Air cargo industry

Introduction

Air cargo industry involves the aviation transportation industry for products across the globe. According to IATA (2021), Air cargo plays a significant role in the global economy engaging in the transportation of over US $6 trillion worth of products and accounting for up to 35% of the world’s trade by value. While Air cargo has especially carved out its niche in the transportation of high-value, light weight commodities, as a result of the significant constraints that it faces, it only makes up about 1% of overall freight movement by weight. Turner (2021) asserts that five sectors within the economy maximize the use of air cargo in the transportation of their products including pharmaceuticals, healthcare, customer electronics, equipments and retail products. For business dissertation help, analyzing the trends and challenges within the air cargo industry can provide the most valuable insights into its prospects and potential areas that need improvement. However, despite the significant constraints like costs given its expensive nature compared to transportation by road or sea, multiple companies across different markets across the globe utilize air cargo to connect with new customers and suppliers that would otherwise not be accessible. The cargo industry is also highly sensitive to changes in fuel prices and its impact in the overall carbon footprint. As a result, it is easily impacted by economic disturbances such as the economic crisis in 2008 as well as the covid-19 pandemic in 2020. Further, trade imbalances between specific geographical regions also make it difficult for operators to adequately fill available cargo spaces alongside a significantly high dependability on ground logistical activities such as warehousing (IATA, 2021). All these factors adequately impact the demand for air cargo services and control its growth and development across the world.

Size and Scale

The size and capacity of the air cargo industry was significantly impacted by the air travel restrictions developed as a result of the covid-19 pandemic. However despite the economic disturbance as a result of the pandemic, the industry has gradually recovered post pandemic and achieved a significant fraction of its pre-covid levels. Based on Weiss et al. (2021) the United States Transatlantic air cargo capacity has experienced a growth rate of 55% over the last 20 weeks reaching up to 52% of its pre-covid levels. Data by IATA (2021) asserts that while a significant reduction in the amount of cargo transported by air in 2020 as a result of the covid-19 pandemic reaching the lows of 16 Billion Cargo Tonne Kilometers (CTK), the levels have sharply and significantly risen in the preceding year returning to the normal levels of around 23 billion CTKs in 2021.

Actual and Seasonally adjusted CTK levels between 2016 and 2021

While the chart shows a gradual reduction of the seasonally adjusted figures of the CTK between 2018 to 2020 the period prior to the pandemic, the actual levels remained relatively leveled at 23 billion CTK between 2018 and 2020 before the sharp drop as a result of the restrictions developed in light of the travel restrictions aimed at reducing the effects of the pandemic. Both the actual figures and seasonally adjusted figures however show a steep rise after the pandemic back to the normal levels of 23 billion CTK indicating a complete recovery of the industry.

Global Overview

While air cargo operates across all the continents with products being moved from and to all the 7 continents, different cities across the world are major business hubs and constitute the majority of goods and products being transported by air cargo across the world. According to Statista (2020) among the major cities around the world making up the key regions for air cargo transportation include Hong Kong, Memphis in the United States, Shangai, Dubai in the middle east, and Doha. All of these cities are significant as air cargo freight routes given that they are the economic hubs of their respective regions and they entail an entry point into the continent and the economies within the continent. For instance, Hong Kong is the entry point into the Chinese economy which is one of the major economies within the world. Products developed by the Chinese are all transported from the major city of Hong Kong making it a strategic location for international cargo transportation to and from the country. While Tennessee and Louisville in the United States are not necessarily the major business hubs within the entire country they have airports designated for air cargo transport that goes outside of the country. This is partly due to the location of a significant amount of industries producing goods for export in these cities. This is similar for all the other cities including Shanghai, Dubai and Doha. Here are the top eight cities and locations globally with the highest cost of cargo transported via air freight.

