Although there are some bright spots in the air cargo market, generally flat cargo volumes coupled with increasing capacity are keeping things fairly calm for now.
The global heavy airfreight industry has remained in an uneasy stasis in 2012, mirroring the general conditions of the world economy. As is true of any market, the two primary drivers are supply and demand. With the global economy showing alternating flashes of growth and recession, then, the airfreight market will likely drift along for the rest of the year.
Overall demand remains flat
Demand in the passenger market has seen steady growth since bottoming out in 2009, and wide-body jets with significant cargo capacity continue to capture an increasing percentage of that market. Cargo volumes, by contrast, have given up all post-recession gains since growth trends turned downward in 2010. In most markets, cargo volumes are flat or down relative to 2011. One reason is that an increasing number of cargo shippers are relying on ocean freight instead of air freight to ship their goods overseas. As a result, cargo utilization continues to decrease in most markets, and cargo rates have echoed that trend.
Although overall worldwide demand is down, several regions, including Latin America and the Middle East, have shown rapid growth in airfreight volumes over the past year. In addition, while Asia has traditionally been (and continues to be) a source of exports, over the past year international trade has expanded on lanes **italic{into} Asian markets. This has driven increased demand for aircraft space on lanes that traditionally were considered back-hauls.
While yields on these lanes are not high enough to flip the westbound trans-Pacific into a head-haul or induce more freighters into service, the additional revenues are enhancing trans-Pacific carriers' bottom line. Moreover, the airfreight market is experiencing more "demand shocks" caused by sales of blockbuster electronic products like Apple's third-generation iPad. Airfreight rates and service availability will see increased variability as manufacturers continue to rely on event-driven sales as a marketing tactic.
More wide-body capacity
On the supply side, carriers seeking to capture the growth in passenger volumes have been adding new wide-body jets to their fleets at a rapid pace: 65 in the first quarter of 2012 alone, and this January was the busiest for deliveries in over four years. Both Airbus and Boeing are continuing to enlarge their order books, and carriers worldwide currently are awaiting the delivery of almost 4,000 wide-body jets.
Most of that new capacity will be devoted to keeping pace with the growing passenger market, where yields are continuing at pre-recession levels, according to the International Air Transport Association (IATA). Still, the addition of cargo capacity on passenger routes as more wide-bodies come online, together with flat-to-decreasing demand, will keep the pressure on cargo pricing and yields in most markets.
As carrier networks absorb this new capacity, wide-body network coverage continues to expand, with carriers adding or replacing many existing routes. Through April 2012, U.S. carriers added 61 weekly flights spread over destinations in Asia and Europe—more than double the rate of coverage growth experienced in 2011. These new routes have had the positive effect of increasing service options in a down cargo market.
Supply (capacity) and demand are not the only factors influencing pricing. The cost of jet fuel, which has experienced dramatic increases since 2010, continues to be the primary driver of airfreight-rate volatility. In the near term, at least, things may be calmer. While jet fuel prices are up about 9 percent since 2011, the U.S. Energy Information Administration is projecting flat prices through 2013.
A look down the runway
Where does all this leave the air cargo industry? As was the case in 2011, there may be short-term increases in cargo volume and rates that will be driven by market forces that are not yet very clear. Over the longer term, freight rates will be kept within a range—held down by slack capacity on the one hand, and pushed upward by what could be mistaken for an economic recovery led by the United States and developing markets on the other. Fuel costs will continue to be the unpredictable factor driving overall airfreight cost volatility.
One positive note: When robust economic growth begins in earnest, air cargo networks will have excess capacity in place on the major East-West routes to absorb growth without service interruption.
The U.S., U.K., and Australia will strengthen supply chain resiliency by sharing data and taking joint actions under the terms of a pact signed last week, the three nations said.
The agreement creates a “Supply Chain Resilience Cooperation Group” designed to build resilience in priority supply chains and to enhance the members’ mutual ability to identify and address risks, threats, and disruptions, according to the U.K.’s Department for Business and Trade.
