Air freight: a Force for Good Challenged by Externalities.

By: Emil Szafnicki and Tomasz Migacz.

This article was originally published in Issue II of the Green Mobility Magazine.

Air transportation is vital for economic competitiveness, social development, and global integration. It offers significant economic and social benefits, including fast, comfortable, safe and accessible travel and the transportation of goods as a fundamental part of logistics systems. During the past 2 years, there has been a lot of talk about the negative environmental impact of air transport and it cannot be ignored. Climate change and the need to protect and reduce the environmental impact are becoming increasingly prominent in local and global discussions, particularly regarding aviation-related emissions and their contribution to climate change.

Aircraft are powered by aviation fuel, made mostly from fossil fuel sources., which not only release CO2 but also have strong warming effects due to the nitrogen oxides and vapor plumes they produce. Cloud formation caused by the altitude at which planes operate is another contributor to the industry’s emissions. In the European Union, flight emissions from airports have risen from 1.4% of total EU emissions in 1990 to 3.7% in 2022. These emissions are projected to double or triple by 2050, potentially consuming up to a quarter of the global carbon budget.

So, what is being done about this? The United Nations, European Union, ICAO, and IATA are already committed to the sustainability of air transport and are taking steps to reduce the negative environmental impact. In recent years, sustainable development has become a priority for the aviation industry – not only passenger flights but also air cargo including all participants of supply chains like freight forwarders, integrators, or airlines. All companies involved in air transport chains seek more efficient solutions to be greener and there are several activities that can help reduce negative emissions and improve the environment. Sustainable development of air transport can be achieved, inter alia, by minimizing the negative impact on the environment, in particular noise and pollutant emissions.

In the EU, the “Fit for 55” package was submitted to the EU Council in 2021. It is being debated in various policy areas such as environment, energy, transport, and economic and financial affairs. It contains a set of legislative proposals to amend and update EU rules and introduce new initiatives to align EU policy with the climate goals agreed upon by the Council and the European Parliament.

“55” contains the definition of the emission reduction target of 55%, which the European Union has assigned to the year 2030. The package is to adjust the EU regulations regarding this target. In addition, EU countries are working on new legislation to achieve this goal and to make the EU climate-neutral by 2050. Regarding transport, the package includes, among others, several newly proposed pieces of EU legislation regarding the Emissions Trading System (ETS), sustainable aviation fuels, and alternative fuel infrastructure.

Globally, IATA, as the largest and most important association of air carriers, acts for the sustainable development of air transport. Like the European Union, IATA made the “Fly net zero by 2050” commitment in 2021, which outlines a strategy to reduce CO2 emissions by the year 2050. This is to be achieved by using 65% Sustainable Aviation Fuel (SAF), with new electrical technologies and hydrogen (13% reductions), through operational efficiencies and infrastructure developments (3%), and by via offsets and carbon capture (19%).
It should be noted that the activities undertaken by the EU and IATA have similar goals, but their scope and field of action are completely different. For the EU, the main task is to define a legal and regulatory framework that aims to harmonize understanding and actions to achieve the goals. The IATA resolution is focused on requiring all industry stakeholders to commit to addressing the environmental impact of their policies, products and activities through concrete actions and clear timeframes, including set targets.

What is the cargo industry doing to achieve the goals set by the EU and IATA to become more sustainable?

Air freight is of invaluable importance for the global economy in general and for each country individually. Air transport is the first choice for the transport of expensive and sensitive goods as well as in the event of a sudden pandemic, or geopolitical changes resulting in military action.

Nonetheless, airlines and air freight stakeholders have been put under significant political pressure in recent years. Likewise, numerous air freight stakeholders, such as airlines, have also been subjected to commercial pressures as customers and contractors seek to mitigate their own environmental impacts.

Provided the multiple challenges facing air freight stakeholders have turned to operational changes, new technologies, as well as a strong focus on multimodality, to mitigate negative environmental externalities.

Globally, the actions taken by air cargo stakeholders can be categorized in six basic trends:

Reducing CO2 emissions and increasing aircraft efficiency

Major cargo airlines and integrators are investing in new aircraft that are more efficient while also reducing carbon emissions. The most important parameters are increased range, increased fuel efficiency, and better use of cargo space.

Air France-KLM has announced the purchase of four new Airbus A350F freighters in April 2022. This type of cargo aircraft offers 11% more capacity while reducing fuel consumption and CO2 emissions by 15%. This is due to the reduced weight of the aircraft and its efficient engines. 

