses may want to take advantage of

The UCC Timeline & Overview Changes will be implemented in stages. Select highlights include:

START

1 May 2016 Delegated and Implementing Acts come into force.

2016

Preparation, development and optimisation occur during this timeframe and continue throughout.

10 Feb 2017

3 Jan 2018

Direct trader access to European Information Systems begins.

2017

Nearly all businesses involved in the import and/or export of goods into and within the EU will be affected.

3 Jan 2019

UCC Authorised Economic Operator updates to begin.

2018

10 Feb 2020

The UCC Automated Export System (AES) to begin.

2019

UCC Guarantee mangement to start.

2020

BEYOND >

UCC Customs Status, Proof of Union Status and Binding Tariff Information (BTI) System updates (Phase 1) also during this time.

UCC Surveillance and New Computerised Transit System (NCTS) funtionality to start during this timeframe.

UCC Information Sheets (INF) for Special Procedures and Special Procedures (SPs) are scheduled to start.

ICS2 including UCC Notification of Arrival, Centralised Clearance and more.

Jan-Feb 2017

Jan-Feb 2018

Jan-Feb 2019

Jan 2020+ Source: www.descartes.com

10 CargoConnect - FOCUS AIR CARGO

SPECIAL feature How to make your business ‘UCC ready’? With all the hue and cry that has been doing the rounds since the UCC has been introduced, there is one burning question that everyone seems to be asking: What are the measures that should be adopted post the introduction of the UCC and how should businesses prepare for changes in the UCC? Jonas Sakalauskas, Attorney-at-law, Litigation & Customs Lawyer has few points to make regarding this. He opines that in order to optimise financial costs and take advantage of the changes introduced by the UCC, businesses currently need to prepare for work according to the UCC. Therefore, he recommends assessing the following: • Current and planned customs procedures and the new requirements applicable to them, as well as transitional periods; • Customs simplifications and their benefits; • The need for AEO authorisation. It is important to assess both the potential negative effects on a business if the latter is unable to take advantage of the simplifications introduced by the UCC and the competitive advantage after acquiring the AEO status, as well as the necessary additional costs and the time limit for authorisation; • Compliance with the guarantee requirements. It is advisable to review the terms of agreements with guarantors and choose a suitable and economically sound guarantor, as well as to evaluate the need for a monetary deposit and working capital flows; • Business partners in the marketing chain and their possible influence on the company’s sales (for example, whether a partner has a AEO status, whether a partner is qualified in customs matters, whether a partner is economically sound, if the business is to be declared a debtor as a result of the partner’s actions, etc). The UCC changes provide additional rights and obligations for importers, and therefore the terms of contracts with suppliers must be reviewed in order to fulfil the established requirements and

adapt them to the company’s activities; proper selection of Incoterms is no longer the only relevant requirement in contracts with suppliers; • The possible impact of the new customs valuation rules on the customs value of goods and the company’s business. It is advisable to review the terms of contracts with customers, which may be associated with licence and patent fees, to evaluate what specific fees are charged for, and properly define them in the contract, and, if necessary, to review the terms of contracts with licence and patent holders; • Business processes of the company and its capability to properly implement the UCC requirements. Select the staff meeting the requirements and ensure their training. Evaluate the need for upgrading or installing information systems (after revising the specifications). The UCC has been applied for a very short period of time and hence there is no established practice yet, and the provisions to be applied at the end of the transitional period are still under review, so businesses should keep a close eye on changes in the legislation.

status is reflected in most of the UCC provisions. We would like to draw the attention of businesses to the advantages of the AEO status that are highlighted by the simplification of customs formalities: • Granted right of representation in other Member States, • Deferred payments with a reduced amount of a comprehensive guarantee (for example, reduction of the guarantee amount to 30 per cent of the current debt amount) or exemption from the submission of the guarantee, • Establishment of temporary transfer of goods stored to another Member State, • Introduction of centralised customs clearance (persons are enabled to submit customs declarations to the customs authorities in charge of the supervision of the person’s place of establishment where the goods declared are presented to the customs authorities at another customs office), • Simplified method of inclusion of the right to submit a customs declaration in the declarant’s records, • Introduction of the right of self-regulation, etc.

AEO status advantage

It is also important to take into account the possible negative effects of operation without the AEO status – AEO status holders will gain a competitive advantage in the market; it would be worthwhile to evaluate the effect of potentially slower customs

The UCC is intended to provide more benefits and to simplify regulation for authorised economic operators (AEO). Although the UCC does not provide for a mandatory AEO status, the advantage provided by this

FOCUS AIR CARGO - CargoConnect 11

SPECIAL feature

Source: www.descartes.com

processes on the activities carried out and a future increase in the costs of guarantees. The AEO status will certainly result in additional costs. AEO-related changes in the UCC will supposedly have a greater negative impact on small and medium-sized businesses due to accreditation procedures, their duration and costs, additional financial, operational legitimacy and other requirements established by the UCC for obtaining an AEO authorisation, as well as the need for relevant qualified personnel.

Additional sanctions for violations The UCC contains new provisions on tougher sanctions on business for violating customs legislation. Unlike previously, violations of customs legislation will be punishable by a fine and/or withdrawal, suspension or amendment of the relevant authorisation granted to a person. The negative consequences of customs checks may be significantly greater in the event of unlawful or improper declaration of duties and other charges calculated by the customs authorities. The UCC also provides for the calculation of default interest on duties from the date of occurrence of a debt to the date of notification of the debt after carrying out customs controls following the release of goods.

12 CargoConnect - FOCUS AIR CARGO

In addition, the UCC significantly expands the list of debtors responsible for a customs debt. The following persons may be declared debtors: • Any person submitting false information required for completing a declaration, • A person who acted in the interests of the person obliged to fulfil an obligation established by customs legislation or who was involved in the performance of actions as a result of which the obligation has not been fulfilled, etc. Thus, the customs authorities will now have more possibilities to declare several persons as debtors (joint and several debtors) and to more effectively recover a debt from any of the debtors or all of them without exceeding the established customs debt amount. A wider circle of joint and several debtors may have negative effects on businesses if the entities engaged by them, whose actions have determined a customs debt, are not financially sound or lack competence, which may result in mistakes leading to a customs debt.

Changes in the area of customs valuation The UCC eliminates the possibility of carrying out customs valuation based on the value of the first transaction of sale to the EU and establishes the rule of “the last

sale” to the EU. For businesses that used to apply the “first sale” rule in their supply chain this may mean higher import duties. It should be pointed out that the UCC provides for a transitional period (until December 31, 2017) for transactions made before January 18, 2016, which may also include open-ended transactions. According to the previous provisions, patent and licence fees used to be included in the customs value if they were related to the imported goods or were a condition of the sales contract for the goods. The UCC expands the concept of a “sales condition”. In accordance with the new provisions, the above fees are considered to be a prerequisite for the sale of goods and are included in the customs value not only where the buyer is directly or indirectly required to pay these fees or the buyer pays them to fulfill a contractual obligation but also where the goods cannot be sold to the buyer or the buyer cannot buy them if the patent or licence fees are not paid to the licensor. In this case, the valuation includes not only the obligations established by the seller or obligations imposed on it by the licence holder but also the obligations imposed on the buyer regardless of the relationship between the seller and the licensor. Therefore, patent and licence fees paid to a third party generally will be included in the customs value. In this

case, the fact that the licensor is not related to the seller basically loses its legal significance.

RE-DESIGN RE-INVENT RE-DISCOVER

Mandatory guarantee requirement Guarantees become mandatory for any existing or potential debts, with a few exceptions. The UCC provides for the possibility to present the customs authorities with a comprehensive guarantee related to two or more operations, declarations or customs procedures. It should be pointed out that the UCC does not enable the businesses using individual guarantees to apply a guarantee rate reduction. Comprehensive guarantee holders (meeting the requirements established by the UCC), meanwhile, are provided with more favourable conditions. The guarantee amount for AEO status holders may be reduced to 30 per cent of the existing debt. Entities that do not have the AEO status but meet the requirements established by the UCC may be allowed to provide guarantees in a reduced amount to secure potential debts. One of the major changes is an expanded list of forms of the guarantee (deposit, guarantor’s undertaking, etc) and the circle of entities that could be guarantors. Businesses are also given the opportunity to choose acceptable guarantors and find a cost-effective solution while reducing the additional costs incurred due to the guarantee requirements. The UCC sets deadlines for decisions taken by the customs authorities. The customs authorities will have 30 days to verify whether an applicant’s application meets the established requirements and notify the applicant of the acceptance of the application. After accepting the application, the customs authorities must take a decision immediately, but no later than 120 days from the date of the acceptance of the application. These rules standardise the decision-making processes at EU level. The UCC introduces a welcome change, namely the right to be heard. Before making a decision potentially unfavourable to an applicant, the customs authorities must notify the applicant of the grounds it intends to base its decision on and enable the applicant to express its opinion within a specified period of time. A 30-day time limit will be established for the applicant to perform this action. Although this condition will affect the deadline set for the customs authorities to adopt a decision, it will not only give the company access to the documents and information the customs authorities intend to rely on in adopting a negative decision but will also enable it to provide its explanations and relevant evidence that could change the position of the customs authorities. This procedure is likely to reduce the number of customs disputes and to make the examination of complaints on appeal more effective. The eventual impact of the UCC is not to be underestimated, even if there appears to be little change now for some. The legislation will affect North American companies in different ways depending on the nature of their business operations in the EU (i.e., processing or end use of goods). While the next few transitional years will bring some degree of uncertainty, however, the opportunities for greater efficiency, transparency, and simplicity are substantial, with technology having a tangible role to play.

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COVER STORY

The Air Cargo Vision 2020 The aviation industry, one of the fastest growing industries in the world has seen rapid changes over the years. The air cargo industry has also a major role in the economic growth of a country. In fact, it is a direct pointer to the prosperity of a country. Nicin Varghese, with the help of industry experts, analyses and explores the future of this rapidly growing industry.

14 CargoConnect - FOCUS AIR CARGO

COVER STORY

ir cargo plays a crucial role in today’s world. Whether it’s through express shipments providing expedited service, cargo carried in the holds of passenger aircraft linking together businesses across the globe, freighters delivering cargo on high volume trade lanes, or chartered flights providing needed supplies on special service schedules, the air cargo industry serves as a key engine of economic growth and development. It supports trade and investment, promotes connectivity, and improves efficiency and competitiveness. Air cargo represents a relatively small percentage by volume of world trade which is less than ten per cent but its significance leaps by value, where it accounts for more than 30 per cent of international trade. In other words, air cargo is oriented towards high value or time sensitive products. For example, the express industry has enabled the widespread adoption of just-in-time practices by many businesses, which save countless dollars in inventory and logistic costs. That said, air cargo continues to expand its clientele and now serves a diverse range of businesses and consumers. It is interwoven into the fabric of everyday life, be it business or personal, in many corners of the globe.

The Current Scene In 2015, airlines around the world safely transported 3.5 billion people and 51 million metric tons of cargo. They accomplished this with a workforce of nearly ten million people managing a fleet of 26,000 aircraft averaging 100,000 flights a day over a global network of 51,000 routes. Even more impressive than the scale of these operational numbers is the contribution of aviation to prosperity. The industry supports the livelihoods of 63 million people and underpins $2.7 trillion of GDP. IATA released data for global air freight demand in July 2016 showing an annual growth in global air freight ton kilometers (FTKs) accelerated to five per cent year-on-year in July 2016, up from 4.5 per cent in June. In terms of total FTKs flown, European airlines posted the fastest annual growth for only the fourth month in the past decade, closely followed by carriers in the Middle East. By contrast, African and Latin American carriers both saw freight volumes contract in year-on-year terms in July.

16 CargoConnect - FOCUS AIR CARGO

Dirk Schusdziara, Senior Vice President Cargo, Frankfurt Airport

Digit alis ation w ill shape the industr y in the coming y e a r s . I t w il l n o t only impact the logistics processes but definitely also the airpor t and warehouse infrastructure too, that have to be adapted to the new possibilities. Ac c or d i n g to t he World C a r go Symposium held at Berlin, the volume of goods travelling by air has risen marginally over the past year but airlines’ cargo revenues have fallen from a peak of $67 billion in 2011 to around $50 billion a year now and freight provides just nine per cent of total airline revenues now, down from over 12 per cent a decade ago. Henrik Ambak, Senior Vice President, Cargo Operations Worldwide, Emirates says, “Globally, the air cargo industry is very competitive and is experiencing an overall slowdown in demand because of the complexities facing the global business environment.” While The Economist found that a dramatic fall in sea-freight rates, as a result of overcapacity among shipping lines, has encouraged customers to switch from sending some non-urgent deliveries by air, excess capacity

among the airlines themselves has done further damage. Since the financial crisis, there has been no let-up in the growth of passenger demand, so carriers have been expanding their fleets. This means the amount of cargo space in the belly of passenger planes has risen sharply. Combined with flat demand for shipping by air, the result is that average capacity utilisation across the air-cargo business has fallen to 43.5 per cent, the lowest since the crisis. So, customers have been able to demand big price cuts. In fact, there are some routes on which there is more cargo than the passenger aircraft flying them can handle. Exports from Africa to Europe and mainland China to America are more significant than passenger flows between them. Long journey times across the Pacific mean that many passenger aircrafts do not have the range to take off with a full hold.

Industry Forecast According to the World Air Cargo Forecast by Boeing, International air freight will drive overall world cargo growth through 2033. Over the next 20 years, world air cargo traffic will grow 4.7 per cent per year. Air freight, including express traffic, will average 4.8 per cent annual growth, measure in RTKs. Airmail traffic will grow much more slowly, averaging one per cent annual growth through 2033. Overall, world air cargo traffic will increase from 207.8 billion RTKs in 2013 to 521.8 billion in 2033. Asia will continue to lead the world in average annual air cargo growth, with domestic China and intra-Asia markets expanding 6.7 per cent and 6.5 per cent per year respectively. The Asia-North America and Europe-Asia markets will grow slightly faster than the world average growth rate. Latin America markets with North America and with Europe will grow at approximately the world average growth rate, as will Middle East markets with Europe. Established markets grow more slowly than developing markets, so North America and Europe air cargo growth rates are below the world average rate. IATA came out with the five year plan for international air cargo from 2014 to 2018. According to them, international freight volumes are expected to increase at a compound annual growth rate (CAGR) of 4.1 per cent. Emerging economies, particularly in the Middle East and Africa, will be the

RE-DESIGN RE-INVENT RE-DISCOVER

Vipan Jain, Regional Manager Logistics, South Asia and Middle East, Lufthansa Cargo

International infrastructure is changing according to its own needs at small to large size airports with respect to expansion at the same location or creating a new facility at a new and different location. Security perception is changing at a fast pace considering new challenges nearly every day. We do expect mandatory x-ray on cargo side world over or other security measures soon. fastest-growing markets. The United States, China and the United Arab Emirates will each be adding more than one million additional tons of freight by 2018 compared to today. The UAE will have replaced Germany as the third largest market. The fastest growing international routes will be between the Middle East and Asia, at 6.2 per cent per year. Within Middle East (4.6 per cent), North America to South America (3.9 per cent), and Europe to Southern Africa (3.8 per cent), will also grow strongly.

Modernising Air Cargo: Changes Anticipated Though the industry appears to be positive in terms of growth and development, there are so many areas which expect drastic changes, face challenges and need improvement in the upcoming years. The key areas are infrastructure, security and e-commerce. Infrastructure is the enabler which will act as a driver for growth in air cargo. The development in infrastructure, planning and distribution can prevent many bottlenecks faced by the air cargo industry, especially domestic air cargo. Cargo theft and other security issues are another major concern of the industry which affects the overall growth of the industry. E-commerce has become a major factor in changing the shape of global air logistics industry. The industry experts strongly believe that changes will happen to the industry in the coming years. Vipan Jain, Regional Manager Logistics, South Asia and Middle East, Lufthansa Cargo feels, “International infrastructure

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customercare@delcart.in

COVER STORY

Henrik Ambak, Senior Vice President, Cargo Operations Worldwide, Emirates

Globally, we see that the cargo industry is mov ing aw ay from gener al c argo and

been great awareness about the constraints faced by the air cargo industry and of late, a great emphasis is being placed on infrastructural constraints along with processes. Whereas simplification of processes is essential in government domain and is being addressed while infrastructural issues need broader involvement of stakeholders like the agents, the custodians, the airport owners, airlines, etc. We are likely to see a change in infrastructure for air cargo in the next five years far exceeding by what we have witnessed in the last decade. With new airports and upgradation of existing airports, the cargo handling capacity will grow in tune with the demand increase. There is hardly any airport handling international cargo which is not undergoing expansion and modernisation today.” Digitalisation plays an important role in modernising air cargo. Initiatives such as e-

need to be modernised and integrated to an extent to make paperless transactions including automatic payment of duties and clearances a possibility in true sense.” Security being a critical element of the air cargo supply chain Kishore continued, “Increased perceived threat from terrorist action will shift the focus to having secure cargo. The security infrastructure has to be ramped up to meet the increased threat perception.” While Shah says, “The security will continue to be a challenge since balancing facilitation of a growing cargo market with addressing growing security challenges would call for sharing responsibilities by all involved. We are likely to see some more responsibilities being placed with cargo agents, custodian and airlines as a means of negating the impact of stricter security measures.” The customisation of services has become trending and important in the success of air

freight and e-Airway bill aims to take paper out of air cargo and to replace it with the exchange of electronic data and messages. Dirk Schusdziara, Senior Vice President Cargo, Frankfurt Airport emphasises the importance of digitalisation while he says, “Digitalisation will shape the industry in the next years. It will not only impact the logistics processes but definitely also the airport and warehouse infrastructure that has to be adapted to the new possibilities. Another development that we already witness now and that will definitely continue to influence the industry is that forwarders are taking over a much more dominant role in the supply chain than they used to have in the past. Therefore, more and more cargo is delivered as build-up pallets (BUPs). Also here, infrastructure has to be prepared for that trend.” Observing the same, SGK Kishore, CEO, GMR Hyderabad International Airport Ltd affirms, “The IT infrastructure of all the stakeholders including airport operators, regulatory agencies, airline and end users will

freight industry. Getting perishable goods from developing economies to markets in industrialised nations would not be possible without air transport. The pharmaceutical industry relies on air transport for its speed and efficiency in transporting high value, time and temperature sensitive cargo, particularly vaccines. Mike Chew, CEO, AISATS points out, “With globalisation, there is an increase in demand of seasonal products round the year, which requires specialised facilities enabled with latest technology, equipment and know-how to handle temperature sensitive cargo such as perishables and pharmaceuticals. AISATS is pioneering such developments in India with their upcoming AISATS COOLPORT which will be India’s first integrated on-airport perishable cargo handling facility at Kempegowda International Airport in Bengaluru. This dedicated state-of-the-art facility comprising of customs clearances and well-equipped testing labs would play a vital role in promoting better trade facilitation and will further

moving towards more specialised offerings in various busine s s ver tic al s including pharma and retail and this has an impact on the kind of infrastructure and security arrangements that need to be in place for shipments but also require more complex processes and system support. is changing according to their own needs at small to large size airports in respect of expansion at the same location or creating a new facility at a new and different location. Security perception is changing at a fast pace considering new challenges nearly every day. We do expect mandatory x-ray on cargo side world over or other security measures soon.” Agreeing to this Rakesh Shah, Chairman and MD, GSEC Limited said, “There has

18 CargoConnect - FOCUS AIR CARGO

COVER STORY

Zhou Zengrong, General Manager-India, China Eastern Airlines

In current world security scenario, all terminal operators/ stakeholders are ver y serious about security

aspect

and are upgr ading security equipments. We can also foresee immense improvement in

operational

excellence along with restructuring of ports and airports.

