Digital disruption & Future of

Air Cargo

Forum ACFA - Air Cargo Digital

April 4th, 2018

2

Sea trade has grown faster than the air trade because the respective value

propositions have evolved in favor of Maritime cargo

Digital Cargo – The “OxCam” competition of world logistics : Sea vs Air

Source: Unctad, , IATA, Arthur D. Little

0

50

100

150

200

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Air

Sea

World trade evolution per mode of transportsTons, World, 2005–2016, base 100 - 2005

CAGR

05-15

3.5 %

2.2 %

Sea cargo 10 billions tons in 2015

Air cargo 52 million tons in 2015 Costs &

Freight

rates

Quality /

Reliability

Delay

Relative evolution on Key success factors

Air Sea

Flexibility

3

Maritime cargo leveraged a wide set of digital technologies across its

entire value chain to improve its value proposition

Digital Cargo – Digital Transformation in the Maritime Cargo

Source: Marine insight, freight hub, Arthur D. Little

Customs &

Security

Operations

Reporting &

Invoicing

Admin

Business

development

& Sales

Sales and Marketing

Booking/

Pricing

Customer

Support

Cyber Security

Block chain

Artificial Intelligence

Internet of Things

Robotics

E-Platforms

Data analytics

Tech

no

logie

s

Demand

forecast

Digital lead

management

Online

booking

Dynamic

pricing

Capacity

Management

Empty

container

repositioning

Smart

capacity

management

Ground

Handling

Automated

warehouses

/ robotics

Automated

port

operations

(loading

/unloading)

Data

protection

(cyber

attack…)

Real time

tracking

On-board

cargo

monitoring

Chabot &

automated

troubleshoot-

ing

E-invoicing

Payment

automation

Pre/post

intermodal

transport

Multimodal

information

sharing

Dig

ital S

ervic

es

Transport

Predictive

mainte-

nance

4

The impact of Digital on the retail ecosystem (e-commerce) is actually

the main impact of Digital on air cargo ecosystem

Sources:

Digital Cargo – The opportunity for Air Cargo

E-commerce is booming

Cross-border e-commerce1

(US$ Bn)

900

300

2015 2020

+25%

“International e-commerce has

shown over 30% CAGR for the last 3

years in a row,”

Commercial Director, IAG Cargo

Digital is disrupting RetailAir Cargo is competitive for

e-Commerce

5

The digitalization of the airfreight value chain brings 3 “promises”: better

customer experience and efficiency gains, enabling higher volumes,

Sources:

Digital Cargo – The opportunity for Air Cargo

Better customer experience

Instantaneous quotations and

booking

Real-time track & trace

Faster and more reliable ground

operations

Faster custom and security

processes

Optimized capacity and yield

management

KN FreightNet

(Kuehne+Nagel)

Zencargo

(Kuehne+Nagel)

Warehouse robotics

(Amazon, DHL)

Efficiency gainsAbility to manage

B2C markets

+ +

6

Air Cargo industry, driven by airlines, is trying to roll-out the foundations

for digitalization through the industry-wide e-AWB program…

Source: IATA, Arthur D. Little

Digital Cargo – The long road towards digitalization of Air Cargo / Airlines

e-Air Waybill

The e-Air Waybill is the 1st step towards e-Freight

(electronic contract of carriage between the shipper

and the carrier)

– Removes the requirement for paper Air Waybill

– Original transportation contract is electronic

– No longer need to print, handle or achieve the

paper AWB simplifying the air cargo process

Adoption rate and targets2011-2018

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

2011 2012 2013 2014 2015 2016 2017 2018

Actual

Trend

IATA 2016 targets

Paper AWB

e-AWBElectronic

message (XML)

Signed e-AWB

agreement

+

+

Front Reverse

7

…but multiple obstacles, on a country-by-country basis, are slowing down

this initiative

Source: IATA, interviews, Arthur D. Little

Digital Cargo – The long road towards digitalization of Air Cargo / Airlines

Obstacles faced by airlines

“We are trying to develop the e-Air Waybill but some

government entities are not ready“

VP Cargo sales, Asiatic airline

“We have the e-Air Waybill but regulation is slowing it

down.“

EU-US import and transit director, European airline

“Air freight market is underdeveloped when it comes to

digitalization”

VP Sales & Marketing, European airline

“We have the e-Air Waybill – for the e-booking we are not

ready. Chinese airlines are not leaders in terms of digital

but more often followers. ”

