AIR CARGO

MANAGEMENT
Dr. Filiz Mızrak
 Air Cargo Trying Harder!
• Aviation is a vital component of the global economy,
involving some 60 million jobs and generating over
US$2.2 trillion of economic act­ivity.
• The need to travel, whether for business or leisure,
has expanded the capacity and scale of aircraft size.
• Aircraft manufacturers are working continuously to
create bigger, better, quieter and more fuel ­efficient
products to satisfy this growing appetite.
 Air Cargo Trying Harder!
• The development of the air cargo industry has simultaneously driven the
global market for goods including electronics, pharmaceuticals, flowers,
fruit and industrial components.
• Around 35 per cent of the world’s total cargo traffic value is classified as
air cargo.
• The industry embraces a wide range of products and shipment sizes to
cater for all customer needs, employing different appropriate aircraft
 Air Cargo Trying Harder!
• A major proportion of air freighted goods travel in the bellies of passenger
planes, such as Boeing 777 or Airbus 330/340, which have the capacity
for 25 tons when fully loaded with passengers and baggage.

• Medium­sized freighter aircraft such as B737, A300­600, B767 and large

freighter aircraft such B747-­400 and B747­8 transport every kind of
product, including fresh flowers, mobile phones, medicines and live
animals.
 Air Cargo Trying Harder!
• At the other end of the scale is the giant Antonov. Based originally on a
military transport plane, it is capable of carrying up to a 150 metric tonne
payload

• Since the era of the Zeppelin, experiments continue to develop airships

that theoretically could carry much bigger loads at lower cost.
 Air Cargo Trying Harder!
• According to Tony Tyler, CEO of IATA;

by 2030 the number of airline passengers will probably double and cargo
traffic could reach 150 million tons per year, supporting some 80 million
jobs and US$6.9 million of global GDP.
 Air Cargo Trying Harder!
Because of the mix of pressures in aviation including
• spikes in fuel prices,
• fierce competition from other transport modes,
• economic fluctuations,
• war, weather and
• environmental issues,
air cargo operators and ground service providers are forever striving to offer a better
service at a lower price.
 Air Cargo Trying Harder!
• At first the express market was mostly limited to mail, important
documents and small packages

• Today the original business models have evolved into total freight
• With the introduction of a new generation of wide­bodied passenger
aircraft, a significant amount of cargo can be loaded on nearly every
flight, even with a full passenger load.
 Air Cargo Trying Harder!

To achieve a fast, quality operation there must be a substantial invest­ment in

• equipment,
• buildings,
• technology,
• staff and training,
this requires capital investment, which ground handling companies have difficulty
justifying if the airlines are not willing to pay a fair return.
 Air Cargo Trying Harder!
• One use of freighters has been the charter market, which meets specific customer
needs.

• When a freighter is chartered to transport goods to one particular destination at a very

keen price but with no return cargo, the aircraft must return empty, which is obviously
a loss, forcing the operator to seek a return cargo at any price.

• If, however, the operator runs a scheduled route structure, there will be as much
freight returning as the outbound through dedicated business planning.
 Air Cargo Trying Harder!
• A good example of this process in action is the Luxembourg­based all­cargo airlines Cargolux,
which has for many years operated regular scheduled services to many destinations throughout
the world.

• The passenger aircraft by contrast is flying on a regular scheduled route with or without cargo
on board and thus does not have the return load busi­ness problem to the same extent.

• However, hard selling by the airline’s cargo sales force is required to fill the bellies in a highly
competitive market; this is often done on the basis of contribution pricing only, not taking into
account the true costs of flying that a freighter operator must bear.
 Air Cargo Trying Harder!

• Volatile and sky­high fuel prices,

• extreme natural events,
• wars and acts of terrorism
• pandemic
have devastated the margins of cargo operators over the last 20 years.
 Air Cargo Trying Harder!

