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But air cargo is only 20% (US$44 billion)
out of total US$225 billion total global
logistics and transport industry
Source: Boeing
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Air cargo accounts for 34.6% of non-land
international trade in terms of value, but only
6% of the weight
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The demand for air cargo
Air cargo is a derived industrial product
Air represents 3% of world trade tonnage and 40% of trade values (OECD)
Strong surface competition
Demand a function of speed, cost, reliability, security
Pricing a function of the relationship of volume to density
Increasingly service sensitive
Often a door to door service is required
Late afternoon pick-ups, early morning delivery
Directional bias is common
Function of balance of trade
Cause of reduced yield on route
Less seasonal than many passenger markets
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Air freight directionality by major flows
Express
Europe to/from N.America Standard
0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00
Ratio of heavy to light directional flow (tonnes)
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Impact of 9/11
Cargo had already started to turn down at the
end of 2000, due to bursting of IT bubble
US passenger airlines lost all lower deck mail of
over 16 ounces (embargo still in force)
Loss of lower deck capacity from cancellation of
passenger flights: shifts to freighters
Strong air cargo recovery was underway in 2004
especially in Asia; IT/PC replacement needed (3-4
years from Y2K), but recently appears to have
stalled (in 2005)
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Air freight suitability
High value to weight ratio products
Companies do not want high value inventory in transit
Density (167 kg/cubic metre is cut-off for charging)
Main deck range from 120 kg/cu.m for AZ to 240 (Emery)
Lower deck range from 128 kg/cu.m (CO) to 208 (UA/Emery)
Bulk loaded range from 152 to 160 kg/cu.m
Urgency
Perishability
Physical (fruits, flowers, etc)
Economic (fashion, newspapers, magazines, etc)
Geography
Lack of suitable surface transport
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Other air cargo characteristics
Shipments do not identify themselves when lost: thus
tracking systems required
Tends to be less regulated than passengers; but often faces
customs barriers
Can be containerised, but heavy direction in many markets
No preference for non-stop flights
Size and density problems
Booking and loading
Pricing
Special handling for some cargo
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The 10 US industries with the largest air exports
Pounds of freight
exported by air
Rank Industry (millions)
10
Perishables (Cool chain sector)
23%
29%
Fish
Flowers
Vegetables & Fruit
Small packages
Clothing
7% Other
21%
9%
11%
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Air cargo flows: total 2,154,000 tonnes
(Source: Boeing World Air Cargo Forecasts, 2006-07)
Asia to Europe
16%
Clothing
43%
14% Industrial machinery
Electrical goods
Small packages
Office machines
10% Other
8% 9%
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Major freight traffic flows by FTKs
International Scheduled FTKs as a percentage of IATA scheduled freight F
Europe
14.2% 26.0%
1.2%
North America North America
2.1%
Asia 0.3% 4.2% 24.9%
23.9% 1.0% Asia
0.6% Middle East
11.1%
Central America 0.4% 3.4%
SW Pacific 3.3%
0.7% 0.00% 3.1% 0.8%
0.2 2.0%
Africa 0.8% SW Pacific
% 2.2%
South America 0.1% 0.2%
0.2%
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Top 10 country pairs for intra-Asia air
cargo
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The supply of air cargo services
Scheduled services offered in:
Lower deck of passenger services - by product
Combis - joint product
Freighters – dedicated product
Charter services (freighters)
Integrators (freighters)
Time guaranteed small parcel delivery
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Top 10 Air Cargo Carriers in 2007 (Domestic +
International)
Cargo % of total % RTKs on all-cargo
FTKs (m) RTKs flights
Fedex 15,710 100 100
UPS 10,968 100 100
Korean Air 9,568 65 87
Lufthansa 8,348 40 59
Cathay Pacific 8,225 53 72
Singapore 7,945 48 56
China Airlines 6,301 67 88
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Air cargo supply chain
Integrators
Scheduled Airlines
All Cargo
Belly Hold
Consignor Forwarder Forwarder Consignee
Postal authorities
Customs interact
at origin and
destination
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With whom do you organise your air cargo needs?
