Yet despite the frustration of each losing season, thousands of Washingtonians and I somehow find a reason to renew our faith at the beginning that this will be the year that our nation’s capital will once again be home to an NFL champion. This faith is not only born out of hope, but also the realization that defeat could bring the change that will lead to resurrection and triumph.
I was reminded of the Redskins while listening to FedEx founder Fred Smith speak to the International Air Transport Association’s World Cargo Symposium in March in Los Angeles. While Smith has not given up hope on air cargo, he and a host of industry experts told the audience that the halcyon days of double-digit growth in air cargo are likely gone forever.
The last 12 years have been quite a rollercoaster ride for the airfreight industry. Just as normal growth patterns were established, significant incidents such as Sept. 11, 2001, the Asian flu epidemic, wars in the Middle East, volcanoes and global recession have suppressed growth and adversely affected air cargo volumes.
Another possible reason for the air cargo slowdown is the world’s focus on making goods smaller, particularly when it comes to high-tech products that have traditionally been distributed throughout the world via air cargo. In recent years, our computers and wireless phones have converged and decreased in size as consumers have gravitated toward lighter, flatter, smaller and increasingly mobile devices. These smaller devices, even when shipped at robust volumes, still take up less room on planes, resulting in reduced space needed.
In the past 20 years, 100 all-cargo operators have disappeared, victims of inadequate capitalization, poor timing and an inability to contend with US$3.15 (2.30 euro) a gallon jet fuel prices. Their demise was also attributable to suppressed demand caused by global recession and new, larger, more efficient commercial aircraft, including the Boeing 777, capable of hauling cargo once reserved for freighters. In fact, Smith told the audience that a 777 freighter making a single trip from Hong Kong to Anchorage, Alaska, costs US$30,000 (21,861 euros) less to operate than a four-engine 747-400 with almost the same payload. This may be why 43 747-400s are now parked in the desert.
Lower airfreight volumes lead many to think that cargo is diverting from planes onto the decks of ocean ships, but according to several economists, this is not the case. To be sure, 1.7 percent of air cargo has found its way to maritime transport. But according to the U.S. Department of Commerce, the top 20 categories of goods shipped by air on the trans-Pacific lane, by percentage, has remained almost constant. In other words, modal shift to ocean may not be the reason behind the air cargo slump.
Forwarders agree with Smith that when you get to heavier shipments, they have to be urgent to go on airplanes, given the relatively high per-tonne cost of shipping by air. Maritime commerce, just like the rails, has become more predictable and information-intensive, making the planning process around arrival times more certain for shippers – and thereby boosting their value in light of slower conveyance times.
Improvements in trucking within the U.S. have also reduced the need for domestic air cargo shipping. Like their maritime counterparts, truckers have become more information-driven, enabling shippers to monitor their goods while in transit and providing time-definite delivery with generous service guarantees.
But despite improvements in maritime and trucking, each has its share of operational concerns that threaten reliability. Slow-steaming continues to increase transit times, making ocean transportation unacceptable for commodities with tight deadlines. New hours of service and driver safety rating regulations are having an adverse effect on trucking as the number of operators decreases, thereby making available trucks harder to find in the U.S.
The air cargo value proposition of speed is still what brings shippers to the airport. But the industry needs to change and, like the Redskins, address its challenges. Our elected representatives can help lead the way to more open markets by entering into trade agreements that promote unfettered commerce between nations. In the U.S., this starts with giving the president Trade Promotion Authority to quickly enter these pacts.
Security regulations, while important, have made airfreight shipping more challenging for customers. Rules initially meant to protect the flying public should be constantly reviewed to make sure they are achieving their intended goals. With 100 percent screening of each piece of cargo, we should be asking ourselves about the usefulness of paper-driven processes. This is something we in the industry can do on our own to get the ball rolling toward more expansive use of electronic processes to move cargo. In the meantime, governments should agree to harmonize rules to avoid confusion and leverage electronic transmission of documents to make the process easier for the customer.
Air cargo may be down, but we will see a comeback once we, as an industry, address issues surrounding efficiency, sustainability and security – and push for change. As global economies recover, consumers will begin to increase spending and manufacturers will count on airfreight to speed their products to them.
Given the Redskins woeful season this past year, I would even go out on a limb and say that we can get our own act together before they do. Hail to air cargo!
Brandon Fried is the executive director of the U.S. Airforwarders Association.