Shipping Lines’ Move to Become Integrators ‘a Compliment’ to Air Freight

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Rather than posing a threat, shipping lines are paying air freight “a wonderful compliment” by moving into their space, says TIACA director general Glyn Hughes.

TIACA

Maersk and CMA CGM have pursued a fast-paced strategy that has transformed them from being largely box carriers into end-to-end logistics players, some would say integrators.

Today, they are also forces to be reckoned with in air freight – having set up their own airlines, acquired freighters and purchased forwarders.

In a recent podcast by Australia-based consultancy Logistics Executive Group, TIACA director general, Glyn Hughes described their diversification into air freight as “a fascinating evolution”, adding: “Some people say ‘should we feel threatened by this?’ and I’m thinking ‘threatened?’  – surely this is a compliment.

“These major maritime operators, which handle around 70% of global trade by volume and a significant chunk by value as well, saying, ‘we’re exposed, we’re light in air cargo’. Surely that’s them saying the future needs to be much more balanced-based (in terms of transport modes). And certainly air cargo is an integral part of the global economic supply chain scenario.”

Ocean carriers have brought a different approach to the airfreight industry which challenges the existing players, he added.

“They look at the relationship with the shipper differently,” said Mr Hughes, who cautioned that the extent that this could be translated to air could be limited.

“In the maritime sector there’s a smaller number of mega-customers that own a significant chunk of what’s moving. Air cargo tends to be much more proliferated in terms of the customer base, and I’m not sure you can be successful in trying to deal with every single customer in a direct fashion,” he explained.

So Mr Hughes believes intermediaries have a critical role to play.

“I think the role of the freight forwarder is incredibly important and will continue to be so. The notion of consolidation is critical when it comes to things like e-commerce. To move tens of millions of shipments of small individual items a day is going to be hugely complex and costly. So there needs to be much more focus on consolidated e-commerce and breaking down e-commerce at destination.”

As for the call to make supply chains more resilient, Mr Hughes noted that, as Covid highlighted an over-dependence on China – and whether more near- and on-shoring by manufacturers is the answer – there had been little interest in changing the manufacturing base.

He said: “The global economy has located production where it offers the best conditions, in terms of quality, value and the lowest unit (production) cost, as well as the easiest access to markets. I don’t think these particular mantras have been undermined; they will continue to play a significant role in the future.

“We might see some ‘split-shoring’, as shippers kind of diversify their risk in having multiple production sites, which works well for the supply chain and logistics industry. Certainly, there needs to be a lot more interaction between the logistics industry, governments and the manufacturing base.”

Asked how things are likely to play out between now and the end of the year, in terms of the return of passenger flights and the prospect of more belly capacity being available, Mr Hughes was more upbeat.

“Talking with many people from the airline side, and some from the regulatory side, there is the feeling that the summer period is as bad as it’s going to get, because ground staff that are coming back have not yet gone through the full certification and training programmes, etc. And so, by the time autumn comes, they think they will be in a much more balanced situation, and the same for flight crews. And then, obviously, they’ll be in a better position for 2023.”

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Source: theloadstar

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