This commentary appeared in the print edition of the Jan. 6, 2020, Journal of Commerce Annual Review and Outlook.
Air cargo isn’t dead yet … we’ve got a long runway ahead of us.
Looking forward to 2020 and beyond, it is challenging to determine how the air cargo industry will adapt to a global slowdown in cargo volumes, while realizing that e-commerce remains a key driver for moving goods between global buyers and sellers.
However, it is clear that e-commerce requires a faster processing protocol, one with better visibility into the origins, values, descriptions, and seller’s details, which remains a challenge today for buyers in the US. Couple these technological and informational challenges with compliance and clearance issues, and immediate e-commerce growth is restricted. If you look abroad at the high-­processing, high-throughput centers under development by Cainiao, Alibaba’s logistics partner, it is evident that more e-commerce air cargo activity is on the horizon. By the way, Alibaba commits to delivery of packages in China “within 24 hours” and globally within 72 hours.
Global parcel volumes continue to grow at a record pace. In 2018, Pitney Bowes Parcel Shipping reported 87 billion parcels shipped, an increase of 17 percent over 2017 volumes, and forecast shipments would reach 100 billion parcels in 2020 and double to 200 billion parcels by 2025. Even though we had a slowdown in 2019 from the double-digit growth of the previous four years, our view is that this is a “lull before the storm” scenario.
As e-commerce volumes continue to increase, alternative US gateway airports, such as Columbus, Huntsville, Rockford, Cincinnati, and Greenville–Spartanburg, are thriving due to their ability to offer air carriers with expedited cargo throughput and turn times. These new air cargo gateways are pulling volumes away from the congested traditional gateways at New York, Chicago, and Atlanta.
President Trump’s current use of tariffs to leverage trade deals has resulted in a resurgence of interest and use in the Foreign-Trade Zone (FTZ) program. The FTZ is critical for economic developers, airport operators, beneficial cargo owners, and logistics providers, as it not only produces cost savings within the global supply chain, but also provides a solution for developing a high-volume, high-visibility secure e-commerce import stream.
In the years to come, e-commerce volumes will create new growth opportunities for the air cargo industry, and that growth will alter trade patterns forever.