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Indiaexportnews.com

Shift from air to ocean freight is becoming more pronounced

  18.12.2013    

The shift from air to ocean freight is becoming more pronounced as air cargo fails to provide speed and visibility customers expect - and at 10 times the price - while sea freight improves service, according to a survey of executives.
Despite this, air cargo volumes should do better next year, but yields will stay under pressure, according to an annual survey of executives conducted by the International Air Transport Association (IATA).
The survey was cited by IATA chief economist Brian Pearce who told a Geneva press conference that freighter numbers started falling in 2005 and had flat-lined since 2011.
Lufthansa Cargo CEO Karl Ulrich Garnadt conceded ocean shipping was looming as a rival because air freight experience was falling short of customer expectations. They want high speed, but door-to-door transit time has shortened from six days while shipping lines have improved reliability and provided higher frequencies and through capacity-sharing had lowered prices.
He said his load factor was 73 per cent in November. "There's a huge difference across the market. On the North Atlantic, 20-30 per cent of capacity is provided by freighters, but it's 80 per cent through Shanghai."
Mr Garnadt said trade hubs from which fewer people travelled had a more sizeable freighter share, reported Atlanta area Air Cargo World.
Mr Garnadt said there was insufficient price transparency. They also want high quality, but there were no generally accepted key performance indicators covering the end-to-end supply chain in the sector, he said.
Said DHL air cargo chief Ingo-Alexander Rahn: "The air cargo industry needs to stay competitive in terms of service, speed and cost, and thus has to concentrate on further standardisation and simplification. The focus has to be documentation."
Mr Rhan also noted the acceleration of the shift from air to sea freight as shipping lines provide more comprehensive solutions for all industry sectors.
Said DB Schenker vice president Tom Mack: "We continue to look at our industry not as an integrated service provider, but add layers and layers of complex processes to slow down the transit time and increase cost. If our industry wants to stop modal shift, we need to address the issues of the total transit time, the total cost and the information flow between all parties to come up with a global solution that allows us to offer market competitive products at market competitive rates."
Said Panalpina air freight chief Lucas Kuehner: "In the eyes of the customer, air freight is about 10 times more expensive than ocean freight. When contracting air freight, the customer expects speed, visibility and security. As an industry, we need to do much better to provide shipment visibility door to door. We need commitment and focus from all stakeholders."
Freighter load factors had suffered despite the retirement of older planes. "The encouraging part of the story is we have seen begun to see load factor stabilise at 45 per cent," said Mr Pearce, the IATA economist.
Leading indicators, world trade growth, industrial production trends and business confidence had all begun to turn positive from the end of 2012, with surges from shipments of semiconductors, he said.
But air cargo stagnation in air cargo after the 2010 rebound, signalled a fundamental change, he said.
"The experience of the cargo and passenger businesses has been very different since the recession. We are seeing some products shift from air cargo to ocean - including semiconductors, which are going through a life cycle of their own and becoming cheaper," Mr Pearce said.
IATA air cargo chief Des Vertannes said work had begun to broaden the scope of the Cargo 2000 standard to reduce transit times and improve quality along the entire supply chain. Establishing "neutral milestones," or globally acceptable performance standards, was a big challenge, but the industry is listening.


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