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Digitalisation and automation in transport: a necessity unfolding into new opportunities - Maritime and Transport Law, July 2020

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Stephan Piazza
KPMG
StephanPiazza@Kpmg.Com.mt

Dr Francesca Ferrando
KPMG
FrancescaFerrando@kpmg.com.mt

 

In a world where human interaction and socialisation constituted the epicentre of our day-to-day lives, few could have predicted the day when human connections and globalisation could end up posing the largest risk to our own health and well-being.

The purpose of this paper is to analyse those areas of digitalisation, which have allowed shipping and aviation to innovate and succeed over the last few decades. This will enable us to better define the direction in which such sectors should be heading in the coming years, taking into due consideration the latest hazards posed by the pandemic. 

Although shipping and aviation share the same goals (transport of persons and goods), they are based on different models.

i) Aviation is a predominantly passenger-oriented industry, while shipping is primarily focused on the carriage of goods. Although during the last few months airlines have shifted their operations onto cargo, this was limited to a few aircraft per company and to the carriage of medical equipment and supplies. Such conversion was dictated by necessity, rather than by a particular business target. On the contrary, although cruise liners had to interrupt their passenger transportation activities, the shipping bulk cargo segment proceeded at a normal pace.

ii) In the aviation industry, demand is generally stable and based on seasonal travel and macro-events (ie sporting events such as the Olympic Games and World Expos). On the other hand, shipping is largely dependent on economic and geopolitical variables, or fluctuations on the prices of commodities.

iii) Efficiency and environmental goals were introduced and pursued in the aviation agenda much earlier than in the shipping sector.

iv) Public opinion tends to perceive the economic impact of shipping in a different manner to aviation, with the consequent effect that relevant authorities tend to distinguish and prioritise their objectives in the two respective sectors accordingly. In practical terms, the fact that shipping is not under the constant spotlight brings with it a more lax approach in terms of adoption of new objectives and policies.

While for the majority of businesses Covid-19 represented a major showstopper, many have also considered the pandemic as an eye-opener as to the untapped potential offered by particular business segments, such as door-to-door food deliveries. In aviation, some of those involved in the aircraft business also opted to explore new opportunities by channelling their business, with some adjustments and notwithstanding the multiple obstacles, into the cargo segment. Only time will tell whether these attempts might represent a new stable stream of revenue for airlines. In the meantime, recent estimates indicate that airlines will still be forced to ground parts of their fleet during the coming years and therefore the possibility of such aircraft being relocated to the cargo segment is not unrealistic.[1] Aircraft manufacturer Airbus recently launched its ‘e-delivery process’, a system that ensures ‘continuation of Airbus’ delivery stream, while integrating the required health and safety requirements during the ongoing Covid-19 pandemic’.[2] Airbus disrupted its ordinary aircraft delivery procedures through an electronic Transfer-of-Title based on the ‘e-SalesContracts’ platform that enables the parties involved to complete the transaction entirely through digital means and in paperless format, without the need for any individuals to be physically present.[3]

Another area where technology has, out of necessity, required resilience from its operators, is that of data collection in the context of the Carbon Offsetting and Reduction Scheme for International Aviation (‘CORSIA’). CORSIA requires airlines to:

(i) monitor emissions on all international routes; and

(ii) offset emissions by purchasing emission units.

The aim is to halt net carbon emission growth at 2020 levels.[4]

CORSIA has opened up the market for emission tracking tools, which track CO2 consumption, as well as encourage efficiencies. Although Covid-19 might impact the definition of the baseline mechanism, digital solutions will play a key role in ensuring that information is accurately collected in a timely and efficient manner.

Disruptive events like the 9/11 terrorist attacks, the terrorist attacks in Europe and the 2008 Crisis, have all shaped the world we are living in and so will Covid-19. Survival is certainly in the hands of those who are ready to adapt and therefore innovate to new realities. Client expectations have changed considerably during the course of the last few years and notwithstanding recent events, these remain of fundamental guidance. Something that the pandemic brought to the surface, with the inevitable delays in services, is how the ‘insta-generation’ significantly impacted changes to client expectations in recent years. Goods are expected to be delivered within a couple of days, no matter which part of the world they come from. Final destination flights should not include more than one stop, no matter if the point of departure is located in a remote region of the world. This has obviously increased pressure among producers, shippers and passenger transport operators. Although we do not know if such client expectations will be realistically satisfied in the near future, the recent events have clearly highlighted the importance of technology and digitalisation in the sustainability of the demand/supply mechanism.

