News / Air cargo carriers need to 'think items, not pallets' to profit from ecommerce

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The misalignment between what e-tailers expect and what airlines provide “needs to be addressed” in order to stay competitive in a shifting air cargo market, according to delegates at the Aviation Connect event in Istanbul this week. 

Denis Ilin, CEO of end-to-end logistics platform for e-tailers, e-SmartLogistics, told The Loadstar, on the sidelines of the conference, there was “an extreme misalignment of mentality of expectations on an e-com site, and what the airline industry and air cargo is offering”. 

Part of the “misalignment”, he says, is the ecommerce industry’s single-item B2C needs, in contrast to the consolidated air cargo shipments airlines provide.

“I’ve been in air cargo for more than 25 years, and I know how it works and how the mentality works. At the same time, I spent quite a few years in cross-border logistics, and I see this misalignment,” he said.  

“With the ecommerce market and ecommerce clients, we always talk airport-to-airport, we always talk pricing per kilo, we always talk about consolidation  and we never even think about mentality over per-piece shipment. 

“When you go online, you don’t order a pallet of goods. You order a single item which goes in inventory being delivered to you. That’s what the ecommerce industry cares about. Being from the airline industry in air cargo, I don’t think we ever thought the same way.” 

And, according to Stan Wraight, president of aviation consultancy SASI World, while airlines do facilitate ecommerce, they cannot reap the benefits of “volumetric and cheap” cargo with their current consolidation model. 

“The air cargo industry doesn’t benefit from [ecommerce]… They get cargo in volumes, but it’s very cheap. Basically, it’s not paying even to cover costs, which demotivates them even further,” he told The Loadstar. 

“If you talk to some airlines today, they say ‘we’re already doing ecommerce, it doesn’t pay’, and then I say ‘you’re not doing ecommerce, you’re carrying pallets like you’re used to doing with consolidations for freight forwarders.” 

And he added that freight forwarders “are only getting the business because the airlines won’t offer what the shippers want”.  

“But why? You don’t offer what they ask for. They buy what you offer, that’s why it’s cheap,” he said.  

Indeed, in order to benefit from the seismic market shift ecommerce brings, “airlines need to provide a different product”, according to Mr Ilin. 

Mr Wraight explained: “The solution is basically end-to-end product. Nothing else. That’s what ecommerce wants. Airlines are still trying to stay within their boundaries of airport-to-airport, not go beyond.” 

Mr Ilin added: “We need to start thinking in ‘items’. We need to be able to deliver beyond airports, or beyond the destination airport at least, and we definitely have to be looking at the pricing and quality scenarios – again, not per aircraft, not per pallet, not per consolidation shipment, but per piece.” 

He said there were two things required for this. One is a platform for a “fully integrated system to track movement of each single piece from its origin up to its door delivery” that facilitates communication with all the relevant partners. 

The vast amalgamation of stakeholders in a single ecommerce transaction includes shippers, carriers, subcontractors, last-mile delivery providers and customers, and Mr Ilin stressed that communication also needs to extend to customs and tax authorities.  

“People need to be fully aware of what’s being shipped, how it’s being transported, what duties are due… Transparency is definitely one of the important things,” he said, and noted that high volumes of single shipment ecommerce parcels had been under scrutiny recently from “overworked” customs agents who find it near impossible to inspect every shipment.  

He added that “the next basic thing, which is also missing”, is what airlines offer on the ground. 

“Airlines know how to fly airplanes. They know how to move cargo and passengers from A to B. But when you deal with all these shipments, it requires a lot of preparation at point of origin – pre-clearance, paperwork documentation, then transmission of these data across the system for pre-clearance upon arrival with customs. 

“That’s the second piece missing at the moment to deliver that product to the ecommerce industry.” 

Mr Ilin believes addressing these issues could help airlines “generate better margin, better volumes and, more importantly, probably, satisfaction of the e-com business”. 

Mr Wraight concluded: “If you don’t have digitisation, you can’t save money, you can’t make money and you can’t attract business. It’s as simple as that.”