Contribution of the Cargo industry to the Aviation Sector

Morell and Klein (2019) advance that air transport and air cargo are both key elements of the global supply chain and development. It not only facilitates trade and tourism across the globe but it also leads to the generation of economic growth through provision of jobs which lead to increased revenues and taxes and foster economic development and growth of different third world countries. Air cargo and transport also enables the delivery of emergency and humanitarian aid and relief and ensures swift delivery of medical supplies such as the covid-19 vaccine which has led to the reduction of the economic impact of the pandemic all across the globe, subsequently impacting the revival of the global economy.

Revenue

In terms of quantity, Air cargo transports over 52 million metric tons of highly vulnerable and valuable products every year. While this amount represents 52% of the global trade by value it only makes up 1% of the world trade by volume. IATA (2021) further asserts that the goods provide an equivalent of $6.8 trillion worth of products annually and $18.6 billion worth of products on a daily basis. Mazareanu (2021) advances however that while passenger aviation was significantly hit by the pandemic as a result of the need for isolation, an almost opposite effect impacted the Air cargo aviation. Revenue generation increased from $101.2 billion in 2020 pre-covid pandemic to $175 billion in 2021.

Cargo Movement

Cargo movement through air travels occurs all across the world with significant trade routes already established and put in place by the existing economic model. According to IATA (2021) among the major cargo movement destinations include Asia Pacific, Europe, Latin America, Middle East, North America and Africa. These destinations have experienced different growth rate post covid 19 with some experiencing higher rates overall compared to the 2019 totals.

The bar chart indicates an increase in cargo movements in the Middle East from 11.3% in 2019 to 15.8% in 2021 as well as in Europe from 6.0% in 2019 to 6.8% in 2021 post covid-19. While cargo movement to North America and Asia Pacific decreases from 20.5% to 19.8% and 4.4% to 3.9%, the overall cargo transportation within the industry experienced an increase from 8.9% to 9.3% indicating a significant recovery in Air cargo from the covid pandemic crippling.

Employment and Cost

According to Mazareanu (2021) the Aviation industry supports 87.7 million jobs around the world. These are both direct jobs within airline companies as well as supported industries through the supply chain, employees spending and in aviation-enabled tourism sector. 11.3 million People work in the aviation industry directly including jobs such as airport operators, other airport based roles such as retail for tickets and bookings, car rentals, customs and immigration, freight forwards and catering. Direct employees also include air navigation services providers, civil aerospace employees such as designers and engineers of aircraft engines and components as well as cabin crews, executives, grounds service employees, check in, training and maintenance staff.

The Air cargo industry also supports up to 18.1 million indirect employment opportunities through air transport industries purchase of goods and services (ATAG, 2021). Such employees include suppliers to the airline companies including fuel suppliers, suppliers of aircraft components, manufacturers of aviation goods, and business support employees including IT accountancy and call centers. The air cargo industry also supports by extension induces jobs such as restaurants and hotels as well as jobs in the tourism industry.

Main Players

According to the National Academy of Science Transportation Research Board (2021) Air cargo transport originates from shippers who can either deliver their products directly to the carrier or utilize third party logistics providers, usually, a freighter or forwarder. Among the primary distribution channels for air freight include: Integrated Express Carriers such as FedEx UPS and DHL which operate a large fleet of scheduled cargo aircrafts, trucks and couriers, all cargo freighter airlines including Atlas Air Evergreen, Kalitta and Polar air cargo which generally operate scheduled wide body and containerized cargo aircrafts, Commercial passenger airlines with space in the belly to move cargo between two airports, Freight forwarders and Regional Air Cargo carriers.

Market Characteristics of Cargo Industry

The air cargo system is characterized as a complex distribution network that handles a vast amount of freight and links manufacturers and shippers to freight forwarders to airport sorting and cargo handling facilities where shipments are loaded and unloaded from aircraft. Morell and Klein (2019) advance that the demand for air freight services are inherently dependent on the underlying demand for products that require rapid transportation in addition to the cost benefits of air cargo in comparison to other modes of transportation. Air freights and cargo can be shipped on scheduled services including on dedicated freighter aircrafts, belly hold on passenger aircraft, on main deck of combination aircrafts and on charter flights with the opportunities for larger one-off consignments. The market segmentation is often based on Disaster / Emergency, Express / Mail / Urgent / Business / Courier, Ultra High Value, Routine Perishable, Routine Non-perishable, Special opportunity, Niche, Outsize, Military, Dangerous Goods, Live animals, Excess Baggage, LHO (Live Human Organs), Human Remains (Chao, Lirn and Shang, 2013).

