The air freight landscape has experienced some dramatic shifts in recent years. In fact, those events seem likely to produce some headwinds for air freight shippers in 2018 in locating available air capacity, especially during peak seasons.
What is Causing the Air Freight Industry to Shift?
Over the last few years, digitization has become more prominent in the air industry. As in most industries, big data obtained in real time, from real events, combined with flexible management, is helping air carriers take a more efficient approach to traffic planning and infrastructure. Airlines routinely use their data and technology to balance available air capacity against customer demands. They can easily scale up or down the number of planes needed for cargo.
Although commercial 747s are being sold to cargo carriers in greater numbers, airlines can now use data to position their planes more accurately. They can park planes or put them in for maintenance when there is an overabundance of capacity, and quickly charter planes from other airlines when they need to meet surging demand. All of this is partly responsible for enabling airlines to run leaner than in the past and cope with cost pressures.
Like all carriers, airlines love predictability in their business. They found a potential new way to obtain more predictability and control of profits in 2017. A large retailer bought whole aircrafts of space for a critical product launch, paying well above market rates. Other airlines may be inspired to take this approach, as well, working directly with larger shippers to gain a healthier return on their assets.
3 Air Freight Trends to Watch for in 2018
That’s the backdrop for these three trends we’re keeping an eye on in 2018 as we prepare to help customers adapt to likely developments.
- Capacity is likely to become harder to find. Other airlines will probably try to engage with large shippers in a variety of industries and negotiate directly for their air freight needs. There is only so much air cargo space available. If large shippers absorb a larger slice of the available capacity, small- and medium-sized shippers will probably find it a lot more difficult to secure air space for their freight. Smaller freight forwarders may still be able to provide quotes for space, but perhaps only the top 10% of freight forwarders—the largest ones with many air carrier relationships—are likely to be able to provide available space when you actually need it.
- Peak seasons will add more pressure on available capacity. At certain times of the year—for instance, Chinese New Year and produce and holiday shipping seasons—there is more freight flowing than capacity to handle it. Expect these predictable capacity crunches to exacerbate scarcer space availability. It’s never too soon to explore your options. In 2018, you still have many ways you can ship by air through a large freight forwarder. There are charters, NFO/hand carry, express, standard consolidation, and deferred services. Generally speaking, the longer the lead time you can allow between pickup and delivery to customers, the more able you will be to find available space and contain your costs.
- Consolidation is one bright spot to consider in this challenging environment. Shippers of any size can use air consolidation service. But it is especially useful for organizations with lean supply chains or those that operate in JIT environments who need to ship smaller quantities of material more frequently, but don’t have enough freight to charter a flight on their own. Freight forwarders or air consolidators accept complementary freight from multiple shippers and combine this freight into Unit Load Devices (ULDs)—essentially, big cookie sheets that slide into a cargo plane’s racking system for transport. Only the very largest freight forwarders are likely to have the customers and volumes to reserve air space through the airlines; shippers who use consolidation have saved between 30% and 50% on air shipping.
Looking Ahead: Adjust Your Air Freight Strategy
The key to sanity in 2018 will lie in understanding the trends and your options. Start by analyzing your current transit times and delivery dates, and evaluating how they impact your ability to execute an effective air freight strategy. Many companies that perform this exercise discover that lengthening transit times alone can often save between 15% and 20%, before other process changes are even considered.
You can also work with a large, stable freight forwarder, who can help you navigate the challenges of finding space availability, even (and especially) during peak shipping seasons.