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Securing Air Cargo
Air cargo exporters and air transport workers demand greater transparency to improve security. This will of course also improve efficiency.
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Tracking of ULDs through blockchain to save industry $400M
SITA and trade association ULD Care hope to bring new efficiency to the air cargo industry by exploring the use of blockchain to digitally track and record change of custody of airline cargo containers or Unit Load Devices (ULDs) across their journey.
By eliminating inefficiency, embedding always-on tracking of ULDs and abandoning redundant paper systems, the use of blockchain is expected to save the industry $400m a year in improved efficiency, fewer losses and prevention of damage. The proposed platform also offers a wide range of authentication and trust-based benefits, reducing the risk of tampering, cybercrime, trade-based money laundering, fraud, and illicit trade.
Bob Rogers, Vice President and Treasurer, ULD Care, said: “Air cargo represents only 1% of all global trade in terms of volume but accounts for 35% of the total trade value and the inefficiency is significant. A container traveling from Shanghai to Long Beach could take up to 30 days to finish its journey, but the true travel time on sea or road is only around 15 days, with the remaining time spent on back-office and paperwork. The use of blockchain could revolutionize that process.”
Today more than 800 million ULDs are in use by airlines yet the system used to track these ULDs has only been partial digitalized and relies on incomplete data sharing and record keeping.
The proposed blockchain system improves efficiency by making use of all data points across the air cargo journey and provides a platform that aggregates and processes the ULD data in a trusted and secure way. The PoC will extend and upgrade the current ULD interlining platform to include non-airline third parties such as ground handlers via open APIs and a new modern interface. The results will transform the industry by lifting the veil on a myriad of previously unknown factors like damage reports. Knowing the location of all ULD’s (and therefore cargo) at all times means companies can accurately track where loss or damage occurs and recover the costs without dispute.
Source: SITA.AERO
How air passenger traffic impacts cargo capacity
The airfreight industry experienced record high rates in the spring of 2020. Around 45% of airfreight is transported in the belly of passenger planes, but with passenger traffic down, about 75% of airfreight capacity was removed from the market.
The world is returning to the skies, but the effects of the pandemic still linger for the air cargo industry. Global international air cargo capacity is down 6% as of April 2022, while Asia to the Middle East to Europe is up 9% from continuous rerouting.
Several other factors are impacting air passenger traffic and cargo capacity, including the ongoing conflict in Ukraine, the skyrocketing fuel prices, the rising shipping costs, and the continued demand straining ocean and land freight. As expected, the demand for air cargo capacity is expected to continue well into 2023, and possibly longer.
Factors affecting air cargo
Following the pandemic, a sequence of events created a “perfect storm” of disruptions that impacted air cargo, all of which were interconnected and influenced by one another.
While struggling with other challenges, the Russian invasion of Ukraine had a detrimental impact on already weakened supply chains.
To start, suppliers of essential goods and raw materials, such as neon gas, steel, platinum, and titanium had to shut down, worsening the ongoing vehicle and semiconductor chip shortages. Crops and raw goods are short, pushing prices to increase, and the goods that can ship to the rest of the world will do so at higher costs.
On top of that, the high fuel prices are increasing the costs of travel and shipping for everyone, consumers and businesses alike. Then, the invasion forced cargo airlines to divert flights away from the region, adding to the time and costs to ship goods.
Both Russia and Ukraine are home to fleets with extra-large cargo capacity, and there are few options to replace them. Added to the ongoing issue of limited cargo space with passenger traffic still slow to return to normal, shipping rates may double or triple.
From the beginning of the pandemic, low air cargo capacity has been a problem for supply chains. With land and ocean cargo overwhelmed, air cargo became a viable solution, but the limitations on passenger travel and the variant strains of Covid-19 brought reduced passenger travel. With fewer passengers in the air, the bellyhold capacity is reduced, further limiting the available capacity.
Passenger freight also has limitations. Schedules for passenger flights don’t always align with the best routes to deliver goods, passenger flights don’t always serve key cargo trade routes, and not all cargo is suitable for the payload of passenger aircraft.
Rising shipping rates and inflation
The current air cargo situation is a confluence of many different factors, but the shipping rates are among the most noticeable. Shipping rates have been unstable since the beginning of the pandemic, but the rising fuel costs and Russia-Ukraine conflict only worsened the situation.
In addition, the economic rebound, increased consumer spending, and limited air cargo space further fuel the rising costs. Airfreight was once reserved for urgent, high-value shipments – with associated costs – but it’s now an alternative solution to the issues of truck driver shortages, port congestion, and other supply chain disruptions.
Shipping costs have a direct correlation with inflation as well, which is expected to increase through 2022. Inflation increases about 0.7 percentage points when the freight rates double, peaking after a year. It can continue up to 18 months, however, and likely will in the current climate.
Because shipping costs increased in 2021, inflation can reach as high as 1.5 percentage points in 2022. The conflict in Ukraine will also fuel global inflation, though how much remains to be seen as the situation develops.
The conflict may cause more significant disruptions to the supply chains in the future, pushing global shipping costs and fuel costs higher, and in turn, leading to increased inflation.
Source: Cargonews.net
