The cost of fuel is down, passenger numbers are up, new runways have been built and profits are secure.
It would seem that the aviation industry is doing just fine, thank you. Or so I thought until I ran into some old and new friends at the recent Payload Asia Conference in Singapore.
I decided to attend because one of the topics on the agenda was the impact of e-commerce on the air freight business. I will come to that subject later, because during the conference it became clear that air freight industry is having an existential crisis that is affecting the e-commerce in more than one way.
Cargo: The hidden passenger
While a number of dedicated freighters is slowly increasing, every new passenger plane also brings cargo capacities below the deck. So, every time you take a commercial flight, you are sharing the flight with tonnes of commercial cargo. All activities involved packaging that cargo, documenting it, palletizing it, loading it onto a plane, and securing it in the bellyhold happened thanks to people working in broadly defined ground services.
If you travel a lot, your most common experience with ground services is probably limited to the airline check-in desk, food served in-flight (but prepared on the ground), and if you are really unlucky, to a conversation at the lost baggage counter. If your flight goes smoothly, you hardly give it a thought. But behind the walls, in the bowels of the airport, on the ramps and all the way to the airplanes’ cargo and luggage holds a crisis of multiple dimensions is taking hold. A crisis within the ground services could affect your life, and not because in-flight catering undercooked your chicken.
The cardinal obligation of the airline is to safely transport people and goods between any two airports. Not so long ago, the airlines were vertically integrated. They owned and managed resources and events from curb side to curb side in case of passengers and between the docks of Origin and Destination for cargo. Then, both passengers and cargo shippers started demanding lower prices. This forced airlines to look for savings at every step of their business processes. It did not take long for them to hit upon outsourcing as a means of reducing costs. Airlines gained leverage over aviation services companies that performed invaluable transportation services. Paradoxically, this led to the typically tense supplier-buyer business relationships that develop when prices become each side’s bargaining chip. Safety is still important, but all else being equal, priority most likely goes to cost-savings.
The human factor: An asset and a concern
Ground services rely on human labor, something that even the cleverest automation will not be able to replace in a foreseeable future. Or at least, this is what my fellow conference participants felt. It’s notoriously difficult to attract and to keep employees in ground services. Ramp working conditions are harsh: heat, cold, dust, noise, rain, snow, sleet, overtime-induced fatigue, you name it. The shifts are long and they operate 24/7. In short, a job in which there is little incentive and an uncommonly high turnover rate. Most of the ground services companies I work with have long lists of unfilled positions. If ground services are part of the airline, they can afford to invest in training, optimize work assignments to avoid fatigue, and enforce occupational health and safety standards. Outsourcing companies are not subject to the same scrutiny and enforcement. If they underpay employees or don’t invest enough staff training, airlines are none the wiser.
And this is where we come to e-commerce. The mushrooming number of packages traversing the globe is enough to keep both integrators (think DHL, Fedex, etc.) and freight forwarders very busy in the foreseeable future. It also means an opportunity for ground service companies to become value-added handlers for e-commerce companies by offering auxiliary services such as shipment quality checking, re-packaging, repairing, returning, etc.
However, before ground service companies can take on such added volume, they need to address the current problems of an already fatigued, under-trained workforce.
Air freight means more than getting something from point A to point B. At the moment, is it possible to ensure that:
- The flow of supply chains that rely on air freight are not disrupted?
- The flight’s safety is not jeopardized?
- The ground crew is performing with utmost diligence?
Not really. At the conference, much was made about the low percentage (30%) of shipments relying on e-waybill. Imagine airlines still relying primarily on paper tickets? In cargo, this means we are not getting vital help from technology scrutinize load manifests throughout the whole journey and decide the safest path for them to take. Furthermore, at the conference I heard that scanning the cargo and ensuring compliance between the waybill and content is going to rely on human observation and opinion for very long time. I learned that certain jobs, such as securing the loads in cargo holds cannot be automated – fastening the safety straps around shipments in tight plane spaces has to be done manually.
With a shortage of ground service crew, the rise in air cargo volumes, and airlines’ strict departure times, ground service providers need more than what most shift management systems can achieve.
For e-commerce to move and to grow unimpeded, we need to re-think and possibly re-invent how freight moves by air. This is not about track-and-trace, this has to go deeper into every element of the supply chains – the processes, machines, and the people. The air cargo business cannot keep lagging behind, because the way consumers acquire their things has changed forever with e-commerce.
What are your thoughts on the air cargo business? Are we heading into a deep end? Let me know what you think in your comment below or talk to me on LinkedIn.