Air cargo across the global economy exists in a bilateral type of agreement. This illustrates a two way transportation of cargo through air to and from a country. Given that countries for example the United States produces different products from China there exists bilateral trade agreements that see goods being transported from the US to China and from China back to the US through Air Cargo. Such trade routes exist all across the globe and continue to develop as the needs for different products by different countries continue to arise. Selfin and hope (2011) illustrate these trade routes and the quantity of the products transported based on the revenue the route earns the exporting country. The US to China trade route given the blossoming economies and partnership between these two countries is the largest trade route with products worth up to US$350 billion being transported annually between the two countries via air transport. China to Europe, to Australia, to Africa and to South America Via Brazil as well as Europe to the US are also major bilateral air cargo trade routes and are predicted to total between US$ 200 billion and US$350 billion by 2030.

Top 25 Sea and Air freight bilateral trade pairs predicted for 2030

Conclusion

Air cargo is among the major forces behind the development and growth of global economy and not only facilitates the transportation of highly perishable products that require rapid transportation, but also ensures adequate and timely delivery of products to all geographical locations across the globe. This ensures continued supply of products to different economies and the advancement of international trade across the globe. It is also a multibillion dollar business which contributes to millions of employment opportunities directly within the industry and also indirectly through different supplementary job opportunities like businesses within airports and tourism activities. Ultimately, Air transport despite being faced by significant challenges including fuel price fluctuations and environmental concerns further compounded by the covid-19 pandemic is gradually and steadily recovering. The cargo capacities as well as revenue obtained from Air cargo activities have significantly rose over the past months to equal the numbers prior to the covid-19 pandemic.

References

• ATAG, 2021. Employment. [online] Aviationbenefits.org. Available at: [Accessed 25 October 2021].
• Chao, C., Lirn, T. and Shang, K., 2013. Market segmentation of airline cargo transport. The Service Industries Journal, 33(15-16), pp.1672-1685.
• IATA, 2021. Air Cargo Market Analysis. [online] IATA,org. Available at: [Accessed 25 October 2021].
• IATA, 2021. Cargo. [online] Iata.org. Available at: [Accessed 25 October 2021].
• Mazareanu, E., 2021. Global air cargo revenue 2004-2021 | Statista. [online] Statista. Available at: [Accessed 26 October 2021].
• Mazareanu, E., 2021. Topic: Air transportation. [online] Statista. Available at: [Accessed 25 October 2021].
• Morrell, P. and Klein, T., 2019. Moving boxes by air. 2nd ed. Routledge.
• Selfin, Y. and Hope, D., 2011. Future of World Trade: Top 25 Sea and Air Freight Routes in 2030. [online] economics.pwc. Available at: [Accessed 26 October 2021].
• Statista, 2020. Infographic: The World's Busiest Airports For Cargo. [online] Statista Infographics. Available at: [Accessed 26 October 2021].
• The National Academies of Science, 2021. The Players in the Air Cargo Industry – Aligning Community Expectations with Airport Roles. [online] Crp.trb.org. Available at: [Accessed 25 October 2021].
• Turner, Y., 2021. The importance of air cargo to the global economy - AIR CARGO WEEK. [online] AIR CARGO WEEK. Available at: [Accessed 25 October 2021].
• Weiss, E., Keane, J., De Maar, L. and Bloemen, M., 2021. COVID-19: Effects on Air Cargo Capacity | Accenture. [online] Accenture.com. Available at: [Accessed 25 October 2021].

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