Sustainable Aviation Fuel Production and Availability (SAF)

SAF is expected to reduce carbon emissions by up to 80% over the fuel’s life cycle compared to the traditional jet fuel it replaces. However, the availability of biofuels at all major airports is crucial to its success. 

Cathay Pacific recently announced its commitment to achieving net zero carbon emissions by 2050. The airline launched Asia’s first corporate Sustainable Aviation Fuel (SAF) program, where corporate customers can reduce their carbon footprint by contributing to the use of SAF produced from waste cooking oil and animal fat.

Increasing the number of e-Freight and digitizing the processes

This paperless procedure helps reduce carbon emissions, weight and waste. However, air carriers, shippers, ground handlers, freight forwarders, customs agents must all participate in e-freight efforts if efficiencies are to be achieved. 

There are several initiatives which aim to promote digitalisation across the industry. For example, in partnership with the Cargo Operations and Technology Board (COTB), IATA has introduced the One Record Standard which creates a unified record of cargo information and defines a common data model for sharing it through a web API. Likewise, IATA’s Interactive Cargo project aims to provide responsive air freight services through self-monitoring systems that can send real-time updates and respond to unexpected changes. Lastly, the FEDeRATED project for digital cooperation, which was co-funded by the European Commission, aims to create an interoperable information-sharing infrastructure for the air freight industry. 

Increase investments compensating for hard-to-abate carbon dioxide emissions

Actors up and down the supply chain have sought to compensate for emissions stemming from hard-to-abate operations, such as flying, by investing in readily available electrically powered ground equipment and vehicles.

Changi Airport in Singapore has introduced 80 electric baggage tractors, saving 627 tons of CO2 emissions. The airport has also installed 26 common use charging points for the electric tractors, which eliminates the need for ground handlers to have their own charging infrastructure. Similarly, Swissport, a global airport ground services company, is also expanding the use of electric GSE vehicles at its operations in over 300 airports, with a goal of electrifying at least 50% of its fleet by 2025. 

Increase in the number of certified investments in airport infrastructure
Infrastructure owners and operators have turned to certified projects in order to mitigate environmental externalities.

d’nata has announced a €200m investment in a fully automated cargo centre at Amsterdam Airport Schiphol. The facility will be developed to BREEAM “excellent” certification for sustainability and eco-friendly design. The facility is scheduled to be operational by 2024 and will be able to process more than 850,000 tonnes of cargo per year including perishables, pharmaceuticals, and dangerous goods. 

Freight forwarders & airlines play together

Freight forwarders and airlines have turned to cooperation as means to overcome the commercial and political pressures exerted upon them, to share costs of investments, and to jointly benefit from ESG -sensitive customers. 

For example, DB Schenker has partnered with Lufthansa Cargo to fly the world’s first CO2-neutral cargo flight from Frankfurt, Germany to Shanghai, China. The weekly rotation has 31,000 tons of CO2e since 2020 and is still the world’s only scheduled full charter fully covered by SAF. Similarly, In February 2022, DHL and Air France-KLM joined forces to purchase 33 million litres of SAF, while committing to cover at least 30% of their joint journeys with sustainable fuels by 2030. 

A global industry facing a monumental challenge. 

The global air freight industry, which moved 65.6 million metric tons in 2021 and which is expected to be valued at 111,810 million USD by 2027 (assumptions CAGR of 4.0% during 2021-2027), faces a historic challenge. 

Compared to the ocean freight industry, where the four largest ocean liners control two-thirds of the business, the air freight market is highly fragmented with the top 10 air cargo carriers holding only 48% of the global market share. 

Yet, regardless of its disjointed market structure, airfreight industry actors will be hard-pressed to confront and overcome sustainability concerns, and to create, and invest in, a more sustainable sector. To achieve this, airlines, freight forwarders, and other stakeholders have, hitherto, been able to slowly introduce new technologies, operational efficiencies, and collaborative agreements. 

In the long-term, though, it is unclear whether the airfreight industry will be to put forward the capital required for further investments in electrification, SAF, and more sustainable infrastructure without passing on these costs to customers and those who rely on the sector the most: governments, high-tech industries, and the pharmaceutical sector. 

Yet, one must not forget that in a highly fragmented, regulated, and multi-stakeholder industry, technology, standardisation, and, above all, digitalisation, can go a long way. 

By: Emil Szafnicki and Tomasz Migacz.

This article was originally published in Issue II of the Green Mobility Magazine.