Air Cargo a Revenue Life Preserver or Long-term Advantage?May 18, 2021
Let’s face it, Air Cargo has been an afterthought for many passenger airlines. With a focus on passenger traffic which brought in the lion’s share of revenues, resources were understandably concentrated on passenger operations and its corresponding revenue. While a few carriers may not derive any revenue from cargo, those that do have generally contributed only 4% to 5% of total revenues, at best, in a given year. However, the world was hit with the pandemic and things are changing.
As the pandemic caused a precipitous drop in passenger revenue, and the almost simultaneous demand for cargo capacity emerged to move urgent medical supplies and other goods around the world. With the world in lockdown, people also became more dependent on e-commerce for delivery of the things they needed to their door. Consumer demand for e-commerce plus new technology that empowers airlines to operate integrated logistics means the airline’s Cargo business can contribute a double-digit piece of the pie.
In the case of Azul Brazilian Airlines, it was unheard of 32% of total airline revenues after the adoption of the SmartKargo e-commerce solution. Carrying e-commerce cargo can be very profitable and airline executives are beginning to see the large revenue potential.
In today’s environment, airlines are scrambling to make sense of this shift and have begun to bring in a new breed of executives to lead their cargo teams. These leaders are disruptors. They are technologically savvy and have a vision of competing for the surge in capacity demand resulting from the growth of global e-commerce. The e-commerce retailers that shipped their packages via postal services now have better alternatives, and these executives are taking advantage of this opportunity. They are creating strategies to create more revenue from the biggest asset their companies have invested in – an airplane! In doing so, they are bringing in much-needed revenue for their companies while facilitating the airline industry in overcoming one of the toughest economic challenges they have likely ever faced. And they are making a substantial difference.
Understanding the promise of e-commerce for a passenger airline translates into incremental, profitable, and immediate revenue that can make a difference to any airline, as it weathers the current crisis and strives to bring in more revenue in the future.