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The unexpectedly abrupt détente in the US-China trade war not only slashed tariffs on regular imports but also cut the US levy on e-commerce parcels originating in China to 30% (54% for parcels moved through the postal network).
This is still high, but not an insurmountable barrier to this traffic. However, low-value shipments outside postal networks are not eligible for de minimis exemption and have to go through customs clearance, which adds to the cost and stretches transit times.
It has been a wild ride for airlines dealing with e-commerce. The escalation of the trade war precipitated dozens of cancellations of charters that had been booked to carry parcels to the US, and the sudden détente prompted warnings of another surge in airfreight.
A fully fledged return to pre-trade war flows of parcels seems unlikely, but e-commerce is expected to remain a major driver of airfreight volumes.
In how far this will involve all-cargo charters remains to be seen (the trend is still continuing in other trade lanes). Much will depend on how China-US negotiations proceed in the coming weeks and what measures the European Union will implement.
How are airlines going to play this going forward, once there is a semblance of predictability in the business? Presumably, many will be content to fill their planes with consolidations of hundreds of parcels, but more enterprising carriers may be tempted to be more ambitious.
It is no secret that the networks of large international airlines with hosts of direct flights between city pairs give them an advantage over the hub-and-spoke models of the integrators, both in terms of speed and cost. With the right set-up, they could offer a premium service that leaves the integrators in the dust.
To get there requires some effort, though. To begin with, the horizon has to expand beyond the airport-to-airport frame to end-to-end service.
Carriers have to align with first- and final-mile providers to offer true door-to-door capability. Further, they must be able to capture and follow parcel traffic at the piece level. Container tracking will not do. Customs clearance is a must.
The technology for this exists today. Kale Logistics, for instance, offers a full suite that covers all aspects of this. The question is whether airlines are willing to take the plunge and aim for higher margins than consolidations that reliably fill their planes.
