In response to Peter Conway's Cargo Crisis feature which ran in our October edition, Hugh Doyle questions whether a shift in the perception of the air cargo industry would help fix its woes
It is disappointing that we still refer to air cargo as though it was a homogenous industry. It no longer is and it has not been since the integrators moved into all international markets. There are in fact now two totally different industries, one which is about short cycle times and reliability, and the other which is about cheap lift and long and inconsistent cycle times.
The first is "air cargo" the latter is "sky trucking".Real air cargo has as much in common with sky trucking as Chanel perfume has with Dettol disinfectant.Does it matter how we define the industry we are in? Absolutely, because for decades this enduring corporate cargo schizophrenia has lead to endless poor decisions leading to declining yields and increasing costs.
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ABOUT THE AUTHOR: Hugh Doyle, now semi-retired, was formerly with Aer Lingus Cargo, Unisys and SITA. |
In an industry where the airlinedistribution channel is dominated almost 95% by freight forwarders, agents and GSSAs who have almost zero switching costs, airlines are making large financial commitments appropriate only to a different industry with a different distribution channel relationship. If airline cargo executives were to re-define their cargo business as sky trucking it would facilitate a far "colder eye" being placed on proposed investments in such high risk areas as freighters, automation and handling facilities. It would also encourage a shift from the historical and dreadful focus on revenue to a focus on profit.
Money can be made in sky trucking, but not by dreamers. It is a difficult industry where the only product is "capacity" that ebbs and flows, is awash with incidental belly lift from a different industry, with the increasing aggravation of having to deal with Middle Eastern "air luckies" for whom the laws of economics do not apply, but who can further pollute markets with fleets of freighters and widebody aircraft. Sky trucking, the industry that we really are in, is in a self-made and self-compounding crisis which did not start yesterday, but in the 1970s when Ronald Reagan started deregulating the industry. Its present crisis is just another episode in the decline in a once great industry that simply could not, or would not adapt!"
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PETER CONWAY REPLIES: |
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| Hugh Doyle may, I suspect, be pushing at an open door in the current climate, in which many carriers who have always prided themselves on being "serious" cargo players are having to take a long hard look at the economics of their freighter operations.
As Doyle correctly points out, the elephant in the room in the cargo business ever since passenger aircraft got larger in the late 1970s and early 1980s has been belly capacity. If you are flying the aircraft anyway, any extra cargo revenue is welcome, so long as it covers the fuel and handling costs. As a result, freighter operators have always faced "unfair" competition from belly cargo, and the air cargo business has twisted and turned for over three decades trying to find the solution. FedEx and UPS found one - go for the high paying express business. Many US carriers found another - get out of freighters altogether. Meanwhile European operators like Lufthansa, Air France and KLM prided themselves on being quality operators able to command a premium for their freight. And Asian carriers saw massive export cargo flows in their backyards, not catered for by belly capacity, and added all-cargo aircraft to cope. It is notable in this current downturn that the quality approach has not saved the Europeans, however, and more than one Asian carrier has also been badly caught out with too much capacity. Even Emirates, surely one of Doyle's Middle Eastern "Air Luckies", seems to be having second thoughts about its large freighter orders. What is the answer? Should carriers follow the US example, or is there some clever new model that can solve the bellyhold dilemma? What is certain is that now would be a good time for some creative thinking. |
Join the debate! Read Peter Conway's original Cargo Crisis article
Source: Airline Business
