Robust logistics plans cut impact of crises

While the disruptions caused by volcanic ash are a reminder of the vulnerability of the industry, more effective contingency measures and increased interaction with customers can mitigate the impact of future disturbances, say air cargo operators.

Senior industry officials are all of the opinion that while natural disasters are unavoidable, the impact can definitely be minimised.

The International Air Transport Association (Iata) estimates that the crisis caused by the ash cloud over Europe cost airlines revenues of more than $1.7 billion (Dh6.24bn) by Tuesday.

Roy Kinnear, Senior Vice-President for Cargo at Etihad Airways, said the volcanic disruptions have shown the essential services air transport provides and also how quickly their bottom line can be devastated by events outside their control.

"The disruptions were unexpected and unprecedented. Etihad Crystal Cargo's major priority was to ensure that its cargo got to its final destination with as minimal delay as possible. Overall, 52 per cent of Etihad's cargo flow was affected by the disruptions," he said.

According to Hamdi Osman, FedEx Senior Vice-President for Europe, Middle East, Indian Subcontinent and Africa, the industry should learn to have robust contingency planning on the ground to better face such crises in the future. "Unfortunately, cargo and shipment backlogs do occur and must be planned for. Therefore, it is important that companies clearly inform their customers of potential delivery and pick-up delays," he said.

More than 100 FedEx flights to Europe from across the globe were cancelled during the week-long crisis.

"Contingency plans were implemented and packages moved on FedEx trucks wherever feasible. An alternative gateway in Europe was utilised instead of the FedEx hub at Charles De Gaulle airport in Paris. During that time, FedEx pick-up and delivery operations in Dubai continued to run as normal," he said.

By April 24, all backlogged cargo was cleared and Etihad Crystal Cargo resumed normal operations in all destinations. "The immediate impact of the disruptions resulted in 680 tonnes of Europe-destined cargo to be backlogged at Abu Dhabi International Airport. An additional 150 tonnes per day southbound out of Europe was unable to be facilitated to avoid further backlogging at Abu Dhabi Airport. Freighter operations into Germany and Italy required cancellation," said Kinnear.

The airline said it adopted various measures including isolation of affected areas to allow remainder of operations to continue as normal; swift, clear communication with customers to avoid market confusion; reallocation of capacity to business segments where additional cargo could be carried to other operational areas of the cargo network; and seeking alternative operations to maintain flow of business, for example, Etihad operated cargo freighters into Austria and onward trucking facilities to maintain inbound cargo to mainland Europe.

Osman said authorities in the region and across the world must be fully prepared in the future and have appropriate contingency plans in case a similar crisis arises.

"This crisis is a practical case study from which many lessons can be extracted, for both the express transportation and commercial airline industries. Existing contingency plans can be upgraded to better meet future emergencies. Different options can be reviewed that can include the routing of shipments through multiple gateways if existing ones are locked down along with adopting different modes of transportation. Maintaining a constant and clear communication stream with customers is very critical too," he added.

International Air Freight recovering

The International Air Transport Association (Iata) said global air freight is now within one per cent of recovering to its previous high point of early 2008.

Iata said March 2010 international scheduled air traffic showed continued strengthening of demand compared to March 2009 with cargo demand growing by 28.1 per cent, an improvement from the 26.3 per cent growth recorded in February.

Iata said the trauma of the recession is not over and the industry has lost two years of growth.

"Nonetheless, the pace of improvement, based on an improving global economic situation, is much faster than anybody would have expected even six months ago," said Giovanni Bisignani, Iata's Director-General and CEO.

International freight markets are also experiencing tighter supply and demand conditions. The 28.1 per cent improvement in demand outpaced the 5.3 per cent capacity expansion in March. This drove freight load factors to 57.1 per cent – the highest since November 2002 when international freight load factors stood at 58.8 per cent. International air freight volumes shrank by more than one quarter during the second half of 2008. The upturn in the business inventory cycle has almost eliminated that decline, although the upturn for air freight has taken twice as long as the collapse.

North American carriers have seen an international freight rebound (+32.2 per cent). Both export and import volumes are very strong in the emerging economies of Asia-Pacific (+34.1 per cent) and in Latin America, which recorded the strongest growth at 47.9 per cent.

European carriers showed the weakest improvement in freight demand at 11.7 per cent.

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