You might find car parts, berries and medicines in your hold luggage this summer, as well as mail or even drum sets from pop bands. It’s a big deal. According to the International Air Transport Association, airlines worldwide are expected to deliver more than 62 million tons of cargo in 2018. Traffic is expected to generate $120 billion in revenue and support $8.3 trillion worth of international trade.
Yet, cargo revenues are still well below the $210 billion peak that the aviation industry’s trade group calls “extraordinary”, mid-pandemic peak in 2021. Air transport was used to move personal protective equipment, vaccines and other items that were too expensive for maritime shipping. Air transport of consumer electronics, car parts, and other items was also in high demand.
International Consolidated Airlines Group (IAG), the parent company of British Airways, Iberia, and one of the largest cargo operators in the world faces a new challenge. In April 2011, it created IAG Cargo by merging the cargo operations of both airlines. IAG Cargo has now a global network of hundreds of destinations across six continents after integrating additional IAG carriers, such as Aer Lingus and Vueling.
Its cargo revenue last year was €1.156billion, or almost 4 percent of the total group. Heathrow, the London airport, is a major hub for the company, with 995 shipments per day, or about 513,464 tons, passing through in 2023.
Alex Paterson is a research analyst at Peel Hunt for transportation. He said that the variety of airlines and routes provided by IAG allows the group to maximize revenue by including cargo. The group hopes to increase its earnings by maximizing the space available on flights, along with the baggage and passengers. It is able to take advantage of the demand for air freight by taking advantage of a variety of long- and short-haul routes.
The benefits of IAG’s hubs in London and Madrid extend far beyond IAG. They provide global connectivity for thousands of companies, including those in technology, manufacturing and pharmaceuticals. Air cargo is also a key part of Britain’s investment and trade. It represents 40% of the value of all imports and exported goods, and contributes £7.2 billion in revenue to the British economy.
IAG Cargo is the result of the merger between British Airways and Iberia’s freight operations.
Luis Gallego is the chief executive officer of the airline group. He said: “Our IAG Cargo works with our airlines in order to provide cargo customers with access to a global network. Air cargo is a key component of global supply chains that are vital for economic growth and activity.
The company’s operations have become more sophisticated with the addition of premium products and upgrades to facilities. This is due to the increase in air transport for medicines, as well as the rapid growth of ecommerce.
The company has introduced several services. “Constant climate” is designed to transport temperature-sensitive pharmaceutical goods. “Constant Fresh” is designed to extend the shelf-life of perishable goods such as fruit, vegetables, fish and flowers by maintaining them between 2C-8C.
In May 2023, IAG Cargo opened New Premia, a state-of-the-art, temperature-controlled facility at Heathrow that doubled its capacity for premium shipments. The semi-automated facility features 29 cool cells that are dedicated to storing medicine, vaccines, and diagnostic samples between flights at different temperatures. This means that sensitive shipments are held in a temperature-controlled environment at all times.
IAG Cargo is a global company with hundreds of destinations on six continents.
IAG Cargo opened its 100th constant-climate facility in Strasbourg in early June. This is the 29th such facility in Europe. Strasbourg will serve as a stopping-off point for pharmaceutical customers in France on their way to London and Madrid, where the products will be more widely distributed.
It could have been a good time to open the latest facility. According to IATA, air cargo demand increased by a “solid 11 per cent” in the second quarter as container ships in Yemen continued to be attacked and disrupted by Houthi rebels. Intra-European cargo increased by 34.4% compared to April 2023. This is the largest annual increase in over a decade.
Willie Walsh said, “While there are still many uncertainties in the economy, it seems that the roots for air cargo’s good performance are becoming deeper,” Willie Walsh stated, director-general of the air transport association, in May. The purchasing managers’ indicator [a key economic measurement] is now showing growth. This makes the prospects of continued strong demand even more robust.
Navigating the world is not easy. IAG says that in order to protect Britain’s air freight sector, it is important to keep the country competitive for doing business and running airlines. The company is working with the government in order to make sure that all cargo flows as efficiently as possible from, to and through London. It is important to be able to fly at night, and so the company is against any further restrictions. The report highlights the “considerable benefits” of cargo operations to society.
Houthi attacks in the Red Sea on transport ships have disrupted international trade
In the cargo industry, manual, inefficient processes, based on paper, are being replaced by digital systems, which can be used for everything from tracking to clearance of customs. Brendan Sullivan said that this digitalisation has not been as rapid as we would have liked. He was speaking at the World Cargo Symposium, held in March. He insisted, however, that “progress was real”. Brazil, for example, has adopted the digital standards of the Transport Association. This has drastically sped up cargo releases from five days on average to just five hours.
In his speech in the spring of this year, Sullivan called on further action. He said that “governments should consistently implement global standards.” In order to meet common challenges, supply chain partners must work together. The entire industry needs to align itself to achieve a unified approach to digitalisation.
We work in a sector that is inspiring. Our success is important. Our success is important.
The industry’s goal is to reach net-zero emissions of carbon by 2050. In order to achieve this, a growing number partnerships are being formed between airlines, shippers, and freight forwarders that support the use of sustainable aircraft fuel.
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