• Despite all the debated shortcomings

of the industry, the entrepreneurial
culture of its leaders has found
solutions to most of these challenges.
• air cargo is still the first choice for
shippers seeking fast and safe
transport of their precious goods.
 Air Cargo Trying Harder!
• Another advantage passenger
airlines have is that, due to the
scale of their operations, they
can continue to buy or lease the
latest and most up to date aircraft
costing several hundred million
dollars but with much better fuel
and emissions performance.
 Air Cargo Trying Harder!
Emirates Airlines, for example,
has a fleet of 265 new or about
to be renewed aircraft
including a large fleet of B777­
300, Airbus A380­800s and
plans a total fleet of 400 mixed
wide bodies by 2020. The
airline also has a fleet of 14
wide­bodied freighters.
• Very few all­ cargo operators can even think of this level of investment. With a Boeing
777 being capable of carrying 25 tons of cargo in addition to a full load of passengers
plus baggage, it is clear that shippers will be attracted to this option.

• A carrier like Emirates is able to offer network scale and flexibility that no freighter
carrier, even Cargolux, can dream of matching.

• Cargo aircraft are often unwelcome at large overcrowded airport hubs, especially at
night, and restrictions are in place at airports such as Heathrow, Frankfurt and Beijing.

• This has engendered a number of ‘cargo friendly’ airports that are eager to accept this
traffic
 Supply chains under pressure

• In one decade the internet revolution has changed the face of

manufacturing and distribution beyond recognition.
• The logistics business and especially air cargo is having to renew itself to
accommodate new rules, technologies and market demands.
• Heavier security also has the effect of slowing down processes
• There is also the failure of many players in the business to take
innovation on board or make the necessary investment in facilities, staff
and training.
 Supply chains under pressure

• E­commerce with its ‘I want it now’ culture puts intense pressure on efficiency,
distribution and final delivery.

• Technology speeds up the process with faster Customs clearance, lighter

documentation and tracking, but this is mostly handled by the postal authorities, not
airlines.

• In the future, tech­nology will bring more transparency and make information
available when needed; at that point the airlines could get back in the game.
 Supply chains under pressure

• E­commerce will facilitate better profiling and help speed up security and
Customs clear­ance.

• Attaching X­ray images will help with screening and will cut back on the
need for manual intervention.

• If all goes to plan the entire supply chain process should be 100 per cent
electronic within five to 10 years.
 The world of air cargo

Three key dimensions of our industry that ensure its long­term future and
sustainability:
• Profit, or the ability to attract funds and invest them in an appropriate way.

• Planet, or the social and ecological impact our activities have on the environment

• People, who use our tools, design our processes, analyse the past, manage the
present and shape the futu
 PROFIT
• The airline industry transports goods that amount to barely 1 per cent of the
volume of international trade, but well over 35 per cent of the value of trade, a
proportion that is rising constantly as manufactured products increase in
sophistication.

• Moreover these goods, whether they are end products for consumption or
components for assembly, are traded by the widest range of industries and
come in every shape and size, in fact any that will fit the contours of an
airplane.
 PROFIT
• The goods also require different conditions of transport, from high
security for valuables, to a temperature­controlled environment for
perishables and pharmaceuticals, or express transit times for all urgent
shipments.

• Finally many different parties are involved, from forwarders to airlines, IT

companies and handlers, truckers and regulators.
 Planet

• Air cargo industry is is respon­sible for ‘only around 2 per cent’ of global CO2
emissions

• Aviation’s emissions are considerably higher per ton kilometre than other modes of
transport.

• 80 per cent of aviation CO2 is emitted from flights over 1,500 kilometres in length, for
which there is no practical alternative form of transport in a globalized world of just­in­
time supply chains.
 Planet

• the industry has set itself very ambitious climate targets, to improve its fleet fuel
efficiency by an average of 1.5 per cent per annum between 2009 and 2020.

• the industry has already reduced emissions per ton kilometre by more than 70 per cent,
and perceived noise by more than 75 per cent, since the first jet aircraft.

• Modern engines consume a fraction of the fuel they used to. Successful experiments
have been carried out with biofuels and other sustainable fuels, and industrial
exploitation will follow when it becomes economically viable.
 Planet

• Capacity utilization is improved.

• Ground processes are streamlined and infrastructure better utilized.

