Air cargo will remain resilient and agile even in dire situations
When the World Health Organisation declared Covid-19 as a pandemic, its message could not have been more clear about a plunge in the world economy causing distress to all businesses – the worst hit being the aviation and air cargo sector triggering a severe crunch in capacity. But vital supplies must get to where they are needed most - and aircargo has now become more important than ever in this crisis. Airlines are adding freighter services and even converting passenger aircraft to carry freight. Obviously, there is no perfect script for responding to the challenges of Covid-19, but together, the industry is getting the supplies to where they are needed. Glyn Hughes, global head of cargo for IATA speaks exclusively to Surya Kannoth about how this pandemic has changed the game for the air cargo industry, IATA’s preparedness in dealing with the crisis and much more. Edited excerpts.
The industry has weathered many storms in the past but Covid-19, by far, seems to be one of the biggest crisis that the world has seen. Can you put in perspective how serious is the capacity crunch and how it has taken a toll on the industry?
From an industry perspective, aviation is suffering and going through the most turbulent and the most disruptive time that it has had in its 100+ year history. With approximately 90 percent of the global passenger fleet grounded, we, at IATA, are forecasting that the aviation industry this year will see a reduction of revenues in excess of $340 billion and that represents about 55 percent reduction versus last year. In terms of flight numbers, till the end of June, we expect to see 4.5 million flights cancelled – almost 50 percent of air cargo travels in the bellies of passenger flights. That is a huge challenge for the air cargo industry - to continue to operate effectively when 50 percent of the available capacity that it uses - has disappeared.
What are your top priorities now to ensure that you are prepared to deal with the times ahead?
I can break that question into two parts - one being, what we are doing right now to make sure that air cargo can continue to fly, and that is mostly focussed on continuing to look at the obstacles and challenges. First and foremost, when governments around the world introduce travel restrictions and close their borders, we need to make sure that air cargo supply chains can get exemptions and continue to operate. We also need to work with governments to make sure that crews are not restricted or are not subject to the same restrictions as the travelling public - in terms of going into mandatory quarantine for two weeks because airlines would very quickly run out of crew. So we've been working very closely with all the airlines and with the states to make sure that there can be some procedures in place. We have also been advocating right now for government support for the aviation industry at this very critical time. It's important to make sure that the airlines can continue to operate since they're burning through cash. We are looking at a number of actions today, but we're also keeping an eye on the future since this industry will need to reshape when the crisis gets over.
But do you think governments around the world are fully cognizant of the impact of the crisis on the aviation and air cargo industry?
In its 100+ year history, the air cargo industry has performed a wonderful job but it performs it quietly, the members of the industry have never really been waving flags around. But it is true to say that before this crisis, many governments around the world didn't fully understand the role that air cargo industry played in the global economy. But of course, the airlines understand. And right now, the whole world understands. There are pictures on every news channel, every newspaper of airlines being unloaded or cargo freighters being unloaded or passenger planes being unloaded with cargo. Considering that air cargo moves 35 percent of global trade by value, most governments, when it came to regulations and policies, really overlooked that fact. And they focused mostly on the fact that it contributes just one percent by volume, so many of the policies were geared towards other modes of transport. But during this crisis, there has been a general realization not just in governments, but in society in general, on the role that the air cargo industry plays. You can't turn on the TV news broadcasts now or read a newspaper without seeing a picture of a freighter unloading some humanitarian or medical or PPE equipment, gloves, masks, etcetera. So I think the role that air cargo is playing is actually becoming much more visual to global society. Even when the crisis ends, the industry will still be as humble as it is today and just continue doing its job. We hope governments will remember that the industry was there to support their citizens in its time of need.
The wage support schemes by governments have currently allowed airlines to furlough staff until June. Obviously, with the recovery being much slower for the aviation sector as compared to other sectors, airlines have now demanded the wage support scheme to extend beyond June. In fact, paycuts and joblosses would intensify if things do not get under control. What do you think will be the most crucial initiatives from IATA to help airlines through the phase?
We had done a calculation to say the airlines had about 60 days, as an industry, of cash at their disposal. The way that the industry is burning through cash, those 60 days is going to rapidly disappear. So it's critical that the governments continue to support the aviation industry going forward for several factors. And it's critical for countries to stay connected with the world by having a very strong, independent aviation sector. It is also critical that those financial measures and supports stay in place. But it's also important that the industry does its part by re-evaluating and resetting, and it's true that after every major crisis, the industry has to reset and rebalance the assets, that it has actually got to be deployed. The expectation in terms of the demand or matching the demand to the assets deployed, and therefore, staffing levels as well. Sadly, we have seen a number of furloughs already announced. And we would anticipate that going forward, many of these jobs will be lost. So it's critical for us, at IATA, to continue to raise the awareness to governments about the necessity of the commercial aviation sector.
