AIR CARGO INDUSTRY

Analysis of Air Cargo Industry

Analysis of Air Cargo Industry

Introduction and History

The air freight/cargo sector is considered one of the major sectors in the transportation industry. It plays an important role in the economy by generating export and import revenue and creating employment in the country. In the UK, Cargo sector falls under the category of cargo handling, transport and travel agencies industry. This industry grew by on regular 5% per year over the period in review, reaching revenues of £54 billion in 2009.

The United Kingdom dominates the cargo handling, transport and travel agencies industry across Europe. The globalization has provided large import inflows in the UK, which has driven demand in the cargo storage and handling, and warehousing sector. Intra industry operations contributed 29% of total sales overall improving spending by 61%. The second largest buyer was the wholesale industry. Spending in the wholesale sector grew by 18%, resulting in a 20% share of sales, in 2009.

Cargo storage and handling, and warehousing are one of the best performing sectors in the UK. Since 2000, the growth in turnover generated by cargo handling sector is 140%, which is equal to 24% share of total turnover in the year 2009. The warehousing and storage sector grew by 155%, in the same period, and contributed 10% of total production in 2009. Since 2000, the share in turnover generated by travel agencies has decreased by 11%, which is accounted for a 44% share in 2007. The British consumer enjoyed easier ways of planning and ticket purchasing since the introduction of online websites. The introduction of internet technology eliminated middlemen, which was a threat to tour operators.

Despite 80% of all players being micro-level, 56% of total turnover is generated by the largest enterprises. While travel agencies are not labour intensive, cargo-related activities benefitted from economies of scale and well-coordinated activities spread across the country. Servisair was the largest player handling air-transported cargo and luggage. The company operated in all main airports across the UK and had 21 ground handling locations in the country, as well as around 20 cargo warehouse facilities. UK port handling was another major player offering cargo handling services in most UK ports. The aggregate number of local producers remained practically the same with only a 1% decrease from 2000 to 2009.

Profit margins decreased slightly to 9% in 2009, from 10% in 2000. Local companies increased expenditure on IT-related services, as well as intra-industry transactions. Labour costs increased 63%, contributing 34% of total costs in 2009.

Cargo handling, transport and travel agencies depend on the overall economic conditions, especially on developments in international trade. Therefore, as the British economy is expected to recover slowly over the forecast period, industry turnover should increase by 6% annually on average between 2011 and 2016. To combat decreasing consumer spending on travel as well as challenges posed by internet operators, tour agencies are likely to specialize in niche holidays, offering “once in a lifetime” trips (Industry Profile 2010, ...