It took a West Coast port strike in 2015 to convince McDonald’s and Victoria’s Secret to switch from sea to air – and they’ve never looked back. That’s according to Geneva-based International Air Transport Association global head of cargo, Glyn Hughes, who told FTW last week that while airfreight might be six to seven times more expensive than ocean freight, it was 10 times more cost effective. “In effect a ship is a floating warehouse, tying up money for an extended period of time.” During the ports strike, McDonald’s needed its potatoes and Victoria’s Secret had a launch deadline to meet. Airfreight was the only option – and it’s remained the mode of choice for both brands. For the fashion industry in particular, speed is of the essence. Hughes points to statistics that reveal that a Zara customer goes into the store on average 19 times a year whereas in the case of Marks & Spencer that figure drops to three times. “M&S can afford to ship their cargo by sea, but the Zara customer needs to see something different – which is where air can provide value,” said Hughes. “In the day of fast moving fashion, you’re missing markets.” And while the need for speed in the fashion industry
is driven by consumer pressure, the medical industry poses a more serious supply chain challenge. According to Hughes, a study conducted by the World Health Organisation in 2004/5 revealed that 25% of all vaccines transported were degraded as they had gone outside the temperature range. “The air cargo industry got together with the cargo supply chain and spoilage is now estimated at around 3%.” Iata, statistics reveal that 30% of scrapped pharmaceuticals can be attributed to logistics issues alone while 20% of temperature-sensitive products are damaged during transport due to a broken cold chain. Globally air cargo has been on an upward trajectory for several years with 2018 stats revealing growth of 3.5%. This is
significantly lower than the 9.7% recorded in 2017 for a variety of reasons. And while airlines in all regions reported an annual increase in demand, Africa was the exception. “Air cargo in Africa has stagnated over the past few years, largely the result of slowing economies in South Africa and Nigeria and the relative depreciation in the price of oil,” said Hughes. Iata is “cautiously optimistic” about the year ahead, forecasting global airline industry net profit to reach $35.5 billion, slightly ahead of the 2018 figure. It is expected that 2019 will be the tenth year of profit and the fifth consecutive year where airlines deliver a return on capital that exceeds the industry’s cost of capital. African carriers are expected to report a $300-million net loss in 2019 (slightly improved from the $400 million in 2018). This makes Africa the weakest region, as it has been over the past four years.
CAPTION: The air cargo industry got together with the cargo supply chain and spoilage has been reduced to around 3%. – Glyn Hughes
