Date: 12 March 2013
Remarks of Tony Tyler at the World Cargo Symposium in Doha
Good morning, and please let me echo Des’ welcome to the World Cargo Symposium 2013. I’d like to begin by saying thank you to Qatar Airways, our host for this event. Akbar al Baker, CEO of Qatar Airways and all his team have made us feel very welcome. And we appreciate the chance to see first-hand what aviation means to Qatar.
I would also like give a special thanks to His Excellency Yousef Hussain Kamal, Minister of Economy and Finance of the State of Qatar for his incisive comments. Qatar’s approach to aviation is a beacon for our industry. Its government understands the power of aviation to drive economic growth and development.
It is no secret that our industry faces many challenges—including financial. Since 2003 we have generated about $5 trillion in revenues. And yet we struggled just to cover our costs and barely broke even.
The recent downturn has been particularly difficult for the cargo side of our business. The two-speed recovery has seen the Western economies struggle to regain lost ground, while the developing economies of the East forge ahead. Cargo has been impacted with a decline in shipments of high value goods from East to West. And sea shipping has captured a larger part of the growth in trade—even for some goods that traditionally have gone by air. Speed is our biggest selling point. But it comes with a price that is many times more expensive than shipping by sea. So there is tremendous pressure to further improve our competitiveness.
Air cargo accounts on average for about 12% of industry revenues—much more in some airlines. That’s not far off the 14% that is generated by business class sales. Improving the competitiveness of air cargo has the potential to impact positively our very thin margins. As you begin your discussions this week, I would like to share some thoughts on five priorities to strengthen the air cargo industry:
1. Transition immediately to an e-cargo environment
2. Secure the supply chain
3. Ensure that dangerous goods regulations are followed
4. Focus on environmental sustainability
5. Speak with united voice on common issues
Transitioning to e-cargo
Let’s start with e-cargo. We first launched e-freight in June 2004—nearly a decade ago. And we still have not realized the paperless air freight system that I believe we all know is needed. There have been some false starts and dead ends. But I believe that we are on the cusp of taking some major steps forward.
Most importantly, the supply chain is aligned. The Global Air Cargo Advisory Group (GACAG) endorsed an e-freight roadmap that reflects agreement on roles and responsibilities for pushing this critical project forward.
IATA is committed to implementing the e-Air Waybill (e-AWB). We are targeting 20% penetration by the end of this year and 100% by the end of 2015. Sunday’s endorsement by the Cargo Services Conference of Resolution 672 on a “Multilateral e-AWB Agreement” will certainly help the process. In parallel to these efforts, the International Federation of Freight Forwarders (FIATA) and the Global Shippers Forum have agreed to push forward with the digitalization of the rest of the document pouch as the e-AWB comes into force.
Our targets are ambitious considering that e-AWB penetration was 6.8% at the end of 2012. But Cathay Pacific, Emirates, Singapore Airlines Cargo and Korean Air have pursued policies that will lead to 100% e-AWB from their hubs by the end of 2013. As a result of their commitment, these carriers were responsible for some 77% of e-AWBs issued last year. I thank them for their leadership. They have demonstrated what is possible. And I challenge every other airline to match their efforts and take part in the benefits.
Of course, I also recognize that we still have some regulatory hurdles. Many states have not yet signed the Montreal Convention 1999 (MC99) which provides the legal framework for electronic documentation. And even in states where MC99 is in force, we have some customs agencies reluctant to move to a paperless environment. This will need a collective push by the whole supply chain—to convince governments of the benefits provided by a more efficient air cargo industry.
Securing the supply chain
The supply chain also plays a critical role in security. It is more efficient and more effective to secure freight as it enters the supply chain than focusing all of our efforts at the airport—where time and space are limited. IATA worked with the International Civil Aviation Organization (ICAO) to develop a framework for supply chain security for states to implement. In parallel, IATA developed Secure Freight as a ready-made template for states to use. It has been successfully trialed in eight countries. The first pilot scheme in Malaysia proved that it is an effective way to manage cargo security. And analysis of the trial provided the basic data to estimate that implementing Secure Freight principles in Malaysia would result in a $1-2 billion boost to its economy over five years.
Air cargo is a global network. So the greatest benefit of security initiatives will be derived when states mutually recognize their security regimes. That is why progress on the US Air Cargo Advanced Screening (ACAS) program, the EU’s Air Cargo or Mail Carrier operating into the Union from a Third Country Airport (ACC3) security directive and the e-Cargo Security Declaration are particularly important developments.
