air freight logistics

AIR FREIGHT LOGISTICS

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Week 1

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HISTORICAL OVERVIEW OF AIRFREGHT Air cargo got its start on May 28, 1910 when Glenn

Curtiss flew a sack of mail from Albany to New York City for the Post Office Department. It covers 150 miles in 2 ½ hours.

November 10, 1910 when the Wright Company flew five bolts of silk cloth strapped on passenger seats from Dayton to Columbus, Ohio. It covers 65 miles.

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OVERNIGHT AIR EXPRESS On April 17, 1973 Frederick W. Smith began his Federal

Express operations at 13 airports.

Provides a door to door overnight service for small packages.

By flying dedicated aircraft, FedEx was able to fly at night and deliver packages the next business day.

Fred Smith revolutionised the air industry by introducing the hub and spoke system, routing all packages and aircraft through a hub in Memphis.

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ARRIVAL OF WIDE BODY JET In January 1970, the Boeing 747 jumbo jets began

operating as passenger liners.

November 1971, Boeing completed construction of the first 747 freighter and delivered to Lufthansa (March 9, 1972) for FRA/NYC routes.

One 21 February, 1974 Boeing introduces B747 Combi for Sabena World Airways, which carries 8x8x10’ containers on the main deck.

All cargo aircraft provided the capacity to carry containers (ULDs) as big as 8x8x40’ and can uplift 100 tons per trip.

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TYPES OF CARRIERS Integrated carriers also known as Express carrier Operate door to door freight transportation networks

They include all cargo aircraft, delivery vehicles, sorting hubs and advanced information systems.

Operates own aircraft to ensure adequate capacity and service reliability. They also use belly cargo space of passenger aircraft to supplement their own capacity and to provide international service.

They include FedEx; United Parcel Service (UPS); Airborne Express; DHL Airways, Emery Worldwide, and Burlington Air Express.

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TYPES OF CARRIERS Combination carriers, which carry passengers and cargo.

Operate point to point service on a wholesale basis, relying on freight forwarder for pick up and delivery, sales to shippers and customer service.

Cargo capacity is a co-product of passenger service.

They have low marginal cost and thus offer much lower prices than express carrier.

Many carriers like Korean Air, Cathay Pacific Airways, Lufthansa and Air France operate fleets of freighters aircraft to supplement their belly cargo capacity.

Cargo accounts for a large share of total revenue of these carriers.

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TYPES OF CARRIERS All cargo carriers

Operates a variety of cargo services.

Gemini Air Cargo and Polar Air Cargo provides point to point services for air freight forwarders, either as common carriers or under guaranteed space agreements.

Atlas Air and Air Transport International, operates aircraft on a contract basis for other airlines.

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AIR CARGO TODAY Air cargo traffic continues to grow at a healthy rate, but has not

achieved the status as forecasted by the air cargo pioneers of the 1930s and 1940s.

These air cargo pioneers fully expected that air cargo would in time be the most important revenue for the airlines.

Why is this so? Air is a premium cost transportation mode compared to any surface

system. It cost more to operate an airplane than to run a truck, ship or railroad

car. Customers use air services due to:

Customer services To get the products to the market early

Aircraft had been designed to carry passenger and thus not suited for air freight.

Unprofitable operations of freighter aircraft.

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AIR CARGO TODAY Many companies use air freight services because they

experience the inventory reduction benefits

Lufthansa, Japan Airlines and Air France earn as much as 1/3 to ½ of their gross revenues from cargo on some routes.

The four largest markets – North Atlantic, transpacific, Europe-Far East, and US domestic account for nearly ¾ of air cargo shipments.

Integrated carriers have successfully followed the strategy of offering superior services at a premium price. They provide time definite, guaranteed door to door services and supported by real time shipment tracking service.

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AIR CARGO TODAY Combination carriers supply airport to airport service primarily

on a space available basis; usually provide no service guarantees, offer little or no tracking capability.

By offering a consistently high level of service, the integrated carriers have raised the expectations of freight shippers.

In addition, the Integrated carriers have developed a variety of lower cost second day and deferred service options through increased use of trucking.

Combination carriers trend to ward contracting out airport cargo services. This may increase airline cargo profitability by reducing labour cost, but it will not help them to regain market share and may further drop due to lower service quality.


AIR CARGO TODAY The number of all cargo operations will rise, due to

integrated carrier moving in all cargo aircraft.

Increase demand for cargo aircraft parking positions, particularly at spoke airports.

Integrated carriers have more flexibility in locating cargo warehouse than the combination carriers.

Noise impact from integrated carriers aircraft may also increase especially at night.


AIR CARGO TODAY Integrated carrier hub/gateway airports:

FedEx: Memphis, Indianapolis, Anchorage, Oakland, Newark, Dallas – Fort Worth.

UPS: Louisville, Anchorage, Newark, Dallas – Fort Worth, Philadelphia, Ontario.

Emery Worldwide: Dayton

Burlington Air Express: Toledo.


THE FUTURE Air mail now accounts for less than 7% of the revenues

for cargo carried by the world’s airlines. Mail growth has been steady but slow, averaging about 4% per annum.

The real potential for air cargo growth lies with air express and air freight.

Boeing expects that world air cargo will grow at a rate of 6.2% pa during the next 20 years.

Two factors influence freight growth: Economic growth

Rate level.


THE FUTURE Trade barriers are removed, customs procedures

simplified. Carriers are given more flexible operating rights, air cargo traffic growth will be stimulated.

Integrated carriers are offering worldwide distribution.

The globalization of the world economy provides a major stimulus to air freight.

Shippers with products with a short shelf life e.g. magazines, fashion goods for perishables use air freight, as the only real choice.


THE FUTURE Lack of cargo specific aircraft. Most of today’s

freighters are converted passenger aircraft which are old, costly to operate and at the end of their life span.

Airbus Industrie has produced a very large aircraft (VLA) called the Airbus A380.

Passenger version

Freight version. A380-800F is a high capacity, long range aircraft with payload of more than 330,000 pounds and a range of 6000 nautical miles.


Assignment 1 Describe the basic concept of Federal Express. Why

has this company revolutionized the air express business? Explain the role of the air freight forwarder in the air cargo business. Why did the arrival of the jumbo jet prove to be both a boon and a bane for the air cargo business?

Do you think that air cargo revenue will ever exceed passenger revenue? Why or why not? Discuss several factors that will influence air cargo growth in the future.


air freight logistics

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