Though it hasn’t yet resonated as much in Asia as in Europe and the US, there is no doubt that climate change and its implications are moving up the political and business agenda worldwide. Should the air freight industry be worried, and is there anything it can do about the topicanyway?
Certainly TIACA, the international air cargo association, sees the issue as one of the most important ones facing air cargo at the moment, and has promised to devote a chunk of its Annual General Meeting in Copenhagen from 12-14 May to the subject. “It is an issue we take very seriously, because it is starting to build and become political,” says Jack Boisen, vice president cargo for Continental Airlines and the current chairman of TIACA.
The importance of the issue was also recognised at IATA’s AGM in Vancouver in June, where IATA director general, Giovanni Bisignani stated baldly that “a growing carbon footprint is no longer politically acceptable for any industry”. He went on to say that air transport ought to have a target of becoming a carbonneutral industry – one with zero carbon emissions – by 2050.
All of this is a remarkable turnaround for an industry that a year ago didn’t think the climate change issue was even worth debating. But if there is growing agreement that there is an issue to be addressed, is there a viable way forward for air cargo that does not involve simply limiting its future growth?
A shifting global consensus
The science of climate change remains controversial to some, but for many the views of the Intergovernmental Panel on Climate Change is influential. This UN body, which represents the world’s leading climate change scientists, said in its latest report in November that there was a 90 per cent likelihood that manmade emissions of greenhouse gases were altering the climate, and said these must peak by 2020 or so to avoid calamitous consequences.
In the European Union this has led to a commitment to cut greenhouse gases by 20 per cent by 2020, though what action will be taken to achieve this is not yet clear. While the US government has avoided any commitments to binding targets so far, it is now keen to be part of the debate about climate change, and the topic has figured in the US presidential campaign.
Perhaps of more concern to the air freight industry, however, is that major corporations are also increasingly taking the climate change issue seriously, and seeking to pitch themselves as low carbon businesses. Among companies that have a stated goal of being carbon neutral are Wal-Mart, News Corporation, Dell Computer and HSBC bank.
The example of Wal-Mart, the world’s largest retailer, should particularly make the air freight industry sit up and pay attention. In September, it asked its 68,000 global suppliers for reports on their greenhouse gas emissions, with a view to eventually labelling all the products it sells to show how much carbon has gone into their manufacture and transport. Two leading UK retailers with international operations – Tesco and Marks & Spencer – made similar commitments at the start of 2007.
One particularly notorious issue that has caught the media attention in Europe in this respect is the one of food miles, and particularly the use of air freight to import food. In March 2007, Marks & Spencer said it would put an aeroplane symbol on air freighted food “because we know this is something our customersincreasingly care about”.
Whether this will lead to retailers using less air freight is not clear. Retailers already use as little air freight as possible anyway, always preferring land or sea freight if it is applicable. Nor is it clear whether western consumers, despite their professed concern for climate change, will give up the luxury of winter supplies of green beans or flowers just because they have been air freighted.
Indeed, Chris Fahy, CEO of DHL Global Forwarding (DGF), the world’s largest forwarder, says it is “too early to say” how good or bad climate change concerns might be for air freight. But he does say that DGF has 17 customers, mainly retailers, who are taking the climate change issue seriously, and asking the forwarder to look at ways to remove carbon emissions from their supply chains. “The retail business has made it a priority,” he says. “Other industries are also concerned, but are at an earlier stage of working out their priorities.”
Air freight only part of carbon chain
It is worth noting here that removing carbon emissions from supply chains is not just about cutting out air freight. Transport – including passenger car and air travel – is often estimated to produce about 18 per cent of total carbon emissions, and of that aviation is just 2.3 per cent, according to an August 2007 briefing paper on the environmental impact of air cargo, produced by Cranfield University in the UK.
Of that total, air cargo is between 0.3 per cent and 0.6 per cent, or between 0.6 per cent and 1.1 per cent if radiative forcing – the supposed greater impact aviation emissions have as a result of being emitted into the upper atmosphere – is taken into account. Less cheerfully, a UK government study found that airfreight made up 11 per cent of carbon emissions from the transport of food, despite accounting for only 1 per cent of food miles.
These figures do show, however, that the overall gains to be made by a retailer or large manufacturer from eliminating air freight from its supply chain will be relatively small. There are bigger and easier wins.
One way might be finding more efficient ways to power delivery trucks. Rutges Cargo, the Amsterdam-based air freight trucker, says new trucks conforming to the latest European standards have a fifth to a quarter less emissions than the ones they replace. Some companies are trying even more radical solutions. The hamburger chain McDonalds apparently has a very serious project to run all of its delivery trucks on used frying oil.
Fahy also mentions such ideas as using electricity generated from renewable sources to power warehouses – DGF has already implemented this in three of its warehouses at the request of customers, he says – and there has also been a revival of interest in rail for transporting retail goods.
Is air freight an expendable luxury?
Lest all these examples lull air freight into a false sense of security, however, it is worth pointing out that the routine use of air freight in supply chains – the minimum inventory, global sourcing model – is a relatively recent phenomenon, and one that may well be reversed. Could the world not get used to waiting a little longer for the latest iPod? Or might environmental factors start to be weighed as well as costs when choosing whether to source components locally rather than from the other side of the world?
There is also the worrying fact that aviation seems to have an emotive appeal for environmental activists, who fi nd it easy to drum up support for a tax on aviation fuel or against the expansion of an airport, despite the fact that many of their supporters regularly fly on holidays or business. For this reason it may be politically expedient for companies to eliminate air freight and boast about it to their consumers.
One fact which might give the air freight industry pause for thought in this respect was the ease with which a portion of exports from China to Europe and the US switched to sea freight during 2007, leaving many carriers complaining of lower air freight growth than was expected.
