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Jan.9, 2017

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112 THE JOURNAL OF COMMERCE JANUARY 9.2017 2017 ANNUAL REVIEW & OUTLOOK AIR CARGO EXECUTIVE COMMENTARY INTERNATIONAL AIR TRANSPORT ASSOCIATION GLYN HUGHES Global Head of Cargo AIR CARGO PREDICTIONS are usu- ally peppered with words like "slump, "ailing,, "crisis," and "depressed." And phrases like "world trade stagnation," "global economic slowdown," and "increasing trade protectionist policies" are held over the industry's head as a harbinger of continuing austerity. Yet, as we have seen with the sur - prising results of the Brexit vote and the recent US presidential election, predictions are not always accurate. In keeping with the recent upset trend, I propose a slightly more optimistic outlook for the industry in 2017. We can't deny that world trade has flat-lined. But e-commerce is growing rapidly at a rate of more than 23 per- cent projected for 2016 (excluding travel, restaurant and event sales). The world has become a global cyberstore. Customers are ordering more and more online. They want their purchases as soon as possible, and are willing to pay extra for the privilege of rapid deliv - ery. As the fastest mode of transport for consumable products, this creates significant opportunities for air cargo in the coming year. The growth in the transport of time- and temperature-sensitive goods such as pharmaceuticals likewise pro - vides grounds for optimism. In 2014, this market was estimated to be worth $8.36 billion, and it is projected to rise to $10.28 billion by 2018. Global value chain trade presents another opening for air cargo. Today half of global trade takes place within a GVC. The trade integration model enables individual countries to special - ize in narrowly defined tasks such as component production, then through a complex network of trade links combine them to produce high-value, time-critical finished goods such as computers or mobile phones, which are usually transported by air. The opportunities for air cargo in 2017 are present, but to exploit them. the industry needs to adapt to the fast- paced, global world of e-commerce and shifting customer demands. That means developing quality-focused, customer-centric supply chain solu - tions that provide enhanced shipping quality and service, greater visibility through the supply chain and better predictability. THE INTERNATIONAL AIR CARGO ASSOCIATION DOUG BRITTIN Secretary General 2017 WILL BE another year of change, challenge and evolution. Our industry will be affected on both the regulatory and business fronts. From a regulatory perspective, while we have made great progress in developing collaborative security programs, accomplished by industry associations working closely together both locally and globally, we likely will see more attention to enforcement of programs. We've already seen the beginnings of this movement. As we have distributed more responsibility for security across the entire supply chain, the compliance arms of the regulatory bodies will be expanding their inspec - tion activities and regimes, to ensure what has been designed and regulated is fully implemented and in effect. From a business perspective, I believe we will see more consolidation in all areas. The global economy still presents a challenge to growth, which will likely not help in the struggle to keep yields moving along any general growth curve. We may especially see this have an affect among ground handlers, who have difficulty over - coming fixed costs to provide the desired service, with current handling rates in the market. It's not likely that many carriers will return to in-house services, so this certainly is a difficult equation to solve. Overall, I am optimistic that these are not insurmountable issues, and I am confident that our industry will rise to the challenge as it always has. UNITED CARGO JAN KREMS President AS WE LOOK back on 2016 and con- sider what may impact air cargo in the coming year, two issues come imme- diately to mind: the rapid growth of e-commerce and the ongoing impor- tance of safety. No one doubts that e-commerce will continue to expand in 2017, with more shipments to a larger area of the globe. This phenomenon is the biggest opportunity and the biggest challenge for the air cargo industry. Forwarders and carriers have the route structure, capacity, operations, and expertise to link manufacturing centers and consumers in both established and developing regions. But we need to use our assets in new ways to better con - nect, and connect with, e-commerce shippers and customers. The fundamental question is: How can we combine our current strengths with creative uses of technology and process enhancements to generate effective, and cost-competitive, trans - portation solutions for e-commerce? Because collaboration is key to our logistics model, making the most of this opportunity will require higher levels of innovation, flexibility and cooperation among shippers, forward - ers, and carriers. The rise of e-commerce is also a factor in the enduring priority of safety. Lithium batteries shipments have generated the most attention, and, with increasingly beneficial and complex mobile phones and computers, we will continue to bear the responsibility for transporting lithium batteries safely. But batteries are only the most con - spicuous of many safety concerns. The contribution of packaging and ULDs to safety, not just the commodities in them, has also become a focus. A welcome development in this area is the Federal Aviation Admin - istration requirement that all air carriers develop and implement a safety management system. While every responsible industry stakeholder oper- ates from a safety mindset, with SMS, all carriers will share the same positive safety culture, and will proactively manage risk in a consistent way — mak- ing our supply chains even safer. n As we have seen with the surprising results of the Brexit vote and the recent US presidential election, predictions are not always accurate. We need to use our assets in new ways to better connect, and connect with, e-commerce shippers and customers. From a business perspective, I believe we will see more consolidation in all areas.

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