There really isn’t a ’sweet spot’ to be in, in the air cargo industry right now. Sure there are companies out there doing reasonably ok, but really none that can claim to be doing great and certainly far more that are just doing badly.
It makes one wonder what the future holds for this industry. Sure yes, it’s cyclical and it will grow over the long term and yes this current downturn will recover – but really is it an industry that can survive on half-a-dozen good months followed by twice as a many not good months, only to repeat again?
That may be an overly pessimistic view, but clearly the global economy is changing its shape and character and the assumptions and parameters of old, do not apply so easily as they once did.
And as if empty freighters and depressed rates aren’t bad enough, there is that niggling feeling that cargo is slipping away from air-side, to dock-side. It’s that old bogey man – ocean shipping – raising his ugly head again and refusing to let the industry sleep well at night.
The topic of modal shift was debated in depth at a recent conference in which logistics executives stated emphatically that there is a growing shift to ocean freight by cargo owners who had a historic reliance on airfreight. And worse still, virtually all the executives in question, believed it was a permanent structural shift.
While hi-tech industries began moving shipments from air to ocean about three or four years ago, it was unclear at that time whether it signalled a short-term trend in response to the poor economic conditions or a structural shift. Laptops for instance, which were the sole preserve of air cargo, are now shipped by some companies with at least 50 per cent going by ocean. And before that it was television sets.
And even tablets aren’t immune from the modal shift, as typically the first wave of new products will go by air and the subsequent waves by ocean container. But even more frightening to hear, was the observation that the pharmaceutical industry and manufacturers of temperature-controlled products were at the “forefront of change” from airfreight to sea freight.
This is an area that countless air carriers have now developed an expertise in and while volumes are relatively small, its all juicy, high yield cargo. To hear that we are on the cusp of a wave where pharma and other perishable products are ‘jumping ship’ is enough to send shivers down the spine.
The contrarian viewpoint to all of this of course, is that product cycles are becoming so short that it will be nearly impossible to ever rely, to any great extent, on ocean freight for fast moving electronic consumer goods, for instance. The idea being that product cycles will just continually get tighter and tighter, making the value proposition of air cargo greater.
Perhaps the most rational view is to accept that cargo is always going to migrate to sea – whether it be due to economic turbulence, changing consumer behaviour, progression of technology leaving some gadgets less time sensitive, or more adaptive and creative supply chains. But the point is, the world is getting more and more used to and reliant on speed. The world is essentially speeding up – not slowing down… and that will always be good for air cargo.
