Air Cargo Industry Export Orientation

Air Cargo Industry Export OrientationMuhammad Farhan Mat Hussain532592142376xBMeWorld Cargo Growth Detail

World Air Cargo TrendsDramatic, 5.8%, drop of world air cargo in 2001-Why?Simultaneous slowing of worlds largest economic groupingsCollapse of the technology bubbleTerrorist attacksDespite SARS outbreaks annual growth jumped nearly 4% in 2003Further 10.7% increase in traffic for first 5 months of 2004 compared to 2003Long-term air cargo growth is expected to average 6.2% per yearRecent Air Cargo Trendshttp://www.boeing.com/commercial/cargo/01_01.html

Air Freight Growth by Major Market

Growth in markets linked to Asia will continue to lead the rest of the industry at rates exceeding the world average The Intra-Asian freight market will grow fastest among all world markets and is expected to display growth of nearly 7% per year- Domestic China 9.4%Asian markets will account for more than 50% of the world market by 2019Yield DeclinesYield: A standard unit of airline prices, defined as average revenue per revenue passenger mile or revenue ton mile The profit squeeze within the passenger industry has focused attention on the cargo market lower hold revenue opportunities. Industry yield for both cargo and passenger services have steadily declined since 1970. Such declines reflect airline productivity gains, technical improvements, and intensifying competition. Scheduled freight yields firmed slightly in the late 1990s and now have begun to increase somewhat. But Yield Trends Decline

Wet Lease AirlinesThe competitive nature of the air cargo industry requires innovation and flexibility. The freighter "wet-lease "airline, or ACMI (aircraft, crew, maintenance, and insurance) provider, has provided traditional airlines a new competitive option. Wet-lease carriers can offer airlines the flexibility to contract for air transportation services on a trial basis if demand is uncertain, augment existing markets, or provide service in markets that are highly seasonal without the investment in dedicated equipment.

ACMI ProvidersRise of the IntegratorsIntegrator is a firm that both flies the cargo between airports and handles ground pick up from and delivery to customersTremendous growth of integrators over past five years because of time sensitivity of goods movementMajor competitors for an increasingly lucrative market are: Federal Express, United Parcel Service, TNT, Airborne International Air ExpressThe definitions of express versus nonexpress air cargo are blurredTraditional airlines, particularly in Europe, expand their offerings of time-definite services. Also, government postal authorities have become full-fledged "logistics providers, "largely through the acquisition of established firms. But regardless of the entity that provides the express service, the air cargo customer will benefit from increased service and lower prices as competing products enter the market. International Express Market

12The international express industry is expected to grow at an average annual growth rate of 13% through 2019, with the overall share of international traffic expanding from 9.2% in 1999 to 31% in 2019. The average international express shipment size has grown from 2.7 kg (6 lb) in 1992 to 4.5 kg (10 lb) in 1999, further bolstering the overall express component of international air freight traffic. While growth exceeded 20% per year from the early through mid-1990s, the rate of growth has moderated since 1997 to 18%. As businesses continue to expand beyond their domestic markets in search of new markets, the express sector will continue to grow, albeit at more sustainable, long-term growth rates. The definitions of express versus nonexpress air cargo are increasingly blurred, as traditional airlines, particularly in Europe, expand their offerings of time-definite services. Also, government postal authorities have made strides in becoming full-fledged "logistics providers, "largely through the acquisition of established firms. These new services and industry realignments further cloud the definition of express services provider. Regardless of the entity that provides the express service, the air cargo customer will benefit from increased service options and lower prices as competing products enter the market. Air Cargo in Southeast AsiaWhy have air cargo services grown so rapidly in Southeast Asia?

How have the quality, diversity, and sophistication of air cargo services changed?

How do different electronics manufacturers use air cargo services to link their globally dispersed operations?

What are some explanations for the intensity of air cargo usage by electronics manufacturers?

Reasons for Growth of Air CargoUntil financial crisis, strong growth in the economies: Malaysia $4530 PCI, Philippines $1,200, Singapore $32,8101980-98: Rate GDP 7%, 2.3%, 7.7%Commonalities: export-oriented economies, impact of electronics, recent economic crisisAdoption of just-in-time (JIT) practices by manufacturers and integrated logisticsLower air freight rates due to superior aircraft

ATTRACTING AIR CARGO SERVICEMarket the Location!

Air Cargo Carriers Must Operate from Airports Near Customers (Catchment Area) Highlight Local and Regional Customer Base

Proximity Criteria is Dependant on Type of Carrier and Airport Function Understand Target Carrier Networks and Operations

Airport Facility Quality is Secondary to Location Sell the Location not the AirportATTRACTING AIR CARGO USERS What Are the Marketable Benefits?

Cost, Time and Reliability

Increased Freight Connectivity Reduced Drayage Costs Access to New MarketsJ.I.T. Manufacturing CapabilityEnhanced Distribution Efficiency/Options17TARGET INDUSTRIES High-value products, short life cycle products, time-critical J.I.T. and spare part goods.Aeronautics - Equipment & PartsAutomotive - Equipment & PartsPharmaceuticalsComputers & Computer ComponentsDiagnostic and Medical EquipmentSoftwareTextiles - GarmentsPerishables - Flowers, Fruit, Vegetables & FishEconomic perishables - Printed materialTelecommunications Equipment - Cell Phones, Pagers18ULTIMATE GOAL Increase Regional Competitiveness via Increased Freight Connectivity, Efficiency and Access to Markets

Air Cargo Operations Can Provide a Competitive Advantage to Regional Economic Development Efforts.

Efficient Air Cargo Access can Provide a Tangible Marketing Tool for Attracting New Businesses.

Most Air Cargo Intensive Target Industries Exhibit Desirable Economic Characteristics.19

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