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Air Freight Market Report 2005
Key Note Publications Ltd, June 2005
It is estimated that the UK air freight market was worth £726.1m in 2004, most of which is attributed to international services. Domestic services have only a limited role, since that market is dominated by road transport operators.
International air freight services are provided by companies based both in the UK and overseas, with the latter having the largest share. Among UK players, non-scheduled operations are showing the fastest growth, although scheduled airlines such as British Airways, which offer air freight as a by-product of their passenger operations, still provide most air freight capacity.
Positive influences on the market include:
- growth in world trade and the opening up of new markets;
- a reduction in air freight rates as a result of competition between airlines;
- the requirement to move component parts around the world faster and more reliably; and
- changes in manufacturing processes that require the widespread adoption of just-in-time (JIT) working practices.
Furthermore, the service provided by air freight operators has become such an integral part of the efficient operation of today's economy that it is less vulnerable than some other markets to the effects of recession.
Several subsectors are considered to be relatively immune to economic downturn, such as the transport of luxury items purchased by consumers in upper income groups, emergency medical supplies and emergency spares.
Air freight operators also benefit from growth in passenger travel, since it increases the amount of cargo capacity available as a by-product in the belly holds of passenger aircraft. Consequently, a worldwide network of cargo services has been created that offers high service frequencies.
More negative influences include increasing congestion, both at airports and for air-traffic control, and general concerns about the civil aviation sector's impact on the environment in terms of noise and atmospheric pollution. There are also threats from the low-cost carriers targeting the passenger market. As they gain market share at the expense of the traditional (passenger-carrying) providers of by-product belly-hold capacity, the proportion of total cargo-carrying capacity could be reduced. Legislative and regulatory developments at national, EU and international level remain of concern to many industry leaders; for example, the burden imposed on airlines by the need to take responsibility for war risk insurance and security, and the costs of inefficient infrastructure.
In recent years, the traditional scheduled airlines have been facing increasing competition from the integrated express operators that are not committed to any one form of transport in their mission to achieve timely and safe delivery of items to their destination.
The air freight market has now largely recovered from the impact of the attacks on the US on 11th September 2001 and has resumed its strong growth pattern. Nevertheless, concerns remain regarding the impact of increased oil prices on economic growth (the sector's main driver) and on fuel and oil costs, which form a significant proportion of airline expenditures.
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