• Above all, the air cargo industry, in a globalized world, offers the pos­
sibilities for companies in all other industries to transform their own
business models, and thereby their supply chains, to meet their own
sustainability goals.
 People
• The most important responsibility for the leadership of the air cargo industry is to
attract, retain and motivate the best staff and managers.
The industry needs people
 who are endlessly curious;
 willing to learn about the limitless range of other industries that rely upon us for their
supply chain
 willing to change even successful past practices, if the need arises to innovate;
 willing to take risks, and to take responsibility for the outcome of their decisions and
actions.
 Air Cargo History
• It is generally agreed that commercial aviation began its life around 1910/11 when the
US Post Office Department recognized the possibility of developing aircraft into a
practicable means of mail transportation.

• Mail delivery, domestic and international, accounted for over half of the nascent
industry’s income from 1918 to 1939.

• In addition, commercial aviation was not a profitable activity on its own and needed
financial support from subsidies and high postal fees.
 Regulations and agreements

The Paris International Air Convention

 introduced in 1922,
 defined the sovereign control of national airspace.
 The principle of freedom to fly over a country’s airspace was generally accepted.
 This treaty, containing nine separate chapters, also dealt with nationality of
aircraft, certificates of airworthiness, patents and permissions for take­ off and
landing.
 Regulations and agreements

The International Commission of Air Navigation (ICAN)

based in Paris in October 1925.

introduced a raft of legal, technical and meteorological services
 Regulations and agreements

Warsaw Convention

 signed in 1929 by 152 different parties and came into force in 1933

 It set out to regulate liability for international carriage of people, luggage or goods
performed by aircraft for reward.

 It defined international carriage, the rules concerning documentation, the liability

limitations of the carrier as well as rules governing jurisdiction.
 Regulations and agreements

• In 1955, following a review by ICAO, The Hague Protocol was adopted

by the ICAO council.

• The Montreal Conven­ tion (formally, the Convention for the Unification
of Certain Rules for International Carriage by Air) is a multilateral treaty
adopted by a diplomatic meeting of ICAO member states in 1999.
 Regulations and agreements

• World War II witnessed major improvements in aviation technology. The

aircraft were vital for military purposes as well as heavy cargo trans­port.

• Most of these aircraft had little practical civil application, but the
capabilities of the manufacturers were tested and developed during this
era.
 Regulations and agreements

• At first, cargo on long­haul international routes remained at a modest level

and consisted mostly of priority airmail, which did not require large
capacity.
• KLM, Deutsche Lufthansa and Air France were the pioneers, carry­ing
newspapers, banknotes , perfume and fashion items, spare parts for
machinery and live animals.
• KLM was first in the transport of large animals, such as horses and cows,
as well as fresh flowers.
 Regulations and agreements

• Most freighter aircraft used at this time were either con­verted passenger aircraft
with the seats removed, or ex­military aircraft that had long proved to be suitable
for the task.
• Air travel started to expand and cargo capacity was needed to supply post­war
rebuilding efforts.
• New types of aircraft were developed, starting with turboprop engines; shortly
afterwards came the introduction of commercial jet aircraft.
• it was the development of military aircraft that led the way for the civil sector to
develop.
 The growth of air freight

The jet age

• The air freight industry, as we know it today, was revolutionized by the arrival of a
new generation of jet aircraft, the DC­8 and Boeing 707, capable of cruising speeds
of around 550 mph with a payload in the freighter version of up to 40 metric
tonnes.

• The invention of special freight containers called unit load device (ULD) heralded
faster and more controllable loading/ unloading and a more efficient use of
available space
 The growth of air freight

• These containers were essential for maximizing use of capacity and speeding up
handling.

• Constructed of aluminium, the ULD is very light but fragile and thus sustains
considerable damage unless properly handled.

• Other types of special containers have been developed such as temperature­

controlled boxes for perishable cargo, pharmaceuticals, and live animal stalls.
 The growth of air freight

• The Boeing 747­100, the first jumbo jet, took off on its maiden flight from
Seattle on 9 February 1969.

• Between 1970 and 1991 Boeing built 476 aircraft, including the improved
B747­200 and B747­300 versions. One interesting variant was the 747
Combi or 747M for main deck.
• Two­engine technology and substantial fuel savings over the 747, common
operational requirements in maintenance and engineering, cockpit
commonality with the passenger aircraft leading to reduced requirements
in staff, all produce a much lower operating unit cost for the airline.
 The major contributors

• Integrators such as FedEx, UPS, DHL and TNT and many smaller
operators owe their existence to their ability to control and transport
documents and goods rapidly door to door, in a one­stop service.