20 CargoConnect - FOCUS AIR CARGO

boost the export and import of temperature sensitive products and would make the state of Karnataka a perishable and pharmaceutical hub of India.” Focusing on the same Ambak said, “Globally we see that the cargo industry is moving away from general cargo and moving towards more specialised offerings for various business verticals including pharma and retail and this has an impact on the kind of infrastructure and security arrangements that need to be in place for shipments but also require more complex processes and system support.”

Identifying the Challenges “The greater the obstacle, the more glory in overcoming it”, said Moliere once. It is no secret that air cargo industry faces many challenges. The industry has to reposition itself and get the structure and process in place and support the changes. Industry experts believe that the success of the industry lies in overcoming the challenges. The first challenge/opportunity comes from the incredible growth of e-commerce. Though the sales volume continues to be excellent, the logistics industry is not capable of delivering the purchased goods in a timely way, and many a times, cannot support the rapid growth in demand for package delivery driven by the e-commerce boom. Regarding this, Chew says, “With the growth of e-commerce, there is an increased need for logistics and supply chain infrastructure support for faster deliveries to fulfill customer’s e-commerce experience. Lack of capacity planning for air cargo while developing airports is a major challenge to adequately handle the increased cargo volumes and needs careful consideration. Capacity should be planned for projected cargo growth for at least the next ten years with modular expansion possibility to meet future demand thereafter. The concept of Air Freight Stations (AFS) could be implemented to reduce congestion at the airport premises. Right now, airports have very limited facilities available to enable faster transport of express cargo and to maintain freshness of perishable cargo during its movement at the airport. We need to develop integrated special handling facilities, with in-house special services like 24x7 custom clearances, availability of drug controller testing lab, etc at

airports across India for express cargo and for temperature sensitive cargo such as pharmaceuticals and perishable goods.” He also emphasised on the need to integrate the airport infrastructure with air cargo facilities where he said, “Apart from special handling facilities, there is a need to integrate the airport infrastructure with air cargo facilities to handle increased air cargo volumes. This can be done by utilising unused infrastructure available at airports and by allocating them to air cargo operators. Such a step would benefit both the airport operator and the end user. Along with developing air cargo facilities at airports, policy formulations and reforms will also play a major role in the growth of air cargo industry in coming years. Clear policies and a central clearance body advising all the approvals will make the development of air cargo complexes much simpler.” Observing the impact of e-commerce in domestic air cargo, Kishore says, “The biggest driver of domestic air cargo growth has been investor-fuelled growth of e-commerce. Over the last few years, there has been a big boom in online shopping of designer fashion accessories, high-end electronics and parts, which make up a substantial percentage of domestic air cargo. However, this segment of domestic air cargo movement is plateauing with e-commerce companies focusing on cost optimisation and converting to road movement. Air cargo industry needs to play from its strengths of providing fast, safe and secure logistics to its customers and add on the value added services wherever possible to provide a differentiated service to retain its client base against stiff competition from other modes of transport.” As discussed digitalisation plays a vital role in almost all the arenas of life and air cargo industry also falls within it. Technological improvement in ground handling and infrastructure has become the need of the hour. On a similar note, Kishore continued, “The industry needs to modernise and be aligned with technological progresses made with time. Though air cargo industry has taken quite a number of initiatives to have paperless transaction, the push needs full focus of all the stakeholders to entail a seamless end to end automatic flow of information, financial transaction and regulatory clearances in places.” He also emphasised

COVER STORY % Growth in Freight Tonnes, year-on-year

Mike Chew, CEO, AISATS

Apar t from special handling facilities,

Route Area

Dec-15

Africa-Europe Africa-Asia Africa-Middle East Central America / Caribbean South Europe-Central America Caribbean Europe- Asia Europe-Middle East Europe- North America Europe- South America Asia- North America Asia- Southwest Pacific Middle East-Asia Middle East- North America North America-Central America North America-South America North/ South America Southwest Within Central America Within Europe Within Asia Within South America

-3.6% -1.3% 8.2% 11.9% -6.6% -1.7% 10.7% -1.8% -13.2% -4.4% 8.2% -4.1% 13.0% 19.4% -5.9% 17.9% 4.1% 0.4% -1.2% -12.2%

Jan-16

Feb-16

Mar-16

Apr-16

May-16

-7.0% 17.7% 5.5% 13.1% 3.3% 2.1% 2.3% 0.4% -5.2% -8.5% 6.5% 9.9% 38.6% 17.8% -3.7% 19.0% -6.2% 13.0% 1.4% -19.7%

0.8% 5.0% 2.0% 7.4% -2.6% -8.0% 1.1% -2.0% -5.5% -20.5% -8.5% 1.0% 24.8% 4.2% -1.7% 6.7% -3.0% 9.1% -7.8% -14.6%

-5.9% 19.8% 8.2% 1.0% -5.4% -4.7% -3.9% -5.1% -13.3% -11.7% 3.4% 6.1% 10.1% 5.3% -6.8% -3.9% -7.8% 13.9% 5.1% -16.9%

-4.7% 18.0% 15.5% 3.2% 5.0% 5.9% 7.8% 1.1% 5.8% -4.7% 4.4% 7.8% 21.4% 7.1% -11.2% 14.2% 4.0% 13.8% 4.6% -18.6%

-10.4% 18.1% 4.5% -7.6% -0.7% 1.5% 2.7% -1.7% 3.6% -3.2% -2.5% 3.3% 20.1% -4.2% -13.2% 10.9% -11.1% 8.8% 4.1% -23.9%

there is a need to integrate the airport infrastructure with air cargo facilities to handle increased air cargo volumes. This can be done by utilising unused infrastructure available at airports and by allocating them to air cargo operators. about the need of value added services especially in India by saying, “Creation of value added infrastructure is becoming a necessity to face the changes in a regulatory environment, especially the export regulations for different countries. Airport operators need to augment their infrastructure to make them an ideal enabler for exporters. Hyderabad Airport has always been taking steps to enable its stakeholders and over the years we have introduced new services such as Road Feeder Service (RFS), Air Freight Station (AFS), Environtainer base, augmentation of cold storage facilities, etc. We are in process of consulting with its stakeholders on estab-

lishment of a dedicated Perishable Terminal.” Zhou Zengrong, General ManagerIndia, China Eastern Airlines points out three important initiatives which ensure improved and world class services to the customers, especially in India. 1. “Improvement in the infrastructure is still a bit slow. The government is already on the job and expected to be accelerated to overcome the infrastructure problem. 2. Connectivity between metros and states will have to be improved for the fast delivery of cargo. The government has already launched several projects all over India to address this problem and it is expected to overcome soonest possible time. 3. Dwell time of exports and imports shipments was earlier 48 hours which has now been changed to 18 hours and in the coming time the government has set the benchmark of 12 hours.” Chew complains about the Indian air cargo scenario saying, “Air cargo industry continues to have relatively low priority in planning, allocation of space, budget, and human resources. Barring the Greenfield airports, there has been a lack of planned and integrated development of cargo facilities at Indian airports. There is also a lack of standardisation and benchmarking of deliverables.” Meanwhile Kishore is feeling positive about the industry with the advent of GST and he says, “The Government of India has been successful in clearing the GST bill

through the Parliament. As per the broad contours of the bill, it will have positive impact on the logistics industry as a whole. It will also entail consolidation in the field with large format warehouses and delivery centers gaining currency. However, the targeted time frame to make the GST applicable will need the players to invest in adopting the mandated changes to be future ready.” Kishore also tries to figure out another major challenge which is the lack of enough aircrafts to transport cargo. He said, “Air cargo capacity, especially the belly cargo capacity, is expected to increase with airlines inducting multiple aircrafts over the next few years which is expected to drive down the air freight rates with increased competition. If the same happens, there will be tremendous growth of cargo movement through air. Other than airports, the support infrastructure from logistics companies, trucking, warehousing, etc also need to be enhanced.” V.V.Sridhar, Regional Manager - Cargo and Salil Nair, Senior Manager - Key Accounts, Spicejet identifies five major challenges for air cargo in the upcoming years. They said, “Five major challenges would be space constraints at warehouses, shortage of handling equipments, screening machines, shortage of skilled manpower in ground handling as well as in security domain. BOPT model for infrastructure development of warehouses, common user terminals, latest screening machines, investment in technology, rigorous training

FOCUS AIR CARGO - CargoConnect 21

COVER STORY

Manoj Singh, Senior Vice President and Head-Cargo, Mumbai International Airport Ltd

At present, enhanced ease of doing business with air cargo security procedures is the need of the hour. This can be addressed through the assimilation of efficient processes and the latest technology.

in both handling and security can help to overcome the challenges.”

E-Commerce: The New Trump Card E-commerce is primarily driving air cargo industry. It has become a major factor in changing the shape of global logistics industry. With e-commerce, an inevitable market shakeout awaits the transportation industry. The demand for express cargo or super speed delivery has become high with e-commerce. The Indian e-retail space has witnessed a phenomenal growth in the recent years, led by a growing internet user base and financial sponsors. Considering the Indian scenario, Binaifer Jehani, Director, Industry and Customised Research, CRISIL informed, “With ever increasing e-commerce demand,

22 CargoConnect - FOCUS AIR CARGO

the demand for express Historical and forecast air cargo growth rates cargo has increased rapidly. This requires adequate infrastructure to process Region Forecast History the cargo swiftly and cost2013-2033 2003-2013 by percentage by percentage efficiently. Ministry of Civil Aviation aims to develop World 2.6 4.7 cargo villages near airports, Asia-North America 2.3 5.4 which we believe will en- Europe-Asia 4.8 5.3 3.0 6.5 able the industry to have ef- Intra-Asia Europe-North America 0.6 3.1 ficient transfers with faster Intra-North America -1.6 2.1 processing. Besides, NCAP Domestic China 9.9 6.7 Latin America-Europe 5.0 4.8 highlighted that airport Latin America-North 2.5 5.2 operators will be encour- America 1.0 4.3 Africa-Europe 5.1 4.7 aged to provide space for at South Asia- Europe 4.1 4.0 East- Europe least ten years lease to ex- Middle 1.6 2.0 Intra-Europe press cargo freighters who may then develop dedicated infrastructure to improve Source: 150 transpacific passenger flights provide Diio/Innovata their operational efficiency.” DOT T-100 the equivalent of only 10 freighter flights Chew points out the importance of robust infrastructure and policy formations to support cient operation of the supply chain for which express cargo. He says, “Proliferation of e- agile air cargo movement plays a vital part.” Sridhar and Nair believe that quality commerce, access to markets and rise in the purchasing habits of consumers are offering is the key to be successful in the rapidly huge opportunities for the express cargo in- growing e-commerce market. They emphadustry in India. Express cargo is integral to sises, “How fast the industry responds to many facets of modern life and the distinc- the changing times, how much and how tion between express and general air cargo far they are willing to invest in technology continues to blur. There is an urgent need for will have the major impact on the business. robust infrastructure and policy support to With e-commerce, transparency has become drive efficiency to keep up with the grow- the key and end users expectations have ining need of express cargo. In this context, creased manifold. For example, the success the development of dedicated express cargo of Ola and Uber is because of their transparzones and the adoption of modern technol- ency, which is possible with only modern and ogy within the air freight terminal can lead digitalised technology.” On a positive note, to increased delivery capacity and shorter Zengrong says, “Industry is fully prepared to take care of express cargo or super speed delivery windows.” AISATS operates an airfreight terminal cargo. More frequencies or capacities will be at Kempegowda International Airport in increased and dwell time will be reduced to Bengaluru, which handles 210,000 tons of cater to the needs of the e-commerce market.” perishables, transshipment, express courier, special cargo and general cargo. For smooth Right From the Expert’s Mouth movement of international and domestic The air cargo professionals from around the express courier, EICI (Express Industry world meet up and discuss the key issues Council of India) has a separate small termi- or challenges faced by the industry at each nal within the AISATS Air Freight Terminal. point of time. Conferences, symposiums and With EICI taking care of all the necessary workshops are happening all over the world regulatory procedures of the express cou- to address these problems. CargoConnect, rier movement, AISATS manages to move in discussion with some major players in priority cargo on time. Chew continued, the industry tried to find out the top chal“E-commerce has grown at a CAGR of 34 lenges faced by each of them in terms of inper cent since 2009 with a subsequent rise in frastructure, e-commerce and security and e-tailing. Success of e-tailing lies in the effi- their strategy to overcome those challenges.

COVER STORY

D. R. Juyal, Director, Air Cargo Forum India

The digital component of the bimodal supply chain becomes a significant factor for all members of the air c ar go indus tr y worldwide to avoid a severe imbalance between demand and supply.

Given below are what we got right from the industry expert’s mouth. Vipan Jain says, “First of all we must recognise the progress we made in terms of infrastructure, e-commerce and security. In the recent past we have seen a major initiative from the government and even from other authorities to improve things under ‘ease of doing business’ and that it has left the users behind. In case we deal with all three points separately, it will be simple to understand. In terms of infrastructure, we are able to cater the existing demand at most of the airports. However certain changes in processes can help to improve the entire supply chain.

