2. Lecture 1
Agenda of today’s Lecture:
Introduction to Air Freight
History of Air Freight
Freighters Demand in Future
Advantages of Air Freight
E-Commerce Growth & Air Cargo Growth
The Air Cargo Supply Chain Structure
Air Cargo Supply Chain Entities
3. What is meant by Air Freight?
Air Freight is also known as air cargo. It is the mode of
transport used to transport cargo swiftly by air.
Definition of Air Cargo according to TACT (The Air
Cargo Tariff and Rules)
“Any item transported from origin to destination
by air under any Airway Bill”.
4. History of Air Freight
Even before the aircraft, mail was moved by balloons,
dirigibles and carrier pigeons.
The first cargo moved by aircraft occurred on 7
November 1910 when a few bolts of silk were
transported by air from Dayton to Columbus, Ohio.
In 1911 experimentation with the movement of post
was started, and by 1914 regular air service began in the
United States.
In Germany, the first official air mail flight occurred in
1912.
5. History of Air Freight (contd.)
However, it was not until 1925 before a comprehensive
airmail service was available in the U.S. On October 7,
1925 the first five Contract Airmail (CAM) routes were
issued by the U.S.
Postal service to fly airmail between designated points.
For example, CAM 1 flew the New York to Boston route
and was managed by Juan Trippe, who later started
Pan American Airways.
6. History of Air Freight (contd.)
By 1931
85% of airline revenue was from domestic airmail
contracts,
14.8% revenue from passenger service and only
0.2% from freight.
If it had not been for the postal service CAM routes, the
development of the U.S. commercial aviation section
would have been hampered.
7. World War II caused a rapid expansion of the aviation
industry and for the first time, large scale movements
of freight were carried out to support the war effort.
In the early 1970’s door-to-door express package
services came into being.
Dalsey, Hillblom and Lynn started DHL in 1969.
Fred Smith started Federal Express, FedEx in 1971.
8. Freighters Demand in Future
In 2018, there were 1870 freighters in operation
worldwide.
Thirty- percent of these were large wide body (>80
tons) aircraft,
33% were medium wide-bodied aircraft (40 to 80 tons)
37% were standard bodies with carrying capacities of
less than 45 tons.
Boeing projects the demand for the world freighter
fleet to increase to 3260 airplanes by 2037. This
expected demand will be met through new freighters
and conversion of passenger airlines to cargo aircraft
9. Advantages of Air Freight
1. The fastest shipping method
2. Highly reliable arrival and departure times
3. Send your cargo almost anywhere
4. Low insurance premium means large savings
5. High level of security and reduced risk of theft
and damage
6. Less need for warehousing and fewer items in
stock
7. Less packaging required
8. Follow the status of your cargo
10. E-Commerce Growth & Air Cargo Growth
E-commerce Growth
The explosive growth of e-commerce over the last 10 years
has greatly increased the demand for air cargo.
This demand is projected to grow at 20 percent over the
next five years.
This high level of activity in ecommerce has provided the
integrated express carriers with a faster growth rate than
the overall air cargo growth rate.
The integrated express carriers grew at a rate of 11.5 percent
in 2017, whereas the world air cargo traffic grew 10 percent.
Of course, this type of growth signals opportunity which
often leads to new entrants.
11. E-Commerce Growth & Air Cargo Growth
(contd.)
In the case of e-commerce, the new entrant
challenging FedEx and UPS is Amazon Air.
Amazon’s deep pockets and proven ability to innovate
has led to an impressive nationwide network of 14
markets served by contracted freighter aircraft
carrying Amazon packages.
It is clear that we are still in the early chapters of the e-
commerce story and its impacts on air cargo, but so far,
the impact has clearly been positive and resulted in a
larger market for the industry’s services.
15. Air Cargo Supply Chain
Air Cargo supply chain is the process of moving
consignments from origin to destination involving
different entities on ground and air.
The process is often complex and subject to a range of
regulatory requirements, especially when they include
international movements and transport by air.
All those involved in these often complicated movements
share the responsibility for ensuring the safety and security
of the cargo and for operating within the law. In particular,
they are responsible for ensuring that nothing contained in
the cargo will endanger an aircraft and the lives of those
travelling it.
16. Air Cargo Supply Chain (contd.)
The cargo will be handled along the chain by a number of entities
with varying responsibilities, including
aircraft operators,
express carriers,
postal operators,
regulated agents,
consignors,
consignees,
GSSAs and
ground handlers.
As a further complication, these entities will often be known by
different names according to the State or region in which they
are located.
17. Entities in Air Cargo Supply Chain
Shipper:
A person or company that transports goods by sea, land, or
air.
Forwarder:
A person or organization that dispatches or delivers goods.
also known as "a freight forwarder“.
Integrator:
Integrators are shipping carriers that control complete
air and road delivery networks and offer a wide range of
package delivery services.
18. Entities in Air Cargo Supply Chain (contd.)
Airline Operations:
Receive, store, transfer, track, load and unload cargo; assign
and manage capacity; bill customers.
Aircraft operators :
Aircraft operators, also known as airlines and air carriers,
provide air transportation for goods. A transport contract
(air waybill) binds an aircraft operator with the relevant
contracted parties for the safe and secure transport of cargo
and mail from one location (e.g. the airport of departure)
to another (e.g. the airport of arrival).
Consignee:
Final recipient of the shipment.
19. Entities in Air Cargo Supply Chain (contd.)
GHA:
Ground handlers are subcontracted and act on behalf of freight forwarders
and/or aircraft operators.
This occurs when the freight forwarder or aircraft operator does not have the
necessary facilities.
Ground handling services can include the provision of warehouses to accept,
handle, prepare, and tag cargo and mail, as well as loading/unloading, transit,
and storage of cargo and mail.
Ground handlers are responsible for dealing with operational aspects, based on
the instructions of freight forwarders and aircraft operators.
Once a consignment is ready for shipment, the freight forwarder will release
the cargo and instruct the ground handler to deliver it to the aircraft operator.
20. Entities in Air Cargo Supply Chain (contd.)
GSSA:
General Sales & Service Agent (GSSA) is
representing airlines in a specific region or country to
commercialize air freight capacity and to supervise
complex local operations.
GSSA is actually 3rd party players representing airlines
mainly in terms of cargo commercialization,
operations and administration services.
