How Do We Anticipate the Future of Air Cargo?

While Q4 will bring unique challenges to the air cargo industry due to ongoing issues with the global supply chain, we remain confident that the strong growth we’ve seen over the past two years will only continue in the coming years. August 2021 numbers showed promising growth of global demand over pre-pandemic August 2019 numbers. Global demand for air cargo is up 7.7% measured in cargo tonne-kilometers (CTKs) which is 3% higher than the long-term average growth rate of 4.7%.

In a few weeks, our team will be in Dubai for the Dubai Airshow discussing the future of air cargo, and I will be highlighting SmartKargo’s significant learnings and points of view in this space. My presentation will examine how airlines can devise new strategies to adapt to the future of cargo by figuring out their role as they manage the supply chain and focusing on the things that make them most successful and profitable.

There has never been a more critical time to consider investing in a technology partner in the air cargo space. To prepare for tomorrow’s demands, airlines will need to establish means to get ahead. We maintain that to do that, airlines will need to embrace cutting-edge technology, enabling them to create new business models that are forward-looking and anticipatory. In essence, leverage technology to enforce what they want to do to grow revenue and make the most of the organic global growth, we’ve seen over the past 24 months.

And with that, airlines are now able to do one of several things with their air cargo business: keep their existing model, own part of the logistics supply chain, outsource the supply chain entirely, or conversely, own 100% of the supply chain. All can be made available to today’s airline. Airlines should not feel completely bound to their old way of operating with cargo and e-commerce. Depending on which model they choose, airlines will be able to decide how much control they want over their supply chain as they adapt to the future of air cargo. And with those decisions a corresponding revenue.

What we have seen with our partners is that there are a few key models that airlines can follow to generate critically important revenue from air cargo right now: palletized cargo, a combination of palletized and e-commerce cargo, and, most profitably, fully implemented e-commerce cargo. There is an incredible opportunity in the air for airlines who embrace e-commerce air cargo transport. Our team estimates that global airlines’ annual potential e-commerce revenue is upwards of $648.3 billion alone.

If you are searching for higher ROI with your air cargo, we suggest looking at e-commerce. The average package is smaller (2-4 kilograms) and is more profitable on a per kilogram basis than purely palletized cargo. E-Commerce packages can fit into the underutilized belly space of most narrow-body and wide-body passenger planes, and retailers can take advantage of an airline’s pre-existing flights and fleet.

While we don’t profess to have every answer of what will happen in the next few years of air cargo, one thing is certain. There is room for e-commerce, and for airlines that choose to embrace owning more of the supply chain and optimizing the trends just described, ROI will follow.

Chaos the Fuel of Innovation

Disruption causes chaos and chaos is what logistics is in today. Some may say chaos is too extreme term, but it is the right term. We see container ships waiting 4 weeks plus to dock and a shortage in those same containers. We are seeing restrictions on e-commerce package shipments around the world and rising costs. E-commerce is in double digit growth across the globe. We all know much of this is a result of the pandemic, but it did not trigger these, it simply accelerated the changes in the market.

Where there is chaos there is great opportunity. There are VC firms that are now focusing only on logistics investments and more on the way. The overall supply chain VC investment topped $50 Billion in 2020 and is on track to exceed that number in 2021. These innovative companies are looking to disrupt the logistics market and drive revenue for airlines, ground transportation, shipping containers and a variety of new logistics services.

So, what does a person do who wants to join in the innovation and disruption; join SmartKargo.  Many of my colleagues were surprised at my decision to leave a company that I had been a part of for 18 years. UPS is 114 years old and a leader in what it does. It has processes and viewpoints that will continue to capitalize on that expertise and the future will look very similar to the past. I realized that I had done what I could do at UPS and that remaining, did not promise to actively anticipate in innovation and disruption in the logistics area. I was looking for something innovative and visionary, and SmartKargo is a leading cloud provider of logistics solutions that extend markets and enhance revenue growth for global airlines and ecommerce companies.

Global e-commerce sales accelerate from an estimated $5 trillion sales globally this year to a projected $6.4 trillion in 2024. This is the key for me to join SmartKargo – We utilize the existing space in airlines planes to ship e-commerce packages from cart to the door. This market is exploding and when I saw the pioneering solution, I knew this was the place for me. When we see companies like Azul and what they have been able to accomplish with the SmartKargo solution and transforming into a leading cargo company in Brazil. There are so many more companies in India, Canada, Norway, and the US that are driving more revenues from e-commerce than they ever envisioned.

My decision to leave my career of 18 years involved significant risk. But I wasn’t happy with the status quo and knew I would not achieve my personal goals if I remained. The only way to get where I wanted was to do something different, to try a new way, a different way. That’s where the industry is today.  If you don’t adapt and seek out new and innovative ways of achieving your goals, you may get left behind. I am on the right track but if you doubt me I would argue that when Sunday morning news programs like GPS on CNN begin show news on logistics and supply chain chaos it is a great time to join a company that is helping airlines and ground shippers increase their revenue and drive innovation.

