By John W. McCurry
What lies ahead for airfreight for the fourth quarter of 2013 and beyond? Some in the industry have been pointing to the final three months as having the potential to launch a turnaround in the industry. Others are still waiting for optimism to kick in.
It’s unclear whether a strong finish to 2013 will be a harbinger of a better 2014.
This is the season of cargo forecasts. The industry’s major plane builders, Boeing and Airbus, will soon release their cargo and freighter forecasts.
Stay tuned for Air Cargo World’s annual forecast, which will be published in our November issue.
Shawn McWhorter is among air cargo executives who have confidence in a strong finish to 2013. McWhorter, president of Nippon Cargo Airlines Americas, gave us an advance summary of remarks he was to make at the Traffic Club of Chicago.
Managing volatility is paramount for the industry, he says. There are some key realities that the industry needs to face.
“It’s a complicated process to move airfreight,” McWhorter says. “And the fact is that it’s getting more complicated, not less because of additional requirements for safety and security. Demand is volatile and unpredictable. Month-to-month and period-to-period projections cause instability in the whole supply chain.”
McWhorter says the industry must come to grips with some myths about how it works with shippers purchasing what they need for each shipment.
“It’s a myth that airfreight can be purchased as a commodity,” he says. “There’s a difference between shipping freight on passenger and cargo airlines. I look at it this way: I don’t buy all my groceries from one grocery story. I buy commodity items from a big box store, but produce from the farmer’s market, which is more expensive.”
McWhorter is also bullish about the future of freighters. He takes issue with one industry consultant who says passenger belly capacity will replace most freighters.
“Basically, freighters have carried 60 percent of airfreight over the last several years,” McWhorter says. “We will continue to need freighters.”
McWhorter also doesn’t believe there is a substantial modal shift from airfreight to oceanfreight. He says the reality is it’s two different products. He notes that some marginal airfreight cargo is being carried via oceanfreight, but that will return to airfreight when rates go down.
So what is the solution? McWhorter says shippers need to take a longer-term view than just submitting 90-day RFPs. He says that is not an effective way to buy airfreight and in the short term causes instability.
“The financial risk has to be shared,” McWhorter says. “Some forwarders are willing to buy large blocks of capacity so they can get a stable rate. Some insisted on getting market spots month-to-month. This lack of willingness to take risk is causing instability.”
He believes there is a lot of airfreight strength in the U.S. and Asia. Demand is strong coming out of Asia with new technology products.
“A lot of carriers have reduced capacity, and that will tighten the market,” McWhorter says. “We have put additional capacity out there. We are already sold out for the year and will have a good peak season, both out of Asia and exports from the U.S. as well.”
So what’s the outlook from airfreight forwarders? Here’s how Brandon Fried, executive director of the Airforwarders Association, sees it: “While volumes hit bottom and we’re now seeing glimmers of modest growth, recent carrier rate actions coupled with the higher costs associated with new regulatory initiatives risk derailing these tepid gains.”
John W. McCurry is the editor of Air Cargo World.