Despite mounting challenges, positive developments include e-commerce continuing to grow, China’s lifting of COVID restrictions, and an industry in a better place than it was in 2019 – financially stronger and more efficient with advances in digitalisation, says Brendan Sullivan, head of cargo at IATA
Air cargo markets will come under increased pressure in 2023 due to ongoing economic and political uncertainty. Volumes are expected to decrease to 57.7 million tonnes, from a peak of 65.6 million tonnes in 2021. And revenues are expected to reach US$149.4 billion. That is $52 billion less than 2022 but still $48.6 billion stronger than 2019.
As belly capacity grows in line with the recovery in passenger markets, yields are expected to take a step back. It will, however, take time for these measures to bite into cargo rates. The good news is that average yields and total revenue for 2023 should remain well above what they were pre-pandemic. That should provide some respite in what is likely to be a difficult trading environment in the year ahead.
Despite challenges mounting, there are some positive developments to note: e-commerce continues to grow; China has lifted its COVID restrictions earlier than forecast; and high-value specialized cargo, such are pharma products, are proving resistant to economic ups-and-downs. The air cargo industry is in a better place than it was in 2019 – financially stronger and more efficient with advances in digitalization.
As we start 2023, I see four priorities for the industry:
Securing its licence to grow by making air cargo sustainable
Continuing process modernisation
Safety
And making air cargo attractive to new talent
Sustainability
Sustainability is the industry’s licence to grow. Shippers are becoming more environmentally conscious and are being held accountable for their emissions by their customers. Many are now reporting how much their supply chains produce in emissions, and they are looking for carbon-neutral transportation options. Meeting customer expectations is essential for the highest standards of sustainability.
The industry has committed to achieve net-zero carbon emissions by 2050. This commitment aligns with the Paris Agreement goal for global warming not to exceed 1.5°C. The strategy is to abate as much CO2 as possible from in-sector solutions such as sustainable aviation fuels, new aircraft technology, more efficient operations and infrastructure, and the development of new zero-emissions energy sources such as electric and hydrogen power. Any emissions that cannot be eliminated at source will be eliminated through out-of-sector options such as carbon capture and storage and credible offsetting schemes.
The path from stabilising to reducing net emissions will require a collective effort. All industry stakeholders across the supply chain as well as governments must each individually take responsibility to address the environmental impact of their policies, products, and activities. And they must work together to deliver sustainable connectivity and ultimately break aviation’s dependence on fossil fuels. We are already seeing some great examples in air cargo; this needs to continue into 2023.
Modernization and efficiency
The pandemic accelerated digitalisation in some areas as contactless processes were introduced to reduce the risk from COVID transmission. Building on this momentum will be critical in 2023 not only to drive improvements in operational efficiency but meet the needs of our customers. The biggest growth areas are in cross-border e-commerce and special handling items like time- and temperature-sensitive payloads. Customers for these products want to know where their items are and in what condition at any time during their transport. That requires digitalisation and data.
The modernisation agenda also includes governments. The international agreement brokered through the World Customs Organisation is a major step forward in supporting a more efficient regulatory framework for international shipments.
The Revised Kyoto Convention brings standardization, technology, predictability and speed to trade facilitation. It entered into force in 2006. The challenge is to double the number of contracting states from the current 131 and to make sure that the contracting states are indeed implementing that Convention. Universal adoption and implementation will deliver the greatest benefits.
We are still seeing far too many diverging requirements by governments in areas that should be harmonized by the convention. This needs to change quickly so we can continue to support global trade – and its vital contributions to economies and the UN Sustainable Development Goals – with modern and efficient air cargo.
Safety
Safety, specifically finding better solutions to safely carry lithium batteries, remains a priority for the industry. Progress has been made but there is more to do.
We need regulatory authorities (EASA and FAA) to accelerate development of a test standard that can be used to demonstrate that fire-containment pallet covers and fire-resistant containers are capable of withstanding a fire involving lithium batteries. In addition, we urge government authorities to step up and take responsibility for stopping rogue producers and exporters of lithium batteries.
Another area under the safety umbrella that will affect the industry in 2023 are the new and changing Pre-Loading Advance Cargo Information (PLACI) requirements, including EU-ICS2. Effective March 2023, the European Union (EU) will implement the Release 2 of its new “Import Control System” (EU-ICS2) regulations. As a result, all air cargo and mail shipments carried to or via EU Member States will need to comply with EU-ICS2. Non-compliance could result in penalties and even sanctions on carriers and global traders. This will be a big transition for the industry in 2023 and one that we will be supporting the industry with.
People
The last topic that I see high on the agenda for 2023 is people. They are at the core of any improvement in what air cargo can deliver. And these last years of COVID have been brutal. We are now competing for talent in a very tight jobs market. And when we do find the right and willing talent, training and longer-than-usual security clearance processes delay their entry into the workforce. We need to do a better job of attracting, onboarding, and retaining talent.
Conclusion
There are challenges. There is real and hard work ahead for all of us. And global economic and political developments make the going even tougher. But it will be nothing compared to what we have been through with COVID-19. As an industry we should sometimes take stock of the value we bring to the world.
Every day, air cargo supports the global supply chains that secure the jobs of hundreds of millions of workers around the planet. Among the important cargo that we deliver are medicines and vaccines. During the pandemic, in times of crisis and natural disaster, the humanitarian aid we carry can be lifesaving. Air cargo also contributes to 7 of the 17 United Nations Sustainable Development Goals (UNSDGs) – critical enablers of a better future for all.
