Is e-Commerce Starting to Dilute Normal Airfreight Flows?

The first half year is almost a month behind us and the signs for airfreight flows for the rest of the year are so far not good at all.
January to June results, although not dramatically low, were far below the expectations of the trade in general.

IATA’s helmsman Tony Tyler put it in a nutshell when he stated that “global air cargo growth has come off the boil.”
This trend according to the IATA managers lies with the continuing weak global economy.
But, is this the only reason?

Asian markets remain weak
Cathay Pacific, traditionally one of the Far East’s most stable carriers on the cargo side are reporting falling volumes all round.
Mark Sutch, Cathay’s GM for cargo sales and marketing sees that growth in the cargo market has dropped considerably month by month this year.

IATA figures show that the first quarter of this year showed the Asian markets dropping by 10 percent compared to cargo generated in the last quarter of 2014.
A worrying trend and which became somewhat better in the second quarter, but only to the extent that tonnages just about reached the end of the 2014 level.
In the same breath IATA is still predicting a 3.7 percent upturn in world trade by the end of this year.
But will this benefit airfreight movements across the world?

Additional belly-hold capacity is flooding the markets
The amount of aircraft capacity on the market remains a challenge all round.
Interesting to note is that statistics show that for every 1 ton of new freighter hull capacity which appears on the market, 3 tons are added by a new passenger aircraft.
This gives many carriers an unwanted extra belly capacity to fill in markets which are slowing.

Carriers are continuing their outlook for enhanced revenues and new added-value products in order to try and boost revenue bottom lines.
One of the shining products continues to be the booming pharmaceutical business.
However, although lucrative as far as rates are concerned, it needs continued investment on the part of the carriers and handlers in order to really be competitive against ocean going container rates and speed of service.
Much better of course than operating London to Singapore at around 0.80 euro cents or doing full charters on a Boeing 747F from New York to the Middle East at a cut throat US$ 200,000 a trip.
Also interesting to note in the statistics delivered is that although dedicated cargo aircraft services are more sensitive to the changes in fuel prices, they are said to earn 10 percent more revenue than pure belly hold cargo.

Traditional air carriers are not seeing much of the e-Commerce generated biz yet
Traditional air carriers are not seeing much of the e-Commerce generated biz yet

Yields continue to vary according to area routings.
They are still far below what one could see as being acceptable to the airline financial managers and one has to be happy that fuel costs fell so far which goes a long way in trying to boost bottom lines for the cargo divisions.

e-Commerce booms!
We all know by now that e-Commerce has almost become a household name around the world.
For a long time many did not know what to do with the term “e-Commerce.”
It’s the future for all around the world and the amount of order being placed within China, USA and Europe is staggering.
Delivery times are fast and the service so easy for the man on the street to use.

But who is transporting all these items which are ordered?
The integrators for a large part.
They are geared towards accepting, sorting, flying and delivering anything ordered within a very short time period.
UPS, FedEx, DHL etc. all have spent billions these last years in creating acceptance and delivery hubs throughout the world.

Cargo carriers miss out on e-Commerce
Some say that the rapid increase in e-Commerce orders has definitely been at the expense of the traditional airfreight flows.
The days seem to be gone where large or medium sized inventories of electricals, computers and the rest are held and which had moved by airfreight and even seafreight.

The traditional air carriers are not seeing much of this business as their distribution systems are not geared towards it.

Not yet anyway!
But this may well change fast as certain airports which have a lower cost structure may be ideal for some “cargo” carriers to look at jumping on this bandwagon and take part of this lucrative product.

One way of airlines (and airports) bettering their bottom lines?
It will be interesting to follow this trend in the next two years.

John Mc Donagh

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