24 CargoConnect - FOCUS AIR CARGO

Regarding security, MOCA has also initiated the first meeting under ‘National Civil Aviation Policy’ to simplify security procedures in the light of changing business dynamics and we do expect changes without compromising security. We have seen couple of more meetings in the last two months to speed up changes in requirements. Overall, we are using various platforms initiated by the government and others to improve things according to our requirements as individually it is very difficult to convince all the stakeholders.” Ambak says that the availability of suitable infrastructure for cargo handling can be a significant challenge in some of the destinations where Emirates SkyCargo operates. But, he is also optimistic about the significant investments they have made to develop world class infrastructure at its hub in Dubai. He shares, “In 2015, we officially inaugurated our dedicated freighter hub ‘Emirates SkyCentral’ at Dubai World Central. It was developed and built to meet the future growth requirements of Emirates SkyCargo. SkyCentral features an extensive cool chain facility with over 15,000 square meters of dedicated storage for temperature-sensitive

goods which also include 4600 square meters of space that has been certified under EU Good Distribution Practice guidelines for pharmaceutical products. We have also launched Emirates SkyPharma, new purposebuilt facility, dedicated exclusively to the timely and secure transport of temperature sensitive pharmaceutical shipments at Dubai International Airport. Emirates SkyCargo is the first cargo airline in the world that has obtained GDP certification for its hub operations covering two airports and the 24x7 bonded trucking service that connects cargo between them. The carrier also operates the largest GDP certified area in the world of-

fering a total area of 8,600 square meters of combined handling space dedicated for pharmaceutical products at Dubai International Airport and Dubai World Central. We would like to see investments in airport infrastructure that will support the smooth processing and delivery of freight as this also benefits the local economies by increasing the opportunities available for import and export.” As global retail is undergoing significant changes as more and more people move away from the traditional retail to e-commerce, Ambak believes that this will open new opportunities for the air cargo industry. Having said this, he reminds, “We should not forget the fact that majority of e-commerce is based on a “within border or region” approach utilising regional distribution centres and therefore global supply chains of more mass volume from production sites will continue to exist.” As a result of the deteriorating geopolitical environment globally, Emirates SkyCargo has implemented a number of new cargo security and screening measures mandated by various regional and international bodies. The risk based approach focused on information pre-screening keeps spreading. This is also considered as the most preferred approach by authorities. “We are committed to provide safe and high quality service to our customers and have invested substantially in security measures in terms of equipment, processes and training of personnel across our global network. We will continue to invest in strengthening our safety and security measures,” he continued. “The principal challenge is to keep the dwell time of cargo shipments as short as possible.” Manoj Singh, Senior Vice President and Head- Cargo, Mumbai International Airport Ltd identifies one of the most important challenges faced by the air cargo industry. He continued to say, “At present, enhanced ease of doing business with air cargo security procedures is the need of the hour. This can be addressed through the assimilation of efficient processes and the latest technology. Air cargo security measures in both critical and non-critical operational activities are being reviewed by the Ministry of Civil Aviation with a view of improving the dwell time without compromising on the security standards to be maintained. Digitisation of security processes viz. e-CSD, cutting down on multiple checks and the establishment

COVER STORY

SGK Kishore, CEO, GMR Hyderabad International Airport Ltd

The Government of India has been successful in clearing the GST bill through the Parliament. As per the broad contours of the bill, it will have a positive impact on the logistics industry as a whole.

of a faster and more innovative approach will help in reducing the dwell time of shipments during the security processes.” Singh seems confident and optimistic about the infrastructure facilities available at Mumbai international airport. Mumbai International Airport Private Limited (MIAL) has been actively creating infrastructure and developing IT and security standards at the Mumbai Air Cargo Terminal since its inception. Most recently, MIAL has commissioned India’s largest state-of-the-art Domestic Common User Terminal in July 2016. The new Export Heavy and Bonded Cargo Terminal has also been completed and is set for commissioning in this year. In addition to these new facilities, MIAL has successfully commissioned various projects in the past like the Export Unitisation Zone (2014), India’s largest Import Cold Zone (2013) and the Export Perishable Cargo Terminal (2011). The automation and augmentation of the pharmaceutical and agro-handling capacities are planned for the coming year. In order to meet compliance measures in terms of security at the Mumbai Air Cargo Terminal, MIAL employs a wide

network of CCTV surveillance, and has in place a highly effective security system with strict access control, ensuring complete adherence to all Bureau of Civil Aviation Security of India (BCAS) requirements. According to him, e-commerce has seen remarkable growth, especially within the domestic segment. “We eagerly anticipate and welcome the growth of such businesses, both within India and on a global level. Despite heavy competition from the other modes of shipping, we are confident of the growth of the air cargo share. It is important for this particular industry, being complex and handled by multiple players, to be innovative and equipped with latest trends, even at the individual level. Air cargo has enormous demand, and the primary responsibility of the industry as a whole should be to retain this demand by offering ease of doing business at all levels of operation,” he elaborated. Schusdziara is of the view that infrastructure has to be adapted to the new possibilities that arise from digitalisation. He believes that it is one of the key points for success. Schusdziara says, “As an airport operator, we

COVER STORY

Rakesh Shah, Chairman & MD, GSEC Limited

We are likely to see a change in infrastructure for air cargo in the next five years far exceeding what we have witnessed in the last decade. The security infrastructure has to be ramped up to meet the increased threat perception. make sure that Frankfurt airport features dedicated facilities and services for all kinds of cargo. Consequently, we are working on our infrastructure to facilitate the business of our customers. A big project right now is of course our Terminal III, which is current-

26 CargoConnect - FOCUS AIR CARGO

ly being built in the southern part of FRA. When complete, the new terminal will add cargo capacity and improve access to our cargo areas; thanks to a new autobahn interchange. At Frankfurt Airport, already two years ago, we have installed a license-plate recognition system at the entrance gates to our cargo areas. This feature can be used for many digital applications. Being linked to our cargo community system Fair@Link, for example, the entrance of a truck to our cargo area automatically triggers customs clearance. In general, our challenge is to push forward digitalisation of the air cargo chain. We are therefore strongly supporting Fair@ Link. The system enables the electronic exchange of data between participating companies. It digitally networks the players in the air freight chain and thus improves the physical processes between them – not just within the CargoCity, but also well beyond its perimeters. Today, Fair@Link represents one of the most advanced cargo community systems at any airport worldwide.” For BUPs, FRA has Speedgate. This infrastructure is a transition point for every kind of cargo between landside and airside and is unique at Frankfurt Airport. BUPs do not have to go through the warehouses of the cargo handlers anymore but they can be directly delivered to the Speedgate where they are handed over to the ground handler. It therefore does not only accelerate the transport of the goods but also helps handlers to use their handling space more efficiently. In order to facilitate the process, the Speedgate is integrated to Fair@Link.

The Game Seems Sensitive

The air cargo market can be described by high average growth rates, but it is also very sensitive to fluctuations in the global economy. In order to prepare the industry to handle the changes that might come up in the next few years, it is important to move along with the needs and requirements of the market. The process must be simple and easy to access. Ambak says how Emirates Skycargo prepare itself to handle the changes, “For Emirates SkyCargo, the key to success is to have our customers at the centre of all that we do. We work closely with our customers, understanding their needs and adapting our services and offerings. It is imperative that we demonstrate the value that we are adding to our customers. By doing this well, we enable our customers to further add value to their stakeholders. Businesses are constantly challenging themselves and business processes are evolving at a pace that has not been witnessed before. Working with our customers helps us to anticipate and take advantage of the next major trend in the market.” D. R. Juyal, Director, Air Cargo Forum India emphasises the need to keep balance between the demand and supply. He considers e-commerce as a major factor in determining the success of air cargo. He explained, “There is a noticeable shift in the consumption patterns of the developed world from things to experiences. E-commerce is moderating the impact. As consumers demand overnight and even one-hour delivery, air cargo can do what ocean transport cannot. The digital component of the bimodal supply chain becomes a significant factor for all members of the worldwide air cargo industry to avoid a severe imbalance between demand and supply. Collaboration involves sharing information, managing expectations, determining demand allocations and jointly monitoring performance goals, all in an environment of trust and transparency. The mobile technology is the requirement for growth of industry and need of the in-house structured training program. Some of our challenges like our high logistics cost in comparison to other developed and developing economies of the world could be addressed very seriously.” Air cargo is a trade facilitator that contributes to the global economic development and creates millions of jobs. The global economy depends on the ability to deliver high quality products at competitive prices to

COVER STORY

Binaifer Jehani, Director, Industry & Customised Research, CRISIL

We expect domestic air cargo to grow by six to eight per cent over the nex t f i ve years on account of expected grow th in dome s tic e conomy and most importantly increasing penetration of e-commerce. consumers worldwide. Air cargo transports over $6.4 trillion worth of goods, approximately 35 per cent of world trade by value. To make the path smooth and non fluctuating, Jain says it is important to come out with innovative ideas. He points out, “People want one touch point and transparency as far as the information on the transportation of their valuable is concerned right from the time of hand over to the time of delivery.

Industry has to come out with innovative ideas to deal with such scenario. Efforts are put in learning the market via survey and feedback. The social media contributes to reaching out to the market and industry must keep the IT updated with the fast moving changes. Digitalisation and environmental friendly products are the needs of today.” Businesses usually find a way to succeed in good and in demanding times. An industry player can ride out the difficult economic conditions and plan to leverage profitable times in a way that will sustain the business in less robust cycles. Thankfully, for every challenge, there is a solution that will help the air cargo industry to better position itself for growth while mitigating risk. “One focus would be to leverage on IT”, says Chew. “The right technology, developed specifically for the air cargo industry’s needs, enables the cargo department to access historical, near and real-time information for confident long-term planning and provides the agility needed to respond correctly to emerging conditions. An IT solution that extends its benefits across the entire organisation, streamlining compliance with regulatory demands and industry standards, staunching revenue leakage, enabling supply chain efficiency can position the industry for sustainable growth. Freight is a direct reflection of the health of the global economy and despite air freight being a smaller portion of the entire trade, it represents significant amount of countries’ total import and exports by value. Need of speedy deliveries has made air cargo services an essential link between the economies. Any fluctuation in global economy leads to shift in demand of air cargo across borders which definitely pose a challenge to air cargo transporters to

utilise their capacity and finding alternative markets for consumption is the way forward to efficiently use the capacities developed”, he further explained. Jehani expects domestic air cargo to increase at a faster pace than international air cargo over the next five years, which helps the industry to be less susceptible to global factors. She elaborates, “We expect domestic air cargo to grow by six to eight per cent over the next five years on account of expected growth in domestic economy and most importantly increasing penetration of ecommerce. In value terms, gems and jewellery, pharmaceutical products, organic chemicals and apparel and clothing accessories account for over half of the air cargo exports from the country. The demand for these commodities is highly sensitive to the global economic growth thereby leading to huge fluctuations in the air cargo movement.” “The air cargo industry works consistently on developing comprehensive strategies for pricing, effective revenue management and control on operating expenses, in order to sustain itself in the face of fluctuations in market trends. To be able to keep pace with business fluctuations and modal shifts that may arise due to global economic instability, we must collectively build our capabilities as an industry and adjust accordingly. The industry needs to retain a continued focus on growing e-freight penetration, ease of doing business, strict compliance to service level standards and infrastructure development that will help enhance capacity, revamp processes, shorten the dwell time and add more value to cargo shipping via air. Fast, reliable and transparent processing is vital for the air cargo industry to maintain its current position of high growth”, says Singh.

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COVER STORY

Salil Nair,

Senior Manager Key Accounts, Spicejet

With e-commerce, transparency has become the key and end user’s expectation have increased manifold.

The Indian Scene India has emerged as the second fastest growing air cargo market after the Middle East and is expected to grow at a compound annual rate of about seven per cent over the next five years. India would also be among the ten largest international freight markets by 2018 led by the United States supplying 10,054,000 tons and China with 5,639,000 tons, the International Air Transport Association’s (IATA) Industry Forecast 2014-2018 shows.

Observing the same, Juyal said, “In accordance with the various initiatives taken by the government in the next five years India’s ranking in ease of doing business is likely to reach at the level of 50 from existing 130 points among 189 countries. Make in India and implementation of GST would be a game-changer. Trucking industry is becoming more competitive to air transportation due to domestic demand volume, which is much more than export. Introducing Single Window system by Customs would definitely help in speedy growth of air cargo.” On similar lines, Kishore speaks, “Boosted by government initiatives such as “Make in India”, “Digital India” and “Skill India”, we foresee investments and industrial development in the near future. These investments and build up of industrial base will have a cascading effect on movement of goods which also augurs well for air cargo industry. However, this will also need investment in the logistics infrastructure space to meet the growth. With the focus to reduce dwell time as envisioned in National Civil Aviation Policy, we foresee government thrust to have smarter regulation, seamless 24x7 discharge of regulatory requirement by having all the regulators under one roof within airport logistics park.” On a positive note, Zengrong says, “We can foresee lots immense improvement in operational excellence along with restructuring of ports and airports. A new concept developed by the Government of India like Public Private Partnership ventures to improve infrastructure has already started taking place. In the current world security scenario, all terminal operators/ stakeholders are very serious about the security aspect and are upgrading security equipments like dual X-ray machines, ETD machines, sniffer dogs, auditing, better trained security staff, etc.”

28 CargoConnect - FOCUS AIR CARGO

V.V.Sridhar,

Regional Manager Cargo, Spicejet

Five major challenges would be space constraints at warehouses, shortage of handling equipments, screening machines, shortage of skilled manpower in ground handling as well as in security domain. Together We Dream, Together We Do With time-definite international transactions, production flexibility and speed characterising much of the new economy, it is nearly certain that air cargo will play an increasingly vital role in the global economy. No other means of transportation is better equipped to meet the economic realities of the new era, where global sourcing and selling, and just-in-time logistics, require that producers receive and ship smaller quantities more frequently, quickly and reliably over long distances. But, air cargo must modernise its processes, improve quality and reliability and widen the range of services offered. We anticipate huge changes in infrastructure and security domains which is definitely going to strengthen the air cargo industry. As e-commerce sales are expected to grow higher in the future, this will also have an impact on the air freight. With great enthusiasm, CARGOCONNECT waits to hear novel ideas and great initiatives from Paris which can solve all the current bottlenecks faced by the industry.

FEATURE

E - Business in Air Cargo Of late, the Indian air cargo industry has witnessed a transformation with e-business policies and strategies being introduced and implemented thus making business process easier and smoother. The implementation of electronic transactions, paperless processes and customised services, e-AWB system, EDI system, cargo applications, online cargo tracking system, Single Window Clearance System etc have helped industry grow exponentially and set its benchmark globally. Ritika Arora Bhola with the help of experts finds out the e-businesschallenges, solutions and benefits 30 CargoConnect - FOCUS AIR CARGO

FEATURE Sanjiv Edward, Head of Cargo Business, Delhi International Airport and Chairman, Board of Directors, TIACA

ndian air cargo industry has an important role to play in nation’s economy and trade because of its significant contribution for the economic prosperity and well-being of the country. According to the IATA Industry Forecast 2014-2018, India has emerged as the second fastest growing air cargo market after the Middle East and is expected to grow at a compound annual rate of about seven per cent over the next five years. India would also be among the ten largest international freight markets by 2018 led by the United States and China. It is estimated that ‘the second fastest-growing market, India, will experience a compound annual growth rate (CAGR) of 6.8 per cent to add 622,000 extra tons.’ Undoubtedly, Indian air cargo industry has come a long way and has successfully made its presence felt globally. Over the years, Indian air cargo industry has taken several important initiatives which have not only augmented the economic growth and improved working of air cargo industry but also there has been a significant contribution to the environment by adopting ‘Green Business or E-Business’ strategies. The implementation of electronic transactions, paperless processes and customised services, E- Air Way Bill (e-AWB) system, Electronic Data Exchange (EDI) system, cargo applications, online cargo tracking system, Single Window Clearance System etc have significantly brought a revolution in the industry. E-business offers many advantages like lower costs, high efficiency, reduced labour work, lower processing costs, more accurate information, higher productivity, tighter security and improved customer service. The ‘go green’ initiative in the air cargo

industry has improved the slow pace of the speed of clearance process. It has created the atmosphere of paperless transaction and less human interaction/intervention. Thanks to the International Airports Authority of India (IAAI) and now Airports Authority of India (AAI), for bringing computerisation in the air cargo processing. According to the facts, Stand Alone Mode

AAI in 1997 at all the four major Airports i.e. Delhi, Mumbai, Chennai and Kolkata simultaneously. This gave great relief to the cargo logistics industry by moving from the documentation regime to computerised one. Later on in 2003, Electronic Data Interchange (EDI) was introduced by the AAI and Customs. A web-based EDI was established by AAI for connecting all the trade

was introduced in 1987 at Chennai Airport Cargo Terminal followed at Kolkata Airport in 1988 and at Delhi Airport in 1989. This initiative did not stop here and the Integrated Cargo Management System (ICMS), an online system connecting all the activities of terminal processing was introduced by

partners i.e. airlines, freight forwarders and customs brokers with AAI EDI system for the flow of information and transaction between the Custodian (AAI) and the trade partners. These initiatives have brought great hopes to the trade and industry for a paperless, faster, reliable processing of EXIM trade at the

FOCUS AIR CARGO - CargoConnect 31

feature Amar More, Chief Executive Officer, Kale Logistics

India's performance has indeed been quite impressive. Indian Customs is already receiving over 99 per cent declarations electronically. In terms of e-AWB penetration as well as volume India's story is spectacular. We were always being looked at as a laggard in terms of digitisation but the fact of the matter is today, we are at sixth position globally in e-AWB volumes.

Observing the same, Sanjiv Edward, TIACA Chairman and Head, Cargo Business, Delhi International Ltd stresses, “Paperless processes and customised services are critical to air cargo industry’s future. One of the challenges to implement e-freight is the IT

actions and elaborates, “Whilst the world is still taking baby steps in removing paper from the air cargo supply chain; India’s performance has indeed been quite impressive. We have come a very long way in last four to five years. Indian Customs is already receiving over 99 per cent declarations electronically. In terms of e-AWB penetration as well as volume India’s story is spectacular. We were always being looked at as a laggard in terms of digitisation and dematerialisation but the fact of the matter is today, we are at sixth position globally in e-AWB volumes. Our e-AWB penetration is over 50 per cent in fact around three out of five air shipments fly under e-AWB. The numbers of FWB/FHL

platform, as many small freight forwarders do not have the IT platform to send e-AWBs. Also, though EDI is implemented 100 per cent, it is inadequately utilised. Efficient utilisation on airport level Cargo Community System would facilitate seamless flow of information between various stakeholders and eradicate the need for paper.” Agreeing with Edward, Amar More, Chief Executive Officer, Kale Logistics too stresses on the dire need for paperless trans-

messages have also increased dramatically and by some estimates it is between 70-80 per cent of the overall shipment volume. India, indeed, has created fantastic digital infrastructure for paperless operations over last few years.” On a positive note, More says, “The best part is we have not remained clung on to just the e-AWB number but there has been a widespread effort to reduce paper handling and improve efficiencies across the

gateway airports of the country. However, in spite of great jobs done by the whole air cargo community including customs, the custodians/cargo terminal operators and the trade partners, the trade is still facing many challenges due to which real benefits of the green initiatives are not being achieved.

E-Business Challenges in Air Cargo Sector

32 CargoConnect - FOCUS AIR CARGO

supply chain i.e. we are looking at the bigger e-freight picture than just the e-AWB clip. Several initiatives like electronic delivery orders, electronic certificate of origins, electronic consignment security declarations, electronic vehicle tokens, online terminal charges payments/receipts, customs single window systems with key PGA (participating government agencies) have taken off beautifully. India, indeed, is setting the pace and creating benchmarks for the world for air cargo supply chain digitisation.” No matter how much progress is happening, he feels that certain challenges still remain. He jots down few: 1. “The biggest challenge is the ‘Paper Philia’ mindset. For example, although most airports have removed the requirement of submitting air waybill copies whilst admitting cargo, some trade members still print three to four copies for cargo tendering, some airlines still want copies of paper to be printed and submitted even for e-AWB shipments. This discomfort with paperless operations has to go away and that will take some time. 2. Secondly, the legal framework has to evolve to dematerialise other supply chain documents. We have fantastic digital infrastructure at most airports wherein electronic data exchange can substitute the paper exchange but legal framework has to further evolve to completely dematerialise the documents. 3. Third, indeed there is a training and communication roadblock wherein the progress on digitization has to be effectively communicated across the vast trade community, we could do better there. Finally, we need to get all the stakeholders like the municipal corporations, security agencies, banks to

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feature K.S. Kunwar, Director General, ACFI

E-business initiatives will strengthen the confidence of the industry and the reputation at a global platform as the proposed 'go green' initiatives will reduce the high dwell time drastically and the processing will be much faster and accurate. It will also reduce the transaction cost of the trade and also the country's ranking in terms of 'ease of doing business'.

