The booming air cargo sector has a number of issues, both regulatory and economic, to resolve during its current golden age, officials told IATA’s Legal Symposium in Bangkok recently.

In case anyone was in any doubt, Brian Pearce, IATA’s chief economist, identified these good times as an opportunity to fix some of the industry’s ongoing problems.

“It’s as good as it’s ever been, and this will continue for at least the rest of the year,” Pearce told the symposium, adding, “we think this year is going to be good, but there are risks on the horizon.”

Protectionism topped the list here, including the type of “soft protectionism” seen in Brexit. “I think it’s something we ought to be worried about,” he said of the broader movement towards more controlled trade.

This is especially so for the cargo side of the airline business, which he said is “damaged” by such moves.

Among the economic problems Pearce mentioned were debt, asset prices, inflation and rising costs, all of which are compounded by uneven reforms.

“Rising costs are the biggest immediate challenge for airlines,” he told the symposium, with increasing labour costs as labour markets tighten being a particular concern.

Behind this is the spectre of inflation as central banks move away from quantitative easing and start moves to unwind the asset piles they built up during QE. Airlines also must consider that asset prices are nearing all-time highs, which brings the risk of a burst bubble into the economic frame.

While debt is not a problem at the moment, it is, said Pearce, “something we really ought to be keeping an eye on.”

Against this rosy backdrop, upcoming rules changes and the need to preserve flexibility came up in another session of the symposium.

Of major concern is ACAS, or air cargo advanced screening. Currently a voluntary programme in the US, this will be a regulatory requirement “soon,” warned Sarah S. Prosser, managing director for regulatory affairs at FedEx, quoting US Customs and Border Protection as her source.

While this step-up is already known about and being planned for, the spread of such programmes brings with it the prospect of a raft of new legislation, which might not necessarily be compatible in the details.

Similar programmes are also underway in a number of other jurisdictions. Prosser specifically mentioned the European Union, Japan, Canada and the United Kingdom as having pilot programmes, with new regulations coming in the EU and Canada.

“We’ll see a lot of new requirements in this area,” said Prosser, adding there was likely to be “a lot of issues on how these things work together.”

Also in the short term is the modernization of the cargo agency. This appeared to be in the process of being sorted last year with a pilot programme in Canada winning favour, as some four-fifths of Canadian forwarders joined the forwarder agreement, which is an IATA initiative.

Last November however, FIATA, the forwarders’ equivalent of IATA, raised last-minute concerns about wanting to tend cargo in a variety of capacities. “It changed the principles under which the programme was originally launched,” Carlos Tornero, IATA’s deputy general counsel told the symposium. (He also likened it to “the roof fell in a little.”)

Against these proposed legislative changes is the industry’s ongoing need to remain – and build on – its flexibility.

On one level, this is a simple business calculation. With each UPS Boeing 747 flight carrying as many as 25,000 parcels, the Atlanta-headquartered deliverer has as many as 50,000 customers to serve, as James T. Millar, UPS’s vice president for legal and public affairs, James explained.

But flexibility goes beyond customer satisfaction and is important on a regional level, said Juan Carlos Mencio, LATAM’s senior vice president of legal affairs, if the industry is not to be stifled.

Mencio’s particular concern is maintaining wet leasing and interchanging, where a leased plane goes to another defined airport or airline for a defined period. This has allowed the LATAM group to lease planes but move them through their four national companies as the seasons require, making LATAM more aggressive and dynamic as a company.

An aircraft used by LATAM, for example, can serve the cut flower market in Colombia and Ecuador and then the soft fruits and salmon of Chile.

“The key words for operational flexibility in those agreements are wet lease and interchange,” Mencio said. This is a particularly regional problem, Mencio says. While US regulators have given approval to this sort of arrangement, their Latin American and European counterparts have resisted, Mencio reported.

By Michael Mackey

Southeast Asia Correspondent | Bangkok