ITM Editor Joseph Clarke speaks with Etihad Cargo’s Head of Revenue Management & Network Planning, Leonard Rodrigues, to explore the pros and cons to air freight, along with the future it holds
90% of what we consume is transported to us by sea. But why not air? While this high percentage must be for obvious reasons – namely the multiple benefits to shipping that outweigh those to air freight – flying goods across our seas and oceans does also have advantages and therefore deserves our attention and consideration.
When businesses are looking to export their goods, they should choose the method of transport of their goods based by carefully considering several factors. Firstly, the type of goods to be transported needs to be reviewed as this will largely determine whether a land-sea or a land-air combination is preferable. Next, the speed of delivery also plays a vital role, as some goods need to be delivered much faster than others, especially if they are perishable ones like foods and flowers. The volume of goods might also depict whether shipping or air freight is better, as well as the distance to final destination.
According to a report by World Bank titled ‘Air Freight: A Market Study with Implications for Landlocked Countries’, “Demand for air freight exports has been limited from landlocked developing countries because most enterprises ship small volumes of low value goods. The main exports shipped by air from developing countries are cut flowers, electronic parts, and fresh fruits and vegetables. Imports by air typically include high value consumer goods.”
That said, the World Bank recognises “the use of air freight can create competitive advantages. For example, producers will agree to shorter order times if shipments possibly experiencing delays in production or cargo clearance can be shipped by air. Similarly, manufacturers of garments, electronics and other goods will compete for larger orders by shipping the large initial order using ocean freight and then using air freight to replenish inventories if demand is greater than expected.”
Maersk have also recognised the great potential and increasing demand for air freight, writing in an article titled ‘The sky’s the limit, how air freight can bring more agility to your global supply chain’, that “with revenues from transporting goods by air having risen by 27.2% in 2020 – at an all-time high of USD 128.2 billion – demand for air freight is continuing to grow, and projections show that the volume of goods being transported by air will more than double by 2035.” Not wanting to let this huge opportunity fly by, Maersk have recently announced that they intend to acquire the global freight forwarding company Senator International, which has an operational air freight platform of own-controlled capacity and operations across Europe, Asia, South Africa and America.
According to Maersk, “for companies transporting goods globally, harnessing the power of air freight can help them become more agile and resilient, slotting seamlessly into their existing supply chain infrastructure and supporting their sustainable growth” and this is driven by the interconnection of four main benefits to customers. The four “key benefits”, as identified by Maersk, are speed, security and control, flexibility and reliability, and reactivity; and are claimed to be “propelled by the principal advantage of speed, providing customers with the all-important tools to meet complex challenges, streamline their logistics strategies and bring efficiency and greater visibility to their supply chains.” Of course, it comes as no surprise, given their global positioning as one of the market leaders when it comes to shipping and logistics, that Maersk will now be taking more to the skies.
So, with experts like The World Bank and Maersk making a strong case for the growing future of air freight, is the sky the limit?
I had the opportunity to speak with Leonard Rodrigues, Head of Revenue Management & Network Planning at Etihad Cargo, to discuss the current situation regarding air freight, as well explore the benefits and challenges, and what the future holds for this industry.
Leanard, why do you think that the vast majority of the world’s goods are transported via sea as opposed to by air?
The driving force behind the majority of the world’s goods being transported by sea rather than air is cost. Firstly, transporting cargo via sea costs less than transporting it by air. According to the World Bank, air freight is 12-16 times more expensive than sea freight. The higher costs mean that air freight is usually reserved for high-value, temperature-sensitive or time-sensitive cargo. This means that, according to IATA, air cargo represents 35% of global trade by value, but less than 1% of trade by volume.
The cost extends beyond financial implications to the environmental cost of air freight. Data suggests an aircraft creates 44 times more CO2 than a ship when carrying the same freight over the same difference. Add to that, ocean vessels can carry huge amounts of cargo, and this makes sea freight the preferred option for transporting bulk commodities, raw materials and large quantities of consumer goods that are not time or temperature sensitive.
What are the advantages of air freight?
The main advantage of air freight is the speed at which cargo can be delivered to its destination, which makes it the preferred option for express and time-sensitive commodities. Air freight also offers higher reliability as a result of more frequent and predictable schedules. In 2022, Etihad Cargo achieved 82.7 percent on-time performance (OTP) for freighter departures and 82 percent OTP for freighter arrivals. The recorded OTP for both freighter departures and arrivals in H1 2023 exceeds our 80 percent OTP target. Surpassing this target demonstrates Etihad Cargo’s commitment to providing reliable, high-quality cargo solutions with minimal disruption to the carrier’s partners and customers.
Air freight also offers a more secure transportation solution. Airports have thorough security measures that mitigate the risks of restricted commodities and theft. In terms of cargo security, cargo is secured from acceptance through to loading at the departure point and on arrival, from unloading through to cargo delivery to the consignee. Measures we have put in place include ensuring the proper chain of custody is maintained and recorded in compliance with local and regulatory security requirements; screening all cargo and providing proof of screening for all shipments; protecting consignments through various security monitoring solutions, which include 24/7 CCTV surveillance and guarding; and performing random checks to ensure compliance with the established procedures.