The Air Freight Asia conference in Hong Kong in September heard various explanations for this including the high fuel price, a lack of new must-have technology products, and the growing efficiency of the sea freight industry in delivering products in a time-definite fashion.
The larger worry, however, must be that shippers were able to make the switch at all. If supply chains can be adjusted to remove or reduce the need for air freight for other reasons, then why should they also not be adjusted to remove carbon emissions and improve a company’s public image with its consumers?
It has to be said that there is no evidence as yet that any shippers or consignees are taking such a step. Fahy agrees that such modal shifts could happen, and speculates that sea-air, or air-truck journeys might become more popular. But he says no customers are yet asking for such changes.
Meanwhile Boeing, whose growth forecasts are widely quoted by the industry, is also still mulling how important or otherwise such mode shifts might be. “High value or time-sensitive cargo continues to be in high demand,” points out Scott Terrance, environmental spokesman for Boeing Commercial Airplanes. “The fuel price has increased considerably over the past couple of years and the global demand for air cargo has not waned.”
Thomas Crabtree, air cargo analyst and one of the team behind the Boeing forecasts, agrees and says the impact of environmental concerns among consumers is still very hard to quantify. However, he says that the company will be weighing the issue carefully this year as it compiles its next World Air Cargo Forecast, due for publication in October.
How can the air freight industry respond?
If concern about carbon emissions is growing among leading shippers, what can the air freight industry do about it? TIACA sees the answer as providing the market with more information, in order to counter what it sees as the “misinformation” about air freight. Boisen points to all sorts of areas – such as the methane produced by cows, or indeed sea freight itself – which are producing a bigger rise in carbon emissions than air cargo, and says TIACA has commissioned research from the UK’s Cranfield University to give it more such facts and figures.
“The argument being put is that air cargo is a major cause of global warming, whereas studies have shown that our industry is a micro-dot in such things,” he says.
Boisen also thinks airlines should recognise the progress they have already made in reducing emissions, and make more noise about it. At Air Freight Asia, he pointed to Continental’s installation of wingtips on its aircraft to save fuel, and the use of electric tugs to eliminate taxiing on the ground.
The replacement of older aircraft with newer models is another example airlines might boast about. For example, the 747-8 freighter consumes 12 per cent less fuel than a 747-400F, despite carrying 16 per cent more payload.
In all, Bisignani estimates that new aircraft will make the aviation industry 25 per cent more fuel efficient by 2020, with a corresponding fall in emissions. “We have been silent about our success in this area, and as a result we now have a reputation crisis,” he told the IATA AGM in June.
Talking up such achievements may well deflect the ire of environmentalists – or more importantly, of corporate shipping managers – but it does not solve the longer term problem identified by Bisignani, namely that in a world that is becoming fixated on reductions in carbon emissions, the total emissions of the aviation industry are continuing to rise.
That is because the growth of the industry – 5 to 6 per cent – continues to outstrip the fuel efficiency gains, which are generally reckoned at 2 per cent or so a year. As Bisignani points out, that is becoming politically unacceptable. So how can the industry reduce its overall emissions while still continuing to grow? How, moreover, can it reach Bisignani’s target of zero emissions by 2050? In his June speech, the IATA director general admitted he did not have all the answers here, but outlined some “potential building blocks for a carbonfree future”.
These included eliminating the 12 per cent in caused by air traffic control delays, creating a global emissions trading scheme under International Civil Aviation Organisation (ICAO) auspices, and new technologies for powering aircraft. In the first of these three areas, Bisignani identified three areas where major ATC improvements could be delivered quickly – the Pearl River Delta, the Single European Sky project, and a new ATCsystem for the US.
On the technology front, possibilities include synthetic fuels, or – in the shorter term – the use of biofuels as part of the aviation fuel mix, which Airbus reckons could be possible by 2010. New jet designs, such as using rear-mounted open rotor engines – also promise major fuel efficiency improvements, and are being studied by companies such as Rolls-Royce.
Emissions trading
The emissions trading idea, meanwhile, would be to set limits on each airline’s carbon emissions, and force carriers that wanted to go above that limit buy carbon credits from other companies in different business sectors, such as power generation or steel making. The advantage of this, say proponents, is that it would allow aviation to continue to grow, while channelling money to industries which can more effectively reduce emissions. The devil is in the detail here, however. Firstly there is the question about where the carbon emissions limit should be for each airline. Should it be at current emissions levels, or at a percentage of that, or should it give credit to airlines who have already invested in fuel efficient aircraft?
Secondly, there is widespread agreement that any scheme needs to be a global one, and though the ICAO committed itself in March 2007 to consulting its 189 national members on such a scheme, few expect progress towards this to be rapid. For one thing, any scheme cannot just include aviation – it must involve other industries too, so that there are partners to both buy and sell credits.
The one part of the world that does already have a working emissions trading scheme involving other industries is the European Union, but its proposal to include all intra-European flights in its scheme from 2011, and then long haul flights from 2012, has created a furore. European airlines say this would only be fair if non-EU airlines flying into the EU were included, but the US and other countries say this would contravene the Chicago Convention which forbids taxing foreign airlines. IATA too has condemned the EU scheme – hence Bisignani’s emphasis on an ICAO-level solution.
All of this leaves the industry with a great deal of uncertainty about the way forward on the climate change issue. It needs to avoid being scapegoated in the emissions debate, but also to develop some practical strategies to show it is not ignoring the problem altogether.
In 2007, Bisignani clearly laid out the challenge, but how the industry is going to be able to respond going forward is still less than clear, however.
Bisignani admitted there were still big barriers to these technologies, but pointed out that aviation itself also started with a seemingly impossible dream. “The Wright brothers turned that vision into reality, and look at where we are now,” he said.
