• ITVI.USA
    15,868.670
    8.820
    0.1%
  • OTLT.USA
    2.774
    0.001
    0%
  • OTRI.USA
    21.470
    0.010
    0%
  • OTVI.USA
    15,873.680
    8.980
    0.1%
  • TSTOPVRPM.CHIATL
    2.960
    -0.660
    -18.2%
  • TSTOPVRPM.PHLCHI
    2.100
    -0.250
    -10.6%
  • TSTOPVRPM.DALLAX
    1.610
    0.250
    18.4%
  • TSTOPVRPM.LAXDAL
    3.340
    -0.130
    -3.7%
  • TSTOPVRPM.LAXSEA
    3.860
    -0.220
    -5.4%
  • TSTOPVRPM.ATLPHL
    3.520
    0.380
    12.1%
  • WAIT.USA
    126.000
    -2.000
    -1.6%
  • ITVI.USA
    15,868.670
    8.820
    0.1%
  • OTLT.USA
    2.774
    0.001
    0%
  • OTRI.USA
    21.470
    0.010
    0%
  • OTVI.USA
    15,873.680
    8.980
    0.1%
  • TSTOPVRPM.CHIATL
    2.960
    -0.660
    -18.2%
  • TSTOPVRPM.PHLCHI
    2.100
    -0.250
    -10.6%
  • TSTOPVRPM.DALLAX
    1.610
    0.250
    18.4%
  • TSTOPVRPM.LAXDAL
    3.340
    -0.130
    -3.7%
  • TSTOPVRPM.LAXSEA
    3.860
    -0.220
    -5.4%
  • TSTOPVRPM.ATLPHL
    3.520
    0.380
    12.1%
  • WAIT.USA
    126.000
    -2.000
    -1.6%
American Shipper

Domestic cargo market variables

   Air cargo forwarders and shippers have certainly seen more challenging times, but in the current domestic landscape, the persistent sluggish U.S. economy is still taking a heavy toll.
  
It’s a good thing forwarders are multimodal, said Brandon Fried, executive director of the Airforwarders Association, because his membership has picked up the slack in air cargo by generating more work in the trucking arena.
  
“This has not been a radical recovery, it’s been a slow one, but thankfully our members ship freight all different types of ways, so they’ve been able to respond to the challenge,” he said.
  
Still, there are some forwarders who are making their own way — and doing a good job of it — despite the economic malaise.
  
“The niche players, the small- to medium-sized forwarders, seem to be doing well,” he said, noting it’s uncertain if these smaller companies are taking market share from their larger competitors or if something else is leading the way.
  
On the air freight side, domestic capacity is constant, and there are no challenges to finding space on planes when it’s needed. Airlines are actually starting to get delivery of larger passenger planes, which is an about-face from the start of the recession, when they were shifting to smaller aircraft to save on costs. The worry then was if the economy recovered quickly, the carriers, equipped with smaller planes, wouldn’t be able to respond rapidly to uptick in demand. Thankfully, Fried said, Boeing 737s and other wide-body planes have started entering the market.
  
Capacity has also been affected by the nature of the airline business. While Southwest is starting to bring AirTran into the cargo market, Frontier Airlines’ recent decision to leave the freight arena took a significant amount of lift off the market. Fried said AirTran’s emergence means Frontier’s departure isn’t a huge hit to the industry, but some capacity will still be lost.
  
“Given the current economic situation and the rate of recovery, I think we’ll be good for now” on capacity, he said.
  
With capacity on somewhat of an even keel, rates have been holding constant, though surcharges, which have always been an issue, Fried said, are starting to become an even stronger sticking point. These extra costs tacked on to cover fuel and security expenses have traditionally been viewed by the airlines as non-negotiable fees that supposedly fluctuate with the true cost of fuel and security. On Sept. 1, Emirates changed the way it calculates surcharges, joining two other carriers. Shippers and forwarders worldwide have been worried these actions will spark a trend that will, in the end, make it more expensive for them to ship their goods.
  
Fried said this is a major issue for his members, and they are taking a close look at how this story evolves.
  
“I would think that the airlines would rethink their position and their reliance on surcharges,” he said. “For a long time, these surcharges were only implemented during periods of extreme change, and then they were only for a short duration until new benchmark costs were incorporated into the base rates. Low base rates with high fuel charges are not fooling anyone.
  
“Forwarders are creative. I can almost see the wheels turning right now as forwarders and shippers think of ways to avoid the cost,” Fried added.
  
One of the main challenges for forwarders, shippers and airlines — and this is a perennial one that’s only getting worse — is the constantly evolving regulatory landscape. Fried fields numerous complaints from his members about new rules that make profitability in the air cargo sector more difficult.
  
“Dealing with the regulations has become so arduous,” he said. “It’s the type of thing where in many instances you have to have a person on site who didn’t exist 10 years ago just to deal with the complexity of the regulations and compliance.”
  
As the domestic air cargo industry moves to the end of 2013, the number of available carriers is likely to be reduced by one. Fried expressed confidence that the $11 billion merger deal between American Airlines and US Airways will ultimately go forward despite what seems like vigorous opposition from the Department of Justice. The two sides, which are to go to trial in late November, will probably reach an agreement “on the courthouse steps,” Fried said. The settlement will likely involve American and US Airways giving up a few slots at domestic airports like Reagan National in Washington and LaGuardia in New York.
  
When the deal happens, there will be some route changes and there could be a bit of rate pressure, but a new significant cargo player will emerge, Fried said. American has had a tradition of strong cargo work, and US Airways has had a vibrant, if less active, cargo operation in the past.
  
“American Airlines and US Air were not strong carriers, and so many see this merger as a way to ensure mutual survival. The area of concern, obviously, is that when you take a competitor out of the market, rates tend to increase and frequencies decrease. They’re not going to fly two aircraft at the same time to destinations,” Fried said.
  
“I think that generally speaking,” he continued,” the new American Airlines will hopefully be a strong carrier with a robust schedule domestically and internationally.”

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