Shippers set to reap the rewards as Iata moves towards tighter industry standards

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Shippers are set to benefit most from a series of Iata initiatives aimed at improving the efficiency of the air cargo industry.

A move to improve Cargo 2000 (C2K) quality standards will partly be based on shipper requirements from the air freight industry, while e-freight would make substantial savings for airlines’ ultimate customers.

Delegates at Fiata’s World Congress in Singapore last week heard how shippers would gain 70% of the productivity and cost savings generated by the implementation of e-freight, according to a study by the Logistics Institute of Asia Pacific, while forwarders would gain 27% of the benefits.

Despite the e-freight initiative initially being driven by the airlines, they would themselves take just 2% of the benefits, claimed the study.

Benefits for shippers include transparency of information, status updates and less inventory holding as the process becomes faster.

The study, commissioned by the Civil Aviation Authority’s “e-freight@Singapore” initiative, noted: “It is observed that the shippers and the freight forwarders reap a higher percentage of savings … due to the larger number of data segment duplication between the documents generated by the shippers and the freight forwarders. In addition, the shippers and the freight forwarders are the stakeholders that generate most of the air cargo export documents, while the GHAs and the airlines only generate the flight manifests and shipment booking forms respectively.”

Iata has set itself a high e-freight target – 20% e-AWB penetration on feasible lanes by the end of 2013 – which it is unlikely to meet, confirmed Des Vertannes, head of cargo (pictured).

Among the many bottlenecks ahead is the failure of many countries – 46% of the 191 ICAO-contracting states, including Russia, Thailand, Indonesia and Vietnam – to ratify the Montreal Convention 1999, which allows for paperless documentation. However, the ICAO Assembly this month added its weight to the argument, urging states to ratify MC99 as soon as possible.

The industry’s impetus has also been impacted by a string of personnel changes at many airlines. In the past 18 months, the heads of cargo at Delta, American Airlines, Cathay Pacific, KLM, Emirates, Air France, Thai, Singapore Airlines, China Airlines, Korean Air and EVA Air have all changed, hampering progress as some of the new chiefs have had to learn the industry’s plans from scratch.

In addition, while the air cargo industry is faring so badly in these tough economic times, many airline passenger divisions have been tightening the purse strings when it comes to investment decisions for the  business, preventing some freight departments updating their IT systems in the timeframe they had hoped for.

“In air cargo there is a plethora of platforms. We need airlines to provide a single process – but they are not getting boardroom support to do so,” said Mr Vertannes.

Although the cards seem stacked against Iata’s plans to improve the industry, it is also pushing ahead with changes to Cargo2000, a quality programme aimed at boosting the benefits of air freight for shippers.

“Air cargo must raise its game, to make sure that shippers get value for money, dependability and reliability,” said Mr Vertannes.

C2K, a group made up of some 60 members, helps companies establish a set of standards, but until now members have only had to measure against their own targets, rather than an industry-wide standard.

“If the industry standard was, say, four hours to break down a shipment and complete documentation, C2K members could set their own standard at six hours, and then have a 99% performance rate,” explained Mr Vertannes.

“Now, we are taking the C2K principle and making it a neutral measure. We are also making it door-to-door, so we should be able to see how we can reduce the overall times of air cargo’s end-to-end performance. We will also add incremental standards.”

C2K’s Master Operating Plan was made available to the whole industry earlier this year, rather than just C2K members. With the new vision being open to all, the benefits for C2K members include visibility into why a member may have failed to meet a standard.

The challenge now, said Mr Vertannes, was developing the correct set of measurements.

“How quickly, for example, should goods and documentation be available to the forwarder? Six hours? Three hours? C2K and the Global Air Cargo Advisory Group will be working on neutral milestones. But we need shippers and forwarders to say what it is that they want.”

Iata hopes the new quality standards will be established by the middle of next year.