Worrying times for air freight

Dedicated air freight companies are seeing a major dip in demand as overcapacity in sea freight drives prices down, and encourages more freight out of the air and onto surface routes.

According to the business journal The Economist, “average capacity utilisation across the air-cargo business has fallen to 43.5%.” Due to the overcapacity, customers have been demanding greater price cuts to send their goods by air. This in turn has had a major impact on operating margins. Some smaller air freight companies have gone out of business while even Lufthansa’s air freight division made a loss in the last year for the first time ever.

Initially this was food news for the integrated parcel and logistics carriers such as FedEx and DHL which could transport goods by land, air and sea seamlessly. E-commerce companies have flocked to them because of the simplicity in moving their goods across the globe.

However, in the rapidly changing environment Amazon has announced that it is to least 20, Boeing 767 freighter jets for it global delivery operations. DHL is one of Amazon’s biggest air freight carriers, and Amazon accounts for nearly 25% of its business according to industry analysts. Executives at DHL will be working hard to fill a future gap in the company’s business even now.

So what of the future? Nothing is certain in the modern day economy, which is beset with falling demand from China and continuing crises in Europe. There is definitely a change in the air freight ecosystem coming as Amazon takes much of its air freight in-house (and even huge businesses such as DHL and Royal Mail feel this happening). There will be most likely a readjustment to the global air freight fleet until the global economy gets on its feet again.