Airtrade Survey, October 2000
Europe Overall
Integrator
Forwarder
only
only
24%
Forwarder Integrator 53%
only only
63% 31%
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Integrators and forwarders
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Integrators
Companies that offer door-to-door service, with control
of and ability to track shipment over every part of
journey
DHL (38%), FedEx (21%), UPS (13%) and TNT (12%)
account for large part of global market (Source: Deutsche Post in
AirCargo World, Oct.2003)
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DHL
24%
European Courier,
Other
32% Express & Parcels
(CEP):
Market shares, 2006
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US Domestic Express revenues: 2004Source: Morgan Stanley
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European Post Offices
Commercialisation in three countries, but most
monopolies retained for mail services
TPG (Netherlands) acquired TNT
Deutsche Post (Germany) acquired shares in DHL and
Danzas/AEI
Consignia (back to Royal Mail!) has Parcel Force and GLS
Post Offices charter small aircraft for night flights
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Current trends
Globalisation means competition between supply chains and not between
companies; lean manufacturing and JIT
IT / Distribution / e-commerce
Barcoding / tagging of consignments and containers (eg RFID in Nokia phones)
Internet tracking and booking
Customs automation, but increased security
Electronic transmission of airway bills (currently only 43% of 35 million sent
globally)
Scheduled airlines introduction of time definite pricing
KLM Select 100 (1 day), 300 (3 days), and 700 (7 days)
Lufthansa time definite (td) - td.Pro (standard), td.X (express), td.Flash (fastest)
the last two have 100% money back guarantees
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Air Cargo Booking
Three portals competing for air cargo booking, but none yet
integrate ocean with air transport
Cargo Portal Services (more North America oriented)
Major backers Northwest Airlines, United and Air Canada
GF-X (more Europe focused)
Major investor American Airlines
BA achieved 5% of total bookings through GF-X in 2004
Ezycargo (more Asia focused)
Set up by Cathay, Singapore Airlines, Japan Airlines and Qantas
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Airline performance benchmarking
Schedule integrity
Moved as booked/planned
Handling service levels
Mishandling rate
Telephone standards
Complaints and compliments
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Air cargo alliances
Strategic alliances driven by passenger
business needs
WOW alliances
Lufthansa, Singapore Airlines, SAS and JAL
Networks joined up, products harmonised, mutual handling,
joint freighters, but no sales representation rationalisation and
different e-booking policies
SkyTeam cargo alliance initially between
AF/DL/KE, but includes joint sales
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Joint Venture Cargo airlines in China
Lufthansa and Shenzhen Airlines set up in 2004 Jade
Airlines to operate A300 freighter services from
Guangzhou base: Shenzhen Airlines 51%, LH 25% and
German government agency KfW 24%
SIA Cargo took a 25% stake in May 2005 in Great Wall
Airlines, based in Shanghai. Singapore government
subsidiary holds 24% and China Great Wall Industry holds
51%.
Cathay Pacific has 17.6% stake in Air China and its wholly
owned subsidiary, Air China Cargo, with 5 B747Fs
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Review
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Reading list
The global air cargo industry (April 2001)
DVB Bank Research .pdf file from their web site
Air Cargo News, especially ‘the Peter Conway Interview’
Airtrade (main library)
Air Cargo World (www.aircargoworld.com)
ATW, Airline Business (especially November issue), Flight
International, ATI
Various text books (eg Doganis, Wells)
Airline cargo web sites, especially Lufthansa’s
Orient Aviation, September 2002, p.16 (DAT library)
Journal of Air Transport Management:
Vol.9 No.2, March 2003 (Hong Kong air cargo hub)
Vol.8 No.5, Sept 2002 (air cargo liberalisation)
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