Episode Transcript
[00:00:06] Speaker A: Hello and welcome to this special Tiaka Air Cargo Forum edition of the Lodestar podcast. Now, this week the Lodestar team has spent time in Miami at Tiaka's Air Cargo Forum. And so for the last few days I've been traipsing up and down a huge exhibition hall with my microphone and I've been chatting to many different air cargo experts and supply chain stakeholders on how they view the industry. So we've got some insights such as current challenges or opportunities that they see arising. It was really interesting actually for me to hear all these perspectives and so I put together a compilation of the responses so you too can hear firsthand what is driving the market. Thank you so much to everyone who gave their insights and of course to Tiaka for hosting such a wonderful event. And I really hope that you enjoy listening to this podcast as much as I enjoyed creating it.
Glyn Hughes, Director General of Tiaka Now, Glyn, what do you think is the biggest challenge for the air cargo industry right now?
[00:01:06] Speaker B: Well, that's a great question because I think it's one of those challenges that we occasionally find ourselves in, where it's actually a good challenge. This year we've seen such record demand for the air cargo services that the challenge we're finding is how we actually supply the capacity, how we manage to put the aircraft on the routes which can keep the customers happy. So when you look at the last 10 months, it's been double digit growth. We've got E commerce, we've got automotive, we've got high tech. And all these are shown really positive signs. So right now the system is actually under a little bit of stress because when you're maximizing the usage of that capacity, aircraft utilization is at record levels. Sometimes the ability to find capacity is very challenging. And then we have situations coming up where we're expecting perhaps a peak period at the end of the year is one thing. As the shopping events really kick into fruition, we also have a change of presidency here in the US which could translate into increase of tariffs, for example, which could then see a short term peak of demand where people to try and get in before those tariffs come into play. We also have another big event which is looming in the middle of January where the east coast US port workers have got another deadline where they're looking at the use of technology in the maritime ports. And if that doesn't come to a satisfactory conclusion, we could see the threat of a strike come to fruition there, which would then translate into some significant short term demands for Air cargo, which as I said before, were already under a stressed capacity situation. So I think that's really the one big challenge that we see as we head towards the end of this year and the beginning of next year. And then we hope that will be alleviated somewhat through the course of next year as additional capacity, perhaps some conversions really come into the marketplace.
[00:02:50] Speaker A: Marcus Flacker, International Business Development Manager for Lufthansa Industry Solutions Marcus, do you think that E Commerce's entrance into the air cargo industry is going to push carriers to invest more in digital solutions?
[00:03:03] Speaker C: Thank you for the question. I think it will trigger that actually, that technologies like I will be used for forecasting really volumes that are going to be shipped. But when we also look back at that incident with the route shipment that was coming from China, you know, the, I think four weeks ago, you know, and you will need to control your shipments a lot better. It's a mass market where you have hundreds of thousands of shipments coming on board of an aircraft. You will need to do something about who is your customer, know your customer, identify patterns. And then of course, one of the problems that we have is really counterfeit products being imported into the US market, but also European Union and AI and digital technology can help you really to fight that, you know, problem, problem in the cargo industry.
[00:03:44] Speaker A: Mike Ernst, Chief Operations Officer at Expedite all how do you see the US Trucking industry developing over the next few months or years?
[00:03:52] Speaker D: Well, we're very optimistic with what we believe the economy will do. We think it's going to really take off in 2025. A lot of the data shows it's starting to pick back up, so we're looking for a good year.
[00:04:05] Speaker A: Celine Hocard Vice President, Sustainability for Celine how much progress have we made as an industry towards sustainability in the last few years?
[00:04:13] Speaker E: So progress is still being slow. We are talking more about sustainability and people and companies are realizing now that each and every one of them, they have something to do. So I would say it's more like the awareness, the acknowledgement that it's not going to happen magically. That is the progress. You have lots of innovative companies, startups, you know, like coming up on the market with sustainable products that we can use, sustainable packaging, sustainable or biodegradable plastics, biofuels, electric vehicles that we can use on the grounds, etc. So it's a lot of like innovation happening, a long way to go. So I can tell you I have a job for quite, quite a long time if I stay in sustainable sustainability in this, in this industry.
