AIR CARGO BUSINESS STRATEGIES

Air Cargo Business Strategies

Air Cargo Business Strategies

Introduction

The air cargo industry has grown substantially during the past years. It has driven the need for a structured environment with the goal to maximize profits. The air cargo supply chain is composed of airlines, freight forwarders, and shippers. Global air cargo has experienced a downward trend of approximately twenty percent as compared to the past years. The analysts of the IATA (International Air Transport Association) were assumed that the worse economic recession was over. The volumes of the air cargo are to stabilize and move back to their previous levels in the short term due to the adjustment of the high-product inventories to the normal levels. This statement is emphasized by WACF (World Air Cargo Forecast). The air cargo industry is expected to grow by approximately 5 percent every year in the long run. The world economy is expected to recover from the economic downturns and the financial crisis in the up coming months.

Air cargo plays a crucial role in the logistics network all around the world as the manufacturers devise integrated supply-chains and opt for JIT (Just in time) methods of production. The major factors in the air cargo industry are continuous growth of the emerging countries, off-shoring and outsourcing activities. The higher level of integration demands more reliable and faster freight services and it also provide opportunities for the air cargo carriers.

This paper discusses the strategies and the business models that an airline adopts in order to address the air cargo market.

Discussion

Competitive Strategies

In the Air Cargo Industry, the competitive pressures build due to the higher cost of fuel. It requires efficient improvements and decreased cost of the air cargo carriers. Energy efficiency of the air cargo carriers can be improved by the development of bigger aircraft. The loss of flexibility must be compensated with a better network and capacity planning (Stefan and Hall, 2005, 119).. In the Air Cargo Industry, if we focus on the conventional cargo carriers and do not include the integrated parcel services such as the UPS (United Parcel Service) or Fedex (Federal Express), the business model of these two is separate from the traditional air cargo carriers (Zook and Brunn, 2006, 490).

Air Cargo Industry is closely related to the development of the world's GDP (Gross Domestic Product), as it depends on the global trade. Boeing is expecting a continual growth throughout the world with an average rate of 3.2 percent annually (Werner, 2005, 267). The economic importance of the air cargo industry and its repercussions on various other leading industries make the volatility of air cargo carriers and their dependence in goof economic conditions a serious international and public concern (Werner, 2005, 267).

Business Models

The business model of air cargo industry has been resistant to change at all levels of conventional carrier scheduling. The carriers that are scheduled habitually tend to operate their divisions of cargo as a by-product of their passengers businesses. Since the operational processes and the automation systems of these businesses ...