Good afternoon. I’m very pleased to get the opportunity to speak to you and to reinforce the importance that IATA attaches to the global cargo agenda. I think I recognize a few faces from the World Cargo Symposium which I attended in Kuala Lumpur in March. And I hope to see many of you again at next year’s Symposium in Doha, Qatar.
I have a strong interest in cargo from my days at Cathay Pacific. For an airline like Cathay, cargo was not just a useful incremental revenue stream in the belly of the plane – it was an essential, fully integrated part of our business.
So I keep a special eye on cargo, and it’s disappointing to report that 2012 was not a good year.
I’m sure you’ll understand that I can’t divulge our new profit forecast ahead of tomorrow’s announcement. But if you have been watching the market progress over the year you will see that it has lost ground. Over the first ten months of the year passenger traffic grew by 5.3% compared to 2011. The same comparison for cargo shows a 2% decline. World trade volumes are still increasing but the commodities mix is favoring maritime rather than air freight.
So cargo is going through a tough time. That means that IATA’s programs for cargo are more important than ever. Our focus is on delivering value that will help our members’ business. And we have clearly reflected this in a revised vision statement:
“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.”
That’s what’s driving IATA. And I hope that you pick that up in what you hear today and tomorrow. For today I’d like to focus on value, innovation, security and sustainability as they relate to cargo…and hopefully contribute to a more profitable industry.
I speak about value a lot. It is in our vision. It is the focus of our work with our members and on behalf of the industry. And I want to start by acknowledging how much we value our partners in the air freight chain, and in particular those who are part of the Cargo Agency Program.
At the Cargo Symposium, I pledged that the Agency Program would be modernized. I am delighted to say that this work is well under way by Des and his team. A key aspect of this project aims to recognize the changing relationship between airlines and freight forwarders whereby today the freight forwarder is very much the customer of the airlines. We must therefore take this into account and ensure we have a Cargo Agency Program that is fit for purpose and has the appropriate governance structure around it. For those Small and Medium Enterprise Forwarders, many of them in emerging markets, who wish to remain a direct agent of an airline, we will protect and maintain that status along with the existing governance regime. We are on track for this to be implemented in January 2014, and I am sure that more information will be available as we move through 2013.
Our other partners are of course crucial to a thriving air freight industry. I think it is a symptom of how our relationships have evolved in recent years that I can welcome representatives from the International Federation of Freight Forwarders Associations (FIATA) and The International Air Cargo Association (TIACA) in the room. And it is good to see the Global Air Cargo Advisory Group (GACAG), of which IATA, FIATA, the Global Shippers’ Forum and TIACA are members, developing its work program across an agenda for efficiency, competitiveness, profitability and sustainability which we all share.
Another objective we share is a joint commitment to raise awareness of the value of air cargo. We’ve made a good start on this. We have focused on reaching three distinct audiences so far.
Firstly, regulators and governments. We’ve been using our Benefits of Aviation reports to highlight the importance of the economic contribution of the industry in nearly 60 countries. And we have asked Oxford Economics to develop a dedicated global cargo study. We know that 35% of world trade by value moves by air, and that about 48 million tonnes of freight is transported annually with a value of well over $5 trillion. But we need to get under the skin of these numbers to understand exactly what they mean for various key markets – and the changes that governments might need to make to safeguard these benefits.
The second target is to raise awareness within our own industry of the importance of cargo. As I mentioned before, I was at an airline that put cargo at the strategic heart of its business, but this is by no means a universal view. There is certainly scope for cargo to share more equitably the spotlight and business focus with the passenger side of the industry.
Finally, we want to reach the public, to remind them of how vital the industry is to many aspects of modern life which they take for granted. I hope those of you who were at the Symposium in March got a chance to see the ‘Air Cargo Makes It Happen’ campaign posters at the airport in Kuala Lumpur. We’ve subsequently displayed these all over the world, including in Beijing, Israel, Ecuador and Miami. These were the inspiration for an even wider ‘Flying makes it happen’ series of advertisements on CNN a few weeks ago. The Air Cargo Makes It Happen messages remind us all of the invaluable contribution the industry makes to the world in which we live. And wherever I give a speech – and you might have noticed that I give quite a few – I continually remind governments of the importance of air connectivity for both goods and people.
Innovation is a crucial element both in IATA’s work and for the future of air cargo. You will hear about a number of different aspects of innovation today, but I just want to quickly focus on one of the most important: e-Freight. IATA and GACAG still firmly believe that e-Freight is the future of this industry.