Paperless processes and customised services are critical to air cargo industry’s future. One of the challenges to implement e-freight is the IT platform, as many small freight forwarders do not have the IT platform to send e-AWBs. participate in the paperless operations to ensure that we achieve the desired results in green initiatives.” K.S. Kunwar, Director General, ACFI also highlights some of the important efreight challenges and says, whole air cargo community including Customs, Custodians/ Cargo Terminal Operators and trade partners, are facing many challenges due to which real benefits of the green initiatives the country is still far behind when we compare globally. The main challenges are as under;i) Timely up-gradation of Customs ICES System is not being done periodically due to which there is frequent break down and slowdown of customs system and causing immense problems to the entire trade i.e. delay in clearance, missing of flight connections, loss of man hours of the entire trade, business loss and increases the transaction cost. As per information customs system up-gradation is now postponed to December 2016 which was scheduled to August 2016 before. ii) Agreed messages transmitted between Customs and Custodians at all the airports have not been integrated yet in-spite of implementation since 2003 which defeats the very purpose implementation of EDI in

34 CargoConnect - FOCUS AIR CARGO

the EXIM trade processing at the gateway airports. Still manual processing and hardcopies are being insisted. Lots of age old procedures/steps which were visualised and agreed to have been eliminated are still happening and thus has increased the work load of the trade partners (following both manual and computerised processes as well).

iii) Some of the important functions are still not covered under EDI mode like transshipment and amendment processes. This takes time from two days to five days and blocking the passage of India to become a transshipment hub and growth of the air freight. iv) Customs authority is trying its best

to implement Single Window System but the other regulatory authorities like Drug Controller, FSSAI, WCCB, Plant and Animal Quarantine departments are not timely geared up in terms of placing their own hardware system at their respective offices at the cargo terminal to connect with Customs system. Online transmission of NOC message from these other regulatory authorities to Customs system is still far away and taking time and the clearance time of such special goods is very high. v) Inward entry of IGM of incoming flights is still being done manually feeding in the Customs system by airlines after the landing of flight and segregation of incoming cargo. This causes delay of 10-15 hours to importers/agencies for filing bills of entry and further processing of import cargo. The ab ove ch a l le nge s causes immense damages to the trade and country’s reputation, and with the dwell time of EXIM trade is very high which affects the country’s ranking in ease of doing business and LPI among world countries will improve further. Adding to it, Pankaj Shrivastava, Senior Consultant, Shrigal Supply Chain Solutions also shares some of the e-business challenges: • Safety and security of high value cargo

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FEATURE Bharat J Thakkar, Joint Managing Director, Zeus Air Services Pvt Ltd

We need seamless EDI processes for both modes. A roadmap from drawing board to time frame completion and cooperation from all stakeholders is required. Different time line to each airport is the biggest issue being faced today. •

Safe handling of cargo to prevent damages (Right MHE’s) • Security of high value cargo from landing to custom clearance to handover to the client • Maintain of speed of plane at ground means (handling, sorting, documentation and delivery at destination) • Technology: RFID Tag, Robust WMS, FMS & TMS, UHD cameras, Auto x-ray m/c • Temperature sensitivity: handling of temperature sensitive product by right infra-structure • Time sensitivity: Abolish delay in clearance by completing the documentation before landing the product at ground. • Lack of dedicated cargo flight for Tier II & Tier –III cities Logistics expert Bharat J Thakkar, Joint Managing Director, Zeus Air Services Pvt Ltd stresses that there should not be dual process for clearance of shipments arriving or departing. “We need seamless EDI processes for both modes. A roadmap from drawing board to time frame completion and cooperation from all stakeholders is required. Different time line to each airport is the biggest issue being faced today. It is my understanding that unless joint effort of all stakeholders are made visible including airport services that can have passenger bags with in short time on arrival space between forwarder and airline will be taken way by integrators,” whines Thakkar.

Way Out! If there are problems, there’s definitely a way out. Over the years, initiatives have been taken by the industry stakeholders to implement all possible solutions to ease the problem. No

36 CargoConnect - FOCUS AIR CARGO

doubt, Indian air cargo industry has come a long way when it comes to doing e-business; the industry has successfully made its presence felt globally. However, the industry has still not achieved the position it aims to and few challenges still prevail. Considering that, experts suggest some important solutions. Edward informs that IATA is leading the e-freight initiative launched in 2006, with an aim to take the paper out of air cargo to replace it with the exchange of electronic data and messages. To implement 100 per cent efreight in air cargo industry, a great effort is

required by regulators, carriers, freight forwarders, ground handlers, shippers, customs authorities and government worldwide. Therefore, Edward jots down few initiatives undertaken by DIAL so far to support e-initiatives at IGI Airport: • “This is the first e-freight compliant air-

port in India The airport launched mobile app for cargo • Integration of the FFM/FHL/FWB data with the Customs EDI data • Generation of Customs Segregation report based on online data • E-carting, electronic consignment detail submission and Ready for Carriage (RFC) process for domestic cargo • In addition to this, efforts are made along with Customs department for the earliest implementation of singlewindow clearance system in a bid to smoothen the process for obtaining the various approvals for clearance of cargo by customs.” More also puts down his viewpoint and says that if we are looking at a holistic solution, then there is no better alternative than creating common industry technology platforms that can ensure three things: 1. Data that is created by one participant can be reused by the next one in supply chain thus avoiding delays, duplicity and errors. 2. Authorised access can be provided to information for relevant participants thus eliminating need for paper based exchanges. 3. Provide end-to-end visibility of shipment to all stakeholders from a single trusted source thus reducing supply chain costs of inventory, etc.” Focusing on the Cargo Community Systems, More stresses that today in most places across the world there is a piecemeal approach to automation. For example, airlines have their portals, customs have their systems, airports have their portals but there is no reusability of data ensured since these are not interconnected systems. So, although •

FEATURE Pankaj Shrivastava, Sr. Consultant, Shrigal Supply Chain Solutions

Solutions can be achieved basically through technology and skilled manpower and simultaneously through big investment to achieve scale of operation and demand of e-commerce industry for medium value product along with high-end product. there may be EDI between forwarder and carrier; the same data can rarely be used for EDI between forwarder and customs. Hence, industry wide cargo community systems are the most effective solutions. He adds, “Secondly, in order to have digital information exchange, we also need to provide the SME logistics players with tools for digitisation i.e. in-house enterprise systems. In the good old days, these were bastions of large companies, as such systems needed large investments but this is not true anymore. Cloud based systems which can be availed at small monthly subscription fees or pay as you go model, create a level playing field and provide the SME trade members to jump on the digitisation bandwagon. Finally, you have to innovate to take the pain of digitisation out. We have an innovative offering wherein we convert pdf documents to industry standard EDI messages. Mobile apps are the future for enabling digitisation as well as bringing in visibility of shipment movement on our smartphones.” Highlighting Digital E-business, Thakkar also adds, “Digital e-business solutions must be aimed at aiding companies in their growth and helping them understand requirements offline and online. This spectrum of expertise should cover through php asp (active server page) and development with jsp (java server pages) with back-end as well. Solutions must deliver value at the same time should be cost-effective. E-commerce solutions must be collaborated with customer/tailor made solutions. E-business solutions will enable companies to reduce time and get closer to their customer faster by web connecting solutions like internet, e-business development internet and solution portal.” In line with others, Kunwar also provides few viable solutions and suggestions: 1. Customs System Hardware should be at

Digital e-business solutions must be aimed at aiding companies in their growth and helping them understand requirements offline and online. This spectrum of expertise should cover through php asp (active server page) and development with jsp (java server pages) with back-end as well. Solutions must deliver value at the same time should be cost-effective.

the highest level keeping in mind long term requirement, 15-20 years ahead planning. Up-gradation should be done as per schedule and requirement periodically. 2. Customs to keep the trade on board while designing the system or up-gradation of system processes and before implementation give a faire trial of the system keeping the trade along so that

the trade is well are of the processes and implementation. 3. Certain redundant processes which were valid in the manual system should be dispensed with while in the go green mode. 4. All the transaction, processing and documentation filing should be digitally signed and no hard copies should be asked. 5. All the stakeholders in the processing of EXIM trade should fully gear up to implement the processes electronically from their respective offices without any manual interference/interaction except on important cases. 6. All the processes including transshipment and amendment should be done electronically. 7. No printing of document hard copies from Customs System should be allowed. 8. At the cargo terminals rather it should be paperless. In case Customs processed documents are required for special purposes they should be allowed to take from the Customs system online. 9. Customs to integrate all the agreed transactions made with custodians in their system to avoid seamless processing and up-gradation of data in their system automatically. 10. Country to have a single air cargo community system for taking care the needs of the entire air cargo logistics trade including the government authorities to avoid multiple feeding of same information and single point contact.” On the other hand, Shrivastava says solutions can be achieved basically through technology and skilled manpower and simultaneously through big investment to achieve scale of operation and demand of e-commerce in-

FOCUS AIR CARGO - CargoConnect 37

feature

dustry for medium value product along with high-end product.

E-initiatives - Future Benefits E-initiatives are definitely going to benefit the Indian air cargo industry in a big way. Paperless transactions, lower costs, high efficiency, reduced labour work, lower processing costs, more accurate information, higher productivity, tighter security and improved customer service will bring a revolution in the industry. Edward also states that implementation of e-freight will bring lot of advantages to the industry such as: 1. Speed-up service 2. Contribute to environment by reducing paper consumption 3. Lower costs: eliminates paper handling and processing costs. 4. Unified Quality Management Standards 5. Electronic messaging for tracking real time status of freight 6. Improve reliability and accuracy: onetime electronic data entry at point of origin 7. Remove trade barriers: facilitate Advance Electronic Information (AEI) requirements for security purpose

38 CargoConnect - FOCUS AIR CARGO

E-Initiatives such as community platforms facilitate digital interactions between all cargo stakeholders’ viz. importer/exporters, forwarders, CHAs, carriers, customs, airport GHAs amongst others. Citing an example of airport community system, More articulates, “It is a single window EDI interaction which can aid in eliminating paperwork at the airport, facilitate faster processing of cargo, making information available to airport prior to cargo reaching the airport. This can help in enhancing security and planning processes thereby reducing dwell times at the airport. Such a platform helps comply with global regulatory and industry requirements such as e-trade (Govt. of India), Advanced Air Cargo Screening (ACAS) initiative of US CBP/TSA, PRECISE initiative of EU, PACT initiative of Canada, advanced security declaration requirements of countries that have signed up for WCO SAFE framework, e-AWB, e-CSD, e-freight initiatives. An airport community platform clearly can bring in more transparency and visibility in the supply chain to reduce overall transaction costs.” Observing the same Kunwar assures that these initiatives will strengthen the confidence of the trade and industry and the

reputation at global platform because the proposed go green initiatives will reduce the high dwell time drastically, processing will be much faster and accurate, the terminals will be able to handle much more cargo volumes what they handle at present, it will also reduce the transaction cost of the trade and finally country’s ranking in ease of doing business among the economies of the world will improve and bring growth in the movement of India’s international trade by air. Coming days are going to be days of speed and reliability, Shrivastava says cheerfully. On a positive note, Thakkar also says that here is no looking back, you change or lose out. Without E-business, air cargo industry will not move efficiently in line with our PM’s ‘Digital India Dream.’

Conclusion Definitely, now there’s no looking back for Indian air cargo industry. With the way things are moving in the right direction and industry stakeholders are welcoming e-business policies, the day isn’t far when PM’s dream of Digital India will come true. Private and government authorities are ready to take every possible step to overcome challenges prevailing in the e-business sector. Way to go for Indian Air Cargo Industry!

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FEATURE

Smart Air Cargo Hubs In The Making With the changing e-business landscape, the part played by the air cargo hub will be very crucial and act as a defining stage in the development of the logistics industry. To ensure that the next-generation of smart hubs has set its wheels rolling on the right spot, the optimum adoption and utilisation of technology needs to be looked into. Sana Husain talks about the prominent air cargo hubs in the world and how investments made in this sector will potentially reveal the interesting market moves in the near future

40 CargoConnect - FOCUS AIR CARGO

FEATURE

t the the IATA World Cargo Symposium, Berlin, Tony Tyler said that air cargo remains essential for the work of disaster relief and for delivering aid, but that is only a fraction of the real value air cargo brings to all of us, every day. Let’s consider, in almost ten years that this WCS has been meeting, over 450 million tonnes of freight have been carried by air and air cargo carries one third of global trade by value, around six trillion dollar worth each year. Modern life as we know it would simply be impossible without air freight. Lifesaving medicines, crucial electronic components, the latest consumer goods, the sell-out Christmas toys rushed to the shops, race horses, cultural treasures, jewelry, food, flowers - the list is almost endless. The industry carries all these goods because the global economy thrives on speed and connectivity – precisely the value air cargo offers above all else.

The Dominant Air Cargo Hubs of the World 1. Hong Kong Airport: The Hong Kong Airlines operates one of the world’s largest freighter fleets, with their cargo business contributing an estimated 25 per cent of the overall annual revenues. They have been instrumental in helping Hong Kong Airport develop into the leading international air cargo hub, achieving number one status since 2010. The terminal at the Hong Kong Airport, specially designed for cargo hub operations, provides an extensive range of customer services. The terminal can handle a throughput of 2.6 million tonnes per year. The company operates scheduled passenger and cargo services to 181 destinations in 41 countries worldwide and ranks in the top ten International Airline brands. To maintain its status as one of the leading cargo hubs in the world, future expansion of cargo operations was necessary for them. 2. The UK airport hub: “Adding a third runway to Heathrow Airport or extending existing runway capacity takes another tentative step towards becoming a reality. Of course, the Gatwick option remains ‘on the cards’ but for business that is the less sensible solution. Both however are far more practical than the ‘Boris Island’ pipe dream,

which has finally been consigned to oblivion. However, I believe that the future of the UK as a serious international hub requires more,” says Peter MacSwiney, Chairman, Agency Sector Management (ASM). Now, although a third runway is a start and the above a sound suggestion, another problem remains - UK needs to make up its mind about what it wants to be. Does the UK want to be an international hub? If the answer is ‘yes’, then realistically Heathrow needs five runways to make the UK a force to be reckoned with. That also means creating the required infrastructure, part of which includes doing something about the pollution around the M4, because if that’s not addressed, the EU won’t give authority for any great expansion. 3. Tehran as a cargo hub - or not! If it happens – it won’t be overnight and whether a new long-term cargo hub will appear there, still does not mean that Dubai’s or other Gulf states position in that respect would be endangered. However, the distance between THR and DXB is not far and the Iranian market will see a heavy influx of goods within the coming decade. This of course depends somewhat on whether the political situation remains steady over the next few years. Iran is determined to modernise aviation Geographically, Tehran could be seen as an ideal point for a future air freight hub. It can be assumed that the Iranian government would not like to see air cargo destined for new building planning and other industrial

projects, entering the country via other hubs within the region. The United Arab Emirates and Iran do not have good relations and there is no indication as to whether this might change in the future. According to recent reports, Iran Air plans to invest almost US$28 billion in a new aircraft fleet. This is a lot of money, a lot of aircrafts and many of which undoubtedly will be freighters. This investment mirrors those of Iran’s neighbors across the other end of the Gulf. This all will take time as although the trade embargo has been lifted, there are still many regulatory and financial hurdles to be settled before a real upswing in Iranian aviation will take hold. 4. Middle Eastern hub: Even amidst tough times, the Middle East air cargo market continues to surprise the world with the highest airfreight growth numbers compared with other regions. Overall decline in global air cargo market and excess capacity are major headwinds that the region is beginning to deal with. Aviation stakeholders continued to capitalise on the strategic location of airports in the Middle East. Significant capacity expansions positioned the region’s airports as aviation’s primary hubs for intercontinental travel. “Although the Middle East region continues to witness growth in air freight volumes when compared to other global regions, overall economic and growth conditions around the world are having an effect on trade-flows

FOCUS AIR CARGO - CargoConnect 41

FEATURE through the region. Air freight volumes in the region grew by 6.5 per cent year on year in the first half of 2016, a figure that is lower than the 14.3 per cent growth witnessed in the first half of 2015. In addition, air freight capacity globally has grown at a rate faster than demand compounding problems of overcapacity and driving down yields,” says Nabil Sultan, Emirates Divisional Senior Vice President Cargo. Primarily opened for cargo operations, Dubai World Central (DWC) is Dubai’s airport of the future. DWC handled 430,132 tonnes in the first half of 2016; a contraction of 2.9 per cent compared to the first half of 2015 when the airport handled 443,011 tonnes of freight. 5. Military deployment hub: Lawyers for the local Air Force Reserve base are finalising the base’s acquisition of the former air cargo building on the west side of the YoungstownWarren Regional Airport so that it can become a military deployment hub. Dan Dickten, Aviation Director at the Youngstown-Warren Regional Airport, says that he’s been told the acquisition should take place soon. The process is being handled by the Air Force Reserve Command headquarters. “We continue to work with the Western Reserve Port Authority and the Air Force Reserve Command headquarters for the best path forward,” Col. James Dignan, Commander of the base, states. “Ultimately, we trust that this local, state and federal partnership will help to solidify the future of the Youngstown Air Reserve Station for years to come,” he adds. The facility will provide a place where troops from all branches of the military from Northeast Ohio, western Pennsylvania, north western New York and nearby parts of West Virginia can deploy to their assignments, Dignan has said in the past.

