With underlying growth drivers in the health sciences sector and a new dedicated handling facility on the way, IAG Cargo is bullish about its pharma business.
“The overall global market is still very buoyant in this space,” says Alan Dorling, global head of pharmaceuticals and life sciences at IAG Cargo. “That’s underpinned by the pharma market per se still growing around 5% per annum compound, and it’s expected to stay that way until 2019. We’ve outperformed that substantially year-on-year for the last five years and we continue to do that. It’s being driven by the usual factors such as government immunization programmes in developing countries like Mexico, Panama and several other destinations in Latin America.”
Other driving factors include the growth of type 2 diabetes leading to higher demand for insulin, and continued growth in immunotherapy treatments and the biologicals that underpin those therapies.
“The other thing that is emerging now is that major pharma companies are taking a global manufacturing approach,” Dorling says. “So they’re setting up one global plant for one particular therapeutic line, and then there are multiple stages of formulation. They might do the initial batch manufacturing unlabelled, and then that goes on to another country for labelling and another country for packaging. It’s no longer regional; it’s all about global. That helps air freight, of course.”
What that also means is that more ground handlers are being challenged to invest and improve, but Dorling says that, even though he thinks that the handlers realize the significance of this product stream, it’s easier said than done.
“We can invest our own money in our own infrastructure, but our ground-handling agents, who make up the rest of our network, are generally handling more than one airline,” he says. “It’s therefore very difficult to be able to make capital investments in business that’s not yours. We don’t do that. What we do is we encourage them to raise their standards because of the future prospects that it brings increasing flows in this time and temperature air freight market. It’s a bit of a ‘build it and they’ll come’ scenario.”
Having opened its Constant Climate Centre at London Heathrow in October 2013, IAG is now in the throes of building a brand new £55 million (US$71 million) Premia facility, with a target completion date of mid-2018. It will include a new, airlocked Constant Climate Quality Centre, where all of the carrier’s Constant Climate shipments will be managed. New temperature-controlled pod cages will be used for the short-term storage of transit shipments.
“That investment can only be made if you can secure a reasonable return,” Dorling says. “The market is becoming very competitive. A lot of airlines have a product offering for temperature-controlled shipments and are becoming equal. I’m not sure where that will go in the long term and whether we’ll see consolidation and fewer airlines in this space, because the regulations will demand a higher level of infrastructure competency and personnel training.”
IAG Cargo’s Heathrow hub was certified under the European Union’s Good Distribution Practice of medicinal products for human use in December 2014. According to Dorling, GDP and the International Air Transport Association’s Center of Excellence for Independent Validators in Pharmaceutical Logistics are both good certifications and raise the bar in terms of good handling, good protection and good training, but IAG went with GDP based on customer feedback.
“Our shippers want to see it granted by national statutory regulatory bodies,” he says. “CEIV is a good programme, particularly with its community approach at the airport, but at our own hubs, we work with GDP and we are still the only airline at Heathrow airside to be granted a licence by our statutory regulatory authority, the Medicines and Healthcare products Regulatory Agency. It’s whether you feel that the validators are truly independent from a government-organized body, just like pharmaceutical licensing with the US Food and Drug Administration, or whether you go for what I would call a more open inspectorate.”
Dorling points to the GDP certification awarded by Singapore’s Health Sciences Authority to dnata Singapore in June 2016, which effectively creates a GDP corridor between London and Singapore.
IAG hopes that it will also obtain the GDP certification for its Madrid hub by the end of 2017.
From the perspective of the ground handlers, on the other hand, it would be prohibitive to invest if price and yield erosion continue to undermine the market.
“Shippers and forwarders cannot expect to see improved infrastructure and dedicated vertical teams invested in, as well as a very low price,” Dorling says. “There would be no margin for the handlers. If there’s nobody doing it, everyone’s equal. If someone does it, they have a huge opportunity. We were the first one in London and we saw a significant uptake. We know that will happen in Madrid as well.”
According to the EvaluatePharma World Preview 2017, produced by life-sciences market intelligence company Evaluate, biological products are expected to account for 52% of the top 100 pharmaceutical sales by 2022. These highly valuable products are very fragile and sensitive to temperature, time, humidity and shock, so the default choice is to transport them by air, which is why Dorling is particularly optimistic.
“I don’t see us as competing against ocean freight because if you need a time- and security-critical approach, it’s going to come from air freight,” he says. “That’s why I think air freight going forward is going to be very positive, and this particular speciality sector, as challenging as it is, is a very good space for us to be in.”
By Jeffrey Lee
Asia Cargo News | Munich