• Because their entire operations are kept in­house, including for the most
part the flights, they have been able to follow the progress of each
package through their own tracking systems, handling facilities and
ground network, meaning fewer errors, delays and losses.
 The major contributors

• Integrators were the first to work closely with Customs in major

destinations, and due to the volume they produced ensure on­site presence
of Customs officers to expedite clearance.

• This competitive advantage over the traditional Customs brokerage firms

allowed them to rapidly expand market share while the industry as we
knew it just looked on.
 The airlines

• Techniques including tracking and tracing, product segmentation and e­

freight have made shipments faster, more reliable and more transparent.

• Yet many legacy airlines are not investing in this technology and forwarders
are not embracing the benefits; they are now paying a price.

• The biggest hurdle for the industry is process segmentation in the logistics
chain and a lack of trust between the various components within it.
 The airlines

• Diverse interests between airlines, airports, forwarders, and ground­

handling companies, Customs and government authorities lead to delays
and poor service.

• The clients are more likely to seek a solution that ‘delivers as promised’,
rather than one that talks about ‘flown as booked’.
 Electronic systems

• In order to offer competitive services, airlines and forwarders, airports and

Customs have had to invest in computer­based systems with a view to
communicating accurately and control the cargo processes.

• The International Air Transport Association (IATA) and The International

Air Cargo Association (TIACA) are the ones leading the way in
promoting these technologies.
 Electronic systems

• The introduction of Cargo Community Systems (CCS) many years ago

was the first stage in this process and the advent of Electronic Data
Interchange (EDI) successfully standardized methods of sending cargo
messages

• With the integrators’ system of total freight control, the freight forwarders
and airlines had to respond and offer a very similar level of service to their
customers, such as door­to­door pick­up and delivery, with online tracking
and tracing to back it up.
 Electronic systems

• The introduction of Cargo Community Systems (CCS) many years ago

was the first stage in this process and the advent of Electronic Data
Interchange (EDI) successfully standardized methods of sending cargo
messages

• With the integrators’ system of total freight control, the freight forwarders
and airlines had to respond and offer a very similar level of service to their
customers, such as door­to­door pick­up and delivery, with online tracking
and tracing to back it up.
 AIRPORT CONNECTIONS

• All airports are in place to connect passengers, mail and air cargo to local
markets and services.
• They may be the very large global hubs, such as Dubai, Paris or Atlanta,
but other regional airports such as Liège in Belgium or East Midlands in
the United Kingdom are also significant for cargo traffic.
 AIRPORT CONNECTIONS

• They may be integrator stations with special sorting facilities, dedicated

freighter hubs or perishables centres. I

• In the face of high costs and the trend of using passenger aircraft bellies
for cargo, some airports are finding life increas­ingly difficult.
 AIRPORT CONNECTIONS

• For air cargo operators, it is the minimum time spent on the ground plus
road links that are important in gaining access to local or transit markets.
• Cargo operations require warehouses and cool rooms, health controls and
Customs with easy access to the aircraft.
• High levels of security are obligatory, with trained handling staff.
• Handling companies must invest in modern computer systems, warehouse
equipment and warehousing facilities
 AIRPORT CONNECTIONS

• An airport is called a hub when airlines operate an interchange of flights with a

high proportion of both passengers and cargo being in transit.
• This is an efficient way of maximizing aircraft capacity and investment of both
airlines and airports.
• Flights arriving or departing from international destinations enter the hub where
both passengers and cargo can be repositioned on flights for other destinations.
• A massive investment in new airport facilities and passenger comfort attracts
business, making the airport profitable.
TOP 10 CARGO AIRPORTS
 Airport Types
International hubs,
• Many different carriers operate for both passenger and cargo.
• Examples are London, New York, Miami and Frankfurt.
• Cargo may reach its local destination or be re­routed via another airline
connection to a further destination.
 Airport Types
Smaller airports such as Munich, Mumbai, Houston and Singapore, which
perform a similar role but on a smaller scale.

