[photopress:Air_Cargo_Consolidation_Service.jpg,full,alignright]Greg Knowler is the editor of Cargo News Asia and his editorials are always worth reading. Sometimes downright provocative.
This time he is making noises about the excess of air cargo capacity. At the 47th International Paris Air Show orders were placed for almost 700 new aircraft, with the overwhelming number of those being placed with Airbus. (This does not mean they are definite orders. There is many a slip between declaration of intent and delivery. Still an amazing figure.)
Greg Knowler writes: ‘But even if half of the orders are firm commitments, the numbers are still incredible given the overcapacity that already exists on many routes and the havoc it is wreaking on the air cargo industry.’
This view is supported by the fact that yields on Asia-Europe and the transpacific have plummeted, over-served by established carriers and new entrants such as Shanghai Airlines, Yangtze River Express and Great Wall. Cargoitalia’s CEO called the capacity coming on line as ‘hysterical’ and Lufthansa’s cargo boss predicting ‘blood, sweat and tears’.
At that same time, rising fuel and operating costs have made air cargo more expensive, bringing it within reach of ocean carriers.
The management of logistics has improved and enabled companies to keep low inventory levels served by rapid stock replenishment. Container ships are increasing in size and need to be filled, so the lines are aggressively soliciting cargo that traditionally went by air. Important point is that several lines are now offering time-definite services.
This is sending profitability plummeting on long-haul routes and forcing carriers to shift capacity to more profitable air routes. Air Canada went so far as to terminate its Toronto-Shanghai freighter service.
The Lufthansa executive is right. Prepare for blood, sweat and lots of tears, because this year is not going to be a pretty one for the air cargo business.
Note he does not factor in the possibility of much of the cargo for Europe going by rail. This has already started to happen and the savings in time make it a very good option. It is twice as fast as shipping and is another great challenge air cargo must face. Greg Knowler’s editorial is timely and, sadly for the air freight companies, accurate.
Source: Cargo News Asia
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