Developments Shaping Up The Global Air Cargo Screening Systems Market is expected to grow at a CAGR of 5.43 per cent to reach $ X.XX billion by the year 2020. Security checks for cargo shipments were traditionally carried out physically, of which the canine method was a vital method. But, the air traffic has increased manifold in recent times, and along with the rise in air traffic, security threats have also risen. The

42 CargoConnect - FOCUS AIR CARGO

9/11 incident shook up the aviation industry, and since then improved security measures are being deployed to ensure safety along with efficiency. It has become mandatory to screen 100 per cent of the cargo in the United States, a trend which has been adopted by several major economies. Many systems in operation in the market are incapable of bulk screening, which is increasing the demand for the latest technology products. This has given a major boost to the Global Air Cargo Screening Systems Market. Important technologies in use currently include screening systems which are based on explosive trace

confidence has many experts feel optimistic about the balance of 2012. For largely domestic air cargo carrier Southwest Airlines, 2012 is far surpassing the past few years, with stable vertical markets such as life sciences, pharmaceuticals, and diagnostic specimens—as well as the more volatile electronics, retail, and automotive industries—all doing well. The airline is poised to introduce a GPS solution that enables shippers to track the location and condition of high-value, timecritical, or other important shipments. Air cargo users such as Quick International

detection (ETD), X-ray and explosive detection system (EDS) technologies. Developing markets are particularly a bright spot. As labor rates rise in coastal China, many manufacturers are shifting production to the country’s inland regions, Asian countries west of China, Africa, and South America, particularly Brazil. Interest is also growing in Russia. Airfreight carriers are responding with new routes and services to these developing locations. Lufthansa, for example, operates a cool pharmaceutical hub in India to accommodate pharma shippers. The outlook for domestic air cargo traffic is a mixed bag. North American carriers showed a 6.4 per cent drop in demand with a 2.9 per cent cut in capacity in April 2012, compared to April 2011, according to IATA. But, growing U.S. consumer and business

Courier, a Southwest customer, view GPS as adding even more visibility to a supply chain that has already benefitted from technology’s ability to transact and track shipments. For example, life sciences customers will be able to ensure that a package’s temperature and integrity are maintained. “We’ve always had to give up control at some point,” says Robert Mitzman,President and CEO of Quick International Courier. “Eventually, we will have visibility into a shipment’s entire trip.” In the expedited domestic market, shippers and forwarders have faced capacity constraints in the past year. “We’re holding our own; supply is meeting demand,” says Rob Lively, chief operating officer, Mach 1 Global Services. But issues such as rising fuel costs, shrinking capacity, increasing regulations, and customers accepting longer transit times

FEATURE in exchange for lower costs concern him. “The long-term direction of the domestic airfreight market is uncertain,” he adds.

Ban or Gain? Air cargo carriers and shippers are decrying the recent upholding of a night-time flight ban at Germany’s Frankfurt Airport. The ban prohibits flights between 11 p.m. and 5 a.m., and restricts flights just before and after that time period. The International Air Cargo Association (TIACA) predicts economic fallout, including reduced future investment by companies at the airport, job losses, increased trucking, and higher consumer prices for products such as perishables. The ban has cost Lufthansa more than $32 million in lost revenue and less-productive aircraft use, as well as schedule restructuring. “Our Chicago-to-Frankfurt flight used to depart at 2 a.m. or 3 a.m.; now it leaves 12 hours later,” says Michael Göntgens, Spokesman for air carrier Lufthansa Cargo AG, whose main hub is in Frankfurt. “That’s a less-attractive schedule for customers.” Air cargo carrier Cargolux, whose main hub in Luxembourg has long banned night flights, advocates tying the level of some landing fees to the noise emissions of the aircraft, as is the practice in Luxembourg and Amsterdam. Many airfreight industry experts question the ban’s validity. Brandon Fried, Executive Director of the Air Forwarders Association, notes that the ruling is based on vague scientific evidence, and cites the dramatically reduced noise levels emitted by today’s aircraft. They are 90 per cent—about 30 decibels—quieter than the first jets introduced nearly 40 years ago, according to TIACA.

Financing And Improving Land Access To U.S. Intermodal Cargo Hubs The efficiency of the U.S. freight transportation system is increasingly influenced by congestion along access routes to ports, airports, and other freight hubs. Such congestion increases the cost, reliability, and efficiency of the movement of goods throughout the transportation system, revealing a need for flexible strategies and policy initiatives to address cargo access problems and requirements. Cargo hubs, a relatively new concept in

transportation system development, are becoming more prevalent as carriers develop networks that concentrate the use of larger ships, higher capacity double-stack trains, dedicated jumbo cargo airplanes, and longer trucks or combination vehicles than previously used on certain high-volume routes. Increased use of higher capacity equipment allows carriers to streamline their service routes by focusing on a few hubs (e.g., international gateways, ports of entry, and inland intermodal transfer facilities) to reduce costs, improve service, and increase the efficiency of their operations. Although, the private-sector carriers are

increasing their emphasis on cargo hub development (e.g., FedEx in Memphis, UPS in Chicago, and Maersk/SeaLand in New York), institutional and funding obstacles make it increasingly difficult to improve and finance the required access to these cargo hubs. Typically, improved access to cargo hubs requires highway and/or rail improvements in developed urban areas where local priorities generally emphasise solving commuter bottlenecks, not improving cargo transfer facilities. In many cases, major investments are required, but principal beneficiaries are dispersed over a broad geographic area, not

Increased use of higher capacity equipment allows carriers to streamline their service routes by focusing on a few hubs to reduce costs, improve service, and increase the efficiency of their operations.

necessarily along municipal, metropolitan area, or state boundaries, nor concentrated around the project limits. If a major cargo hub depends on only one primary carrier, issues often are raised as to whether or not that private company should be fully responsible, given that the improvements may have many other secondary beneficiaries. Conversely, if many users are involved, it is often difficult to reach a consensus on solutions and their financing. The purpose of NCHRP Project 8-39, Financing and Improving Land Access to U.S. Intermodal Cargo Hubs, was to examine effective strategies for improving land access to cargo hub and intermodal facilities by making use of existing and emerging funding sources and by developing partnerships among government agencies, cargo hub operators and users and local communities.

FINDINGS Cargo hubs are increasing in importance as carriers and public authorities enlarge intermodal terminals and multi-modal complexes intended to: 1. Handle growing shares of the total cargo controlled by private networks and

FOCUS AIR CARGO - CargoConnect 43

FEATURE the nation’s transportation system 2. Increase the efficiency of cargo movements The nation’s transportation system faces a significant challenge in providing and/or maintaining adequate access facilities as new cargo hubs are developed and existing hubs expand. Arterial highways, local streets, and access facilities that connect these cargo hubs to Interstate and other major highway facilities—often in developed parts of metropolitan areas—require significant investments to replace obsolete infrastructure, separate truck from rail or automobile traffic, provide adequate capacity, or improve safety. In some cases, the most practical solutions involve non-highway investments (e.g., new rail connections, added rail capacity, new intermodal rail yards, and barge services). Special policy attention is needed to address this cargo hub access challenge. This need for policy attention is heightened by several major trends that drive the need for improvements and highlight the importance of further development, growth, and increased efficiency of cargo hubs. Currently, cargo hub access projects are being implemented primarily by making use of available highway user tax funding sources and/or by obtaining private, port, airport, or economic development program contributions.

What’s a Cargo Hub? For this research, a cargo hub is defined as any facility that provides cargo handling/ transfer facilities and services, and, in most cases, involving intermodal transfers. Depending on the volume level and markets served, cargo hubs can be categorised on the basis of their global, national, state, or regional significance. A major cargo hub of national significance is defined as a cargo complex or area that handles a significant volume or dollar value as a percentage of total national cargo volume or dollar value. For example, Memphis International Airport is the largest air cargo hub in the nation and the world, handling about 7.7 per cent of total U.S. air cargo volume. Within a private carrier network, a major hub is defined as a major transfer point or a consolidation point where the cargo handled represents a significant percentage of the

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carrier’s total volume. For example, approximately ten per cent of daily domestic package volume for UPS is handled through the Chicago Area Consolidation Hub (CACH), the largest package sort facility in the world. Major cargo hubs of state or regional significance are defined on the basis of the total volume handled by the area terminal(s). FHWA has established criteria to designate intermodal connectors to the National Highway System (NHS).

•

The Need For Special Attention To Cargo Hub Access

•

Special policy attention is needed to address the cargo hub access challenge, in light of the following major trends and other factors that drive the need for improvements and that highlight the importance of further development, growth, and improvement in the efficiency of cargo hub operations as follows: • Globalisation trends and growth in international trade are major drivers for economic development. The United States historically has had an advantage in the intermodal transportation efficiency and reliability in the global economy, and cargo hub access is an opportunity to maintain and improve the U.S. competitive advantage. • Industry practice and emphasis is to establish more and larger hubs, relying on spoke and feeder networks that can

•

take advantage of larger ships, vehicles, planes, and trains, so as to increase efficiencies, lower costs, and increase reliability, and thereby concentrate heavy truck traffic on the roads immediately next to the intermodal terminals or cargo hubs. State/local governments and port/airport authorities are usually interested in attracting major hub operations to their areas, because such complexes generate significant employment and attract additional nearby development. Most existing cargo hubs are in and around metropolitan areas, near established areas of the city and near passenger airport terminals, where there is often heavy automobile traffic and congestion, or near at-grade rail crossings, which generate unreasonable delays and difficult-to-resolve safety and security concerns for nearby residents and businesses, particularly as cargo hub traffic increases. Intermodal connections at major hubs are a major source of delays but may well be where enhancements may be possible to improve transit times and reliability (compared with the smaller opportunities that may be possible in the long-haul segments of the cargo movements). A quick response is needed to address changing and fast-growing market de-

FEATURE mands and multi-jurisdictional coordination involving public/private sectors, particularly when private carriers and shippers decide to build a new facility or significantly expand an existing facility.

Often the greatest hurdles lie in•

Coordination among several jurisdictions or public-sector agencies and private companies so as to reach a consensus on practical solutions; • Lack of concentration of many project beneficiaries in or near where the project is located; • Lack of support by local communities, which often do not understand that, even though heavy truck traffic may have some negative impacts, such traffic also has positive economic benefits, and access improvements actually can reduce some of the negative impacts; • The difficulties in obtaining financing, including – The need for flexibility, innovation, and creativity, to use available financing sources and mechanisms, particularly for large cargo hub access projects involving various modes, many jurisdictions, and private companies; – Legal constraints and delays associated with use of federal funds; – The fact that many cargo hub access improvements involve rail grade separations requiring private–public financing partnerships and approvals; – The lack of dedicated funding sources for cargo hub access projects and difficulties in meeting eligibility requirements for available public funding sources that were established with different primary objectives; and – The limited applicability of a project-specific user financing approach for most cargo hub access needs.

Monitoring the future for world’s top cargo airports The air cargo growth disappeared in the second half of 2015. A manufacturing slump in China, a spiraling debt crisis in Europe, falling fuel surcharges, and continued economic turmoil in South America have all contributed to yields shrinking in most regions around the world – even those areas where growth continues, such as Asia and the Middle East, the rate of growth has been shrinking. By

most accounts, the rest of 2015 had produced much of the same mediocre performance for the air cargo industry. Most of the world’s airports, how¬ever, are suffering through none of this gloom and doom. Memories of the boom times in the last half of 2014, when a surprisingly strong peak season and the U.S. West Coast port crisis sent traffic tonnage soaring, serve as reminders that booms and busts can come and go in quick succession. For airport cargo facilities, the operators know that speeding up ground-han¬dling systems, clearing back-

economy, there was a net increase in global demand for foreign goods and commodities in 2014. This helped awaken the air cargo market in 2014 after several years of low growth, ACI said. Most regions demonstrated weak year-over-year growth rates in air cargo volume in 2013, but experi¬enced stronger growth in 2014, when total volume increased by 4.7 per cent, according to ACI. Most airports in the top 20 main¬tained their positions from last year, with just a few moving up one or two spots. The airports that grew the fastest, on a percentage basis,

logs and reducing trans-shipment times are of paramount importance for forwarders, regardless of whether the economic indicators are rising or falling. Looking at the WATR tonnage fig¬ures for 2014, the latest data made available by ACI, the effects of the surge in cargo activity in the second half of 2014, driven partly by a stronger-than-expected peak season and the U.S. West Coast port crisis, is made evident in the charts for do-mestic, international and combined air cargo shipments. Almost across the board, with the anomalous exception of Dubai Inter¬national (DXB), which has fallen by 3.1 per cent over the previous year, cargo volumes among the top 20 largest cargo airports rose significantly. Despite the uneven recovery in the global

included Chicago O’Hare, with a 12.1 per cent surge to reach 1.38 million tonnes and a move from 20 to 19 on the top 20 list. Guangzhou’s year-to-year 11 per cent rise to 18 on the list, with 1.45 million tonnes, was also impressive. On the domestic freight chart, the ripples from China’s e-commerce boom become more evident, with sev¬en of the top 20 airports coming from Mainland China, including Beijing (3, 1.05 million tonnes), followed by Shanghai Pudong (5, 10.2 per cent rise, 767,864 tonnes).

The European 2016 slot A downbeat time, in 2015, for the European airfreight community, many logistics professionals are looking ahead for signs to offer hope for a brighter inbound year. The

FOCUS AIR CARGO - CargoConnect 45

feature

planned FedEx purchase of TNT seems to be the deal that has the most people in the industry talking about better times ahead. The only imminent cloud on the horizon for the new combo is where exactly FedEx/TNT will call home. The Netherlands will be the corporate headquarters in Europe, but then comes the trickier task of identifying where the main operational hub for the newlyweds will be located. TNT would obviously favor its current Belgian nerve center in Liège. According to Liège Airport, after TNT doubled the size of its operations there in 2007, it has become a major cargo presence accounting for more than half of the 400,000 tonnes that passed through the air hub between January and August of this year and employing 2,000 of the airport’s 3,500 jobs. FedEx said Liège would continue to be a “significant operation” once the deal goes through, but the integrator also has substantial operations in Cologne and Paris Charles de Gaulle. In 2009, FedEx had renovated the Paris-CDG facility with a US$158 million expansion, so it is not likely to leave that location anytime soon. But, questions remain about how long the combined companies can continue to operate two hubs that are just 275 kilometers apart. Over in Germany, the mood is a bit darker. Lufthansa Cargo continues to swallow its pride after not being allowed to build its planned mega-hub for cargo, the LCCneo, at Frankfurt Airport, due to budgetary restraints at the mother airline. Farther east, news comes that the opening date for the much-delayed new Berlin airport has been pushed back – again. Next year is shaping up to be a race against time between LH Cargo and Berlin to see which facility will not open first. Russia’s AirBridgeCargo Airlines will

46 CargoConnect - FOCUS AIR CARGO

TNT doubled the size of its operations there in 2007, it has become a major cargo presence accounting for more than half of the 400,000 tonnes that passed through the air hub between January and August of this year and employing 2,000 of the airport’s 3,500 jobs. likely continue to confound the industry as it is obviously in an expansionist mood. TIACA has decided that “innovation” is going to be the watchword of the biennial Air Cargo Forum to be held in Paris in October, the site of so many strike actions by

Air France workers over austerity cuts imposed by the French carrier. Let’s hope the industry comes together to find innovative ways to help European carriers solve labor problems such as these and puts the industry on a more profitable path for 2017.

Celebi talks ambition Celebi is developing a strategic investment and growth plan for the next five years. In cargo terms, the company will invest in advanced technologies, network capabilities and infrastructure that will allow customers to become more efficient and reliable across their total supply chain. “In today’s aviation industry with fluctuating demands, increased competition and changing supply chains we aim to create even more value for our customers and business partners. We are looking forward to the opening of the new airport and are already fully engaged to make this a great and innovative success for Turkey and Celebi,” explains Onno Boots, Chief Executive Officer. “In today’s world, supply chains are increasingly defined based on the end-user requirements. E-commerce, for instance, has penetrated almost all industries, affecting their supply chain designs and logistics approach. With the ‘internet of things’ and ‘3D printing’ this trend will accelerate to an even bigger supply chain transformation in the near future,” he elaborates. Celebi, he says, has big ambitions and is aiming to reap the rewards that Turkey’s cargo market will bring: “Istanbul and Turkey have been a social, cultural and economic transit point for centuries. Celebi wants to make it the cargo hub of the future, together with our industry partners.”

FEATURE

One vote for Brexit has left everyone perplexed, while looking at the future outside the European Union. The logistics industry is just as divided and confused as everybody else, but what is clear, is that nobody really planned for this eventuality. Sana Husain checks for the relative impact of â&#x20AC;&#x2DC;Brexit earthquakeâ&#x20AC;&#x2122; on the industry, while also seeking the wave of optimism

48 CargoConnect - FOCUS AIR CARGO

FEATURE The Brexit Scene Brexit simply refers to the exit of Britain from the European Union trade bloc. The word is borrowed from Grexit (which is used to refer to the possible exit of Greece from the EU). The recent talk of a pending Brexit has got many panicked over moving countries, loss of jobs, industries collapsing, debt crisis and so much more. On June 23, 2016, the British people voted in a national referendum on the future of British membership of the EU. On a turnout of 71.8 per cent, 52 per cent voted to leave the EU. More people in Britain supported Brexit than have ever voted for any British political party. The House of Commons debated a petition on September 6 seeking a second referendum. The debate concluded without a vote, and, the government made it clear that, in the words of Brexit Department minister Robin Walker, “this was a once in a generation vote and that decision must be respected.” A so-called “March for Europe” before the debate in London drew only 50,000 supporters. In addition to the political chaos that has already begun to commence as a result of Brexit, one of the areas of most concern is what it means for businesses. Supply chain, logistics and distribution sectors may be among those seeing and experiencing some of the most dramatic shifts and severe implications as the result of the departure. Most organisations across the globe are riddled with questions about how this decision is going to impact supply chain operations both in the short and long run.

