Air Logistics Combats Threat Of Falling Airline Yields

24 July 2002

Air logistics opens up an opportunity for airlines to offset the dramatic fall in yields by offering specialist products and services - that's the view of David Pierce, Emirates SkyCargo's Cargo Marketing and Business Development Manager. "Logistics is the new tool on the block," said Pierce, in an overview of the state of the air freight industry delivered to Emirates cargo managers at their recent conference in Dubai. 

Emirates has pushed wide open the logistics management door with SkyChain, a network of integrated systems enabling the cargo customer to manage all aspects of the supply chain via the internet.  

While 2001 ranks as one of the most disastrous years ever for airfreight, Pierce sees signs of recovery with growth in tonnages of around six per cent per year forecast for 2003 to 2005. 

However, while cargo volumes increase, yields have steadily fallen, creating a growth gap "In the period 1980 to 1999, real revenue, international tonnes and international FTKs increased; freight yields declined. In the period 1985 to 1999, freight yield tumbled by 2.2 per cent per year and they continue the downward spiral: -3 per cent in 2000, -8 per cent in 2001 and - 5 per cent in 2002. 

Costs are the key. Distribution costs are the drivers behind changes occurring in the air logistics process. While the costs of air transportation account for only 20 per cent of the total; distribution costs account for 80 per cent.  

In today's industry, general freight offers low growth and low yield; express freight is a maturing market offering high yield; but special service products such as live animals, valuable goods and supply chain management offer high growth and high yield.

Within the airfreight industry, relationships between airline, forwarder and shipper are changing. In place of a vertical shipper-forwarder-airline structure, there is now round table communication with each party talking to both the others.  

Customers now look for air logistics tools and tailor-made services; forwarders are re-inventing themselves through mergers and consolidations, market control and global coverage;  

Rising costs place pressure on freighter yields. Pierce predicts that passenger bellies will still provide more than half (54 per cent) of capacity with freighters coming in at 41 per cent and combis at just three per cent.