Colography: Rising jet fuel costs eroding air freight market share
The Colography Group Inc., an Atlanta-based cargo market consultancy company, reported Wednesday that rising fuel costs are contributing towards a reduction in the air freight industry’s growth and market share in comparison to other transportation modes.
“The rapid price escalation for refined products such as jet fuel has an adverse impact on demand for air transport, which is already priced at a premium to competing modes,” said Ted Scherck, president of The Colography Group. “As a consequence, shippers and consignees may find it more cost-effective to configure their supply chains to increase the use of more economical surface transport services.”
According to its annual forecast of the worldwide expedited cargo market, The Colography Group said the total value of cargo moving by vessel or across borders by truck will grow 13.7 percent over 2005 forecasts, while the value of air shipped goods is projected to rise 8.9 percent in 2006. Surface tonnage is projected to increase 8.7 percent, compared to an 8.5 percent rise in air tonnage.
“As a percent of worldwide value, the value of surface-shipped goods continues to grow at the expense of air. Goods moving by surface transport will account for 65.4 percent of total cargo value in 2006, up from 59 percent in 1999. By contrast, air’s share peaked in 1999 at 41.1 percent and is projected to drop to 34.6 percent by 2006,” Scherck said.
“Over time, steamship and trucking operations have become more reliable and expedited in delivery times,” Scherck said. “For many companies capable of migrating to surface from air, modal conversion is becoming an increasingly viable option. Indeed, if fuel prices remain at their current levels, modal conversion may become a competitive imperative for shippers and goods at the margin of the cost/value proposition.”
The Colography Group predicted that the value of the global cargo market — excluding all domestic goods and all goods moving via transborder rail and/or pipeline — will reach $10.2 trillion in 2006. Despite the predicted comparative market share erosion, The Colography Group said the value of air freighted goods (excluding domestic services) will rise by nearly $290 billion in 2006. “Demand for air freight services will remain robust, and it will play an integral role in maintaining a positive environment for global trade next year,” Scherck said.
