So what is driving all this demand? With so much talk in the industry revolving around e-commerce, one could be forgiven for thinking this was the sole driver of air cargo at the moment, writes Donald Urquhart.
“It has had a tremendous impact, and consumer demand for instant gratification for delivery coupled with a need for transparency has driven demand where cheap articles compete with computers for space,” says Wraight.
He adds that the integrators are feeling the pressure of Amazon and Alibaba who both have taken larger control over their logistics through dedicated air uplift through ATSG and Atlas Air in the former and SF Express and YTO in the latter.
“And post offices are exploding their volumes of package airmail and carriers are struggling to find their niche in all this,” he adds. For Boeing’s Crabtree, the solid cargo demand over the last 24 months is a three-part combination.
“It’s a resumption of world trade in normal channels, it is the resumption of industrial production in normal channels and e-commerce that is driving the resurgence in air cargo traffic bold on freighters and in passenger bellies,” he said.
While he agrees e-commerce is indeed a key factor, he notes it’s difficult to pin down exactly how much is eCommerce because of the fact some it travels simply in postal mail bags and a significant portion is consolidated on pallets by freight forwarders. And of course a significant portion goes on the express carriers.
But one thing eCommerce is unlikely to do, is influence acquisition of maindeck capacity, unless of course you’re in the express business.
“Here it’s a volume issue, not necessarily value,” notes Wraight.
“Do you really want to buy an expensive asset to fly bulk cargo with low yield just to play in a market? I would say no. But if you have your own products where the volume is coupled with control over revenue, then yes.”
Indeed this is one big misconception with e-commerce says the industry analyst. While everybody’s benefiting from the growth of the e-commerce, but in the general freight market its generally consolidated e-commerce which is coming from forwarders specialising in e-commerce.
“People still think its high-yield stuff, but it’s not. E-commerce is generally not high-yield, it’s only a small portion that is high-yield and that is generally going with the express carriers,” he says.
As for the combination carriers whose cargo futures looked troubled a few years ago and resulted in a number of carriers trimming their fleets of large freighters during the downturn, Wraight says this exercise has pretty much run its course but adds that eventually they will need newer replacements if they are to remain serious about cargo.
“They will need a certain amount of freighters to keep the bellies full and also offer a product that allows them to participate in the higher yield verticals, and stay a carrier of choice for major shippers,” says Wraight.
“Will that mean new freighters, eventually yes, the question is how many, timing and what type. It may only happen 10 years from now, but it will happen,” he says.