On the e-Air Waybill (e-AWB), I think we have to accept that it has been harder to drive this forward than we anticipated. I know you have a more detailed session on this later today, so I won’t explore the reasons now. But I will say that the IATA Board of Governors met last week, and we agreed new targets which I believe shows we are still committed to making this happen.
These new targets are:
- 20% e-AWB penetration by end 2013
- 50% by end 2014
- 100% by end 2015
So we have slipped by a year. It’s not satisfactory, but it is the reality in the present economic circumstances.
On Security, we are tackling the issue on four levels:
1) The Secure Freight program
2) The Electronic Consignment Security Declaration
3) The US Air Cargo Advanced Screening program (ACAS)
4) The European Audit program for cargo arriving in the EU from third-country airports & shippers (ACC3)
Right now there’s an exciting opportunity for the air cargo supply chain with regard to cargo security. Various regulatory authorities around the world are looking to increase the oversight and security of the freight chain. That could lead to administrative burdens. But if we get it right, it will open up opportunities to strengthen the integrity of air cargo while enhancing our natural advantages of speed and efficiency. To that end, IATA is involved with pioneering work on securing supply chains by developing new electronic solutions for submitting data to states for their risk assessment.
Following the success of the first Secure Freight pilot in Malaysia, we are now engaged in pilot projects in Mexico, Kenya and Chile, working closely with the civil aviation authorities and industry stakeholders to strengthen their infrastructure and ultimately enhance their national aviation security program. And the initial trials of the Electronic Consignment Security Declaration (e-CSD) have been endorsed by regulators in the UK and the Netherlands. This is an excellent step forward.
But we’ve got still some big challenges with the ACAS and ACC3 regulations. Again, these issues will be explored in greater detail later today, so for now I would simply urge our member carriers to take part in the ACAS trials because it offers a solution to the understandable US need to increase cargo security in the wake of the 2010 printer cartridge plot. And similarly the ACC3 EU plan to audit hundreds of airports, handling agents and possibly forwarders, commencing from the middle of 2014, offers the industry another significant milestone to overcome. IATA has offered to lend its auditing expertise to help with this ambitious scheme.
Finally, sustainability. The last few weeks have seen a sea-change in the debate over aviation carbon emissions. The concession of a pause by the EU in the application of its emissions trading scheme is highly significant. The International Civil Aviation Organization (ICAO) now has the space to find a global solution. As an industry, it was partly our united position and consistent message that helped to convince the Europeans to change course. We have reaped the benefit of being ahead of the game in terms of our commitments to 1.5% annual fuel efficiency improvements, carbon-neutral growth from 2020, and a cut in net emissions of 50% by 2050 compared to 2005 levels. These are crucial targets. We’re meeting the first of these, the 1.5% fuel efficiency, but our 2020 target for capping emissions through carbon-neutral growth is going to be even more of a challenge.
To achieve it, we will need some kind of market-based measure that can be implemented globally. That is why the negotiations at ICAO are so crucial. Carbon-neutral growth gives us our license to meet the increasing demand for global connectivity that only aviation can meet. If we as an industry do not remain united, and ahead of the politicians, by proposing a viable, transparent and fair global market-based measure for emissions, then we will find that governments pick us off with a patchwork of taxes and charges which will do little for the environment, but could threaten the financial viability of air freight.
IATA is working incredibly hard to find a compromise solution that all airlines can support. The IATA Board has fully endorsed our approach.
As we sort this out in time for the ICAO Assembly, our work in other environmental areas continues, through our four-pillar strategy of new technology, operational improvements, and infrastructure developments.
I am as passionate about cargo as I am about any other part of the airline business. We have a huge agenda for improvement. We’re working to help make cargo more secure, and we want to be champions of the value of air cargo. We’re helping to drive new quality standards for infrastructure and operations, and we want to find new talent to build the next generation of cargo leaders. We’re committed to modernizing the Cargo Agency Program, and to achieving unity for the industry’s high level goals through the GACAG. And finally, we want to make this industry sustainable, both financially and environmentally, so that the benefits of air freight can continue to enhance people’s lives.
Des of course can’t unfortunately be with us today, but his team is here and I am sure you will have a lot of questions for them over the course of the day. But, for the next few minutes, you are welcome to ask me questions.
Thank you very much.