EAC examines the evolving role of air cargo

The recent European Aviation Conference, which took place at the Luxembourg Centre for Supply Chain Management (LCL) at the University of Luxembourg, brought together policymakers, academia and industry for a deep discussion on the evolving role of air cargo, as well as its trends, challenges and opportunities in a post-pandemic context as we look toward an e-commerce-driven, digital global economy.

In his opening remarks, LCL Founder and conference chairman professor Benny Mantin shared his expectation that the venue would be a “template for further collaboration between policy makers, practitioners and researchers and that the topics discussed would provide fertile grounds for richer and deeper exploration”.

Following the formal opening by its chairman, the EAC began with a keynote by the International Civil Aviation Organization (ICAO), the United Nations specialised agency for civil aviation.

Delivered by the director of its air transport bureau, Mohamed Kalifa Rahma, on behalf of ICAO secretary general Juan Carlos Salazar, the keynote highlighted how ICAO intends to help significantly boost trade flows, leading to greater globalization of supply chains.

Specifically, ICAO is advancing this goal by working with Member States toward the establishment of adequate regulatory environments promoting enhanced connectivity, strengthened competition, increased transparency, and expanded consumer choice through safe, secure, resilient air cargo services.

“Ensuring this work leads to the expansion of air cargo services, especially to currently under-served areas, does also require a globally-coordinated strategy for environmental protection, and carbon emissions in particular, and one that takes into account the actual realities of each country and its economic actors,” said Salazar’s keynote.

He pointed out that this outcome was achieved at ICAO last October when the States at the 41st ICAO General Assembly agreed on the collective long-term goal of carbon neutral or ‘NetZero’ international air transport by 2050.

Sustainable Aviation Fuels (SAF) most especially have been singled out as a key near-term priority on this journey to sustainable flight, and countries at the third ICAO Conference on Aviation and Alternative Fuels in Dubai agreed on a new global framework to help kick start the policy, regulatory and investment and actions now needed for aviation’s greener fuels transition.

The opening session was chaired by Andrew Charlton (Aviation Advocacy) and featured Glyn Hughes, director general of The International Air Cargo Association, Cargolux executive Maxim Straus and Chris Grames of Boeing.

The panel found that there are numerous prevailing issues faced by cargo carriers such as airport congestion, infrastructure to meet e-commerce demand, environmental impact—especially with the looming SAF requirement—taxation and over-flying.

The session on trade was chaired by Cortney Robinson (air transport officer for air cargo at ICAO) and had Brian Pearce (University College London), Steve Altman (NYU) and Selçuk Gençaslan (Turkish Airlines) as speakers.

The experts discussed data revealing that our world is getting smaller, with the average distance travelled by freight lengthening significantly. Indeed, regional trade still dominates, but overall, there is no evidence that global trade is shrinking.

In the next session, Charles Stotler (University of Mississippi) had a fireside chat with Mohamed Khalifa Rahma where numerous priorities of ICAO were discussed, such as the response to Covid-19, sustainability and digitalisation.

In response to questions about the priority of air cargo in its broader response to Covid-19, Rahma explained ICAO’s role as global platform where the 193 Member States to the Chicago Convention convene and adopt standards and recommended practices for international aviation.

Highlighting how ICAO suddenly had to coordinate the global response of an entire sector to Covid-19, Rahma gave the example detailed contributions of the ICAO Council Aviation Recovery Task Force (CART) he shed light on the ongoing dynamics taking place.

In addition to engaging its member states, ICAO has formed new partnerships with industry, such as the International Port Community Systems Association (IPCSA) and the International Chamber of Commerce (ICC), which have been granted stakeholder status.

“Such new partners bring an active interest and expertise in air cargo that we can use to meet emerging needs such as digital exchange of cargo information as part of the digital, e-commerce driven economy, preparedness for future massive disruptions to global supply chains (resilience), and trade facilitation through improved air cargo connectivity,” said ICAO’s Robinson.

The fireside concluded with a call for broader collaboration with academia to find win-win solutions for impactful research.

Digitalisation is critical aspect of the sector. A discussion on the topic was led by TIACA’s Hughes with Virginia Cram-Martos (Triangularity, also representing UN/CEFACT), Steven Pope (ICC), Lucas Fernandez (covering for Chris McDermott, Champ Cargosystems) and IPCSA Secretary General, Nico De Cauwer.

A key message is that digital transformation is embracing change. Several efforts to enhance standardisation and mutual trust among supply chain actors, such as Verifiable Credentials, were discussed as ways to facilitate cross-border trade.

Barry Humphries (BKH Aviation) chaired the discussion on air service agreements. Carlos Bermejo Acosta (DG Move), Mark Bosly (UK Department of Transport), Vann Chanty (Cambodia’s Civil Aviation, representing Association of Southeast Asian Nations, ASEAN), and Roque Felizardo Da Silva Neto (Brazil’s Civil Aviation Agency, representing LACAC) discussed trends such as the rise of regional multilateralism.

While in Europe there is some reversion of the scope of liberalisation (given long-standing concerns relating to foreign ownership and control of airlines), other regions seek opportunities for closer integration and the efficiencies it can bring.

Wouter Dewulf (University of Antwerp) led a session with David Gillen (University of British Columbia) and Joachim Arts (University of Luxembourg) on supply chain evolution.

Views were shared on whether e-commerce companies are better off being asset-light or asset-heavy, whether Maersk’s move into airfreight will be successful or not, and who benefits from uncertainties.