“It’s not like the U.K. will stop trading with the EU and the U.S. or anyone else” Andrew Clarke, C.H. Robinson Chief Financial Officer

The problem is that this situation and its varying circumstances are clouded with confusion and uncertainty. Logistics and Supply Chain Disruptions The Wall Street Journal reported that shipping and logistics companies will be forced to deal with supply chain disruptions until updated trade agreements and regulations are established. “It’s not like the U.K. will stop trading with the EU and the U.S. or anyone else,” Andrew Clarke, Chief Financial Officer, C.H. Robinson said. In addition to a hampered f low of goods, many organisations in the sector are also expecting a surge in retail and manufacturing organisations looking for assistance in adjusting to the new trade reality. Amid growing concerns, though, there are still many trying to assure the business community that there is no need for panic

and that conditions are generally still, and will continue to be, stable. “There clearly is going to be a period of transition here where everyone is trying to figure out exactly how Brexit will take place,” C.H. Robinson Chief Financial Officer Andrew Clarke explained to The Wall Street Journal. “But it’s not like the U.K. will stop trading with the EU and the U.S. or anyone else.” Even so, it seems transportation and logistics businesses may already be experiencing some repercussions of U.K.’s vote to leave. According to the news source, last week, XPO Logistics Inc. shares dropped by almost 15 - 12 per cent of the firm’s total revenue is generated from the U.K. Furthermore, in New York, shares for both United Parcel Service Inc. and FedEx Corp. declined at rates of 2.2 per cent and 3.8 per cent, respectively. Some Europe-based logistics and cargo companies also saw a drop in shares. Retail Outlook A global e-commerce executive explained to the source that Brexit may also benefit retailers and logistics organisations in the U.K., at least in the short term, since a weakened pound means foreign buyers can purchase goods for less. From a retailer’s perspective, the source added, the U.K.’s vote to leave has made countries throughout the region more closely resemble America, Japan or China because it has complicated the shipping and distribution process. Down the line, retail supply chain operations may get

FOCUS AIR CARGO - CargoConnect 49

FEATURE even more complex, as distribution channels become restructured and more specific restrictions are set in place. Most organisations seem to be in agreement that, despite what Brexit could mean for future operations, developing new trade relationships and regulations will take a few years, at least, so there won’t be too much immediately affected. Lack of Response Planning and Preparedness Although talks of a possible U.K. departure were in the works prior to last week, the news came as a shock to many. Two weeks before the referendum, Logistics Manager issued a survey to logistics and supply chain professionals in the region that revealed over 80 per cent of respondents had no contingency plan in place in the event that Britain decided to leave the EU - which is surprising considering that more than half agreed that it leaving would affect business. Possible Implications Needless to say, Brexit will grossly impact countless businesses, among them being the logistics industry. EU membership allows free movement within the member states as stipulated in the trade agreements. Here are some of the implications of potential Brexit to the logistics services.

Redefining Partnership The EU is Britain’s largest trading partner. An average of 52 per cent of the country’s products finds good market within the unions members. As such, this partnership ensures that the European market is well supplied and the UK economy and businesses flourish. If the recent traffic at the channel ports is anything to go by, the sheer volume of imports and exports is astounding. British exit from the EU will mean that the existing trade agreements with other EU members will be renegotiated. This could mean higher trade tariffs come into play, which could in turn translate to lower movement across borders. Here is the story; when the export levels shrink, the demand for professional logistics services also go down. This domino effect’s last tumble is taken by the logistics industry.

50 CargoConnect - FOCUS AIR CARGO

Restricted Movements As a current EU member, British citizens enjoy the freedom of moving in and out of member states with minimum restrictions, disruptions and even fast tracking through EU lines at border controls. This allows every citizen to enjoy hassle free travel throughout the continent. With the possible Brexit, British citizens will no longer have that privilege. This means that they will have to go through the meticulously slow passport control processes, and the same goes for the products. This new process will definitely add to the delivery hours and increase administration work when it comes to navigating the borders that were once wide open. This means that the costs will go up, the delivery speed will increase and the agitated customers may want to pull out. This results in lower business for the logistics industry players.

Costs It’s possible that Brexit could increase operating costs for logistics companies. Trade tariffs within the EU would raise the bottom line for exporters – a financial hit they might try to pass on to third-party transport providers. Moreover, reduced freedom of movement around the continent will impair operating efficiency, and inevitably reduce hauliers’ margins. A further area of concern is fuel prices. The AA has suggested that a weakened pound as a result of Brexit could increase the cost of fuel in real terms, but it has also been quick to state its neutrality on the inout debate. As it happens, most experts agree that the biggest influences on fuel costs are the global oil price and the fuel duty imposed by the UK government. Neither of these will be directly affected by a vote to leave the EU.

Walk On The Beach “We have yet to see what the full political fallout will be in the U.K., but supply chain and logistics leaders should avoid immediate reactions, review scenario plans and consider new opportunities,” said Lisa Callinan, Research Director, Gartner. It is apparent that the decision to leave could cause businesses to rethink locating

‘Let us all hope that an open trading relationship is the mantra of the negotiation that is shortly to be upon us. Will Whitehorn FCILT, President, CILT and Deputy Chairman, Stagecoach’

‘This positive agenda for a new trading and operational world needs to be supported by clearly informed negotiations that understand the vision and the opportunity that can be taken from a new model. The Institute, through its Public Policy Committee and Forums, will be mobilising the great expertise within our ranks to inform and support policy development and negotiation from our position of unbiased objectivity.’ Professor Alan Braithwaite FCILT, Chairman, Freight and Logistics Policy Group, CILT and Chairman, LCP Consulting

‘Although there have been many efforts to unite European airspace, the Single European Sky has been a long time coming, and Brexit is unlikely to make much different to this glacial progress. On the other hand, airlines fly around Europe and between the EU and the USA with few commercial restrictions, and there is no reason why this should not continue.’ Paul Le Blond FCILT, Chair, Aviation Policy Group, CILT

‘We are in a hiatus, a period of nervousness where it is impossible to predict what exactly will happen. Steve Gooding FCILT, Vice-President, CILT, and Director, RAC Foundation

FEATURE

their corporate headquarters in the U.K. “However, where there is uncertainty, there is also opportunity,” Callinan added. “The U.K. could remain a strategic choice to locate EU headquarters, as some will contend that the U.K. will have more freedom to form trade agreements outside the EU while maintaining a relationship with the EU.” The referendum result will be a test of the agility and resilience of global supply chain models in the midst of a period of significant change and uncertainty for the EU. Nevertheless, modern global supply chains should have the built-in logistics capacity to navigate and exploit disruptions such as Brexit. • Prepare for Added Supply Chain Complexity • Logistics Leaders: Prepare for Change but Retain Perspective • Supply Chain Leaders: Be Ready for Increased Demand Variability

Actually, Not A Bad Farewell! The possibility of Brexit is very real, and the potential implications on trade are equally worrying. UK exclusion from the luxury of EU free trade agreement may result in increased tariffs which affect imports while reducing competitiveness of the UK product leading to low exports. This reduced trade affects the shipping and logistic companies such as MoveCorp which will have less business. While all the aforementioned implications can cause major decline in the demand for logistics services, they are without a doubt manageable. A quick reaction to some of these implications can keep the

businesses going despite the hardships. For example, companies can form strategic dual sourcing partnerships to ensure that business continues as usual, even if the sources change. If the tariffs make import to and export from UK hard and expensive, businesses can always explore other markets, which will keep the logistics companies in business. The UK membership and possible exit is among the top complex issues to tackle this year. With the nation already divided, the risks involved in case of an exit affect quite a number of companies, which in turn affects the demand for logistics services. Additionally, the tariff regime could spell doom for the strength of the pound, making imports even more expensive. It is not all doom, however, should Brexit happen. While the current challenges may go on for a few months, there are mitigative measures to take. Businesses may only face a rocky few months before they figure out alternative sources of raw products and markets, which means that the logistics industry will spring back on its feet in no time. Brexit will have no effect on the overwhelming majority of Britain’s international connections, memberships, and affiliations. It will remain a member – a veto-holding, Security Council member – of the United Nations. It will still be part of the IMF, the World Bank, and many other international organisations. It will have the opportunity, in the case of many technical institutions, to become a member in its own right, and to be a more effective advocate of its interests, and a more effective partner with the United States, than the EU ever was.

‘What is most worrying is the effect on the supply chain – the many businesses engaged in operating and expanding the rail system. These businesses have been attracted to invest in Britain because rail is first in class across Europe and because we have a stable political and regulatory environment. The risk is that the Brexit vote has changed that perception, damaging the rationale to be based in Britain, supplying the whole of the EU. The aim had been for rail to emulate the automotive and aerospace sectors and rebuild a competitive manufacturing and engineering capability.’ Jim Steer FCILT, Vice-President, CILT, and Founder and Director, Steer Davies Gleave ‘In the aftermath of the EU Referendum, it is more important than ever that the momentum behind investment in our urban and inter-urban transport networks is maintained. At this stage, some things are uncertain: there will be changes, which will bring challenges and risks. But these changes will also provide opportunities that we must benefit from. To this end, devolution is more important now, than ever.’ Jon Lamonte FCILT, Vice-President, CILT and CEO, Transport for Greater Manchester ‘The worst impact of the vote on our sector is at a strategic level. The uncertain future will undoubtedly mean a fog for the strategic pathway for many businesses. So, a lot could change and there is much to think about based on the vote of 37 per cent of the electorate, but I look forward with optimism.’

Emma Ross MILT, YP International, Deputy Convenor and board member, CILT, and General Manager (Fresh Distribution), Wm MorrisonSupermarkets plc

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VOL VI ISSUE VII JUNE 2015 `20

Inland Shipping:

In Search of the Lighthouse

Indian Logistics

PFT: A FILLIP TO COST EFFECTIVE LOGISTICS

Domestic Air Cargo Reaching for the Skies

In Changing Times

Budget 2016: Great Expectations

Spine 7 mm

Air Freight

Keeping it

Upcoming airports

Technology in air

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Market

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AEO: Securing the Supply Chain

Bonded Trucking: Rough Roads Ahead?

Pharma Logistics: One Mistake Can be Fatal

Freight Containerisation: Rising above Troubled Waters Cover Sep-2015.indd 1

Secure the Cargo: Pack it, Lash it

Pharma Warehousing: Smart Storage, Smarter Productivity 28-08-2015 19:43:30

Efficient Reefer Transportation: Key for Cold Chain Logistics

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High Logistics Cost: A Hindrance to India’s Growth Story

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IATA Cargo Agency Program Turns IATA-FIATA

With the changing market scenario and evolving industry needs, relationship between forwarders and airlines is also evolving. Nikhil Mishra provides you an inside view of the new IATA-FIATA Air Cargo Program and the benefits it caters to the air cargo industry

54 CargoConnect - FOCUS AIR CARGO

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he International Federation of Freight For wa rders A s s o c i at ion s (F I ATA) and the International Air Tra nspor t Associat ion (IATA) have unveiled reforms to the IATA Cargo Agency Programme. The amendments reflect the transformation of IATA cargo agents or freight forwarders from being ‘selling-agents’ for airlines into ‘purchasing customers,’ and aims to involve forwarders as equal partners in the decision making process. The International Air Transport Association (IATA) and the International Federation of Freight Forwarders Associations (FIATA) have signed an agreement to implement the IATA-FIATA Air Cargo Programme (IFACP) to replace the existing IATA Cargo Agency Programme, an initiative to control and improve professional relationships between airlines and their sales agents, the latter whose status has changed of late from sales operatives to clients. An agreement was signed by Tony Tyler, IATA’s Director General and CEO and Huxiang Zhao, President of FIATA, to implement the IATA-FIATA Air Cargo Program (IFACP). But in order to meet the evolving needs of air cargo industry and to showcase the change in relationships and transformed role of freight forwarders. IATA and FIATA have joined hands to give a new face to the current Cargo Agency Program in the form of a new modernised program – IATA-FIATA Air Cargo Program (IFACP). In the words of Alex Popovich, Senior Vice President, Financial and Distribution Services, IATA, “IATA and FIATA have reached an important agreement on a new jointly-managed air cargo program. This is the result of four years of hard work to modernise the relationship between freight forwarders and airlines. The IFACP also provides a framework to ensure that the industry standards are relevant, pragmatic and fit for purpose. These standards cover the endorsement of freight forwarders and more broadly the safe, secure and efficient transportation of air cargo shipments.” According to Tony Tyler, IATA’s Director General and CEO, the move reflects today’s market conditions. “This is the result of four years of hard work to modernise the relationship between freight forwarders and airlines,” he says.

The Governance Board will set strategic directions for the IFACP. IATA-FIATA Governance Board recognises the role played by forwarders in today’s marketplace as customers of the airlines, and increases consultations at all levels to achieve common air cargo goals, which are objectives for both FIATA and IATA.

Why IATA-FIATA? Over the years IATA Cargo Agency Program has enjoyed the status of carrying out successful global operations but the role of IATA Cargo Agents (freight forwarders) has changed nowadays. Today the vast majority of forwarders are purchasing customers of airlines and their business relationship is often as buyer and seller. To meet the evolving needs of the air cargo industry, IATA and FIATA joined forces to review, refine and reengineer the current Cargo Agency Program. The IFACP aims at providing a framework of industry standards that are relevant in line

with best practices and safety regulations and fit for purpose. The new agreement better reflects new business models and the buyer-seller relationship between forwarders and airlines. Rudi Sagel, Chairman, FIATA’s Airfreight Institute (AFI), added: “The Cargo Agency Program has since very long needed upgradation. I am really pleased that FIATA and IATA have joined forces to provide our industry with a new, modern program and a framework for operation that benefits both airlines and freight forwarders. IFACP will eliminate unnecessary administrative procedures and costs as well as free up valuable resources to tackle the complex challenges that today’s global trade presents. These include regulatory compliance, safety and security and the introduction of new technologies. This agreement paves the way for a more successful future for the fastest and most fascinating mode of international transport.” The IFACP will be governed by the IATA-FIATA Governance Board (IFGB). The Governance Board will set strategic directions for the IFACP. IATA-FIATA Governance Board recognises the role played by forwarders in today’s marketplace as cus-

FOCUS AIR CARGO - CargoConnect 55

feature tomers of the airlines, and increases consultations at all levels to achieve common air cargo goals, which are objectives for both FIATA and IATA. Future regional or national joint councils (as appropriate), will be established to provide feedback and to discuss and submit proposals to the IFGB. The new joint councils may propose to IFGB the minimum criteria of financial standing required for endorsement and retention of Freight Forwarders in their respective countries or regions. The joint governance board will be better equipped to promote efficiency and shared values, clarify supply chain liability and improved compliance with safety and security standards through a more coordinated and concerted industry approach

BENEFITS OF IFACP The new program will simplify the governance structure which in turn will reduce the administrative requirement to manage the program while given that more than 80 per cent of transactions are performed by Freight Forwarders acting as principals, the proposed IFACP better clarifies and validates the business through a buyer/seller relationship. IFACP aims to achieve key industry goals including e-cargo priorities and address properly the Principal-to-Principal relationship between Freight Forwarders

56 CargoConnect - FOCUS AIR CARGO

IFACP will eliminate unnecessary administrative procedures and costs as well as free up valuable resources to tackle the complex challenges that todayâ&#x20AC;&#x2122;s global trade presents. This agreement paves the way for a more successful future for the fastest and most fascinating mode of international transport.

and Airlines will help to diminish liability issues and reduce the risk of legal challenge going forward. Ready for carriage conditions, operational criteria (e.g. DGR training requirements) and best business practices (e.g. cargo standards) will be referenced in the IFACP Handbook helping to raise the Airline and Freight Forwarderâ&#x20AC;&#x2122;s awareness of their responsibilities and their compliance to agreed industry operational requirement. The IFACP aims at modernising the contractual relationship between airline and forwarder so that it reflects the true nature of their business rela-

tionship. The Cargo Agency Conference and the IATA/FIATA Consultative Council both recognize the need for collaborative supply chain approaches to develop industry standards and reduce supply chain complexity, cost, and overall transportation time. The program will promote and guide the participants on technical and operational capabilities to increase industry professionalism and interoperability success. Further it aims at clarifying the liability scenarios effective under the role performed by the forwarder. The current participants of the IATA Cargo Agency/Intermediary Program will be provided with a new IFACP Freight Forwarder Agreement. Upon execution and receipt of the completed agreement, the freight forwarder will then automati-

cally join the new program. Neither further formalities, nor assessment will be required at the time of transition to the new program.

CONCLUSION The IFACP surely aims at providing a completely new face to its governing strategies which in turn will mark a significant change in the air cargo industry by making it more forwarders friendly. IFACP will certainly eliminate unnecessary administrative procedures and costs as well as free up valuable resources to tackle the complex challenges that todayâ&#x20AC;&#x2122;s global trade presents.

