Air cargo carriers battle competition from seas, passenger planes

* Average shipping time in air freight is 6.5 days

* $6.8 trillion worth of goods sent by air cargo each year

* Extensive paperwork slowing down process

* Cargo volumes flat since 2010

By Victoria Bryan

DOHA, June 3 (Reuters) - As more cargo shifts to passenger planes and back onto the seas, airlines are having to rethink their cargo operations or risk the freighter plane becoming a thing of the past.

While some carriers have already reduced the number of freighter planes they operate, more drastic changes to shorten transport times and regain ground lost to the shipping industry are needed, delegates at an annual airline meeting in Doha said.

Air freight built a reputation for getting bulky, expensive goods from A to B as quickly as possible. Even today, the $6.8 trillion worth of goods transported by air cargo every year represents 35 percent of international trade by value but only 0.5 percent of total volumes.

But as paperwork has increased, the average time it takes to shift a product from the manufacturer to the final importer stands at 6.5 days, compared with Lufthansa Cargo’s boast in the 1960s that the process took only three days.

High value goods such as electronics have also become smaller, meaning they take up less space and do not need dedicated freighters for transportation.

These trends are pushing companies such as AstraZeneca , Ericsson and Sony to transport more of their pharmaceuticals and electronics via sea at lower cost. In addition, growing demand for plane travel means more and more freight is being transported in the holds, or bellies, of passenger planes.

The International Air Transport Association, meeting this week in Doha, predicts cargo volumes will total about 52 million tonnes this year, effectively unchanged since 2010.

“The industry needs a structural redesign,” Glyn Hughes, director of cargo industry management at IATA, said on Tuesday.


Airlines have so far reacted to the tough cargo market by cutting capacity and taking freighters out of service.

“Most are losing money and they respond by cutting capacity to try to break even to survive this slump,” said Andrew Herdman, director-general of the Association of Asia Pacific Airlines.

Lufthansa Cargo has postponed a decision on whether to take more Boeing 777 freighters. Other carriers such as Air France-KLM, Singapore, Japan Airlines have all reduced the number of freighter planes they operate.

Air France-KLM - whose passenger aircraft currently account for 72 percent of total freight capacity compared with 54 percent in 2007-08 - plans to make a decision in a couple of weeks on whether to reduce its fleet of freighter-only aircraft further, Chief Executive Alexandre de Juniac said at the meeting. The carrier has already cut its freight-only capacity by 11.5 percent to 14 aircraft in 2013.

But to better compete in the long term, airlines need to cut shipping times and position themselves as premium operators specialising in high value or perishable goods, such as flowers, or bulky oversized goods, delegates said.

“Something has to change to deal with the overcapacity,” Jonathan Kletzel, Transportation and Logistics Leader at PwC, told Reuters.

He said the freighter-only carriers should make the most of the fact they can also offer routes outside the designated passenger networks and should look at improving links with other forms of transport.

IATA wants its members to shave 48 hours off shipping times - pointing out that of the 6.5 days on average it takes to get air freight from door to door, only a few hours is actually spent in the air.

It is therefore encouraging airlines to simplify procedures with freight forwarders and ground handlers, and to cut down the amount of paperwork it creates by moving to digital documents.

The association said that just 14.3 percent of contracts, known as airway bills, were in electronic form in 2013, short of its target of 22 percent for 2014.

“As an industry we’ve been pretty much dong the same things for 50 years, and I think anything like this is a sizeable change,” Hughes said when asked to explain why the industry had been so slow to move to electronic documents. (Addition reporting by Siva Govindasamy, Amena Bakr and Tim Hepher; Editing by Raissa Kasolowsky)