Air cargo logistics challenges move front and center

Here is where we find air cargo logistics today.

Commonly employed for high value or highly perishable products, air cargo transport is increasingly used as more individuals and businesses purchase products on-line and expect delivery in a very short period of time. Modal mix is becoming more common as supply chain and logistics managers juggle choices to fulfill the expectations of the beneficial cargo owners (BCO). Sea-air services are expanding which combine the cost value of maritime transport with the higher speeds of air services and a lower environmental footprint when time permits.

While leisure passenger traffic is recovering, the higher margin business travel is only slowly returning to the skies. The slow recovery has many effects on the commercial aviation industry. The most striking impact is a loss of capacity, especially on international routes. With many widebody passenger aircraft sidelined due to lower passenger loads, the capacity for cargo shipments has shrunk.

Quite simply, the worldwide air cargo logistics industry is continuously beset by challenges, which can be turned into opportunities by organizations that are adept and flexible. The vibrancy, vitality, resiliency and sustainability of the industry is critical for the socio-economic well being of everyone in the world.

This blog series will focus on key areas changing the air cargo industry as you read this. They include the value of air cargo transport, the different roles of air cargo, disruptions to the worldwide air cargo logistics industry, and new developments that contribute to the industry’s vitality.

Keep in mind that:

• Change is constant – a delayed reactive response is death.
• The worldwide air cargo logistics industry has experienced a series of disruptions which can be traced back to the early 1970s with the emergence of the integrated air carriers.
• There is a cumulative impact from: the COVID pandemic; increasing reliance on e-commerce/high-speed delivery expectations; digitalization; expansion of ocean carriers into the air cargo services and operations; consideration of climatic issues; and an unsettled geopolitical environment. All are challenging traditional structures, services, and relationships.
• The realization by governments and businesses that a global supply chain is critical for both socio-economic and business viability going forward.
• There is a misunderstanding of air transport and its role in the global well being.

So we are all on the same page, here are some key terms to keep in mind:

• The worldwide air cargo logistics industry is more extensive than the traditional focus on airlines, freight forwarders, ground handling agents, and trucking companies. Actually, it encompasses all of the parties involved in handling and moving air cargo shipments including truckers, freight forwarders, ground handling agents, clearance agents/customs house brokers, border agencies, digital platform and service providers, airports, airlines, 3PL companies, crating and packing companies as well as security and safety inspectors.
• The term beneficial cargo owners (BCO) encompasses all parties who ‘own’ the freight. They can be the physical shipper, the final consignee, or increasingly the party which takes ownership of the shipment and may never handle it but gains a tangible benefit from each shipment. Increasingly, the BCO is the party which orders the product. Each one of who selects a product on an e-commerce platform is a BCO. We dictate what is being ordered, where and when it is to be delivered. We defer to the platform operator as to the method of transport. But through track and trace applications, we monitor the process of the shipment though the supply web.
• Supply chains/webs – the complexity of supply processes is leading to the replacement of sequential chains with complex webs. The webs are composed of individual chains, but the webs facilitate modal shifting, sourcing of similar goods from different locations, and a plethora of pathways to move the goods to the point of delivery.

Several disruptions have affected the worldwide air cargo logistics industry over time. These disruptions reinforce the notion that it is not appropriate to rely on prior traffic characteristics to forecast future air cargo volumes.

Key disruptions here include:

• Years ago, the emergence of the integrated cargo companies—Burlington Air Express, CF Air Freight, DHL, Emery Air Freight, FedEx, TNT, UPS and others—challenged legacy airlines. They had to re-think their business models and provide a new, innovative option for individual and corporate beneficial cargo owners to employ air cargo services to move their goods. As in every instance of industrial change, the list of companies has declined to DHL, FedEx and UPS.
• Online / e-commerce platforms have upset the apple cart in recent years. These companies, employing sophisticated data collection processes and complex algorithms are customer centric. They have leveraged the expectation of high-speed delivery which in turn has led to the expansion of their networks of facilities and rising control of transport. These include road and air and employ their growing purchasing power when acquiring space on the open market in all freight transport modes.
• Mega freight forwarder-controlled air lift is expanding. There is a potential to crowd out the smaller freight forwarders which can not compete in terms of financial resources and controlled traffic.
• Ocean carriers’ entry into all-cargo operations and services are another disrupter. These international transport players are shifting their assets into the air cargo arena. These moves provide a multimodal offering to their BCO customers.
• Digitalization is increasingly becoming the norm in the freight transport industry and specifically in the air cargo arena. Reliance on traditional communications systems and protocols is waning as BCOs demand full and complete information about their shipments. Open access encrypted digital platforms are spreading from the Indian subcontinent and Europe as their benefits to all cohorts of the worldwide air cargo logistics industry are understood. In addition to operational and business benefits, these systems also address environmental concerns – a increasingly important focus of BCOs.

That should be enough to set the tone for this blog.

So put your seatbacks and trays in the upright and locked position. Stow all carry-ons in the locker above you or underneath the seat in front of you. And make sure your seatbelt is tight and secured around your waist. Now join me for a look at the worldwide air cargo logistics industry as we go below the wing and onto the main deck.

Charles H.W. Edwards, B.A., M.Sc., MBA, has over 50 years in the transportation, distribution and logistics industry. Edwards is a vice president of SASI World and a professor of the practice at the University of North Carolina at Chapel Hill in the Department of City and Regional Planning. He is a Scholar Fellow of Sigma Chi Mu Tau (Supply Chain) honor society. He began his career as a truck driver in Toronto. Since then, Edwards has worked in international freight forwarding in Canada and the UAE, numerous sectors of the airline industry, aviation design and manufacturing in Germany and the United States, ocean freight, rail management, economic development, and logistics education. Edwards can be contacted at [email protected].

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