BDP Trendwatch

March 09, 2011 - GLOBAL air cargo security should be approached from a supply chain angle, whereby security of shipments are ensured from the time of packing to loading. This would be more effective than the prevailing practice in many countries of doing 100 per cent scanning of air cargo.

This was the key thrust of a message delivered by Giovanni Bisignani, director general of the International Air Transport Association (Iata), in his speech to 900 air cargo executives gathered in Istanbul, Turkey, for the Iata World Cargo Symposium.

'The industry must be secure with effective measures that facilitate the speed needed to support global commerce,' he said. 'Air cargo security must be based on a combination of three measures - supply chain security, scanning technology and better use of e-freight data.'

He warned that many governments and politicians were working on new air cargo security regimes that could dramatically impact the business: 'Iata is taking the lead to engage governments with industry knowledge and expertise. Our message to governments is clear. We must resist the knee-jerk call for 100 per cent cargo screening.'

Iata believes its Secure Freight initiative will help industry and governments to work together on investment, processes, technology and risk assessment to implement a supply chain approach.

Secure Freight is being piloted successfully in Malaysia and the target is for two other countries, including the United Arab Emirates, to implement it in 2011.

Other initiatives include pushing for the introduction of new certified screening equipment to supplement the supply chain security process and handle oversize items and pallets if required. Iata is also advocating more effective risk assessments through better use of electronic information.

On this front, a key Iata initiative is its e-freight programme, which was started in 2004 with the aim of saving the industry US$4.9 billion by converting over 20 shipping documents per item, and the processes behind them, to electronic format. But although the e-freight network covers 80 per cent of cargo volumes, actual e-freight penetration currently stands at just 2.8 per cent.

Iata has targeted 10 per cent e-freight volumes on capable trade lanes by the end of 2011, and 100 per cent by 2015.

'It's a no-brainer,' said Mr Bisignani. 'If we can be faster, cheaper, more accurate and secure we need to get it done.'

Last week, Iata revised its 2011 financial outlook, projecting the global aviation industry would earn US$8.6 billion this year, a 46 per cent drop from 2010's US$16 billion.

The new figures are based on Iata's raised assumption of the oil price at US$96 per barrel, from the previously forecast US$84. Taking into account hedging levels of about 50 per cent of anticipated consumption, this added US$10 billion to the industry's fuel bill.

Air cargo is expected to account for US$68 billion of the industry's US$594 billion revenues. Volumes are expected to grow by 6.1 per cent, while cargo yields are expected to grow by 1.9 per cent in 2011. But along with the rest of the aviation business, air cargo is expected to be hit hard by rising fuel costs.

Iata data shows that the low point in unit costs has passed, with fuel and labour cost pressures picking up in many countries. In addition, capacity could start becoming an issue as twin-aisle aircraft deliveries rise by 8 per cent this year.

On the positive side, Iata noted that there is still plenty of momentum in demand growth, with leading indicators such as the purchasing managers index, rising to new highs early this year. World trade expanded at a strong rate of 10 per cent at the end of last year, while cash-rich corporates are in good shape and consumer confidence is picking up in the US.

VEN SREENIVASAN