What is the future of air freight forwarding operations?
The V shaped economic recovery, soaring sea freight rates and the quick delivery solutions that air freight forwarding option can provide has made it a lucrative option for businesses world-over. But is this a temporary correction or will this change the air freight industry forever?
Looking at the surging costs, it is easy to assume that this question is tad too late; however the current air cargo rush and the resulting higher costs are a result of multiple factors and that is the focus of our current blogpost.
Like every other freight transportation, the air cargo too was hit badly by the COVID-19 pandemic; however it was also the only mode of transportation that continued to operate even during the strict restrictions. While the world came to a halt, the air cargo flights continued to operate around the world.
Air Freight recovery
Pre-covid, air cargo businesses relied heavily on the passenger airplanes, with nearly 60% of the cargo being transported in the aircraft belly of a passenger flight. Once the flights were grounded innovative methods were implemented to keep the business going. Increased use of freighters, specialized charters, converting passenger planes into cargo only plane were some of those ideas which helped sustain the industry. Global experts estimate that air cargo revenue can be expected to reach pre-pandemic levels only by Q3 of 2023.
Air Freight is a competitive sector today
The supply-chain was largely driven by ocean freight for both its capacity and costing however with the sky rocketing sea freight forwarding rates, the air freight forwarding is a viable option today for many industries. The airline sector was growing at a 12% CAGR in 2019; adding to the rapid enhancement of the air cargo infrastructure and greater digital infrastructure conducive to cargo handling.
The current blockages affecting the ocean freight can be an advantage to the air freight. Operational difficulties like congestion, cancellation of ship calls, accessibility issue and the high container costs are disrupting the supply-chain world over. In situations like these air freight can be a complementary solution.
Economic recovery is driving demand
Economic recovery world over is driving demand and that is exerting an enormous pressure on the current supply-chain system. Add to it the delays and disruptions caused by ocean freight; the pressure is at an all-time high. We are seeing the repercussions of this all around us. Shortage of semi-conductors in India to unavailability of petrol in UK to shortage of diapers in USA, all these are examples of effects of disrupted supply-chain. In these situations air freight forwarding can be a great solution.
Even during the peak of pandemic air freight was able to supply time sensitive pharma raw material and finished goods. It also kept the e-commerce supply uninterrupted all over the globe. Important air traffic hubs are seeing huge spikes in cargo bookings.
Challenges for Air freight in the future -
Paucity of dedicated air cargo
Before the pandemic, the air freight forwarding operations was a small portion of the entire logistics industry. There was a dearth of dedicated air cargo operators and the majority of air cargo was transported in the belly hold of passenger aircraft. With the passenger flights coming to a standstill, there was a major loss of critical infrastructure.
Dedicated airlines to handle air cargo in the coming future will be a viable option for the industry, however adding to the cargo airlines capacity is possible only by either buying new aircrafts or converting passenger flights to cargo flights. While both the options aren’t feasible in the short run, the aviation industry is definitely considering these as measures to be implemented in the long run.
Improving onward connections
The switch from ocean to air freight has put a lot of pressure on the existing carrier cargo hubs world-over. This is the right time to grow the capacities, improve onward connections, and create dedicated resources for cargo. Shortage of crew is another pressing issue that needs to be addressed.
Air freight forwarding services will be irrevocably changed in the coming years. It is important for cargo companies and airlines to take preemptive measures to maximize business. It is important to be prepared when the time comes.
US Airlines have already remodeled passenger flights to cargo flights and even placed orders for new cargo airplanes to meet the future growth prospectives.