For years, a passenger flying around the world could go online, book a seat based on actual availability, and grab a cab to the airport. Meanwhile, booking cargo on the same flight could take days and dozens of emails. Despite moving roughly one-third of global trade, air cargo technology played second fiddle to passenger travel, which represented 90 percent of airline revenue.
Air cargo is generally tapped for urgent shipments, offering trans--Pacific transits that are 10 to 12 times faster than ocean. But the procurement and management of air freight is ironically manual. For example, offline capacity and pricing, together with time-sucking back-and-forth communications, caused end-to-end transit times of air cargo shipments for one company we work with to stretch to between 7 and 14 days, despite only two to three days of actual travel. This lack of visibility meant that forwarders and shippers routinely overpaid by 10 percent or more. Meanwhile, the International Air Transport Association (IATA) regularly reports an industry average capacity utilization of under 50 percent, which points to untapped revenue and major sustainability concerns.
And then COVID-19 hit.
The need for urgent medical supplies and a dramatic increase in e-commerce converged with a massive decline in passenger travel. Demand spiked, while capacity plummeted. As a result, ocean rates remained stable between February and May 2020, but air rates shot up by 400 percent. The sudden supply and demand imbalance created a land grab for capacity and major challenges in moving goods that were suddenly more critical than ever.
Most of the industry continued to cling to static, Excel-based schedules and rates that quickly became pure fiction when held up against flights and rates changing on a daily basis.
The industry adapted, but another herculean challenge is on the horizon, with billions of COVID-19 vaccine doses destined for every corner of the world. Vaccines require either active or passive cooling door-to-door, with carefully controlled environments and transit times.
This means that the end of the pandemic depends entirely on air cargo distribution networks.
It won’t only be the pharmaceutical sector that is impacted, though. The global e-commerce shift will push supply chains harder than ever, with iPhone 12s and fast fashion competing with vaccines for space in the belly of fewer flights than ever.
It is here that new technologies, more specifically, digital capacity management and pricing tools, are entering as key enablers of reliable and agile global distribution.
Air cargo at scale will rely heavily on real-time capacity management and distribution. Freightos research from 2019 found that ocean carriers were far more advanced than airlines in terms of dynamic capacity pricing and application programming interfaces (APIs) that communicate rates and availability directly to customer platforms.
Today, accelerated by COVID-19, more air cargo carriers are adapting automated revenue and capacity management, with dynamic pricing and APIs for distribution. At the start of 2020, roughly 8 percent of airline capacity was accessible via digital third-party platforms, but by the end of the year, over 20 percent of air cargo capacity was set to be available online. This is a rapid advancement for any entrenched industry and will translate into improved revenue management as well as more efficient operations, as accommodating demand surges is something computers have been doing above the deck for decades.
For forwarders and shippers, the digitalization of procurement improves the purchasing experience, particularly during volatile periods. The use of dynamic pricing can also translate to improved utilization and, in turn, more available capacity and lower pricing across the board.
Setting aside the specific technology involved, COVID-19 has also prompted a cultural shift in attitudes toward logistics technology in general. In a September webinar, Robert Kunen, the VP Distribution and Customer Service at Air France-KLM, described how a few months into the pandemic, they could divert customers to online booking with the one-two punch of expediency — no customer support representatives were available — and improved experience. On the customer side, demand for digital services is soaring; e-bookings on the Freightos platform WebCargo, for example, have increased by roughly 600 percent this year compared with 2019.
The prospect of a COVID-19 vaccine makes the need for such technology that much more pressing. Vaccines will not get children back to school or workers back to the office without sufficient distribution. Digital capacity management tools can ensure that every cubic meter of space is utilized, at a fair market price, even when flights are added or canceled on short notice. For every air cargo shipment booked digitally, vaccines will arrive hours — sometimes days — sooner. And airlines, many of which are struggling financially after losing key revenue streams, can leverage these efficiencies to regrow their businesses.
The logistics industry’s success in keeping global trade moving in the early days of the pandemic was inspiring. But the opportunity to emerge from the crisis stronger, armed with the digital tools that will empower more dynamic shipping, whether a potentially life-saving vaccine or a new cell phone, may be one of the longest-lasting and most impactful byproducts of a challenging 2020.