Making Air Freight More Efficient

If you work in logistics, you’re managing cost, efficiency, and speed with every shipment. Every time you choose a shipping mode, you’re making a compromise among these three attributes. Air freight is usually the fastest option, but it’s also the most expensive.

Despite the price, air transportation is the best choice for certain shipments. It’s an essential element in supply chains involving time-sensitive, fragile, or perishable items. No other mode can match the flexibility, speed, and security of air freight, and logistics organizations are taking steps to make it even more efficient than it is already.

On February 18, 2020, The International Air Transport Association (IATA) and the International Post Corporation (IPC) signed a memorandum of understanding outlining their new cooperative efforts to improve the efficiency of air freight and airmail, agreeing to work together toward these six goals:

1. Developing Industry Standards

Different carriers use their own solutions for managing both the physical and electronic procedures involved in air freight. Developing industrywide standards will improve efficiency when multiple carriers are involved.

2. Implementing Piece Level Tracking

The air freight industry is moving to implement technology-based standards to improve piece level tracking, which allows shipments to be tracked at a low level of consolidation (before they’re grouped into pallets or unit load devices).

3. Improving Efficiency for Small Packages

Small packages are sometimes much less efficient to ship than large packages from a shipper’s point of view. Improved navigation and booking procedures are intended to close this efficiency gap.

4. Improving Security

Security is one of the major selling points of air freight, but there is always room for improvement. Together, the IATA and the IPC are working to make security even better with improved procedures for the handover, carriage, delivery, and settlement of air cargo.

5. Including New Partners

There aren’t that many successful carriers in the air freight industry, and it’s difficult for a startup to attain success. Efforts to improve optimization and standardization across the industry will include new partners and encourage healthy competition.

6. Soliciting Industry Feedback

To date, the IATA and the IPC have operated with limited input from the carriers they serve. Now, they are soliciting additional feedback from ground handlers and other industry stakeholders.

Air freight will always be an essential part of logistics, and because the industry is working to improve efficiency, security, and speed for all stakeholders, it will remain a crucial mode of transportation for decades to come.

The Decline in American Air Cargo Trade

Cargo plane loading commercial product in airport

In the U.S., air freight forwarding is on the decline. According to the International Air Transport Association, the global demand for air freight declined by 3.8% in Q3 of 2019.

Growing Capacity, Falling Demand

The cost of a typical cargo plane is around $200 million. Shippers don’t invest in new aircraft without extensive research and planning. Like many capital investments, businesses plan these purchases years in advance. Unfortunately, global economics operate on a much tighter schedule. Between 2009 and 2014, global exports ballooned, prompting many shippers to order new aircraft. Now, as shipping has declined, FedEx, UPS, and Amazon are taking delivery of aircraft ordered three to five years ago. This has put increased pressure on the entire air cargo industry.

Trade Wars

Continuing disputes over global trade imbalances have driven an overall downward trend in global trade. Chinese imports are a good barometer. According to the U.S. Census Bureau, we are importing nearly 9% less volume of cargo from China in 2019 compared to 2018. The reduction is equivalent to nearly 100 fewer cargo flights every month.

Consumer Confidence

Even as US unemployment has declined to historic lows, consumer confidence remains shaky. The Conference Board reports that after nearly two years of relative stability, consumer confidence has fallen. They reported a 9% decrease for the month of September 2019.

Alternatives to Air

In terms of speed, air freight wins hands down. However, speed isn’t the only consideration. The fuel costs for air freight make it too expensive to be economically viable for everyday shipping.

Despite the decline in the U.S. air trade in recent years, shippers are continually pursuing ways to make the process more efficient in terms of time, labor, and fuel costs. The trends are clear:

  • The unstable price of fuel is driving aircraft manufacturers to improve efficiency.
  • Technology is improving the management, loading, and operation of cargo aircraft.

Global trade isn’t going away. Once the current trade disputes and other negative aviation trends blow over, consumers all over the world will again demand the inexpensive consumer goods that only global trade can deliver.