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The Last Mile’s Lasting Impact

Consolidation: Trump Card for Growth of 3PLs

feature

Assuring Security With

RFID

Radio frequency identification (RFID) has been identified as one of the ten greatest contributory technologies of the 21st century. In the aviation industry, major airports/ airlines including US, Europe and Hong Kong have been using RFID in the area of baggage handling. Nicin Varghese examines how RFID turned to become a boom for air cargo security

he airline industry is one of the biggest and most happening industries in the world. It handles more than three billion passengers annually. In an airport, people and technology work together to complete every procedure every single day, to ensure that everything gets to the right place at the right time. However, to bring reality closer, people work at airports can and will make mistakes. Computer systems working behind the scene can and will also make errors. In the end, what we get is a chaotic airport that guarantees delay, misplaced baggage and people going to places where they are not supposed to go. We

58 CargoConnect - FOCUS AIR CARGO

can decrease human error by having better trained personnel but what about the computer errors? Well, this can also be solved. We can decrease the amount of computer error by utilising newer technologies that can function more efficiently that outdated ones. A major challenge to the industry, both in customer satisfaction and security, is tracking passenger baggage. The implementation of RFID in airports will definitely minimise the amount of technological error and is an effective solution for tracking passenger baggage. RFID is used to enhance the ability of baggage tracking, dispatching and conveyance so as to improve the management efficiency and customer satisfaction. The RFID

feature enabled system provides baggage handlers and airport operators with real time and historical track and trace data, giving an instant overview of the position of luggage in dollies and ULDs. This will improve passenger security and satisfaction as well as reducing flight delays caused by mishandled baggage.

What is RFID? How it Works? RFID systems can be considered as the successors of bar codes. They are several key differences between RFID and bar code: • Unlike bar codes, data are not gathered manually and, since companies have a great number of products, using RFID leads to a drastic reduction in workload. • When using a bar code, the operator has to scan the items one by one, while the RFID reader can automatically receive information from the tags. • RFID scanning can be done at greater distances than bar code. The scanning distance of RFID depends on the type of system as explained hereafter. • The constraints that apply to the positioning of the tags are much weaker than the constraints to satisfy when bar codes are concerned. Tagged objects can be read in different orientations at high speed. Orientation sensitivity depends on antenna design. • Tags can store more data than bar codes. • RFID readers can communicate with multiple tags. As a consequence, it is possible to capture the information concerning an entire shipment. RFID system consists of a reader or interrogator and a tag or transponder, which is a silicon chip connected to an antenna. A tag can be active or passive. Passive tags are cheap when compared to active ones. They are also low in storage capacity, which is just enough to store an item identification and a limited history. One advantage of the passive tags is their size, which is less than the size of a dime, which makes them easy to incorporate or attach to items. The read range of a passive tag cannot exceed five meters using stationary based readers at a frequency ranking from 860 Mhz to 930 Mhz, and 20 centimeters using hand held readers. Furthermore, any metal surface is an impassable barrier for reading a passive tag. Passive tags are most widely used in RFID applications and their life expectancy is much more than active tags. Active tags are totally energy independent from the reader. This allows them to communicate at distances of several kilometers. Furthermore, a metal surface is no longer an impassable barrier. Active tags can remain dormant until they exposed to the field of the reader. Moreover, they can constantly broadcast a signal. One drawback of these tags is that the quality of the embedded battery is difficult to evaluate, which results in a random lifetime of the tag. Another problem is the cost of active tags, this cost resulting mainly from the building battery. For the same reason, the size is quite important: the size of a playing card. When a tag passes through the field covered by a reader, the information stored in the tag is transmitted to the reader. RFID printer and encoder will be placed at the check-in counter. Similar to the conventional way of bags check-in, customers will check-in their bags and the attendant will print a label and wraps it around the bag handle. The only exception is that the label will not only have the customers’

FOCUS AIR CARGO - CargoConnect 59

feature information printed, but a unique ID number (UID) will also be encoded onto the RFID chip. Since each bag is identified by a ten digit IATA bag number, a database is needed. Information on the database will include the passengerâ&#x20AC;&#x2122;s name, flight number, and all cities on their ticketed itinerary. RFID readers are placed inside the baggage handling stations at each security check point. This way, the computer can associate the X-ray of each bag with the respective passengerâ&#x20AC;&#x2122;s information. Also, RFID readers are placed before splits in the conveyor belt. This way, each baggage can be sorted to the correct place. If readers do fail to read bags, manual handling of baggage can be performed with a mobile RFID reader.

at the check-in counter. In an overly simplified version, each baggage is then sent through a series of conveyor belts, through x-ray machines, then to more series of conveyor belts to a unit load device (ULD) in order to be transported to a plane, all automatically guided by computers connected to barcode scanners reading each tagged baggage. In reality, many factors will lead to a computer not being able to read the barcode. The baggage will then have to be diverted to a manual barcode reader, operated by humans, opening up the chance of the baggage being lost or misplaced. Barcodes need a direct line of sight between the tags and the readers and can be easily damaged, readers can only read one barcode per pass and have relatively poor accuracy, and the system

nology, it can improve the overall passenger service level by improving the tracking of mishandled baggage. The RFID technology tracks and records the baggage location when it is delivered to the wrong terminal or flight. This will make for more responsive and faster delivery of mishandled baggage. On top of these benefits, the new technology will also enhance the speed and accuracy of baggage handling, especially when dual flight transfer is required. Passengers will be better informed, and the baggage delivery status can be tracked easily. With the increasing transparency of the baggage handling process and a reduced baggage claims record, the RFID project will help the airline to build a strong brand image and set new standards of passenger service. In addition, the baggage tagging initiative is also expected to reduce the overall operating cost, beyond the savings associated with baggage claims. The overall transparency of information can help both airlines and airports to enhance and optimise the baggage handling process. In this way, RFID can be instrumental in helping airports and airlines deal with security issues.

Passenger Tracking: Another Milestone

Securing Baggage: Priority of RFID Though international airports such as McCarran International, Las Vegas, etc. provides baggage handling services for all the airlines, majority of the airports all over the world have to take care of the baggage themselves. Tracking baggage efficiently is a major component of the airline business today. If travelers keep losing their baggage with one airline, they will avoid traveling with them again. The conventional method of baggage handling is through a barcode tag attached to each piece of baggage usually on the handle

60 CargoConnect - FOCUS AIR CARGO

needs high maintenance. Fortunately, RFID technology can easily address these issues. RFID does not need a direct line of sight and are more durable than barcodes, readers have the ability to read multiple tags and have a relatively high accuracy, and the system has a lower maintenance than barcode systems. RFID is a relatively mature technology, especially in the airports, already been tested and implemented in many countries worldwide, and the technology has been standardised by the International Air Transport Association (IATA). By implementing the latest RFID tech-

Thousands of people gathers at an airport each day. The possibility to get lost in the crowd, for anyone, a child, an adult or even a terrorist is easy. Today, there is nothing in regards to passenger tracking other than video surveillance and security patrol. This method may be adequate for a small airport, but with a bigger airport, there are a lot of limitations. With thousands of cameras and even more people, it is almost impossible to find anyone anywhere inside an airport. RFID technology can solve this problem. RFID technology can tell where each passenger is at an airport as long as they carry an RFID tag. Technology for RFID passenger tracking is different from baggage tracking. Passengers will be given a RFID tag with a unique ID number in the tag. This number is to identify the passenger when compared with a database, which may contain the passengerâ&#x20AC;&#x2122;s name, age, gender and flight number. By tracking the location of passengers with the RFID cards, customised services can be offered to boost the customer satisfaction

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and create a positive impact on the sales turnover. Through the information on the RFID embedded card of the premium passengers, they can be greeted in the language they prefer, and they can be offered their favourite newspaper and drinks once they enter the premium passenger lounge. This RFID card can also be a tracking device to help the airline better understand its passengers’ profiles.

Problems Encountered with RFID Even though RFID is a boon for securing passenger baggage, it has got some major privacy concerns. Basically, RFID tags respond to any reader requirement assuming that the read range allows it, thus making possible clandestine tracking and inventorying. Indeed, tags broadcast only a fixed serial number, but this serial number can be combined with personal information in some circumstances. It is possible to use this information to design the customer profile. A tag may also contain information about the product to which it is attached. This may be of great interest to competitors since they could be informed about volumes sold and stock turnover rates. Thus, RFID technology that enhances supply chain visibility and, as a result, facilitates management and improves competitiveness may also play a negative role. RFID also enabled passports to become mandatory to enter some countries. Tags incorporated in these passports can be read clandestinely. They contain private information concerning the owner of the document and can be used by unauthorised persons.

62 CargoConnect - FOCUS AIR CARGO

RFID technology that enhances supply chain visibility and, as a result, facilitates management and improves competitiveness may also play a negative role. RFID also enabled passports became mandatory to enter some countries. Tags incorporated in these passports can be read clandestinely. However, problems encountered with privacy can be reduced by ‘tag killing’, where the tags will be deactivated immediately after use and ‘putting tags to sleep’, where tags are made temporarily inactive. Renaming tags is also a solution for overcoming privacy issues. It consists in changing tag identifiers over time. Distance measurement is another

solution, consists in introducing additional circuitry in tags so that they can achieve a rough measurement of the distance to the reader that tries to connect itself to the tag. Depending on the comparison of this distance with some predefined distances, the tag will deliver more or less information to the reader. A blocking scheme is also available. It consists of introducing a so-called privacy bit in the tags. If the value of this bit is zero, the scanning is limited to the identifier. Further information is delivered only if the privacy bit is equal to one.

Final Words The integration of baggage and passenger tracking proves to be far more effective than either system alone. It not only has both advantages of baggage and passenger tracking, but can match passenger with their bags when they get on the plane, and get out of the airport. Widespread adoption of radio chip tags in the air travel industry has not been easy to achieve, despite the efforts of the International Air Transport Association. It has set a deadline of summer 2018 when all 265 member airlines should be able to track and fully trace bags - not only on their own flights, but also when passengers connect to other carriers. However, airline bag tracking is difficult for a number of reasons. Updating to the latest technology requires infrastructure changes that can be expensive and disruptive. As most airports leave it to each airline to handle its own bag-checking system, the technology and procedures vary widely.

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Interview

Realising the vision to make Delhi Airport the Cargo Gateway of India... Serving TIACA as an elected Board Member since 2013 and heading the cargo business at the Delhi International Airport since 2007, Sanjiv Edward can be accredited for transforming Delhi International Airport into one of most modern, efficient and fastest growing airports in India. In an exclusive interview with Tariq Ahmed, he talks about the increase in cargo volumes, recent infrastructure development in cargo facilities and much more

64 CargoConnect - FOCUS AIR CARGO

How will you rate the success of the Cargo Strategy that was created and launched in an attempt to make Delhi Airport the ‘Cargo Gateway of India’? The key pillars of growth that we nurtured in realising our vision to make Delhi Airport as the Cargo Gateway of India are operational excellence, attractive business location and network development. We would rate our strategy very high as it has steered us to focus and successfully implement numerous projects such as modernisation and upgrading of cargo terminals, commencement of CUDCT operations, launch of AFS and RFS facilities in Tier II cities, IT and technology upgrades, launch of cargo mobile app, 24x7 customs operations, commodity focused initiatives, etc. In addition to this, we have made significant advancements in simplifying the document management processes and in a span of less than four to five years, most of the cargo handling processes are made paperless at IGI Airport. We have also integrated the FFM/FHL/FWB data with the Customs EDI data and generation of Customs segregation report and these transactions are now being done without using single paper document. We are also the first e-freight compliant airport in the country and also the first airport to have implemented domestic e-carting and ready for carriage (RFC) processes. In the backdrop of all such development initiatives, our cargo volumes have grown almost twofold in the last nine years and we are leading air cargo airport in the country, handling around 0.78 million tons per annum. Going forward, we remain focused and committed in improving further the operational efficiencies at cargo terminals by continuous technology upgrades, infrastructure advancements and process simplification.

Talking about the Airport Cargo Infrastructure Modernisation Project at Delhi Airport, it was a mega-project. With investments of over USD 125 million, it was huge in comparison to infrastructure development projects at other airports in India. What are the key targets that were achieved as part of the successful completion of this project? In sync with the developments of other key projects like Terminal 3 and new runway at IGI Airport, the project for modernisation and up-gradation of the cargo terminals was also taken up on priority. The major infrastructure development on cargo facilities involved: • Brownfield Cargo Terminal Expansion (CELEBI) enhancing the capacity to 703,000MT/year including dedicated Pharma Logistics Centre of 72,000MT annual capacity. This was made operational in year 2010. • Domestic Cargo Terminal Expansion including Common User Domestic Cargo Terminal made operational in year 2010. • New Greenfield Cargo Terminal (DCSC) with a capacity of 300,000 MT capacity made operational in the year 2012. With all the developments done so far, the cargo handling capacity at IGIA has been increased from 770,000MT/year in 2006-07 to 1,500,000MT/year now. Successful completion of this project has made IGI Airport, the largest cargo gateway across the country. It is now connected with over 60 international destinations, served by around 50 international carriers both passengers and freighters. As India’s busiest airport for air cargo, we handled over 0.78 million tons in the year 2015 -16. We aim to provide the “best value” services to airport users in the

most efficient and effective manner. This has been achieved by working closely with business partners and by undertaking numerous other initiatives designed to enhance and expand the airport’s capabilities.

The Air Cargo Industry is closely tied to the development of World Gross Domestic Product (GDP) due to its massive interdependence with global trade. How far do you agree to this statement? Aviation industry generates around USD 664 billion of GDP per year and by 2026, it is forecasted that this industry will contribute one trillion USD =to world GDP. As per IATA’s revised 2016 financial outlook, global air transport industry profits rose upwards to USD 39.4 billion and this year is expected to be the fifth consecutive year of improving aggregate industry profits. Needless to say that air transport facilitates world trade, help countries contribute to the global economy by increasing access to international markets and allow globalisation of production. This is also pertinent for implementing best international practices, including just-in-time inventory management and build to order production. Connectivity across continents also facilitates transport of high value electrical components and temperature sensitive pharma and perishable products such as vaccines, food and flowers over the world. It also contributes to improved productivity by encouraging investment and innovation; improving business operations and efficiency; and allowing companies to attract skilled manpower. Other economic benefits of air cargo industry include the jobs or economic activity that occur when companies or industries exist because air travel makes them possible, the intrinsic value that the speed and connectivity of air travel provides, or domestic tourism and trade. Thus, air transport is a major contributor to global economic prosperity as it is the only rapid worldwide transportation network, which makes it essential for global business and tourism to flourish. It definitely plays a vital role in facilitating economic growth, particularly in developing countries.

Discuss the modern day challenges faced by shippers using air freight for shipment of their goods and services. The key challenges faced by shippers include: • Longer dwell times and lack of standardised processes • Cumbersome procedures • Lack of enabling infrastructure such as warehousing, last mile connections • Lack of skilled manpower • Upward trend on operating cost because labour cost has been increasing in logistics sector • Change of supply chain model as macro-environment has been changing rapidly and the expectation from customer changes as well: >> Shorter supply chain cycle >> Smaller lot size and shorter inventory & production cycle >> Growth of e-business >> Demand for end to end solutions We are aware of the challenges in the industry; in DIAL we have tried to address all to facilitate the business growth.

FOCUS AIR CARGO - CargoConnect 65

Interview

“Aiming for mandatory carbon offsetting scheme by 2020” On the sidelines of IATA’s 72nd Annual General Meeting held in Dublin earlier this year, Michael Gill, Director - Aviation Environment Resolution, International Air Transport Association takes on market- based measures for aviation carbon emissions in order to ensure the economic and social benefits of safe, secure, efficient and sustainable global air transport, while sharing his perspective in an interview with Sana Husain. The IATA AGM has passed a resolution on a market-based measure for aviation carbon emissions. What does this resolution mean? First of all, we are so delighted that the IATA airlines have adopted this resolution at the AGM. What it means is a firm commitment that reaffirms the previous commitment of the airline industry to the adoption of a global market bases measure of aviation by ICAO and specifically a mandatory carbon offsetting scheme that would be implemented from 2020 and that’s going to help our industry meet its 2020 target of carbon neutral growth.

Why does the industry need carbon offsetting to achieve carbon-neutral growth? Well, the aviation industry has adopted a four pillar strategy to address its climate impact and it’s through the use of operational measures, better use of infrastructure and new technology that we are already achieving significant reductions in CO2 emissions. But, to understand the need for carbon

66 CargoConnect - FOCUS AIR CARGO

offsetting scheme is the fourth pillar of the strategy. It’s an economic measure that’ll allow us to achieve this carbon-neutral growth target of 2020, where the other three pillars have not quite got us to that target.

issue and so we are confident that in the ICAO assembly in September, governments again will show that willingness to achieve consensus and an agreement.

What sort of projects would be invested in for Are you confident that governments will agree to offset emissions? How can you guarantee that a carbon offsetting scheme? these are effective? This is a political process and in any political process there is no guarantee of the final outcome until the agreement is signed. But, we do see the real engagement from the government in this process. We see genuine attempts to find consensus on some very sensitive political issues and there is president for this in the recent past. Governments have shown willingness to come to agreement in the climate space area. In December, last year we had the Paris agreement on UNFCCC and just in February this year at ICAO, governments had agreed on a CO2 certification standard, for new aircrafts. So, the governments have shown willingness to come together in the recent past on this

One of the key aspects of the negotiations of ICAO is to ensure genuine reductions in CO2 emissions across the world. The rules will provide very clear guidance on the types of projects which will be approved and the criteria for which the units, the credits that airlines can purchase will be eligible. We are looking at a whole range of different projects, seeking an example from reforestation projects to cleaner energy projects in the developing states. The fundamental aspect for us really is to make sure that the rules provide for extremely strict criteria for approval of those projects and we are confident that governments are moving in that direction in their discussions.

