A recent article by Tim Fernholz on Quartz touched on the impact that the iPhone 5 and other personal tech devices have on air cargo figures. Undoubtedly, the iPhone 5 has provided a much needed shot in the arm for the air cargo industry, which has had to bounce back from a collapse in rates and volumes as a result of the global recession.
According to a news article in The Guardian, air cargo companies saw an increase in cargo volume tied to the launch of various smartphones and computer tablets, which favor shipment by air over other modalities. Further, Martin Dixon of freight research firm Drewry said the delivery of the iPhone had helped the air freight industry bounce back from a collapse in prices – July 2012 were the lowest since July 2009, when most of the developed world was gripped by recession. According to The Guardian, that’s a huge boon for freight businesses and represented as much as a 50 percent rise in profits for one Chinese delivery firm and highlights the kind of effect a product launch has on other facets of the world in technology.
Yet despite this, the air cargo industry as a whole will continue to have razor-thin margins, meaning that carriers can’t be solely reliant on the next high-demand consumer electronics product to bail them out – they have to think of new approaches to playing in this volatile marketplace.
Air transit is by far the fastest and most direct form of delivery, and has been utilized very well by the likes of Apple as part of its supply chain. However, the majority of companies do not have pockets that go as deep as Apple’s, which means they may only look towards air freight in emergencies or if the rates continue to be low. It is therefore up to the air freight industry to change the rules somewhat to control their own destiny. Some carriers are already adopting a dynamic approach towards pricing, which can flexibly take into account market changes as opposed to the current practice of long-term agreed rate. This means they are able to raise prices when demand is high and reduce them if necessary when demand is low. While this may seem radical, in reality this mirrors the behavior of personal tech customers, who shop around for the best rates despite having an agreed rate with a carrier.
A second strategy being advocated by some shippers is that carriers ought to have a direct relationship with them and avoid the “middle men.” While this may not be viable as a general rule, imagine a carrier having Apple as a direct customer!
Only by changing some of these archaic practices, can carriers truly be in a position to maximize profitability and improve their margins.