MIT ICAT Selected Cargo Carriers 2001(Source: ATA) Carrier Number Air Cargo cargo of Ton-miles Revenue Operating Aircraft(millions) (S million)Revenue FedEx 320 7,609 $6,948 458% UPS Air 258 4.094 $2,624 966% United 543 2390 $704 43% Northwest 440 2,161 $715 7.5% KLM 132 2,512 $882 155%
MIT ICAT MIT ICAT Selected Cargo Carriers 2001 (Source: ATA) Carrier Number of Aircraft Air Cargo Ton-miles (millions) Cargo Revenue ($ million) % of Operating Revenue FedEx 320 7,609 $ 6,948 45.8 % UPS Air 258 4,094 $ 2,624 96.6 % United 543 2,390 $ 704 4.3 % Northwest 440 2,161 $ 715 7.5 % KLM 132 2,512 $ 882 15.5 %
MIT ICAT Demand for Air Cargo Services Like demand for passenger air travel, demand for air cargo shipment is a“ derived” demand Primary drivers of air cargo demand include: Economic growth and trade(especially imports/exports) Relative prices of air cargo versus alternatives-ocean, truck, rail Difficult to quantify demand/supply accurately: No comprehensive sources of data on air cargo traffic and pricing Lack of published schedule data( unlike passenger airlines) Vertically integrated air cargo operators (like Fedex and UPS)only publish limited schedules for selected flights All-cargo carriers tend to operate flexibly based on daily/weekly demands Combination carriers provide joint supply of cargo and passenger capacity
MIT ICAT MIT ICAT Demand for Air Cargo Services • Like demand for passenger air travel, demand for air cargo shipment is a “derived” demand. • Primary drivers of air cargo demand include: – Economic growth and trade (especially imports/exports) – Relative prices of air cargo versus alternatives – ocean, truck, rail • Difficult to quantify demand/supply accurately: – No comprehensive sources of data on air cargo traffic and pricing – Lack of published schedule data (unlike passenger airlines) – Vertically integrated air cargo operators (like Fedex and UPS) only publish limited schedules for selected flights – All-cargo carriers tend to operate flexibly based on daily/weekly demands – Combination carriers provide joint supply of cargo and passenger capacity
MIT ICAT Drivers of Air Cargo Growth in 1990s Overall economic growth(especially world trade Historically, 2 to 2.5% increase in world trade with each 1%increase in total gDP Air freight trade has been growing even faster due to regional differences in economic growth Since 1993, average 7-10% annual growth in world air freight traffic ·G| obalization Increasingly integrated and interdependent national economies Liberalized(free) trade and reduced protectionism · Lean Inventory Strategies Reduced order-cycle times: just in time "and"make to order Less stock on hand to avoid production shutdowns, retail stockouts Air freight shortens delivery times to customer
MIT ICAT MIT ICAT Drivers of Air Cargo Growth in 1990s • Overall economic growth (especially world trade) – Historically, 2 to 2.5% increase in world trade with each 1% increase in total GDP – Air freight trade has been growing even faster, due to regional differences in economic growth – Since 1993, average 7-10% annual growth in world air freight traffic • Globalization – Increasingly integrated and interdependent national economies – Liberalized (free) trade and reduced protectionism • Lean Inventory Strategies – Reduced order-cycle times: “just in time” and “make to order” – Less stock on hand to avoid production shutdowns, retail stockouts – Air freight shortens delivery times to customer
MIT ICAT Constraints on Air Cargo Growth · Economic recession Reduced production demand for goods, international trade · Trade barriers Tariffs or protectionism designed to limit free trade Aircraft regulations Air cargo operators have used older aircraft that are most affected by new regulations on noise emissions and safety For example, noise hush-kits reduce cargo payloads Modal competition Air freight has tremendous speed advantage for long distances, but is highest-cost option Trucks very competitive for short haul (1000 miles, overnight Development of new"fast ships"for ocean cargo
MIT ICAT MIT ICAT Constraints on Air Cargo Growth • Economic recession – Reduced production, demand for goods, international trade • Trade barriers – Tariffs or protectionism designed to limit free trade • Aircraft regulations – Air cargo operators have used older aircraft that are most affected by new regulations on noise, emissions and safety – For example, noise hush-kits reduce cargo payloads • Modal competition – Air freight has tremendous speed advantage for long distances, but is highest-cost option – Trucks very competitive for short haul (1000 miles, overnight) – Development of new “fast ships” for ocean cargo