IATA: Better SC practices to battle cargo crisis

Global - The International Air Transport Association (IATA) made a call for industry players to beef up their cargo supply chains in order to battle the dismal air cargo industry.

The air cargo industry is in a tailspin, with the latest reported figures showing a further contraction in January by 23.2% from December's alarming 22.6% on-year drop. As some 35% of the value of goods traded internationally by air, air cargo has long been the barometer of global economic health.

"The continued decline in cargo markets is a clear sign that we have not yet seen the bottom of this economic crisis," said Giovanni Bisignani, IATA's director general and CEO in an address to 700 industry experts at IATA's World Cargo Symposium in Bangkok.

In December last year, the IATA forecast 2009 freight volumes to drop 5%. Combined with a decrease in yields, this would result in a 9% drop in freight revenues to US$54 billion. "Unfortunately, the shocking fall in demand that followed is making these projections look optimistic," said Bisignani.

The chief highlighted three priorities for the cargo supply chain as key areas to beef up in order to tackle the downturn.

The first was a call for a strong industry effort to convince the US that its plans to implement 100% cargo screening in 2010 are misguided.

"Scanning everything loaded onto the aircraft is a waste of precious resources," he said. "To be effective, we must identify the risks involved with a supply chain approach... Governments must remember that this is a global industry. We need a globally coordinated approach that looks at the entire supply chain."

Bisignani also stressed the importance of gaining supply chain efficiency with e-freight in the face of thinning margins. "Improving quality without reducing costs will not get us far. We need to modernise the old paper-based processes of air cargo with e-freight," he said, putting the estimate for cost savings at US$4.9 billion in cost savings for the supply chain, a 22% reduction in shipper buffer stock, a 25% reduction in customs penalties, and average 24 hour decrease in shipping time and a 1% increase in market share against sea shipments.

Lastly, IATA called for greater industry participation of the entire supply chain in Cargo 2000 to improve quality. "Cargo 2000 quality standards are even more important in this crisis. To be effective, we need the whole supply chain to be aligned with a common vision on how to deliver quality. That is what Cargo 2000 is all about," he said.