For air cargo in 2013, shippers should expect a relatively slow first quarter that gradually leads into a more active summer.
Barring any macroeconomic collapses — the debt-ceiling negotiations have the potential to wreck even the most conservative predictions — volumes and yields will continue to increase toward the end of the year, with the closing months of 2013 showing good growth.
It’s a tale of two years, said Neel Shah, president of JS Aviation Consulting and chief commercial officer at Los Angeles-based perishable forwarder Able Freight. Just don’t expect much of this activity to happen domestically, he added.
“Anybody who is going for growth and has a long-term view of their business is absolutely focused — 95 percent of their energy — on the international arena,” Shah told American Shipper
. “Every forwarder that wants to grow… is growing the international side of the business, whether you’re a small guy or you’re one of the large, intergalactic forwarders.”
He pointed out that with the way the business is moving, forwarders that focus purely on domestic activity are looking at a rough climate ahead. Shah predicted domestic-only forwarders will be almost completely extinct in five years. At Able Freight, which is among the top perishables exporters in the United States, domestic activity isn’t high on the agenda. The company exports 60,000 tons of air freight annually for a number of major domestic growers and the U.S. government.
Rising consumer confidence and a falling unemployment rate will drive air cargo activity in the second half of the year, Shah said, but most of that activity will be focused on serving an expanding middle class in the Middle East and China. Capacity will also exit the air cargo arena, which will ultimately help overall volumes. Shah figures the Asian carriers are only flying 65 percent to 70 percent of their fleets, and that there are ongoing restructuring activities in Europe that could significantly change European capacity.
This boost in the middle class overseas is paired with a middle class in the United States that isn’t expanding. He sees this lack of movement inhibiting air cargo activity, but the largest factor is, of course, the continuing shift away from air cargo in favor of trucking.
“Domestic freight has always been challenging and continues to deteriorate every year primarily because of mode shift. People are shipping less by air,” he said. “I don’t see those trends reversing at any time. Domestic business will continue to shrink at a certain percentage every year.”
Shah, who seems like a very busy man, practices what he preaches. He just returned from a business trip to Asia, and his calendar is booked full of global conferences and sales meetings all over the world, striving to expand the reach of Able Freight and tap into more of the expanding global markets.
"We're out there developing the international markets," he said. "The opportunity is unbelievable." - Jon Ross