Finding the right balance

11 December 2007

Dr Nick Hubbard and Robert Mayer, of the Division of Transport and Logistics at the University of Huddersfield, discuss air freight and its impact on climate change.

Air freight has, until recently, received little coverage in the climate change debate as the air passenger market has been targeted by media and environmentalists. Phenomenal growth rates contributed to a 140% increase in air freight between 1992 and 2002, with growth in world freight tonne-kilometres outstripping growth in world GDP. Forecasts predict a 4% and 6% growth in the tonne kilometres performed for 2007 and 2008. A considerable share of this growth has been attributed to a modal shift from sea transport to air. In particular, the express air freight market is likely to experience significant growth through integrators like DHL or FedEx.

In 2006, freight revenue accounted for 12% of the airline sector's revenue, yet when it comes to the tonne-kilometres performed, freight accounts for nearly 30% of the industry's output. Global air transport (passenger and freight) contributes in total (including indirect, induced and catalytic effects) to about 8% of global GDP.

Air freight contributes not only to GDP but creates employment, not only in the sector but along the whole supply chain.

Air freight and the supply chain
Air freight plays a vital role in global supply chains. Globalisation has boosted the need for quick and reliable transportation of goods. Just-in-time and global sourcing have been key drivers of this development and air freight facilitated this. Today, many industries, from car manufacturers to flower growers, benefit from secure, reliable and fast transport by air. A significant proportion of air freight consists of high value goods. In the UK, nearly a third of all physical exports (measured by value) are shipped by air. This percentage is even higher when looking at exports to more distant destinations.

Time-to-market is a critical factor in many supply chains, particularly in sectors with short life-cycles. This includes high value electronics, as well as fashion items like clothing. However, in recent years, there has been an increase in the use of air freight for fruit and vegetables, which now make up about one-eighth of the UK imports by air. In some cases, pushing value added processes up the food supply chain to the point of origin, such as grading, packaging and labelling, may serve to increase the export values of the product being produced, but may increase the final weight of the transported product. The increasing share of these lower value products (ie. fruits and vegetables) has led to a decrease in the average product value transported by air.

Air freight and climate change
The majority of UK air freight is carried in the belly hold of passenger aircraft. Aircraft movements by dedicated freight carriers are marginal in comparison to the movement of passenger aircraft, but their share is likely to increase. As passengers prefer newer and modern aircraft, many older passenger aircraft are converted into cargo planes. Around 70% of freighters are now converted passenger aircraft and the narrow body market is dominated by old Boeing aircraft that are often more than 30 years in service. The wide bodied segment, older models like the DC10 and Boeing 747-100/200/300, also have a considerable share. In addition to the operation of older equipment and technology, the weight of freight aircraft is usually greater, resulting in increased fuel consumption and harmful emissions. One of the key movements towards a more sustainable air freight system can only be through a more modern aircraft fleet. The orders for new freighter aircraft have increased over the last few years, but so have the forecasts for conversions of older passenger aircraft.

To change the fleet composition in the sector, it is necessary to incentivise the operations of modern cargo aircraft. Increasing fuel prices might encourage airlines to switch to more fuel-efficient aircraft. It is important that any measures to tackle the environmental impacts of air freight are introduced by regulators to cover the whole EU. Any moves by individual countries are likely to have an effect on the competitive advantage of airports in that country as airlines may relocate their activities to other airports.

Air freight rates have fallen in real terms in recent years, making this mode of transport a more affordable choice for companies. Originally, only high value goods were transported by air; today, many other time sensitive products use this system. Increasing the costs for air transport (eg. through the inclusion of aviation in the EU Emissions Trading Scheme) may ensure that only high value goods are carried by air. Compared to other modes of transport, the external costs of air freight (by tonne-kilometre) are more than double those by road and more than 10 times more by rail. Looking at CO2 and NOx emissions, which have a significant impact on climate change, air transport emits more than any other mode of transport. Particularly on short routes, an aircraft produces 14 times more CO2 and more than 1.5 times more NOx per tonne-kilometre than a 35 tonne truck.

Recent research shows that night flying might be less environmentally-friendly than flights during the day, as the contrails produced by aircraft reflect only radiation from the Earth at night, whilst during the day, they also reflect the sun's radiation. Given the congestion of many airports during the day, many freight operators fly their aircraft during the night, which may have a more harmful impact on the Earth's climate. Yet the economic advantages of night flying for air freight in utilising emptier skies and under-used airport capacity tend to outweigh potential environmental hazards, including noise pollution.

The launch of the Sustainable Aviation Strategy in June 2005 and the subsequent report on its progress has shown a welcome commitment from the aviation sector to discuss and address climate change issues. Signatories have committed themselves to work towards targets set by the Advisory Council for Aerospace Research in Europe (ACARE) of a 50% reduction in CO2 and 80% reduction in NOx emissions by 2020.

Air freight and the food miles debate
Most food freight is transported by cargo planes and not in the belly hold of passenger aircraft. This is partly in response to the more efficient and reliable handling of freighters at airports. The Soil Association's Air Freight Green Paper questions whether air freighted food and produce should receive Organic Certification in the UK. As a temporary measure, Tesco now use labelling to indicate air freighted produce and intend to detail the carbon footprint of their products. However, the calculations are complex and while distance travelled is an important variable, the example of the transportation of flowers from Kenya to Europe shows that there is an array of other environmental and ethical considerations that need to be taken into account.

Conclusion
The air transport sector receives a great deal of bad publicity with regards to its potential impact on climate change. Most criticism has been related to the increase in passenger operations but now air freight is being targeted. The industry is looking at technological solutions to reduce its environmental impact. The Stern Report recommends Emissions Trading Schemes, and aviation's inclusion in the EU ETS will eventually be implemented. Retailers and manufacturers should be doing their bit. Supply chains should be reconfigured to balance optimal responsiveness with minimal emissions both during production at source and transportation to the destination. They might also save a bit of money along the way.