Five Questions With... Andrew Herdman
We have to recognize that air cargo is extremely secure and always has been, and that’s one of its key filling features because so much of the goods we ship are high value. And so the system is set up to be very secure. Having said that, instances like the Yemeni printer incident and so on has prompted further initiatives by governments to impose tighter security controls. So the U.S. government has insisted on airlines that serve America have to comply with U.S. security requirements. Europe has recently introduced its own version of assessing other countries’ security ratings. So there’s been a strengthening of security all around. The problem for airlines is there are non-harmonized requirements for different countries. And you may have one rule for outbound and another rule for inbound. Since much cargo is consolidated through international hubs, the fact that you’re governed my so many different jurisdictions makes life complicated for big international cargo carriers. So we’re keen that governments talk to each other. There’s no point in one government insisting every other government follows its methods. I think there’s now a realization that we need equivalent outcomes. We don’t have to prescribe exactly how it’s done. I think the U.S. government now recognizes that many other governments have similar functionally equivalent regimes, and that’s now recognized, which avoids duplication of efforts, having to repack and rescreen cargo unnecessarily. But it still falls short of how we’d like to see it in terms of common global standards and harmonization of operating procedures.
5. How do you view the competitive landscape of air cargo versus other modes of freight?
Because the air cargo business has been relatively stagnant, it’s tempting to say that we’re losing market share to shipping, but given that 1 percent of the tonnage and 35 percent of the value, I have to remind people that if we disappeared tomorrow that our shipping friends would hardly notice the increase in business. So I don’t think there’s much evidence of a really significant modal shift. I think certain goods are going to go by air, certain goods are going to go by sea because are shipments are so marked that it’s a really a question of the category of goods. I think the problem in air cargo at the moment is there’s an element of our business, which is unexpected retail demand…That’s missing and has been missing for the last couple of years. The recent growth in retail sales is rather modest and it’s not taking retailers by surprise, so those who combine shipping by sea and some by air, particularly garments for example and some electronics, they find that they can rely on the ocean shipments for the bulk of their requirements because they’re not getting surprise demand spikes on the upside. As the global economy picks up and occasionally when you get new products like new iPhones or new iPads or new Saturn Galaxys, you do the same effect where you get a surge where people want the product. They want it now. And you see a surge in airfreight of those products. That’s always been the case – that pattern. I’m not a believer that we’re seeing a long-term mobile shift in one direction or another. There’s a role for trucking. There’s a role for ocean shipment. I think they complement each other rather than competing head-to-head.