Just as we are going through an energy transition from fossil fuels to renewables, the logistics industry is likewise going through a transition in air cargo transport.
The idea behind the energy transition is to reduce pollution and the costs of energy. Today, renewables are costly. But they promise to offer consumers clean energy at affordable prices in the future.
Likewise, air cargo and global supply chains are in transition to a post-Covid world. Improved air cargo and supply chain operations promise to provide improved operations.
Today, air cargo shipping features increasing usage and increasing prices. That’s a temporary situation due to the lingering effects of Covid and the Suez Canal blockage.
Both have challenged global supply chains, increasing shipping unpredictability and cost.
As air cargo undergoes transition, we’re seeing an increased reliance on air transport.
This post will provide a current snapshot of air cargo operations. Comparing present to past operations will provide insights into air cargo’s transition.
Without further ado, let’s dive in.
Air Cargo Business is on the Rise
Air cargo business is picking up as normalization sets in. According to InBound Logistics (March 2021, p. 23.), the air cargo market is almost back to its pre-Covid levels. Also as vaccinations increase and businesses open up, recovery is gaining momentum.
Besides air cargo, supply chains , too, are gradually returning to normal. Or better stated, they’re resetting to a New Normal.
For example, air cargo operations are benefitting from delays and dislocations. Container shortages have wracked supply chains and will likely continue to do so. That’s causing a delay in shipping delivery times. Also, delays caused by the Suez Canal crisis further exacerbate on-time delivery. Add the current container scarcity, and you have a third factor causing port congestion.
A case in point is Peloton bicycles. Peloton bikes sat at the Port of Los Angeles for 12 days from December 22, 2020 to January 2, 2021. This type of delay is unacceptable during the critical holiday season. As a result, Peloton is turning to air freight to check the negative effects of port congestion.
That’s only one example. The bottleneck at ports has also made air freight a relatively less expensive option. That’s due, in large part, to the scarcity of available container space. So, for certain items it makes sense in terms of cost, as well as time, to ship via air transport.
At the same time, consumer demand is increasing with the rise of e-Commerce. That’s part of the reset as consumers turned to online shopping during the pandemic in droves. That places even more pressure on capacity as well as prices.
The increase in demand has also led to a quick drawdown of existing inventories. This is boosting increased manufacturing activity in the U.S., Europe, and Asia.
As business for air cargo picks up, it has the beneficial effect of keeping goods flowing. Yet with fewer planes in operation that leads to reduced air cargo capacity. And that puts upward pressure on prices. But the spread between ocean and air shipping costs are declining. So, air cargo is proving to be a viable service option.
Finally, many passenger airlines are still grounded. International travel will remain sluggish until the threat of the pandemic dies down. Even so, with the spotty global recovery, air cargo service is recovering briskly.When international travel attains its pre-pandemic levels, cargo space constraints will diminish. Formerly at 65% of all air freight, cargo space is now down to 45%, as planes aren’t available in the same numbers. That percentage is likely to improve over time.
Air Freight: A Bright Spot in Improving the Flow of Goods
The energy transition will take time, likewise, air cargo’s transition will also take time. It’s in transition to a New Normal that features increased reliance on air shipping.
Although air freight’s transition has some painful spots, it also has several benefits.
It keeps goods flowing, especially high-cost and high-demand items. It helps reduce uncertainty about shipping, by mitigating unpredictability. That’s a critical benefit given global supply chains’ fragility.
Of course, increased reliability comes with a rise in costs. But a balanced approach makes air freight a viable option.
Keep in mind, air freight is not a panacea. But as we transition to a New Normal, you can expect a greater reliance on air transport.
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