Small regional airports such as Bristol in the United Kingdom, Bilbao in

Spain or Halifax Stanfield in Canada, which are building up considerable
passenger traffic where travellers are avoiding big hub airports.
 Airport Types
Cargo-friendly airports,
the air freight business is the main activity.
These include Liège (Belgium), Cologne and Frankfurt­Hahn in Germany.
These airports welcome cargo traffic while some of the bigger hubs do not
want freighters and cargo­related activities.
• Whatever the size or location, all airports must provide runways of 3,000
m, electronic navigation equipment, radar, beacons and perimeter fence
security. Various international organizations, as well as national ones, such
as the Federal Aviation Administration (FAA) in the United States or the
Civil Aviation Authority (CAA) in the United Kingdom, control these
facilities.
 International hubs

• All these airport hubs maintain an economic balance between passenger and cargo traffic.
• Hong Kong International Airport is 2nd busiest air cargo gateway in the world, handling
over 4 million tons per year.
• The airport provides all the facilities and services needed by cargo operators. It was
constructed well away from the city centre, which keeps all noise and emissions far away.
• It is one of the leading gateways for the Chinese mainland and incorporates the highest
standards in equipment as well as security.
• Its success is due to its strategic position next to China, with direct access to factories in
the Pearl River Delta.
 International hubs

• Miami International Airport has unrivalled cargo flights serving Latin

America and the Caribbean as well as an overall total of around 90
carriers .
• The Airport’s significant gains in the world’s air cargo market have
provided widespread economic benefits for Miami­Dade County.
• The Airport’s trade supports more than 1,000 freight forwarders and
almost 250 Customs brokers located around the airport.
 International hubs

• Miami’s trade is largely with the Caribbean and Latin American countries,
especially in perishables such as flowers, seafood, fruit and vegetables,
plus some clothing.
• MIA’s export cargo is comprised of computers and peripherals, machinery,
medical equipment, telecommunications equipment, agricultural
machinery, apparel articles and aircraft parts
 International hubs

• Dubai: the original 35,000 square metre Dubai Airport’s cargo facility was
built at a cost of US$75 million in 1991 with a capacity for handling
150,000 tonnes.
• The Cargo Mega Terminal was opened in 2008 at a cost of more than
US$200 million, with increased capacity of 2.5 million tonnes.
• Dubai Airport is served by over 125 airlines flying to more than 260
destina­tions worldwide.
 International hubs

• Dubai has rapidly developed from a largely sea–air trans­shipment base

into one of the world’s top passenger and cargo hubs, in parallel with the
rise of Emirates airlines.
• Dubai itself has expanded its business and trading status but the airline’s
operations benefit from its unique route network
 Small and medium airport
• They serve their local catchment areas for both passengers and cargo.
• In most cases cargo plays a minor role but is still important to the airport’s
bottom line.
• For example, Dusseldorf International Airport is situated in the North
Rhine Westphalia region, traditional home to Germany’s heavy industries.
• The airport is the third­busiest passenger gateway in Germany with 70
airlines serving over 180 destinations worldwide.
 Small and medium airport
• It serves as a secondary hub for Air Berlin and Lufthansa as well as
benefiting from multiple daily flights to and from the Middle East.
• The airport has become a busy hub connected to a growing number of
intercontinental destinations, making it increasingly important for the big
forwarders and logistics companies.
 Specialist cargo airports

• There are many airports around the world where cargo plays a more impor­
tant role than passenger traffic.
• The airport may have space for large­scale seasonal charter operations, for
example the New Beaujolais traffic at Chateauroux in France, and
seasonal produce imports at Ostend (Belgium).
• Each one of these airports has marginal low­cost airline traffic and they are
all situated some distance from major passenger destinations.
 Specialist cargo airports

• They are mostly open at night and can all handle large freighter aircraft
such as an AN­124 or a B747F.
• Thanks to an absence of congestion they are capable of achieving a fast
turnaround.
 Integrators

• Because of the need for speed and freedom to fly at night, the main
integrators, such as FedEx, DHL and UPS, have developed their own hubs
where only cargo is handled.
• For example, FedEx has a long established hub at Paris CDG, UPS at
Cologne and DHL at Leipzig.
 Integrators

• In the United States, FedEx Express’s Memphis ‘Superhub’ contains over

300 miles of linked conveyor belts which comprise a digital sorting and
processing system for domestic and international small packages trans­
shipped through the facility.
• The hub handles an average of about 3.3 million packages per day and
employs more than 8,000 workers during the night shift.