Aviation and shipping embraced technology at a different pace and extent, starting off in entirely different decades. Aviation companies are highly dependent on the human capital workforce (crew members and large maintenance teams) and oil price fluctuations. Technology was a means to streamline and render more efficient aspects concerning aircraft maintenance, passenger reservations, boarding procedures, claim handling and customer care protection, as well as the tracking of goods carried on a particular aircraft. While in aviation, innovation was led mainly by customer-oriented necessities and was introduced gradually throughout the last two decades, hand-in-hand with software development, often interacting with airport infrastructures; shipping converted its approach towards technology only during the last few years, with serious inconsistencies and deficiencies among the various port hubs across the world.  Although distributed ledger technology could have rendered the shipping industry paperless years back, the transitioning phase started only in the last few weeks due to the medical emergency led by Covid-19, which prompted shipping and customs operators to do away with unnecessary paperwork. 

Cyberattacks on worldwide major transport and logistics operators a couple of years ago led to a standstill of operations, shutting of IT systems across multiple sites and stranding of ships all over the world, with serious revenue impacts, brought under the spotlight the necessity of having sound cyber-attack mechanisms, aimed at reducing external attacks. This prompted IMO to amend the International Safety Management Code, in order to cater for such events and also for operators to understand the need to consistently invest in digitalisation and not to carelessly outsource this to third parties.

Another sector within the aviation sphere that has encountered a rapid spike over the past decade, is related to the use of drones, which have become operational on a vast scale and widely within the European Union territory. Predictions show that the European drone sector will eventually employ more than 100,000 people and have an economic impact exceeding €10bn yearly over the next two decades.[5]

The versatility of drones within the military sector is recognised, however the uses of drones during the Covid-19 pandemic has been novel, and in some cases, crucial to continued operation with companies like Zipline offering the delivery of vital medical supplies via drones for remote areas since 2014.[6] Throughout the Covid-19 pandemic, Zipline has upped its efforts. The use of drone operations minimises human contact by firstly removing the human element from the delivery service and secondly by assisting people to stay safely indoors and allowing the supplies to reach them. The use of technology in support of drones is a truly remarkable progress that has been leveraged by a number of similar drone companies and has borne fruit at a time when the world needed it most.

The potential of technology in this age is vast, from robotic process automation to data analytics.  Driverless means of transport are now being used among various sectors of European public transportation and private transportation by car. Even shipping is not immune to such novelties with different grades of automation, which go from semi to complete automated vessels. Furthermore, the benefits arising out of technology and digitalisation are not limited to ship operators and airlines themselves but also extend respectively to ports, airports and subsidiary service providers, such as air traffic control, ship and port operators.

However, while automation could represent an opportunity to increase cost efficiencies, reduce costs on workforce and enhance opportunities for companies involved in the IT and cybersecurity arena, it also comes with multiple challenges. While start-ups with sufficient will and capital to invest might make the most of the competitive advantage offered by the newest technologies, older companies might see this as an unnecessary burden. Automation requires individuals having a strong IT and technical background, as well as substantial adaptation planning from an internal organisational point of view, which not every shipping company may wish to pursue. This is somewhat similar to what was required by the banking sector in embracing the Fintech revolution.

Conclusion

In light of the above observations, it is evident that the world of technology and transport must work in tandem, in order to facilitate and help one another. The cooperation of these industries could result in significant benefits for all involved. Although innovation most certainly comes at an initial cost, it is vital that the transport industry remains progressive, modern and current. Development and innovation has most often been a matter of necessity and urgency. Success, in particular during such hard times, lies in the ability to predict, intercept and safely anticipate – where possible – such necessities. It is our opinion that the digital world provides and will keep on providing the perfect platform for an improved service. Harmony between technology and transport has the potential for unlocking great opportunities and we look forward to this future with great enthusiasm.



[1] Centre for aviation, 'Lufthansa Europe's first fleet cut; will go deeper, others to follow' (CAPA - Centre for Aviation, 10 April 2020) https://centreforaviation.com/analysis/reports/lufthansa-europes-first-fleet-cut-will-go-deeper-others-to-follow-520959 [Accessed 22 May 2020].

[2] Martin Fendt, 'New aircraft “e-Delivery” process assures health & safety for customers and Airbus employees, and enables business continuity' (Airbus, 21 April 2020) www.airbus.com/newsroom/press-releases/en/2020/04/quick-news--april-2020.html [Accessed 15 May 2020].

[3] Ibid.

[4] ICAO, '2 What is CORSIA and how does it work? ' (ICAO Environment, n/a) www.icao.int/environmental-protection/Pages/A39_CORSIA_FAQ2accessed 22 May 2020

[5] European Commission - Internal Market, Industry, Entrepreneurship and SMEs. (2018). Unmanned aircrafts - Internal Market, Industry, Entrepreneurship and SMEs - European Commission. [online] Available at: http://ec.europa.eu/growth/sectors/aeronautics/rpas_en [Accessed 15 May 2020].

[6] Zipline, 'Zipline’s COVID-19 Response' (Fly Zipline, n/a) https://flyzipline.com/covid-19 [Accessed 18 May 2020].

 

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