Ocean Transport Taking a Bite Out of the Air Freight Market

July 21, 2014 DATAMARK

The month of May brought some positive news for the global air freight market: cargo volumes grew 4.7 percent compared to May 2013–a reflection of improved economic conditions, including a rebound in Chinese manufacturing activity, according to the International Air Transport Association (IATA).

However, because of the competitiveness of ocean transport and the air cargo industry’s difficulties in growing its e-freight initiatives, the overall outlook for the sector is not as bright.

Freight shippers are turning to ocean transport and rail and road modes, and paying 10 times less than it would cost to ship by air, according to Air Transport World. Although ocean shipping takes 30 to 40 days, low costs and improved reliability of delivery times make the choice worthwhile.

FedEx Chairman and CEO Frederick Smith pointed out the challenge for the industry at the 2014 IATA World Cargo Symposium in Los Angeles earlier this year.

“Ocean transport has become more reliable with more sailing frequencies per lane offered by carrier alliances,” Smith said in a presentation at the symposium. “Combined with improved shipment information, fuel-efficient slow-steaming container ships allow products to be landed at the destination port with great predictability.”

The air freight industry is struggling to bring shippers and carriers together to invest in a common system for electronic air waybills and other air transportation documents. Air cargo still moves relatively slowly due to the paperwork required to ship around the world. Air Transport World points out that due to the lack of an e-supply chain, the end-to-end time for air cargo consignments is 6 to 7 days, the same average time it took to ship by air in the 1960s.

Tony Tyler, IATA’s director general and CEO, said the industry needs to move quickly on e-cargo initiatives, lest more market share is grabbed by ocean, rail and road.

“After several months of wavering conditions in the demand environment, the outlook for global air cargo appears to be stabilizing,” Tyler said. “That’s good news but the sector still faces an uphill battle to restore competitiveness and increase its share of trade growth. This will not be achieved with a business-as-usual mindset. The competitors to air cargo are innovating aggressively, cutting end-to-end shipping times and improving efficiency. There is tremendous potential in the e-cargo agenda to help shorten average shipping times by 48 hours from the current average of 6.5 days. Airlines have a pivotal role through expanding the use of e-air waybills. But success will need a united approach across the value chain.”

The post Ocean Transport Taking a Bite Out of the Air Freight Market appeared first on Outsourcing Insights.

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