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E-commerce shake-up

A rise in e-commerce is changing the landscape for airlines, forwarders, postal operators. Ian Putzger finds out more

I f you are paid by the block hour or the pallet position, it is of little relevance whether you are hauling aircraft spares, iPhones, pharmaceuticals or consumer goods ordered online. Still, the much cited disruptive power of e-commerce is clearly reaching into the ACMI sphere. In June William Flynn, Chief Executive Officer and President of Atlas Air Worldwide Holding (AAWH), told investors that the world's largest widebody freighter leasing company is shifting its focus further to the express and e-commerce sector.


“We are moving away from heavy freight and into the integrator, express and e-commerce market,” Flynn declares. “We are becoming a different company.”


The strongest indication of this shift came in May, when Atlas struck an agreement with Amazon to lease 20 Boeing 767 freighters to the e-commerce giant for ten years and operate them under a seven-year crew, maintenance and insurance deal.


Atlas has also aligned itself with other players in this sector, notably China Post and the integrated express carriers, which are leasing freighters from it. The firm's strongest ties in the express field are with DHL, which started out in 2008 with a comprehensive partnership, under which the integrator assumed a 49% stake in the AAWW subsidiary, Polar Air Cargo, which provides linehaul across the Pacific for the express firm under a 10-year block space agreement. The alignment with DHL intensified this spring through AAWH's takeover of ACMI provider Southern Air, which itself had changed its fleet from a 747 freighter lineup to a mix of Boeing 777 and 767 aircraft targeting the requirements of express carriers and tying up most of its fleet with DHL.


Flynn points to traffic statistics, which present a stark contrast between an almost stagnant general airfreight sector and rapid growth in the express sector, something that has been attributed largely to a surge in e-commerce flows. He notes that, according to IATA figures, traditional airfreight (minus express and charter volumes) grew 2.4% in 2015 and is expected to show a compound annual growth rate of 4% between 2015 and 2019. Bank of America Merrill Lynch, on the other hand, see express business up 4.9% in 2015 and e-commerce up 20.4%. For the 2016-2018 period they project compound annual growth rates of these two sectors of 6.3% and 22.3% respectively.


Predictions for growth in e-commerce are bullish. According to eMarketer, a market research company that focuses on digital marketing, media and commerce, online shopping will show a compound annual growth rate of 27.4% over the coming five years. By some projections, the global B2C volume will reach $2.26 trillion a year by 2020, fuelled by annual growth rates of 15-20%.


Amazon's moves to build up dedicated freighter capacity, securing deals for 20 767 freighters apiece with Atlas and Air Transport Services Group, have sent strong ripples through the industry and prompted carriers to examine their options. Lufthansa Cargo recently disclosed that it had held talks with Amazon and Alibaba. A spokesman for the carrier said that these were continuing and are focusing primarily on the needs of the e-commerce providers and what the carrier could do to meet these.


Inevitably these developments have prompted speculation that e-commerce vendors and carriers might be tempted to cut forwarders out of the equation, scenarios that have been further fuelled by talk of 'uberisation', with technology platforms automating functions performed by logistics firms. Industry observers as well as carrier and forwarder executives dismiss such scenarios as unrealistic, pointing out that carriers do not have the wherewithal to manage elements like customs clearance.


Albert Saphir, President of logistics consulting and training firm ABS Consulting, regards Uber as little more than a message board linking buyers and sellers of capacity, adding that these have been around for years in the trucking sector. "This has nothing to do with functions like forwarding, compliance or customs clearance," he says.


David Emerson, Group Sales and Marketing Director of SEKO Logistics, does not see a risk that airlines will bypass forwarders, noting that they lack the capabilities to sort e-commerce shipments and feed them into final mile delivery networks.


Some carriers have taken bold steps to tackle the brave new world of e-commerce themselves, points out Christopher Shawdon, Vice President of Logistics Solutions and Global Transportation at Unisys. According to him, AirAsia, which carries some 500,000 shipments per year, is showing considerably more interest in e-commerce than in the traditional airfreight business. Brazilian low-cost airline GOL has used franchised agents within its home market (which accounts for the bulk of its traffic) to perform pick-up and delivery rather than work with forwarders.


"Almost all of their business is like that. It's not the traditional model of working with forwarders," he remarks. >>

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