It’s Time to Capitalize on E-Commerce

The Dubai Air Show is coming up in a few weeks, and on November 16th, I will be moderating an exciting panel entitled “How to Capitalize on E-Commerce.” Panelists featured are Mohsen Ahmad, the CEO of Logistics for Dubai South; Abhishek Shah, Co-Founder and CEO of RSA National; and Marc Houalla, Executive Director, Paris-Charles de Gaulle Airport Managing Director, Groupe ADP. SmartKargo has been at the forefront of helping airlines figure out how to capitalize on the impressive e-commerce surge over the past few years. We know this panel will undoubtedly provide informative insights into how innovative approaches to air cargo can change the face of e-commerce delivery.

From our experience at SmartKargo, the explosive e-commerce growth we’ve seen over the past two years is both global and organic, and its spike came from the most unusual and unfortunate of sources: the global pandemic. It goes without saying that COVID-19 has impacted the entire world, and it has changed the way people view commerce transactions and engage with retailers.

The pandemic has driven a dramatic change in consumer behavior with respect to e-commerce. More than ever before, early 2020 prompted a stark need for consumers to get products into their homes and workplaces more safely—which almost always translated to much less use of brick-and-mortar retail stores. Despite more retailers re-opening their physical stores in 2021, the rise of e-commerce continues, and the opportunity for airlines to ship e-commerce packages has never been better. Here is a fact we like to share often: e-commerce growth sales are projected to grow globally at a CAGR of 6.4%, from an estimated $5 trillion this year to a projected $6.4 trillion by 2025.

We know that for airlines to capitalize on this impressive CAGR, they will have to think differently about their passenger-to-cargo relationships. With passenger revenue still underperforming relative to 2019 pre-pandemic levels, airlines need to create additional revenue. The profitability of e-commerce packages is a significant component of not only offsetting but increasing revenue. On a per-kilogram basis, e-commerce air cargo is by far the most profitable type of air cargo. By increasing air cargo through e-commerce package delivery (averaging between 2-4 kilograms each package), airlines can increase revenue now, when it’s needed the most.

Right now, as we start the fourth quarter, we need to think differently about the future. We need to think of air cargo as a demand-pull to get the most out of organic growth. Airlines already have a great deal of information about their passengers. Passenger information is rich in data points, and it will inform an airline’s foray into e-commerce. Here’s our message to our airline partners: your passengers are also e-commerce buyers. You already know their behaviors in one area in which you specialize. E-Commerce air cargo is simply a fantastic extension of that body of knowledge.

I am looking forward to our panel with these three industry experts as we discuss these and other opportunities in the exciting world of e-commerce. We will update our readers after the event to share highlights to partners and supporters who cannot attend the Dubai AirShow event. In the meantime, we hope that these exciting trends help you to consider breaking with the norm. There is much innovation happening right now in our space, and the time to act is now.

Cargo: The Unspoken Hero of the Air

From November 14-18, 2021, SmartKargo’s CEO Milind Tavshikar and I will be attending the Dubai Airshow with the key leadership team members. We will be joining industry leaders from across the world as we contemplate and anticipate the future of air cargo. We are thrilled to be a part of this vital air cargo and global air traffic management event.

In a preview of what we’ll be discussing, we will highlight all the remarkable developments in technology in this space. I’ll be leading a panel on how to capitalize on e-commerce through the innovative use of air cargo with representatives from Dubai South, RSA National, and Group ADP. Milind will be speaking on various topics, including ways to adapt to the future of cargo and build a resilient cargo ecosystem.

Air Cargo Continues its Growth Trajectory Despite Pandemic

According to IATA, the July 2021 global air cargo demand was up 8.6% relative to 2019 as measured in cargo tonne-kilometers (CTKs). They also assert that current economic conditions support air cargo growth. Willie Walsh, IATA’s Director General, stated, “July was another solid month for global air cargo demand. Economic Conditions indicate that the strong growth trend will continue into the peak year-end demand period.”

Here at SmartKargo, we solidly believe the future of air cargo has incredible upside potential, and e-commerce parcel delivery on both narrow-body and wide-body planes will be a great source of currently untapped revenue for airlines worldwide. Pre-pandemic, there were approximately 38.9 million total global flights across domestic and international airlines. Due to the pandemic, the number of flights significantly decreased. However, we anticipate that with the acceleration of vaccinated passengers going back to air travel in 2022 and a substantial rise in e-commerce, those numbers will slowly continue their hastening back to pre-pandemic levels.

E-Commerce Revenue Potential by the Numbers

Because airlines can use existing fleets, current flight patterns, and already established security and warehousing, airlines are poised to tap into this great source of recurring revenue that will add to both top and bottom-line revenue.

Using our estimates based on existing partner outcomes, we anticipate that flights should resume to their pre-pandemic levels by 2022, and, assuming fifty percent of their fleet is comprised of narrow-body planes, there is a global opportunity of $649.3 billion in potential e-commerce revenue on an annualized basis for airlines.

We like to refer to this revenue growth potential as an “opportunity in the air.” As we have already begun to see with our current airline partners in Norway, Mexico, Canada, and India, the future of air cargo for e-commerce is one a burgeoning revenue driver and that has the potential to make up for weaker business travel and passenger sales on traditional passenger airlines due to large-scale events like the global pandemic we are currently facing. We have found a way to capture additional revenue—and that future, we believe, is e-commerce air cargo.