Air cargo represents more than 35% of global trade by value and freight shipments account for, on average, 9% of airline revenue. Air freight companies face many of the same challenges as the logistics industry as a whole—some of which, like communication and tracking capabilities, can be solved with digital platforms. But digitization is not a panacea. Here are some of the challenges facing the industry that can’t be solved by digital tools.
The cost of fuel is a major concern for airlines, and increases in fuel prices have a major impact on route profitability. Digital tools can help airlines get better information about cargo weight, analyze fuel price trends and optimize fuel usage, but they do not help manage the volatility of the fuel market or the generally increasing fuel costs.
According to the February 2018 IATA Cargo Strategy report, trade protectionism is another major threat to the entire logistics industry, including air shippers. Digital tools can help shippers make on-the-fly changes if the tariff regime changes suddenly and can also help custom clearance specialists keep track of shifting import and export laws. However, they can’t help if overall trade volume decreases because of trade protectionism and don’t, on a long-term basis, allow shippers to avoid import or export taxes.
Safety and Security Concerns
Security and safety in the air cargo industry refer to both concerns about malicious attacks as well as the challenges inherent in managing hazardous materials. Digital tools can help air freight providers ensure that all personnel follow security best practices and safety protocols when transporting lithium batteries and other potentially hazardous cargo, as well as navigate security requirements in both the origin and destination country. However, digital tools do not remove the inherent risk when moving cargo that can spontaneously combust in-flight or in operating an aircraft in the age of terrorism and cyber attacks.
Another major challenge in the air freight industry is over-capacity—planes are not traveling full. This extra capacity is largely due to growth in passenger air travel and increased use of wide-belly passenger aircraft. Digital tools can help optimize cargo loads and make it easier to find back-haul cargo, but they can’t increase demand for global air freight to match capacity.
For traditional air freight carriers, digitalization is also the root cause of some challenges—specifically, disruptions to the air cargo landscape by technology companies like Amazon and from new platforms that allow for crowd-shipping and other novel shipping techniques.
Given the major challenges facing the industry, it makes sense to use digital tools to make as much of the air freight journey as smooth as possible. Using digital tools to solve or mitigate the challenges they are best suited for frees up institutional time to focus on developing strategies to address all the potential threats that require creative problem-solving—and have the potential to give the carrier a market advantage.