The cost of modal shift

20 / 03 / 2014

  • "Air cargo volumes have flatlined since 2010 as passenger traffic grew strongly"

    "Air cargo volumes have flatlined since 2010 as passenger traffic grew strongly"

MODAL SHIFT to ocean and other surface freight has cost the air cargo industry almost two percentage points of annual growth since 2000.

The problem is set to continue at a moderate pace, says a report conducted by research firm Seabury Group and IATA.

It reveals that airfreight’s share of total global containerised or unitised cargo transported declined from 3.1 per cent in 2000 to 1.7 in 2013 – and about one third of this marketshare loss was due to modal shift.

Raw materials and perishables were affected the most, but fashion, hi-tech and machinery parts shipments also experienced significant shifts from air to ocean.

Trade lanes from Asia have been hit the hardest.

Research data from shippers indicates that the main factors driving modal shift include transportation costs, increased reliability of ocean freight, and concern for the environment.

They suggest that air cargo could ‘minimise or reverse’ the effects of modal shift by offering cheaper rates, better airfreight products and having closer relationships with customers.

Forwarders want sustainability through fuel efficiency, improved operational reliability and a broader use of electronic communication, says the report.

Shipments from the automotive and electronics sectors are identified as most at risk of migrating from air to ocean in the future.

Gert-Jan Jansen, head of Seabury Cargo Advisory, says annual global airfreight volumes would be 15.2 million tonnes higher if airfreight had retained its 3.1 per cent market share. “Over the past 13 years, 5.4 million tonnes have shifted from air to ocean – an average annual loss of more than 400,000 tonnes per year,” he points out.

“Without this modal shift, the compound annual growth rate for airfreight could have reached 4.5 per cent from 2000 to 2013, instead of the 2.6 per cent actually achieved,” he adds. 

Air cargo needs to devise a way of addressing the issues highlighted in the report, if it wishes to minimise or reverse its market share losses.

“While shippers would like to focus attention on airfreight rates, there are other aspects at play,” Jansen warns. “Forwarders require improvements in terms of fuel efficiency, reliability and use of e-communication, while respondents also highlight the importance of reduced door-to-door transit times.”