But there is a positive sign that conversation is really happening. And now it's also really happening, you know, at board level, senior management level in the various companies that actually I'm aware of or I'm part of or etc. So that's good.
[00:05:24] Speaker A: Rusi Batlawala, Chairman of Chapman Freeborn what would you say to a young person who's possibly interested in getting into this industry?
[00:05:32] Speaker F: Well, I was attracted to the industry when I was 16, 17, 18, and to this day I find it amazing to see how airplanes land and take off. I always refer to aviation as one of the sexiest things around. Moving E commerce, moving freight from one point to the others. The whole logistics is interesting. It's exciting. Every day something new, and I think it appeals to young people who don't want to sit in an office and do the same thing every day. Aviation is a fascinating business and no two days are ever the same.
[00:06:03] Speaker A: Christopher McDermott, CEO of Champ Cargo Systems what is the cost benefit ratio of adopting AI into the air cargo industry?
[00:06:10] Speaker G: Well, I think AI has got huge benefits that can offer the industry. When you look at the processes we have within the air cargo industry, there are lots of those could be optimized using AI, because there's a lot of data that can be analysed and to the benefit of the industry overall. However, it does come at a cost and that cost is to do with energy. Current AI systems use multiple times the energy of conventional systems and therefore the amount of power required is starting to swamp data centers now. So you will see, for example, in Ireland, they put a moratorium on data center builds for the moment because it's taking up 20% of the national grid. So that is. That's very hungry. So the other thing is that the technology will improve over time and power requirements will drop. So there's a big, I believe there's a big benefit to the industry, but it comes at a cost currently, and we just need to improve algorithms and improve the technology over time.
[00:07:05] Speaker A: Zach Oakley Executive Director for Chicago Rockford International Airport what's the sustainability benefit to being a dedicated cargo airport?
[00:07:13] Speaker H: Being a dedicated airport, it allows us to be a lot more efficient with how we deal with the freighter operators coming in and out of the airport. An airport like Rockford is uncongested. So operating into Rockford, the airline is going to save about an hour of operating time. So as soon as the aircraft touches down, it's about five minutes from wheels down to engines off consistently. That's completely different than what you're going to see at a large passenger hub airport where the aircraft will land, taxi around the airport 20, 30, 40 minutes before going to parking immediately at Rockford, able to get to the parking position, turn everything off, start the immediate offload. And then that time savings throughout is those engines aren't burning fuel, the cost savings for the crew and then in cargo, you know, you can't recreate time. That time savings gets passed down throughout the operation.
[00:07:55] Speaker A: Brandon Fried, Executive Director of the Air Forwarders Association Brandon, how do you think a new Trump presidency is going to impact air cargo?
[00:08:02] Speaker I: I think in numerous ways. Obviously one of the first ways is these proposed tariffs. You know, the incoming president says he's going to hit China with 60% tariffs and even the European Union with 10% tariffs. I think a broad brush tariff imposition is probably a mistake not only for our business but for the, for the country. It's going to increase inflation and it's going to make our products less competitive. And I think a lot, in a lot of ways it shields bad behavior. If we're not producing products efficiently, then we need to be looking at that as a manufacturer of goods and figuring out why. And if you have other countries that are locked out of our market, that's not good for the US Consumer as a whole.
[00:08:49] Speaker A: Matt Pittot, CEO and Founder of Cargo AI Matt, what is the biggest benefit that the air cargo industry can take from AI?
[00:08:57] Speaker G: So the biggest benefit I see is that there is a lot of manual processes that, that can be automated and AI like ChatGPT or other models like this, we really can improve a lot of process so we use it for spot requests, bookings and so the airlines really have better efficiency with that.
[00:09:15] Speaker A: Phaedra Daton Hertog Customer Success Manager at Avery Aviation Software Phaedra, what's one of the main benefits that digitalization can have in the supply chain? Thank you for asking me. Charlotte. What we don't speak a lot about.
