The Growth of Multimodal Solutions and the Rise of Air Cargo

Shippers are turning to multimodal solutions more and more. Cost, congestion, and customer service are driving the need to diversify shipping modes. As a result, the use of air cargo shipping has seen a pivotal increase in usage.

One feature of the New Normal is the diversification of shipping with a reliance on air freight. The diversification and increased use of multimodal solutions help shippers navigate the New Normal’s higher risk environment.

Besides addressing cost, congestion, and customer service, multimodal solutions mitigate risk. That’s especially important for the future as risks increase in number and severity.

With all that said, the post will focus on the rise of multimodal solutions. In particular, we’ll analyze the changing dynamics of air cargo and what that means to you.

Why Shippers Are Pivoting to Air Cargo

The increased reliance on air cargo did not occur without reason. Actually, the increased reliance is because of several critical factors.

In today’s on-demand economy, it’s tougher to get the capacity, schedule, and pricing you need to satisfy your customers’ demands. Congestions, capacity shortages, and skyrocketing prices manifest the business environment.

To begin with, congestions at the nation’s seaports are breaking records. To relieve some of that congestion, air cargo has become an obvious alternative. According to Mads Ravn, Executive VP at DSV stated:“ We see more ocean to air conversions as a result of long delays and already longer transit times coming out of Asia to the North American East Coast. So, port congestion is a major factor in driving the shift to air cargo.

Next, consumers have shifted their buying patterns to online, which has led to the rise of eCommerce. Traditional retail, meanwhile, is on the decline, especially with younger consumers. This marks a trend in the making that’s also reshaping logistics.

As a result, manufacturing output is up to meet this demand. China also factors heavily in this mix. Besides eCommerce demand, manufacturing is replenishing inventory drawn down during the pandemic. Also, as China eases its Covid lockdowns, manufacturing will increase.

Finally, the return of passenger air travel increases air cargo capacity. It makes capacity available that declined with the pandemic-induced fall in air travel.  Statista reports air travel is currently at 3.43 billion. In 2021, the number of air passengers came to 2.27 billion, which was up from 1.8 billion in 2020.

By comparison, in 2019, the number of scheduled passengers was 4.54 billion. Today’s air passenger traffic is substantially lower – 50 percent lower  – than what it was in 2019. While not yet at pre-Covid levels, the data reflect an upward trend that is returning to normal. Of course, more available cargo capacity makes air freight a practicable option.

These factors help explain why air cargo is now a viable mode of shipping. But that’s not to say air cargo is a comprehensive remedy.

Air Cargo: Neither a Quick Fix nor a Perfect Solution

Although shippers are relying on air cargo more, air cargo has its limits.

First, air freight is more expensive than other transportation modes. But that gap has closed with the skyrocketing rise in ocean shipping rates. Also, air cargo is not viable for any type of cargo. It lends itself to high-value items in high demand and requires speedy delivery.

One timely example of the value of air cargo is the resupply of infant formula from Europe to the United States. This example shows how air freight’s advantages: speed, agility, and resilience. Namely, air freight can meet exceptional requirements with the speed and agility consumers demand.

IATA data show air cargo represents about 35% of all volume and $6 trillion of goods shipped. Also, the International Chamber of Shipping reported that the total value of global shipping topped $14 trillion in 2019.

In terms of volume, air cargo is not dominant, conceding that to seaborne trade. With a smaller footprint compared to seaborne cargo, air cargo’s growth and impact are more exposed to external factors.

Inflation, rising interest rates, and the ongoing war all affect the viability of air freight. On its own, air cargo cannot resolve your shipping challenges.

However, as one element of a multimodal solution, air cargo offers ample benefits. And taking a holistic multimodal approach offers more extensive benefits.

The Future of Air Cargo

Air cargo has its advantages and disadvantages. Still, the trend suggests that air cargo will continue to grow in the post-pandemic world.

Credit the omnipotent consumer. Consumers are now shifting their weight from buying goods to buying services. As governments remove their Covid restrictions, consumers are spending more of their disposable income on services. That will have ramifications for capacity, schedule, and pricing.

On the whole, those ramifications should be positive as capacity increases along with air passenger travel. More available capacity should support planned shipping schedules and moderate prices.

Air cargo’s value will likely rise and become an established trend. Its unique ability to meet rising customer expectations makes it a viable option. That’s especially true in the shift to an on-demand economy.

This reflects a structural change in the logistics industry. And it’s defining the New Normal.

But, by itself, air cargo is less beneficial if not considered as part of a holistic distribution strategy. In formulating your distribution strategy, you must focus on balancing the need to move freight quickly, efficiently, and effectively.

Optimize Your Multimodal Strategy by Working with an Air Logistics Partner

Multimodal logistics is on the rise, and so is air cargo. The future of logistics depends on agile, speedy, and resilient supply chains. That’s what the New Normal looks like.

Diversifying cargo among all modes of transportation enables improved customer service and support. And you can gain a competitive advantage by expanding your air freight solutions.

At American Global Logistics, we provide low-risk, cost-effective, tailored solutions. We exploit advantages in the market for you while delivering quick results. One way we do that is by diversifying your carrier options among all modes of transportation.

Contact us today if you want to leverage the benefits multimodal solutions offer. We can meet your needs for capacity, schedule, and pricing by leveraging our robust Global Network.