Cargo Manager, Chinese airline

“Air cargo is a very traditional business, you can move to

quickly with the eAWB because customs do not follow”

VP ACS, Global express airline

“Air freight market is far from the passenger business, this

has to be understood. We start now to work on e-solutions”

VP Commercial, Middle-Eastern airline

“e-Air Waybill is not going to change everything already, we

still use paper because customs need a stamp”

Head of cargo, Asiatic airline

“We would like to exclude paper, but our government is not

ready for this, it slows us down”

Head of cargo, European airline

8

Enhancement of data sharing

Information about safety,

security, customs status and

dangerous goods regulations

Processes simplification

Registration process unification

for truck drivers at the airport

to reduce coordination effort

between parties

Automation of processes

(handover certificates printing,

change of depositary,

eDGD1…

Better Shipping Planning

Electronic data exchange

Greater efficiency and transparency of

each transportation step (incoming

shipments alert, flight manifest…)

Intelligent business

management

Analytics for sales, handling

and revenue management in

base of data available

Operations digitalization

FAIR@link Digital Platform

Business

digitalization

E-Cargo service

Leading airports are embracing digitalization to increase efficiency for the

different stakeholders in the airfreight value chain

Source: Fraport,, Lufthansa, Arthur D. Little

Note: 1) Digital dangerous good declaration

Digital Cargo – The long road towards digitalization of Air Cargo / Airports

Digitalization of cargo at Frankfurt airportCase study

Customs

HandlerTransporter

Airlines Digital

transformation

9

New digital players are entering the market and competing with

traditional Logistics Service Providers: we identify 6 archetypes

Digital Cargo – Impact on client relationship & front-office

Smart decision making

(analytics)

Automated decision

making (real-time input)

Automated decision

making (static input)

Manual decision making

/ intuition

Information brokering

Deci

sion-m

akin

g qual

ity

Market focus

Spot pricing &

brokerage

platforms

Tender platforms

Traditional LSPs

Traditional LSPs

Vision: Digital LSPs

Specialized marketplaces &

crowdshipping platformsGeneric

marketplaces

Carrier

Integrators

DFEs 2.0 &

e-forwarders

DFEs 1.0 & 1.5

Spot

Niche

Spot

Full

Spot & Contract

Niche

Spot & Contract

Full

1

2

4

3

5

6

10

Answering phone request

for customer

Interface

between airlines, customs,

GHA and freight forwarders

50

50

E-booking standardizes

quotations requests, limiting the

need for human intervention to

complex requests

E-booking and e-AWB can

simplify these activities by

reducing the data to be filled

manually and the risk of errors

100

100

Fill invoice for

CASS accounting

Fill invoice for

internal accounting

~0

~0

Thanks to e-AWB the data entry

for invoices can be fully

automated

Thanks to e-AWB the data

entry for invoices can be fully

automated

100

100

Op

era

tio

ns

Ad

min

Booking data

entry

Facilitation with customs

Interline operations

Track & Trace

CASS invoicing

Internal invoicing

Task Description ComplexityEffort

Today

Effort

@ full digitizationRationale

We have recently assessed the potential efficiency gains enabled by digital

in airfreight sales, operations and admin processes

Digitalization of Sales, Operations and Admin processes

Digital Cargo – Impact on operating costs

Source: Arthur D. Little

High complexity Low complexity

11

We see 5 Key Success Factors to grow in a digitalized airfreight industry

Digital Cargo – Key Success Factors to embrace digital transformation

1

2

3

4

5

Robust Digital FoundationsDevelop and deploy a robust common data infrastructure across the airfreight value chain:

simplification, standardization and quality of data are three targets to be pursued

Focused Project PortfolioMake sure that your digital initiatives are fully aligned to your strategic priorities

Understand the digital technologies to fully exploit their potential

Governance & OrganizationAvoid building “digital silos” inside the company and adopt a holistic approach in defining

and steering your portfolio of digital activities

Lean & Agile approachLeverage rapid prototyping and minimum viable products to test, and if necessary adjust,

the new digital solutions, with the end users before committing to full scale deployments

Ecosystem PlaySmooth interaction across the entire value chain is a key requisite for delivering high quality

services: an “ecosystem-play” is needed for airfreight digitalization to succeed

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ACFA – Forum Air Cargo Digital

Contact:

Mathieu BlondelPartner, Travel & TransportationE: blondel.mathieu@adlitte.comM: +33 6 76 49 27 78