One of the top priorities for the new group is developing an early warning pilot focused on the telecommunications supply chain, which is essential for the three countries’ global, digitized economies, they said. By identifying and monitoring disruption risks to the telecommunications supply chain, this pilot will enhance all three countries’ knowledge of relevant vulnerabilities, criticality, and residual risks. It will also develop procedures for sharing this information and responding cooperatively to disruptions.
According to the U.S. Department of Homeland Security (DHS), the group chose that sector because telecommunications infrastructure is vital to the distribution of public safety information, emergency services, and the day to day lives of many citizens. For example, undersea fiberoptic cables carry over 95% of transoceanic data traffic without which smartphones, financial networks, and communications systems would cease to function reliably.
“The resilience of our critical supply chains is a homeland security and economic security imperative,” Secretary of Homeland Security Alejandro N. Mayorkas said in a release. “Collaboration with international partners allows us to anticipate and mitigate disruptions before they occur. Our new U.S.-U.K.-Australia Supply Chain Resilience Cooperation Group will help ensure that our communities continue to have the essential goods and services they need, when they need them.”
Artificial intelligence (AI) tools can help users build “smart and responsive supply chains” by increasing workforce productivity, expanding visibility, accelerating processes, and prioritizing the next best action to drive results, according to business software vendor Oracle.
To help reach that goal, the Texas company last week released software upgrades including user experience (UX) enhancements to its Oracle Fusion Cloud Supply Chain & Manufacturing (SCM) suite.
“Organizations are under pressure to create efficient and resilient supply chains that can quickly adapt to economic conditions, control costs, and protect margins,” Chris Leone, executive vice president, Applications Development, Oracle, said in a release. “The latest enhancements to Oracle Cloud SCM help customers create a smarter, more responsive supply chain by enabling them to optimize planning and execution and improve the speed and accuracy of processes.”
According to Oracle, specific upgrades feature changes to its:
Production Supervisor Workbench, which helps organizations improve manufacturing performance by providing real-time insight into work orders and generative AI-powered shift reporting.
Maintenance Supervisor Workbench, which helps organizations increase productivity and reduce asset downtime by resolving maintenance issues faster.
Order Management Enhancements, which help organizations increase operational performance by enabling users to quickly create and find orders, take actions, and engage customers.
Product Lifecycle Management (PLM) Enhancements, which help organizations accelerate product development and go-to-market by enabling users to quickly find items and configure critical objects and navigation paths to meet business-critical priorities.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
Businesses were preparing to deal with the effects of the latest major storm of the 2024 hurricane season as Francine barreled toward the Gulf Coast Wednesday.
Louisiana was experiencing heavy rain and wind gusts at midday as the storm moved northeast through the Gulf and was expected to pick up speed. The state will bear the brunt of Francine’s wind, rain, and storm damage, according to forecasters at weather service provider AccuWeather.
“AccuWeather meteorologists are projecting a storm surge of 6-10 feet along much of the Louisiana coast with a pocket of 10-15 feet on some of the inland bays in south-central Louisiana,” the company reported in an afternoon update Wednesday.
Businesses and supply chains were prepping for delays and disruptions from the storm earlier this week. Supply chain mapping and monitoring firm Resilinc said the storm will have a “significant impact” on a wide range of industries along the Gulf Coast, including aerospace, life sciences, manufacturing, oil and gas, and high-tech, among others. In a statement, Resilinc said energy companies had evacuated personnel and suspended operations on oil platforms as of Tuesday. In addition, the firm said its proprietary data showed the storm could affect nearly 11,000 manufacturing, warehousing, distribution, fabrication, and testing sites across the region, putting at risk more than 57,000 parts used in everyday items and the manufacture of more than 4,000 products.
Francine, which was expected to make landfall as a category 2 hurricane, according to AccuWeather, follows the devastating effects of two storms earlier this summer: Hurricane Beryl, which hit the Texas coast in July, and Hurricane Debby, which caused $28 billion in damage and economic loss after hitting the Southeast on August 5.