E-commerce has literally redefined shopping as consumers around the world are now moving to a round-the-clock online experience.
With e-commerce causing a structural shift in shopping and fuelling the air freight market worldwide, cargo segment has become a key driver of airline revenues.
This year, air cargo is expected to be worth $116bn, about 13% of total airline revenues, according to the International Air Transport Association, global trade body of airlines.
Asian airlines in particular have an outsized role in air freight, accounting for nearly 40% of the global market. This is because the region is a major manufacturing hub and its e-commerce is growing exponentially.
E-commerce is literally changing the way people buy stuff, especially in countries with huge markets such as China, India and the Far East.
Air cargo traffic would double within the next 20 years, growing at an average rate of 4.2% a year, industry experts’ estimate.
Cross border e-commerce, which is expected to present the biggest opportunity to air cargo, is expected to grow even faster than the overall online sales market over the coming years — growing by as much as 25% each year.
Top six trade corridors for cross border e-commerce are said to be: intra-Asia, transpacific (each direction), Asia to Europe, intra-Europe and intra-North America.
For this reason, airlines are now creating a huge amount of space in their cargo hold in addition to placing orders for dedicated freighters with leading plane makers including Boeing and Airbus.
Airports Council International (ACI) earlier said the air freight industry had experienced a revival across many of the world’s airports in 2017 and this had continued into 2018.
The world’s airports, it said, continue to be a vital link in the economic multiplier effect that aviation provides and the role it plays as an enabler for global commerce is growing.
Air cargo volumes at the 20 busiest airports grew by 6.8% in 2017, an ACI report showed. These airports handled a combined 51mn metric tonnes of cargo. This represents 43% of global air cargo volumes.
Shanghai, Chicago and Doha all experienced double-digit growth rates of 11.2%, 12.6% and 15%, respectively in 2017.
An IATA report showed that cross-border e-commerce trades primarily in low cost, lightweight products. Specifically, around 81% of all the packages are below 2kg in weight, with a good 45% of the total being less than a quarter of that.
Around 50% of online retailing is footwear, apparel and consumer electronics with the exception of travel, entertainment and financial services, data showed.
To gauge the impact of e-commerce on global air cargo industry, one needs to look at only two major festivities — ‘Black Friday’ in the US and ‘Singles Day’ in China.
In 2018, Singles Day generated more than 1bn packages in a 24-hour period, IATA said. In fact, global e-commerce growth rates in the region of 15% to 20% year-on-year are the norm, creating millions more shippers and billions more parcels with revenues measured in the trillions. As part of simplifying business cargo, which is dubbed ‘StB Cargo’, IATA has launched what is called the ‘ONE Record’ project, which is an end-to-end digital logistics and transport supply chain, where data is easily and transparently exchanged in a digital ecosystem of air cargo stakeholders, communities and data platform.
But to take optimum advantage of e-commerce opportunities, it requires both a virtual and physical infrastructure.
On the virtual side, ONE Record is about creating a digital ‘plug and play’ environment to make data easily accessible, furthering air cargo’s paperless processes vision.
“Ultimately, ONE Record will allow everybody involved in the logistics and transport supply chain to exchange data easily and transparently,” points out Brendan Sullivan, IATA’s head (E-Commerce and Cargo Operations).
“In the e-commerce world, shippers and consumers want transparency on their package, they want predictability of delivery times, and they want speed,” Sullivan noted in a recent analysis.
On air cargo’s future, IATA said the move away from dark and dusty warehouses on the outer reaches of the airport will be vital in terms of physical infrastructure.
The cargo facility of the future visualises fully automated high-rack warehouses, green vehicles navigating autonomously through the facility, and employees using artificial intelligence (AI) and augmented reality (AR) to be more efficient.
“The cargo facility of the future will be safe and secure, green, automated, connected and smart,” says Sullivan.
Undoubtedly, the reliability factor associated with shipments by air as a swift mode of delivery remains a viable option, especially where consumer demand for high value-added goods and perishables remain buoyant.
Similarly, express parcel deliveries that are generated from online purchases are an important driver in the upward surge in volumes shipped by air.
* Pratap John is Business Editor at Gulf Times.
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