[00:09:29] Speaker E: Is the next generation. We have to make it future proof.
[00:09:33] Speaker A: Make sure that the next generation can.
[00:09:35] Speaker E: Use it as they are used now.
[00:09:37] Speaker A: Working on their telephone, using it for WhatsApp, etc.
[00:09:41] Speaker E: Digitalization will definitely help attract new people.
[00:09:45] Speaker A: Bill Nesbitt, Senior Manager of Cargo Business Development at Dallas Fort Worth Airport could you tell us a bit about how E Commerce is changing the operations at the airport?
[00:09:54] Speaker D: Sure. So the E Commerce business we're seeing is from a different set of community than we're normally seeing from your traditional freight forwarders and scheduled airlines. They operate more on a charter basis on long term charters it's definitely had an impact on the amount of work that our CBP Customs and Border Protection officers workload. So E Commerce brings its own set of challenges from a custom standpoint. And so one of the things we've done at DFW is to implement an airside centralized examination station. So those customs officers are right there on the airside in a facility operated by Donata, and the cargo comes in and they try to clear it same day when they need to do an inspection, versus sometimes it would take seven or eight days if it was going to another bonded facility.
[00:10:43] Speaker A: This next clip comes from CEO of Market Intelligence and Data company Rotate, Ryan Kirous, and it's from a longer interview, but Ryan made a really interesting point about the capacity shortage. And if you remember, at the beginning of the podcast, that was what Glyn identified as one of the biggest challenges that our industry is facing. So I spoke to Ryan about the impacts of this and how the industry is responding, and it's really interesting, so I thought you might enjoy.
[00:11:09] Speaker J: Capacity growth has been 8%, but that is lagging demand growth, right? Demand was growing, you know, anywhere between 10 and 13% based on FTKs or tons. Passenger flights are coming back. They've been coming back, but the rate of coming back is slowing down, right? Airline freighters, you know, capacities are following basically global demand. So airline freighters are moving wherever the demand is. And because of their changing strategy, you see that the integrators haven't really added much capacity. This capacity profile of 8, it's also quite behind demand. So that leads to spot rates that are very high. So if you look in 2024, you know, this is Zenata data, you see that spot rates are way above contracted rates, which makes sense. If demand has been growing faster than supply, spot rates get pushed up. So you see airlines moving capacity, right? You've read in the news klm, you've seen Qatar move capacity from the US and South America into Asia. So where you see, you know, big drops between Europe and Latin America, you see drops in the transatlantic of 3%. We're looking at September versus the summer. So immediately after the summer, people just started moving capacity, freighter capacity into Asia. So you see the Trans Pacific went up 2%, Europe, China went up 2%, Middle East, 2%. It's really the transatlantic, it's South America. You also see it on Africa. There was an article that I read recently about the growers in Nairobi being warned about capacity constraints and there being limited capacity for their flowers getting out. The last time you saw something like this was during COVID where PPE was pushing capacity into China for the Trans Pacific and Europe. And then you saw then that Nairobi farmers and Latin American farmers, they can only take so much of a cost increase, 20%. That's a bit of an unintended consequence of all this. I think that when people talk about the market, they get quite a lot of energy about it. But not all the markets are experiencing similar growth, right? So if you are in Africa, you're not feeling the same market. If you're in North America as an export market and you see all that excess capacity, empty flights going back to China and the rates are dropping to like barely making money, cents, 60 cents per kilo, you're not feeling very good about the market, right? So it's not growing and the rates are poor. So in total, the market went really well. Where did it come from? It came from Asia Pacific. And you can see this is the imports from China, from the US, EU and UK, they've grown substantially since 2017. That's e commerce. So it's now over half of total exports to those three destinations. The question everybody keeps asking is how sustainable is it to continue flying, you know, $2 iPhone covers across the Pacific, Electronics, pharmaceuticals, classic journal cargo that's getting pushed out by this E commerce.
[00:14:11] Speaker A: So there you have it. That is some insights from the Air Cargo Forum this week in Miami. We'll be back on Monday as always with a news in brief. Thank you for joining me and I'll see you next time.
