Opportunities in an Era of Cargo Disruptions

The Russia-Ukraine conflict and the COVID-19 pandemic continue impacting global air cargo, which is also tackling rising fuel prices, economic sanctions and no-flight zones. These trends affected numerous markets by increasing service costs and delaying deliveries at a time when e-commerce skyrocketed, increasing the need for faster deliveries. Under these circumstances, companies have been forced to adapt to give continuity to their operations and keep up with the growing demand.

“We had never had a shipping crisis like this one. Fuel prices are increasing as a global pandemic shrank air freight capacity by 80 percent,” said Luis Ramos, CEO, Aerocharter.

The cargo sector is still affected by the global context but the COVID-19 outbreak allowed the sector to become more relevant to the economy. To face the sanitary crisis, air freight became crucial as it allowed countries to receive and send medical supplies, forced many companies to get certified for the transportation of pharmaceutical products and turn their passenger fleet into cargo aircraft. During the pandemic, “cargo transportation was globally considered an essential activity for the continuity of economic activities and most importantly for the lives of people,” said Jorge L. Torres, Vice President, FedEx Express Mexico.

Airlines were not prepared for this crisis. “Supply chain disruption forced companies to reconfigure their cargo fleets, as travel demand lagged," said Luis Sierra, CEO, MAS Air. Before the pandemic, MAS Air was implementing a five-year strategic plan but as COVID-19 hit, its operations were destabilized and focused on maintaining their operations. Fortunately, the brand is overcoming the obstacles posed by the pandemic and is currently celebrating its 30th anniversary, said Sierra.

Although COVID-19 heavily impacted air cargo companies, opportunities also arose due to the lack of containers for maritime transportation. "The shortage of shipping containers is an opportunity for airlines to demonstrate the potential of air freight, which is being increasingly recognized," said Guillaume Marsoin, Director Mexico and Central America, Air France-KLM Martinair Cargo. This is linked to the fact that during the COVID-19 recovery phase there has been an increase in rates, a change in the flow of goods, fewer operational vessels and congested ports. Even though this situation benefits the industry because clients are looking for more transportation options, air freight companies have to deal with the challenge of prioritizing what products should be given priority depending on their relevance or urgency.

For air cargo to succeed in overcoming these challenges, the public sector must participate in the process and embrace digitization and automation. In Mexico, cargo transportation can be delayed by the overreliance on physical requirements and permits, which could be digitized to the convenience of regulators and companies. Moreover, the excessive use of paper hinders the industry’s sustainability efforts. For that reason, the sector could benefit from the implementation of the cargo processes used in the US and the EU. "Processes and other standards of operations need to be revised, as many lead to time and monetary losses," said Frank Nozinsky, Director, Sales and Handling Mexico, Lufthansa Cargo.

The e-commerce boom is putting further pressure in the cargo industry. “E-commerce is booming, accelerated by the pandemic. This has made customers even more anxious to get their products in days, if not hours, so we are anticipating that the sector will become even faster,” said Nozinsky to MBN.

In Mexico, e-commerce grew by 81 percent during 2021 and plays an important role in exports, which are a large part of the country’s GDP. As sales increase, the sector needs streamlined processes and regulations that facilitate the transportation of goods across borders. “Regulations must adapt and so that customer experience improves and transparency is promoted,” added Ramos.

The air cargo sector is undergoing a transformation. “I am confident about the future of airfreight, we have the right opportunity to be more sustainable, optimize productivity, change and start thinking about the future,” said Marsoin.