March 2005 | Commentary | Viewpoint

Air Freight Needs New Business, Fresh Thinking

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Let's tear our eyes away from China. During the past decade, the China market's enormous growth has hypnotized the airfreight industry. The vast scope and volume of goods winging their way across the Pacific has blinded many in air cargo to negative trends elsewhere.

Almost all of air cargo's other international lane segments—Europe, Latin America, the Middle East, the Asian subcontinent, and the South Pacific—are showing little growth. Domestic air freight actually is declining in revenues and shipment count with surface transportation substituting for air in many cases.

Prescription for Growth

What the airfreight industry needs now is to refocus its efforts, with less reliance on technological hijinks and greater emphasis on generating more business from existing customers, plus initial business from new customers. To obtain this business, we must generate new ideas and concepts that will provide fresh strength to this once fastest-growing sector of the transport industry.

We also must relearn geography. China is not the only country on the air cargo map. In our zeal to satisfy shipper needs between the United States and the more than one billion Chinese, we are in danger of forgetting the other four billion occupants of this planet.

Despite a strong world economy, air freight operates in a tough environment. The once common belief that air could snatch meaningful portions of cargo away from sea has proven to be an impossible dream.

West Coast seaports are clogged with containerships, leading to two- and three-week delays. Yet few shippers turn to air as a substitute transport mode. Our current environment calls for relearning basic selling skills.

Our people need more shoe leather and less preoccupation with the Internet; more sales calls and less time looking at computer screens. We should offer customers manageable, hassle-free delivery systems that move freight quickly and precisely instead of presenting complicated logistics "solutions."

Our industry simply cannot afford minuscule growth in the international cargo arena and an actual decline in domestic shipments. Air freight's slice of the transport pie already is too meager.

Of the approximately $1 trillion spent annually on worldwide transportation—air, ship, truck, and rail—air cargo's share is less than 4 percent internationally and a scant 2 percent of domestic, inter-city deliveries.

What we certainly don't need are airlines attempting to sell "direct" and cutting out the consolidator, or 800-pound gorilla international forwarders entering the increasingly crowded, shrinking domestic market. These are zero-sum games. No one wins.

Drumming Up New Business

What we do need are fresh sources of business—to convince shippers that air is the transport method of choice. We need to assure customers that in an increasingly global economy, moving goods by air is the most productive, efficient, and ultimately the most profitable method of transport.

Target Logistic Services, for example, has begun a sales division that seeks out new cargo customers—shippers who currently rely solely on trucks or rail to move their freight. One finger in the dike, however, is not sufficient. We must formulate and implement an industry-wide sales and marketing effort.

Finding fresh sources of business in any industry is not easy. Air freight has not been particularly successful in this endeavor. The industry has been stuck in the 4-percent and 2-percent groove for the past generation. We have been overly content to solicit business from customers already utilizing air; in effect stealing customers from each other rather than soliciting new shippers.

The air industry has not been sufficiently innovative nor adventurous in convincing wholly surface shippers to transfer at least some of their cargo to air or to generate greater air shipments from existing customers. When air cargo was in its heady growth stage, when revenues were rising 15 and 20 percent annually, perhaps such a complacent attitude was justified.

With air cargo currently showing little or no growth, this indolent stance no longer is tenable. The industry must do nothing less than to create a new sales and marketing environment.

As a first step, each segment of the industry—airline and forwarder—should strengthen their traditional roles and hone their specialized skills. Airlines are unbeatable in moving cargo from airport to airport. The forwarder is a winner in picking up and delivering cargo directly to the loading dock.

Greater cooperation, not animosity, between every segment of the business also must be a given. As Ben Franklin sagely observed, "We all must hang together or most assuredly we all will hang separately."

Forwarders are very competitive. Ditto the airlines. Today's challenges for air freight are so formidable, however, that a united front is imperative.

When was the last time the Air Transport Association sat down with the Air Forwarder's Association to engage in meaningful dialogue and thrash out mutual problems? That date is lost in the mists of time. The airlines must realize that in their current weakened state, forwarders can help, not hurt them.

Forwarders must recognize new economic and political realities. Suspicion and resentment toward the carriers must cease.

Perhaps most importantly, we require a new, persuasive and comprehensive rationalization for the use of air. The last genuine effort to provide an economic and philosophic underpinning of air freight was the Total Cost Concept. And that was formulated 35 years ago when we lived in a different world! We require persuasive reasons to utilize air for the world of 2005, not 1975.

Working with Uncle Sam

In our age of tightened security for international cargo, the role of U.S. Customs cannot be overlooked. While all steps must be taken to prevent terrorist attacks within the United States, too strict measures that inhibit the flow of goods can be counterproductive.

Importation of hundreds of billions of dollars worth of goods that contribute to a flourishing U.S. economy should not be hindered unnecessarily by heavy-handed bureaucratic procedures. Our industry should aid Customs in assessing and formulating policies that strike a realistic balance between security and economic health.

Another positive role that government could play is to end bi-lateral international aviation treaties. While our State Department and its counterparts in other nations argue endlessly about landing rights for the airlines—the recent U.S.-China cargo agreement was five years in the making—air cargo lanes are fast shifting, reflecting rising and falling manufacturing centers. Let's declare an "open skies" policy whereby a free marketplace, not government fiat, determines air cargo routes.

Our industry requires nothing less than a revolution in thinking. It must reassess its role in the domestic and international transport mix. Let's finally climb over that 4-percent barrier. Let's bring airlines and forwarders together. Genuine cooperation will create a powerful tool to convince shippers that air indeed is the preferable mode of transport in the 21st century.

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