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India Warehousing Handbook 2016

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Interview

Turkish Airlines Scales New Heights With Cargo Previously working at Turkish Airlines’ frequent flyer programme department, Miles & Smiles, Halit Anlatan was promoted to Cargo as Vice President (Marketing & Sales) after showing keenness in the logistics segment. In an interview with Smiti Suri, he talks about the crucial developments in Turkish Airlines and how they are tracing the globe, offering excellent services What’s the current size of Indian export pharma cargo dealt by Turkish Airlines? We export pharma from India, which includes both ambient and COL shipments from our online origins; BOM / HYD / DEL.

Considering the fact that small temperature excursions can do a huge damage to pharmaceutical products, how does Turkish Cargo ensure an uninterrupted and transparent cool chain to the end-users? Turkish Cargo’s cold chain logistics are prepared specifically in order to protect the contents and prevent them from deterioration. At Turkish Cargo, all transportation of medical supplies is executed in accordance with IATA regulations. We offer our customers various

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services including temperature-controlled active and passive systems. Our new cargo terminal comprises of over 3.000 m2 special storage area and 39 separate special cargo rooms which have high quality standards, including climate-controlled storage units designated for drug, vaccine and medical supply shipments. All of our temperaturecontrolled storage units are monitored for temperature and humidity levels via an online tracking system. Temperature-sensitive cargos are stored safely in storage units which are suited for the type of cargo and are stored under the temperature range requested by the sender. Medical supply cargos containing medicines in our temperature-controlled storage units are then transported from storage and emplaned before take-off. Additionally,

there are active temperature controlled containers, which are time and temperature sensitive and as such are kept at a designated temperature from the acceptance stage until their arrival to their destination. We provide some special equipment such as single use thermal covers and dry ice. To prevent our cargos from being exposed to often changing temperatures during flights, we use active temperature controlled containers. We’ve made agreements with international container suppliers, namely, Envirotainer and CSafe. In containers, which contain highly sensitive cargos such as medical supplies, vaccine, insulin and cancer drugs, we manage to maintain the desired temperatures even during long-distance flights. With our data entry log, we also report to our customers about the changes in temperature of their

shipments during the whole transportation process. Thanks to our agreements we’ve made with international container suppliers, we can realise shipments between -20°C and +25°C at the demanded circumstance and capacity.

The new route of Turkish Airlines from Istanbul has proved beneficial for Cambodia’s fashion sector by providing direct export link to European markets. Does the airline plan to target other sectors in a similar fashion? How do you perceive the Indian market for the same? We are using air cargo as a freighter, so we don’t have any problem. We began to associate with Hyderabad in freight. But, we are not able to use wide body aircrafts or belly cargo for Indian airports because of the slots problem in such airports. If we achieve this, I think we will have a chance to get more airports and also more flights to Delhi, Mumbai, Bangalore or Hyderabad and even Ahmedabad, given that there are so many airports in India.

we can mostly focus on and how we can go further with these destinations and the capacity. For example, we are talking about the work lease options, and in parallel, we are working on our IT system. Then, we are collecting customers’ needs from the system and are seeing that we need extra capacities for the destinations. After that, we apply for the work lease options. So, this enables us towards a more concrete structure and timetable on the freighters’ schedule. Hence, we are able to serve the customers better. We are constructing NDU portal on our site. What this portal can do is, for example, you can apply as a customer with your username and password and look at your tonnage, revenue, prices, and almost everything. Probably, we will realise this until the end of September. In October, it’ll be open to the customers. I don’t think we could have achieved this with the old IT system we had used.

For the Indian market, what’s your marketing strategy in the coming years? We focus on pharmaceutical products and express business and capture the market in European destinations. This year, we have changed much of the freight, wide bodies; putting together Europe’s cargo from countries like Germany, Netherlands, and also a shuttle to Paris.

Can you please talk about your specialised cargo segments? We have around 3,700 sq. metres area of warehouse, containing around 40 rooms for us. We have segregated our products according to varying temperature requirements like perishables, flowers, fishes, etc. that we are carrying from Africa to Europe. We don’t mix these products as their different smells might get mixed up. So, we split these products in these rooms.

Born in the East, how has been the journey What is your USP? of Turkish Airlines to the West, in pursuit of CIV(Commercial Individual Value) is our USP, which is suitable for pharma compaWhat’s your take on the much debated Open Sky American cargo? Policy proposal by Indian government? If given This year is a good year for us. We opened nies. We had observed a range of different

With our data entry log, we also report to our customers about the changes in temperature of their shipments during the whole transportation process. Thanks to our agreements we’ve made with international container suppliers, we can realize shipments between -20°C and +25°C at the demanded circumstance and capacity. an opportunity, would you like to turn the odds in your favour? We appreciate any liberalisation effort, to increase our traffic volume.

Expected to solve IT based problems and improve processes in all areas of operation, COMIS project won Turkish Cargo the ‘Logistics Project of the Year’. How and when was COMIS conceptualised? Has it attracted any potential investments by other organisations in air cargo logistics industry? After implementing the new IT system, we had the chance to see which destinations

two new destinations in Miami and Atlanta. Also, we put the freighter to Atlanta this year, New York, and also Chicago. So, we want to be with these three freighter destinations and also wide body capacities. We’ll increase the capacity in Los Angeles in the beginning of August. Also, we will resume 777 flights to New York. So, there are chances for us to increase the tonnages with these new capacities. We hope the development won’t be a problem in the USA. Besides, we are looking for opportunities in the best businesses. For example, our charter-based businesses are there in Houston, Miami, or South America.

customers visiting our warehouses from the beginning of the year to the end of the last month, especially shippers and forwarders like DHL, Roche, Novartis and Pfizer. As you know, it’s not easy for a pharma company using each warehouse, the way it is suitable for us. Every time they come to us, they see the warehouses and the processes. If they need any processes to be changed, we do it for them. This is what makes us unique.

How has the Indian market evolved for the group till date? Compared to last year, the tonnages are promising for us. We will focus on mainly the special products, like pharma and express.

What do you see as the vital global trends in the air cargo industry, considering the last financial year? There are good things related to e-airway bills. When last used, it was 30 per cent. I hope they are targeting at least 50 per cent more than the previous one, in 2017 and 2018. Also, from the cargo aspect, security is very important. So, hopefully that will be more convenient around the world in 2017 and 2018.

FOCUS AIR CARGO - CargoConnect 69

Interview

Çelebi Delhi Cargo Terminal Management India Pvt Ltd has been successfully operating the Brownfield cargo terminal since last seven years with a huge clientele base of around 47 international carriers. Ramesh Mamidala, CEO, Çelebi Delhi Cargo Terminal Management India Pvt Ltd, in an interview with Tariq Ahmed, paints a fair picture of how they are able to pull off such huge capacities of cargo safely and securely on an everyday routine

Service standards that speak for itself… Çelebi has made investments worth INR 300 crore to bring in visible changes to the airport infrastructure scenario at the Çelebi Delhi Cargo Terminal. How has this benefitted the air cargo industry? Since the Brownfield project was handed over to Çelebi back in 2009, investments have been made in terms of rebuilding the cargo terminal, which was previously handled by DIAL and AAI. Investments were made to modernise systems, handling equipments, trained staffs, etc. Compared to other service standards in Delhi Cargo Terminal that we had back in 2009, there is so much of change. The cargo terminal back then struggled to manage 300 to 350 trucks a day on the export side. We have expanded the capacity twofold since 2009. When we completed construction in 2012, the capacity which was around 350,000 tons doubled to around 775,000 tons. We improved service standards for both import and export. The service standards of Çelebi Cargo Terminal is one of the best in the country and is at par with any cargo terminal in the world, be it Dubai, Singapore or Hong Kong. Basically, these are the benefits that we have provided for the air cargo industry.

Most of the shippers in India that have experienced service standards know that we are a class apart when it comes to quality. Çelebi is also known for world class equipments which one generally does not come across with other players in this segment, even with the multinational ones operating from India. We are also known for best management and best handling equipments.

What innovative solutions have been provided by Çelebi Delhi Cargo Terminal to its clients that give them an edge over services offered by other operators in this domain? The world class equipments definitely provide an edge to our clients. But more importantly, a couple of process changes that we did give them the service advantages in the country. For example, if you are a freight forwarder and bring in cargo for export, you can offload your truck and be done in an instant as you will not be required to wait for Customs inspection to store the cargo inside the warehouse. This is a massive advantage for exporters as their trucks and staffs are not engaged in the airport, and this is very unique as it does not happen anywhere in the country. We are in fact asking AAI and Customs to make this a standard process across all the airports and this is exactly how international terminals work worldwide.

Being a global conglomerate with more than 55 years of experience, what sets Çelebi apart from other players in the industry? Security of air cargo has always been a major con-

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cern for airports and terminal operator. How have Çelebi Delhi Cargo Terminal been able to securely manage such voluminous amount of cargo on a regular basis? What are the highlights of the Çelebi Security Management System? A combination of factors has made this possible. Firstly, the way the Çelebi Delhi Cargo Terminal is designed ensures that nothing alien enters the terminal. Both imports and exports go through stringent security checks. There are security guards and CISF personnel guarding the terminal area. These are standards that are maintained worldwide, so we have implemented the same here. Around 400 CCTV cameras, 24X7 control room and almost 400 security guards on the floor; all these factors work together to make these terminal extremely secure.

The capacity of the warehouse has been increased by 90 per cent since the time of its takeover. What has led Çelebi to achieve this breakthrough? This can be attributed to the redesigning of the terminal and the redesigning of the processes. We designed our equipments around the redesigned processes. For instance, storage racks of three levels have been redesigned to six levels, thus doubling the capacity. Other process optimisation reduced the cargo movement within the terminal, which also had a huge effect in increasing the capacity of the warehouse.

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Interview

“We prioritise on reducing complexity and improving efficiency” Bringing fresh ideas on the table, Delex (Delivery Express) works on providing well-developed, often customised and innovative logistics solutions and services laced with technology to the Indian industry. Srinivas Sattiraju, Chief Executive Officer at Delex, in an interview with Sana Husain, elaborates about the highly optimised and customised logistics solutions, while also discussing the boost in domestic cargo volumes in the near future

Delex is in a position to provide highly optimised and customised logistics solutions to suit every client’s requirement with high focus on efficiency. Would you like to elaborate on that, mainly focusing on customisation? The prime requirement of any organisation these days is to ensure that their products reach customers on time and in a cost and process efficient way. To do this, an efficient and effective strategy is important. Keeping service levels and standards at their highest, regardless of the issues that one might face in implementing the strategy is highly important for the overall health of the organisation. Again, one set of strategy solutions may not suit all, as each of our clients have different set of requirements and demands. Here, arises the need for highly customised solutions. Delex, from the start has always focused on this aspect and built its businesses with its clients. In our approach towards building customised solutions, Delex majorly prioritises on (a) less complex processes, by breaking down complex processes into easily achievable, small and separate steps, (b) focusing on doing only those things that are a must to maintain the required KPI target levels and (c) at all times maintain or improve cost efficiency.

What’s your take on the rising demand for project logistics in India? What are the driving factors behind it? The growth of demand for project logistics is directly associated with the growth and development of manufacturing sector, especially the large scale industries that require heavy plant and machinery movements,

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erection and installation. Till recently, except for some core industries like cement, fertiliser, etc., commodity sectors, the growth of manufacturing in other sectors is largely limited to the end of the line assembly services where heavy industrial equipment and installation requirements are low. However, with the latest government push for “Make In India”, where even the defense sector manufacturing is being opened for private sector investments, I foresee multifold increase in demand for project logistics. It may not be an exaggeration to say the growth could be as high as 100 per cent.

A report earlier states that Visakhapatnam International Airport has chalked out plans to boost domestic cargo and will hopefully see full-scale operations by the end of February 2016. Now, that the airport operator, Airports Authority of India (AAI) has finalised a private entity, Delex Cargo India, to operate the cargo terminal, moves have resumed international cargo operations. At present, do you really perceive a boost and in which segment/s? Delex has won this tender and started operations w.e.f Sep 1, 2015. In the first year, we focused mainly on developing the processes, getting various players used to the new Common User Terminal procedures, besides targeting some market development activity that has seen some growth in volumes. However, we foresee that in the next threefour years, this airport shall see a double-digit growth in the domestic cargo volumes, as a direct result of increased industrial activity and business development in the region. If you look at the newly formed Andhra Pradesh that is carved out, after the formation of Telangana, there are no major international airports or industrial centres, unlike Hyderabad. The new AP state government is actively working on various models of development and trying to bring in industries in to cities like Visakhapatnam, VijayawadaGuntur, Tirupati, etc., places and it is only natural that this industrial growth fuels the growth of air cargo, both domestic and international. I personally assess that this growth would come from horticulture, animal husbandry, pharma, automobile parts and seafood sectors, for which the new AP state is highly conducive.

What’s your take on the air cargo operations in the future? Are you planning to focus on any specific airline in relation to one of your future goals? Air cargo plays a crucial role in today’s world. Whether it’s through cargo carried in the holds of passenger aircraft or chartered cargo flights linking together businesses across the landscape, the air cargo industry serves as a key engine of economic growth and development. It is always a trend that is witnessed across major economies of the world that whenever a given economy witnesses a steady growth rate, that country also experiences equally good volume growth in the air cargo industry. The same thing is being reflected in the Indian economy too. With a stable majority government in power and good growth projections of above six per cent year on year, it is only natural that Air Cargo Industry of India is also poised to experience good growth. Air cargo throughput volume forecast, considering the current volumes, is expected to grow by eight to ten times than the present level in the next ten years. A few major factors contributing to such growth in air cargo movements are the rising levels of disposable income in the hands of people, network expansion of domestic air carriers, time sensitive product deliveries of healthcare, pharmaceuticals, electronic and automobile industries. At Delex, our domestic distribution and delivery model had always set this vision where we will be carrier neutral in building and providing domestic, air cargo-based distribution solutions to our clients. However, we did develop significant capabilities in handling large carrier space selling capabilities, representing them as exclusive GSAs in the market and we did carry out these GSA activities continuously, close to four years from 2012 till 2016 before discontinuing our last arrangement in July 2016. We shall continue to pursue such opportunities in future too, but that shall be an independent business model, that is not interlinked with other ongoing business lines of Delex.

How far do you think does “networking” contribute to the success of logistics industry? ‘Networking’ alone does not guarantee success. At best, it can open a few doors or help firm

Eventual success in logistics industry will only come on the account of ‘networking’ that is based on various measurable parameters like ‘cost’, ‘time’, ‘reliability’ and ‘coverage provided’. up an initial engagement and win business. Eventual success in logistics industry will only come on the account of ‘networking’ that is based on various measurable parameters like ‘cost’, ‘time’, ‘reliability’, ‘coverage provided’, etc., factors. ‘Networking’ if implemented in its true sense, where companies network together to share their resources, developing additional channels in different parts of the country where they are not present, will have a positive impact on the success of various stakeholders involved.

3PL logistics market in India is expected to be worth US$ 301.89 billion by 2020, finds a new research report launched by NOVONOUS. Indian logistics market is expected to grow at a CAGR of 12.17 per cent by 2020 driven by the growth in the manufacturing, retail, FMCG and e-commerce sectors. How do you plan to explore the potential of Delex in the future? Starting from the early 2016, Delex is working on re-aligning the company’s growth strategy and future charter, that shall be centered around a few key business lines around 3PL warehousing, domestic distribution by surface, rail, air and intra-city last mile delivery, making significant investments into technologies, that enable smooth information flow and more efficient business process management, etc., Besides investments into technologies and other operational resources, Delex is also in the process of creating colocated express logistics centers across six to eight major cities of India, wherein we shall create co-located facilities that shall have space for warehousing as well as access to our surface an air distribution network. We feel that this physical infrastructure, backed by the integrated IT platform, would be a major differentiator for Delex in the post-GST logistics scenario in the domestic scene.

FOCUS AIR CARGO - CargoConnect 73

OUTLOOK

A sneak-peek into the immediate future

trend of accelerating growth and Strongest forecasted growth is foreseen on confidence in air cargo has marked trade lanes between Asia and the Middle 2014, with the worldwide level of East, within the Middle East region, and freight tonne kilometers (FTKs) between North and South America. Growth increasing by 4.7 per cent com in mature markets of the North Atlantic and pared to 2013. This follows three within Europe is expected to be well below years of decline and sideways drift in freight the global average. Domestic operations, esvolumes, and confirms the tentative signs of recovery noted in late 2013. Both the industry and IATA expect solid, but not spectacular, growth in air cargo volumes over the next five years. The IATAâ&#x20AC;&#x2122;s forecast is for an compound annual growth rate average growth rate of 4.1 per cent per annum. It is the emerging markets and regions pecially in China and in the US, will also that are expected to deliver the fastest form a large portion of future traffic. growth in air cargo volumes over the next At the top end of the air cargo market, five years, led by the Middle East and Africa. integrators are taking an increasing share

of the business. Accelerating urbanisation will increase the number of mega-cities and the emergence of mega-regions; regions anchored with one to three mega-cities of ten million people or more. These mega-regions, mainly in Asia, create agglomeration of GDP and population and are expected to drive world trade. Aviation will be critical to support the movement of people and goods between mega-cities and regions. However, the industry should strengthen its value proposition and competitiveness to ensure alternative modes do not capture the growth. Despite these impressive numbers, the air cargo industry faces significant challenges. Aircraft utilisation rates have started to show solid improvement, but air cargo load factors are hovering around a weak rate of 45 per cent. Looking ahead, aircraft utilisation rates will continue to be challenged by ever increasing capacity.

380

million people

Eastern Europe & CIS

million people

3500

Middle East

million people

500

Asia - Pacific

million people

Latin America

Growing population and consumption will drive trade and air freight 74 CargoConnect - FOCUS AIR CARGO

430

million people Africa