Covid-19 has accelerated the pace of digitalisation within the industry for quicker turnarounds. Do you think when things come around, the industry will be more proactive in adopting digitalisation tools to survive future challenges?
During the current crisis, things have changed. We have changed. We're finding ways and means to do things differently. And we will take that spirit back with us into the workplace during this crisis as well. We have seen backlogs of cargo or in certain airports in India. There was a situation where Mumbai Airport was just was clogged with cargo and they weren't able to allow more to come in until the backlog was cleared. Digitalisation would have helped that process. There's also been another sad consequence. We've seen an increasing number of counterfeit masks, for example, respiratory masks being shipped. We feel that the data ultimately has a way of protecting the supply chain, and it could be used as a means to actually identify and target counterfeit - whether they are masks or respirators or lithium batteries, which is our concern going forward. So I think the need to do things more efficiently, the need for less human to human interaction, the need to just move into the modern era means that, yes, I would anticipate that the speed of acceleration of digitalisation will enhance when this crisis ends.
The crisis has also seen a lot of creative juices flowing within the industry. Passenger planes retrofit to move air cargo, new innovations etc. What’s your take?
With 90 percent of the world's passenger fleets grounded right now because of the travel restrictions and the closed borders, 50 percent of the cargo capacity that's utilized has also been grounded with it. At the same time, the demand for cargo for the movement of medical supplies is dramatically increased. So the airlines were very innovative in, first of all, deploying very quickly the 777s, 787, A350s, A330s, which have good cargo capacity even with a load of passengers on board. So if you take away the passengers, you make a very usable aircraft for carrying cargo. If you then want to put cargo on the seats, then they will have to seek an additional approval from their civil aviation authority because, of course, the seats are not designed to have boxes on them. So the approval process would have to look at how they would intend to restrain the cargo, the weight of that cargo, the type of cargo, no dangerous goods in the cabin and should only be for carrying medical supplies. So there is an additional process and safety risk assessment that carriers need to go through.
Further iterations of that are where some carriers are considering removing the seats to lessen the weight, thus reducing the fuel burn. So it has been very reassuring to see how quickly the industry has responded to employ in a safe fashion a large number of passenger aircraft. Now, we also would anticipate that as the start up begins again with passenger flights resuming when they resume, that there will be a slow build up. And I would anticipate that some of these aircraft may still continue to be employed in cargo-only environments for some time after the startup commences.
Is there a sense of urgency to execute a "cargo reset" post Covid-19? How important is it to keep the entire industry structure healthy?
People speak about a restart but cargo hasn’t really stopped. So, to your point of how important it is to keep the entire industry structure healthy, it is important to understand how our industry will be when the economies start to resume. When factories start going back to work, whenever that may be, there will be a reliance on air cargo then to bring in component parts, whether or not automotive production lines recommence to take finished products from the factories and bring it to the consumption markets. So it'll be like a restart of the global economy. And, of course, a restart for the global economy will put cargo in the forefront. It's then fair to say that we would expect, once the consumerism kicks in, and when people are allowed to go back to buy all the things they haven't been able to buy for the first 3-4 months of the year, there will be a further demand. But we would anticipate a mid-term economic impact - we've already seen a number of countries going into a technical recession. So, we might see some reduction in consumerism later in the year.
But the longer term prognosis is that 2021 is anticipated to be a growth year for the global economy, particularly coming off of the early figures. It's going to be a little bit of an up-and-down cycle for the next 12 to 14 months. But air cargo is going to be there and it's going to be resilient and agile and respond to what the world throws at it.
What is the biggest lesson that you have learnt through this crisis?
I think one of the lessons we've learned is to salute the bravery of the people in this industry. They're still turning up to work to do their job. It is just remarkable to see people do that on a day-to-day basis. They have my total admiration. Secondly, honestly speaking, quite often, we criticize governments. But I also think we have to congratulate governments. ICAO has had a tremendous role to play since the outbreak. They have been really responsive. They've issued state letters. They've worked with states. Governments have been responsive when we've had issues on crew quarantine challenges or when some countries closed all borders and airspace to all types of flights. We've contacted them, and sometimes, within less than 24 hours, they've reissued new notifications opening up for cargo. So I think this has shown us that governments, when they have a strong willingness to work with industry, can be incredibly positive and beneficial in terms of collaborative work. And I think it's that community spirit that keeps us connected.
This interview was originally published in May 2020 issue of The STAT Trade Times.