Agreement was clear: air cargo data is the new oil. The paper-based operating environment is a barrier to obtaining, sharing, and analysing cargo data—a digitalised eco-system for air cargo should be prioritised.

The final session of the day, on integration of the “Global South” was chaired by Ken Button (George Mason University) and featured Gianmaria Martini (University of Bergamo) and Eric Tchouamou Nyoja (University of Huddersfield), who agreed on the need to avoid further exploitation of the global south and ensure it benefits from globalisation.

Day two

On day two, Thomas Immelmann (University of Applied Sciences Bremen) introduced the Martin Kunz Lecture, giving the honour to Thomas Klein (Cargolux) who presented the evolution of the sector in recent years.

While historically airfreight used to perform and grow at twice the rate of GDP growth until 2000, since then the trends have reversed.

One challenge is the growth of services. Another is the fuel price rollercoaster. He noted the strong seasonality and shed light on profitability calculation, especially during Covid.

Simon Wright (The Economist) then remotely interviewed DG Move executive Filip Cornelis starting by reviewing the priorities of the European Commission.

According to Cornelis, pre-pandemic “cargo was not a topic we talked about… it was kind of in the background and all the focus was on passengers”.

It was not until Covid-19 that it emerged as an item of “strategic importance.” Among the areas in which the Commission could be helpful and add to the diversity of ideas, Cornelis spoke of “making air traffic management better performing”.

Nevertheless, Cornelis was unsure that specific policies for cargo were necessary.

Already for broader aviation policies, views of EU Member States vary dramatically it is important to find common ground, to which end they are working on common standards encapsulating social rights, level playing field, sustainability and so forth.

A discussion on climate impacts was led by Anna Straubinger (ZEW – Leibniz Centre for European Economic Research) with Marcos Gonzalez Alvarez (DG Clima), Stefan Grebe (CE Delft), Laurent Donceel (A4E – Airlines for Europe) and Bill Hemmings (Rosetta Advisory Services) as speakers.

It started with a quote by the European Commission’s President, Ursula von der Leyen, that carbon emissions must have a price and every person and every sector will have to contribute.

It was noted that freight accounts for 15% of global aviation emissions and that non-CO2 are responsible for 2/3 of climate aviation impacts.

It appears that we are reaching the natural limits of fuel efficiency suggesting that technology might not be able to offer further break throughs. It is imperative that SAF will have to ramp up.

Infrastructure and overland challenges were discussed in a session led by Anne Lange (Frankfurt University of Applied Sciences).

The speakers included Marcus Bezold (Lufthansa Cargo AG), Ram Menon (Wallenborn Group) and Daniel Kohl, (Luxembourg’s Cluster for Logistics – C4L).

The trucking sector is fragmented and digitalisation has made little progress.

It is also subject to intense pressure to modernise the fleet — e.g., the transition from Euro 5 to Euro 6 — although the gains are minimal and the cost is unjustified.

Further, electrification is challenging given the current economics of the existing technology.

Benjamin Bierwirth (Frankfurt University of Applied Sciences and Avistics GmbH) chaired a session on drones with Tiago Lopes (European Investment Bank), Luc Antoon (Skeyes Belgian Air Traffic Control) and Vincent Pedrini (Luxembourg Drone Federation) as speakers.

They pointed out that the drone eco-system is growing with aspects including cargo, passengers, dual-use, surveillance, MRO, flight operations, ATM, ground infrastructure, and IT.

There is an emerging need to standardise and harmonise to facilitate and support the growth of the sector.

The challenge is how to simultaneously solve the three elements of the equation: safety, financial stability, and regulation/policy.

​The third day started with a keynote by Tae Hoon Oum (University of British Columbia) on future transport research requirements, where he reviewed the changing global economic and political environment accounting for aviation policy issues.

The panel led by Benny Mantin (University of Luxembourg) reviewed some of the take aways from the preceding two days and brought discussion involving panelists with diverse backgrounds:

Cortney Robinson (ICAO), David Gillen (University of British Columbia), Charles Stotler (The University of Mississippi), and Achim Czerny (The Hong Kong Polytechnic University).

The opportunities for research were clear and some discussion evolved around the importance and contribution of passengers to global trade with an emphasis on leisure versus business travellers.

A keynote by Steven Truxal (Leiden University) entitled “EU air regulation under review: what’s on the horizon?” provided an exposé on EU air regulation reviewing seven important pieces: (i) state aid, (ii) horizontal guidelines which is linked to Article 101 of the Treaty of the Functioning of the EU.

He also looked at five pieces of forthcoming regulation: Air Service Regulations which dates back to 1008/2008 and require an update which may see topics such as financial health, ownership and control, UAS, restriction of flights in a crisis, PSOs to include sustainability criteria and so forth.

Slot allocation regulations – 793/2004, to maximize existing capacity and may see stricter requirements on slot use.

Energy Taxation Directive, linked to 2003/96, with kerosene and heavy oil not being fully exempt anymore.

Due Diligence Directive, which links to sustainability, and Air Passenger Rights Regulation, which is a revision of Reg. 261/2004 and Reg. 1107/2006.

“The three days of EAC 2023 have clearly demonstrated the importance of air cargo being a vital component of global supply chains,” said Mantin in concluding remarks. “Given its importance and core contribution to global GDP — even more so than passenger traffic — air cargo deserves greater attention from all stakeholders.”