In the May 24th edition of Loadstar, Sam Whelan writes about the ways in which the e-commerce boom is creating operational challenges for the larger airlines. Everyone is aware that air cargo development in 2017 far exceeded the expectations for the industry and that E-commerce demand for air freight led that charge. E-commerce demand shows no signs of letting up, but just as e-commerce has brought disruption to the retail industry, it is also creating disruption in the air cargo industry.
There is no doubt that e-commerce has been a boom to a struggling air cargo industry but with these opportunities have come challenges, challenges that some air carriers just don’t think makes good business sense.
E-commerce boom brings operational challenges for bigger airlines
The Loadstar, 24/05/2018
At the Air Cargo China event in Shanghai last week, airline executives told The Loadstar the benefits from increased e-commerce shipments had not come without added risks.
“I look at e-commerce as a great opportunity, but also something that requires time for reflection and reason, for a number of factors,” said Qatar Airways chief officer for cargo Guillaume Halleux.
“In the e-commerce business, with a few exceptions, you don’t often see the usual big global names, you see mostly local forwarders and some of them do not always have a credit limit or financial establishment with us. So there is a financial risk there that we need to assess properly,” he explained.
E-commerce packages pose additional security risks, Mr Halleux noted.
“These channels of e-commerce are, so far, not so clear; you’ve got a lot of co-loading, meaning that when we receive e-commerce cargo it has gone through a number of third-parties before it reaches us and that calls for very thorough security screening.”
He said another challenge arose from yield optimisation, because “technically you may lose up to 30% in terms of revenue per pallet due to the density of the bags”.
He explained: “This is similar to mail; basically it’s very bulky and volumetric, so the face value of e-commerce might be attractive in terms of dollars per kilo, but the revenue per cubic metre on the aircraft – once you do the math – might not be that great.
“So, everybody gets very excited about e-commerce but I keep telling my organisation ‘let’s be very cautious, we don’t want to do e-commerce for the sake of being trendy, you do it if it makes business sense’.
“We’ve now started to decline some e-commerce offers out of certain places in Asia because, after thorough consideration, it doesn’t always make sense,” Mr Halleux added.
According to Adrien Thominet, chief executive of general sales and services agent ECS Group, e-commerce optimisation is a major challenge for larger carriers.
“E-commerce is good for low-cost carriers and small size narrow-bodies, it works, but for the big carriers with wide-bellies used to selling full pallets, it becomes an issue. And this is where the technology needs to change, because previously you were handling one hundred parcels in one shipment and now you have to handle one hundred shipments.”
For Swiss WorldCargo, which operates only passenger aircraft, the key to e-commerce is to provide value-added services in order to maximise revenue.
Head of business development Andrés Perez said Swiss had traditionally carried mail for China Post,which had transitioned to e-commerce packages in recent years. As a result, the airline is working with a technology partner to interlink forwarders with their cross-border counterparts, allowing it to provide last-mile deliveries, payments, labelling and tracking services.
Freighter airline Cargolux is taking a different approach. Chief executive Richard Forson said the carrier would continue transporting goods in bulk to distribution centres.
“E-commerce is not a panacea in that you’re going to get premium rates like the integrators, because we don’t offer those door-to-door services.
“For example, within China there’s a booming market with few restrictions, but cross-border e-commerce becomes a challenge in terms of customs and VAT issues.
“So am I going to be another UPS or FedEx? No, that’s not my business at the end of the day.”