Why do you think that businesses should consider using air freight solutions over shipping?
Air freight offers a solution that supports a just-in-time (JIT) inventory strategy. Businesses using a JIT model seek to be efficient, save cost and time and improve competitiveness, which requires a stable and predictable global supply chain. Air freight offers an answer to this, helping these businesses receive the required stock to meet demand without having to hold large amounts of inventory.
Companies that deal in perishable commodities, such as fresh produce, temperature-sensitive goods, such as pharmaceuticals and high-value cargo also favour air cargo over sea freight. Etihad Cargo has continuously invested in and added features to our product range, including PharmaLife for the shipment of pharmaceuticals, healthcare or life sciences commodities and FreshForward for the shipment of perishable fresh produce, including fresh fruits, vegetables, dairy, fish, meat and flowers.
Ensuring that perishables are delivered in the best condition possible through processes that provide visibility and offer robust traceability and tracking is key. Through the adoption and utilisation of digital traceability, clients can validate the authenticity of product safety, provenance and health or sustainability claims. Cutting-edge technologies and processes ensure the data collected, tracked and shared gives unrivalled visibility across every stage of perishable cargo’s journey.
What are the challenges/risks to air freight?
One of the challenges facing air cargo operators is cost, and finding the balance between softened yields and providing air freight solutions that meet customer expectations and capacity requirements. There is a direct correlation between the market softening and the current rate of demand for air cargo capacity. That said, the erosion of yields has now slowed, and Etihad Cargo is continuously exploring ways to enhance capabilities, develop and utilise new technology and invest in our infrastructure to ensure we can meet cargo capacity demand, add value to our customers and remain the air cargo partner of choice.
Other challenges relate to the types of cargo being transported, including temperature-sensitive and dangerous goods. Carriers are tasked with ensuring this cargo reaches its final destination within tight schedules and in perfect condition while ensuring the safety of the cargo, the aircraft and the people involved in the transportation process.
How are these risks mitigated?
To mitigate the risks associated with air freight, we recommend taking a multi-pronged approach to safety, reliability and quality, using technology and data to further enhance the customer experience and overcome the challenges of air freight. While investing in technology can help to achieve operational efficiencies, which benefits customers and partners, by developing and launching digital solutions that positively impact the customer journey we can also ensure that operations are safe and secure.
AI solutions to assist ground handlers in calculating cargo dimensions more efficiently are also vital. AI-powered solutions boost efficiency, digitise and standardise cargo handling across networks, and enhance service levels for customers and partners. We are utilising AI to enhance the quality of our operations through the integration of the third dimension to generate ULD-level load plans so we can maximise the cargo carried on our flights and significantly reduce the risk of needing to offload a shipment due to overbooking or having to load cargo in a way not anticipated. Using computer vision, we can anticipate how cargo will be assembled and loaded onto the aircraft using cargo dimensions and volume data.
Etihad Cargo is also using AI to set bid pricing, or dynamic pricing, which enables carriers to continuously adjust pricing based on a variety of criteria, including real-time changes in supply and demand, fuel prices, seasonality and labour market conditions. Dynamic pricing optimises the price between supply and demand at a network level, with contextual data benefiting both the buyer and the seller. Buyers benefit from more affordable pricing, and sellers benefit from selling at the right price point.
To promote the safety of employees, passengers, and the aircraft itself, we have implemented some crucial initiatives to ensure that all cargo being transported by Etihad Cargo meets the safety requirements as stipulated by IATA and local and regulatory authorities. These initiatives include the use of checklists to ensure safety compliance during acceptance of specific cargo products; package integrity checks during acceptance, build-up, loading and unloading; and an easy-to-access safety reporting tool with a simple interface to ensure that everyone can make a report. Once reports are received, they are analysed to identify trends and areas where improvements can be made to the relevant working instructions.
Robust compliance monitoring programmes are also critical to the transportation of dangerous goods. With these programmes, we can check our processes, measure our level of compliance, and implement additional measures as required. This works together with our safety management reporting programme, which facilitates the development of proactive safety measures, campaigns and promotions.
Finally, what are your predictions for the future of the air freight industry?
The air cargo sector is a niche one and is driven by a small number of people and organisations all heading in the same direction and affecting change through a shared enthusiasm and commitment to improving our industry. The past couple of years have shown how quickly the air cargo sector can adapt, so the future looks to be an exciting time for the industry. I hope we will see continued collaboration and an appetite for embracing new technology to enhance the sector’s capabilities.
Etihad Cargo committed to a digitalisation journey back in 2018, and in the years that have followed, we have very much tried to lead the change rather than react. In addition to launching AI solutions that will transform air freight operations, we have also partnered with Rotate to co-develop Sales Cockpit, a tool to help us identify solutions for our customers, ensuring our sales representatives and commercial teams have access to updated data analysis that will provide a real-time snapshot of the carrier’s business on particular routes, with individual customers and by product, enabling us to offer tailored solutions to each customer. Our hope is that the greater air cargo community will also take a proactive approach to developing and launching new solutions that will shape the future of tomorrow’s supply chains.
Read more news and exclusive features in our latest issue here.