With a new year unfolding quietly, softly in front of us, it seems the air cargo industry, if not much of the world, is waiting with bated breath for that proverbial light at the end of the gloomy economic tunnel. While most industry players are wisely reluctant to forecast – probably as much out of the fear of spoiling any potential karma, as just plain lacking any visibility – there are glimmers of optimism out there. But despite these ‘green shoots’ – whether real or simply wishful thinking – one thing is as clear as a mountain stream: The world is not the same place it was a few years ago.
Predictability, seasonality and many long-practiced business paradigms have no place in today’s global economy. Largely gone is the end of the year ‘peak’ season, faintly visible for a short time this past December, but by all rights, gone the way of the dodo bird. Increasingly sophisticated global supply chain strategies – euphemistically referred to by some as the Zaraesque strategy of smaller, more frequent shipments – mean not only less likelihood of seasonal peaks, but perhaps a more entrenched modal shift to sea freight. Even high-tech gadgets like iPads – incorrectly hailed as air cargo’s savior – are now going by sea freight after initial stocking.
Fuel prices of course remain a problem and one that sees no immediate relief despite frenetic activity in trying to develop alternative fuel sources. Near-shoring will undoubtedly have an impact, as too will ‘on-shoring’ with companies like Apple, Whirlpool and Caterpillar amongst others looking to return some manufacturing to the US, although the jury is still out on all of this. Traditional trade lanes are not so relevant any more, new trade lanes – Intra-Asia, Asia-Africa for instance are fast moving to the forefront requiring new strategies to profitably tap the new cargo flows.
Fleet composition for carriers is another area potentially in want of paradigm change. Large global fleets of wide-bodied passenger aircraft – which perform as mini-freighters in many cases – may render large fleets of freighters for carriers unprofitable.
E-commerce is another monkey wrench in the gears. With rapidly changing consumer patterns seeing the sharp rise of online shopping this will also impact global supply chains. What exactly this will mean for the air cargo industry is not entirely clear, as even the integrators are struggling with wafer thin margins in that business.
Bureaucracy and regulation is perhaps one area where, unfortunately, no change seems to be occurring. Witness the attempt by UPS to acquire TNT – quashed like a bug under the giant heel of the European Commission. In what appeared to be a relatively straight-forward, albeit very large deal, the fact that UPS threw in the towel despite the pain of a €200 million termination penalty speaks volumes of the shear magnitude of obstacles UPS saw before it if it was to make the takeover work.
But let’s not get over-wrought on the negatives. Emerging markets – rapidly coming into their own – will help propel new economic growth and new logistics and air freight opportunities as this issue’s cover story (p. 22-24) highlights.
These new opportunities will come with their own unique challenges and will surely require innovative strategies, but clearly this new global economic era requires a ‘thinking out of the box’ ethos.
In the meantime this year has the appearance of some improvement for the air cargo sector what with the US debt crisis put to rest until next year, the European malaise at least not looking to get much worse and small but encouraging signs of growth out of the US. This combined with irrepressible growth in a plethora of very different emerging economies – from China to Chile – holds the promise of returning to a more vibrant industry, but a promise that requires the courage to change mindsets, paradigms and strategies to adapt to this dynamic brave new world.