- At the AVSEC World conference last week, I was able to speak with US Department of Homeland Security Secretary Janet Napolitano and Transportation Security Administrator John Pistole on the latest issues regarding ACAS. They are aware of the industry’s commitment to security. And the standards and solutions being provided by IATA and our partners in GACAG are helping to shape regulation. I urged them not to rush through the rulemaking process regarding ACAS. Our challenge is to continue to demonstrate our capability to provide accurate data of all transactions which supports their risk assessment decisions.
- The EU’s ACC3 scheme comes with a different challenge. In countries deemed “red” or “white” the security infrastructure of suppliers must be audited in order to continue shipping to the EU. That affects some 700 airline stations as well as many freight forwarders and shippers and the deadline is July 2014. The current pool of independent validators is insufficient which is why IATA has created a Center of Excellence to build the needed skills through training. The program is off to a flying start. Already one state has endorsed the training program. And we will hear more on that later in this session.
- And lastly the e-Cargo Security Declaration (e-CSD) has been endorsed by the UK, the Netherlands, Germany and Switzerland. And proof-of-concept programs are underway in Canada and South Africa. This new standard is going to be in ICAO guidance material to enable access of shipment data to civil aviation authorities. To encourage other states to move in the same direction, it is important that the industry uses e-CSD in those countries where approval has already been granted.
Improving the Handling of Dangerous Goods
Alongside security, safety is also a top priority. 2012 was a great year for safety. Overall, there was an average of one Western-built jet hull loss for every 5 million flights. And no airlines on the IATA Operational Safety Audit registry suffered a hull loss with a Western-built jet. But there were still 75 accidents of all types. And because every accident is one too many, all partners in the industry continue to work together to make aviation even safer.
When it comes to cargo, the focus is on dangerous goods. We have well developed dangerous goods regulations. Of course, most things can be safely shipped by air—provided the regulations are followed. And the industry has a good track record of compliance. But over the last year we have had two reminders that we cannot take our eye off the ball.
- Mercury leaks from manufactured goods grounded an aircraft for several weeks. The goods were not properly declared. And they were not properly packed.
- Lithium batteries have also gained a lot of media attention. The issues with lithium batteries powering the 787 are being investigated by the National Transportation Safety Board (NTSB) and I am confident that they will find a solution. Lithium batteries in personal electronic devices pose limited risk and are not the principle concern. But we have seen incidents involving lithium batteries in cargo shipments. A lot of high value electronic devices powered by lithium batteries are shipped by air—from mobile phones and laptops to larger electronic devices.
We don’t need more regulation. But we need to ensure that the regulations are concise and, most importantly, followed. With over 50 million tonnes of cargo transported by air annually, it is a big challenge. And this is being made even bigger as the number of shippers proliferates—particularly with the growth of e-commerce.
We are tracking dangerous goods incidents and sharing this with the industry and regulators—to identify trends and develop mitigation actions. And one early conclusion is that we must adapt training and improve communication—particularly with respect to the new and larger community of shippers. We are working closely with ICAO and regulators to address this. And we will need to work together as an industry to raise awareness of the need to follow the rules.
Tackling the environmental challenge
Alongside all of this, we must keep in mind our commitments on environmental sustainability. It’s one of the major themes of this conference for good reason. The ability to manage our carbon emissions is our license to grow. That is why we are committed to improving fuel efficiency by 1.5% annually to 2020, capping emissions from 2020 with carbon-neutral growth (CNG2020) and cutting net emissions in half by 2050 compared to 2005. No other global industry has made such commitments. And the strategy to achieve these is agreed and clear—focusing on technology, operations, infrastructure and positive economic measures.
The threat of including international aviation in the EU Emissions Trading Scheme (EU ETS) focused much attention on economic measures—more specifically halting this extra-territorial action. In November, the EU “stopped the clock” on implementation. And that has created the space for governments to move forward positively, through the ICAO process, in developing the global approach and framework that is needed. The focus is on the ICAO Assembly later this year.
We should not underestimate the challenge that this represents. A framework for positive economic measures is one pillar of our strategy. They will be needed—at least temporarily—in order to meet our commitments. And so we are working hard to support the success of the process. At the direction of our Board of Governors we are working through our governance processes to achieve an industry agreement on how to share the burden of CNG2020. And the efforts of the cargo community to develop a common carbon calculator will assist in the dialogue and further the transparency that is a cornerstone of our approach to sustainability.
