Economic Impact of Air Cargo

Great technology, Air Cargo, and logistics have been my business passion for some time. Trade is a phenomenal business and is the economic bedrock of the global economy. And I must say that the air cargo industry outdid itself over the past 2 years. And the Air Cargo market is estimated to be a $145.2 billion industry by 2027. But that being said, one should always assess the market they are in as well as future growth trends.

Currently, the Air cargo market has some fascinating stats. According to IATA, approximately 100,000 planes take off, 20 million parcels are sent, and $18.6 billion in cargo shipped within 24 hours period. The multiplier effect of air cargo is undeniable. The ecosystem for air cargo includes governments, freight forwarders, ground handling, technology firms, mechanics, security and so many others.  The estimate from IATA is that there are over 68 million people employed to support the aviation industry worldwide.

We understand that the covid pandemic nearly destroyed passenger airline travel over the past year and a half. We all know the reason why, but this prompted many airlines to shift more emphasis to their cargo business— converting passenger jets to cargo-only transportation to ensure revenue was being generated. Many airlines large and small have taken advantage of this trend. Additionally, the impact can be seen by the expansion of many airports to ensure more cargo capacity. In cities like Chicago, Philadelphia, Pittsburgh and so many others, airports are working to be sure they are ready to accommodate more cargo. Recently, Santo Domingo Airport in Latin America broke a monthly cargo record—and there will be even more airports setting new records. The local communities are aware of the multiplier effect that the air cargo industry provides their geographic area.

Then there is the simple proof of how so many of the airlines across the globe used their airlines and logistics expertise to support the people within their various markets. Many of the world’s airlines, including most of our customers, delivered vaccines to many, many people in local, regional, and international markets—a huge impact on restoring economic activity.

Air cargo is poised for great opportunities. The market is expanding and this is impacting the world. Given the tremendous growth in e-commerce globally, intersecting with the growth in air freight, there is no reason why air cargo cannot far exceed its current economic impact. This is especially true when you see the growth in customer expectations and demand for next-day package delivery. Air cargo is an exceptional, growing part of the overall global economy and a great place to have a career.

Wrap and Extend?

Wrap and Extend to Capture Critical E-Commerce Revenue

Airlines have faced some of their most challenging quarters in decades due to the global pandemic. According to ICAO, 2020 gross airline revenue fell close to $400 billion. Yet, one industry has proven to be relatively insulated from deep losses during the pandemic: e-commerce. As more and more people looked to online solutions during the pandemic, revenue shifted from retail to e-commerce worldwide. Before the pandemic, e-commerce accounted for 14% of all retail sales; however, in 2020, that number jumped to 17%. Experts anticipate that this trend will continue. Global e-commerce is projected to grow 28% over the next three years from $5 trillion to $6.4 trillion by 2024.

This surge in e-commerce will allow airlines to expand their cargo transport capabilities and grow revenue, even if passenger levels remain below the peak. E-commerce packages, usually averaging 1-10 kilos in weight, are a perfect fit for an airline’s domestic fleet. Plus, with passengers carrying less baggage due to baggage fees, more belly space is generally available today for additional cargo. These two realities, coupled with the fact that typical passenger planes only fly with about 50% of their cargo capacity utilized on any given flight, means that revenue opportunities exist and are optimized through SmartKargo’s seamless solution.

SmartKargo’s flexible and cost-effective cloud-based platform allows airlines to “wrap and extend” their current cargo solution in a turnkey fashion and start building additional revenue streams in as little as a few months—not years. Airlines in Brazil, Canada, Mexico, and Norway are early adopters of SmartKargo’s wrap and extend methodology.

This flexible approach allows airlines to “wrap” the e-commerce solution around legacy air cargo systems without starting from scratch. This innovative approach will enable airlines to add this rapidly growing e-commerce business within months, not years, as it has taken with others in the industry. In addition, SmartKargo facilitates revenue capture quickly and easily.

One of the key benefits of their solution is that implementation is seamless with existing legacy systems. SmartKargo deploys a team of the seasoned airline, technology, and e-commerce experts to integrate the method and establish business processes alongside the airline cargo team. This low-cost investment has proven to yield significant results for their customer base, mainly because airlines do not have to “rip and replace” existing legacy systems. Because SmartKargo can essentially take what airlines have in place and extend their cargo e-commerce capabilities, airlines have increased revenue from the first day of implementation.

SmartKargo supports air-to-air and door-to-door businesses with easy integration into e-commerce sites. One of SmartKargo’s key differentiators is its deep knowledge of e-commerce vendors and e-commerce logistics. Their solution, using existing APIs and EDI-enabled e-commerce technology, is disrupting the traditional air cargo business.


Innovative Disruption Brings Breakthrough

In today’s digital world, innovation is a key trait that great companies possess. Whether you’re talking about Google, Amazon, Alibaba or so many others, their ability to continually innovate and expand their vision is paramount to their success. Innovation used to be driven by necessity, with necessity being the proverbial mother of invention. We innovated to make life easier on us (washing machines) or make things easier to build (steam cranes), safer (electric lights), more efficient; and you can easily name a dozen of others. But as the digital age came upon us our innovation was guided by new principles and a series of questions, including “WHY and WHY NOT”.

Today’s innovation uses technology to challenge existing norms and markets on a variety of levels. Many of the people in those markets initially believed their status quo was safe and things would never change. For instance, whoever thought something like ride-sharing would arise to be competitive to Taxis? But now, Uber dominates in many cities and has now extended into food delivery. Uber has recently announced it will expand into the delivery of “just about everything” in an attempt to disrupt Amazon at the local level1These mega-successful market disruptions by Uber have been enabled by technology. Uber is now one of the top 250 most valuable companies by market cap in the world. And there are so many others, namely Tesla, Amazon, Apple, etc. All have changed their markets and what it means to compete.

The keyword is disruption. And today, companies must disrupt themselves or be disrupted by someone else. Where necessity is often the catalyst for innovation, disruption, or “why not” thinking are now keys to innovation. Organizations must think critically, learning to challenge their perceptions and accepted norms as concrete. And many organizations make this mistake concerning highly regulated environments. PayPal disrupted the regulated payments market, Sofi and Robin Hood challenged investments and in the United States, even the highly regulated Healthcare industry has been changed with innovative healthcare applications and telehealth.

Air Cargo is also ripe for disruption now. It has long been fairly uninterrupted, safe, and was often an afterthought for many passenger airlines, with about 1%-3% of their revenue coming from cargo. So, why bother? Sound familiar? But now, more than ever, Airlines are looking to grow their revenues, as well as create brand new revenue streams. Our customer Azul has innovated and is now the leading e-commerce logistics company in Brazil, and growing fast. They did not wait for the competition to force their hand and be the catalyst – “why not” was the catalyst.

The expected total sales in e-commerce globally will grow from an estimated $5 trillion sales this year to a projected $6.4 trillion globally in 2024. Therefore, the entire e-Commerce logistics market should be innovating and disrupting. Airlines, 3PLS, 4PLS, freight forwarders, first and last-mile ground delivery companies, as well as warehouse operators, must innovate to gain access to the fast-growing and very profitable e-commerce logistics market. There’s a bigger piece of the pie for Airlines now if they choose to disrupt and own more parts of the e-commerce logistics market than they had before. Yet many airlines are afraid to disrupt the longstanding ecosystem. My question then is, do you still want to own a taxi in New York City?