At the same time we are not letting-up in reminding governments of their important role in the other pillars by supporting initiatives such as implementing the Single European Sky and the commercialization of sustainable biofuels for aviation.
Acting as one industry – advocating for air cargo
On all of these issues, we are more successful when we are aligned and speaking with one voice and a common goal. The basic cargo agenda of efficiency and business sustainability is one shared across the whole freight value chain. That’s why GACAG was created. From the challenges of e-cargo, to our approach on improving safety, securing the industry or ensuring sustainability, we are stronger if we stand together.
GACAG is still in its infancy. It has been successful at developing joint positions on some key issues. This must evolve to joint actions.
One area where it would be natural to further develop cooperation is raising awareness of the benefits of air cargo. At the last World Cargo Symposium (WCS) we launched the “Air Cargo Makes It Happen” campaign. It dovetails with the Benefits of Aviation campaign which has quantified the impact of our industry in jobs and economic activity. Globally aviation supports 57 million jobs and $2.2 trillion in economic activity. That’s impressive. The goal of the cargo and benefits of aviation campaigns is to raise awareness of our current contributions and future potential to be a catalyst for growth, jobs and prosperity.
We have a good story to tell. This industry facilitate trade links that helps nations to develop, delivers vital medicines, enables global supply chains that support employment opportunities and brings products to markets, carries artworks, stage sets, sporting equipment and historical artifacts that allow us to share our cultural heritage. I have said it many times…and I will say it again. Aviation is a force for good in our world that generates wealth both material and of the human spirit. That is true for the passengers we carry and the cargo we deliver. And raising awareness of that is a good thing. The objective is not to seek praise. We want to build the understanding that policies and actions to provide the basis for aviation’s success have broad economic and social benefits.
Over the year, the “Cargo Makes It Happen” campaign has been rolled out in several locations around the world—including here in Qatar. And I hope that through the joint efforts of GACAG we will see it many more locations in the coming months. In parallel, we are developing a specific Benefits of Aviation study to quantify air cargo’s importance. And I hope that GACAG will facilitate a joint action plan to focus on persuading key governments of the need to put cargo at the heart of their economic strategies.
Moreover, we also need advocacy within the industry. For example, airports could focus more on developing efficient cargo facilities. Often they regard 120 passengers as more important than 120 tonnes of cargo. That may be understandable to the airport and a Unit Load Device is less of a source of income as it doesn’t buy perfume at duty free shops. But there is a solid case to be made for the overall economic importance of improving air cargo facilities. And of course virtually every plane has an opportunity to carry cargo. And many routes are only viable with the combined cargo and passenger business.
Ensuring IATA is a force for value and innovation to the air cargo industry
Before I close, I would like to comment on IATA’s commitment to deliver value to the industry. Since the last WCS, IATA has re-confirmed its mission to represent, lead and serve the airline industry. And we have developed a vision to be the force for value creation and innovation driving a safe, secure and profitable air transport industry that sustainably connects and enriches our world. This ambitious vision, among other things, captures IATA’s commitment to be a solid industry partner.
These are not just words. An example of our focus on innovation and value is the work that we have been doing with FIATA to modernize the agency program. We have developed a series of proposals which will be submitted to the Cargo Agency Conference later in the year. These will help the program to reflect the reality of the principal-to-principal relationship that exists in over 70% of transactions performed between airlines and their forwarding partners. And it reflects the changing rules and obligations linked to liabilities between the partners.
But we are not stopping with the cargo agency program. We are also looking to modernize the cargo Ground Handling Agreement (GHA) to ensure it incorporates all activities called for in the modern supply chain. I expect the revised standard GHA to include provisions for new technology and to demand the appropriate facilities for high value and perishable goods to be processed.
Let me conclude by expressing my optimism in air cargo. I believe that 2013 will see improvements in the industry’s prospects—including for cargo. But it will also present challenges. As I have outlined we have a clear agenda to improve safety, security, efficiency, sustainability and create a better understanding of our importance to the global economy. These are big issues. Success will positively impact all the players in the supply chain. And I hope that the discussions this week at WCS will provide the platform for a stimulating debate on how we can cooperate—on these and other areas—to make our industry stronger and more competitive.
Together, we can deliver!
Thank you very much.