Third quarter global air freight review
Air freight is showing strong signs of improvement across North America, as Air Cargo World reported today that American carriers witnessed strong third quarter performance.
Air freight divisions within Delta and Southwest saw freight and cargo revenues increase by 13 and12.9 percent, respectively, while competitor American Airlines reported revenue growth at 4.8 percent.
Delta in particular has seen its freight division take off. Company officials said that profits rose to $30 million year-over-year, and that Delta’s freight operating revenue increased to $257 million this quarter.
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Also reporting strong numbers in the American air freight market is United Parcel Service. The company reported a higher third quarter profit, with increased rates, cost cuts and technology improvements overcoming a stagnant economy.
According to a report in Reuters on UPS, the company claims that “the U.S. economy appears to have stabilized and is growing slowly, after concern about a possible double-dip recession stifled consumer demand earlier this year.”
While the revenue growth is certainly good news for air freight companies, expenses are growing at a staggering rate. Fuel costs for American Airlines increased by over 40 percent year-over-year, up to $3.15 per gallon from $2.24 per gallon last year.
Those expense increases cost American Airlines $653 million more this year, and was perhaps the biggest factor in the company’s $162 million net loss this quarter.
Those losses are shared by some global air freight companies. Hong Kong International Airport, the world’s busiest air cargo hub, reported a 6.1 percent decline in September volume, thanks in large part to sluggish European and U.S. economies.
Cainiao Network Launches Customer-Centric Logistics
As the logistics division of the Alibaba Group, Cainiao Smart Logistics Network has decided to provide its Southeast Asian customers with unsurpassed service during its annual shopping festival. Based on customer feedback surveys, the company will expand its real-time customer service support and speed up delivery times. ‘By expanding and deepening our services, we aim to provide a stronger logistics infrastructure that can bolster the booming eCommerce sector, support merchants’ expansion into new markets and diversify retail options for consumers’, said Chris Fan, Head of Cross-Border, Singapore, Cainiao Network.
Who Is Cainiao?
According to TIME Magazine, Cainiao ‘is far from a typical logistics firm’. The company controls an open platform that allows it to collaborate with 3,000 logistics partners and 3 million couriers. This means that merchants can choose the least expensive and most efficient shipping options, based on Cainiao’s real-time logistics analytics. The company’s goal is to ship packages anywhere in the world in under 72 hours—and for less than US$3.00.
For countless small business owners around the world, from coffee-growers to textile-weavers, this could change everything. Usually, it costs about US$100 to ship a DHL envelope from Shanghai to London in five days. Cainiao aims to change that. Said its CEO Wan Lin: ‘The biggest barrier to globalisation is logistics’.
What’s Part of the Upgrade?
Throughout the Tmall festival, Cainiao’s logistics upgrade will be divided into four critical segments:
- Real-time customer service support. Cainiao has launched a direct WhatsApp channel for customers to receive logistics updates and ask questions.
- Expansion of air freight parcel size and weight limits. Packages can now be up to 30 kilograms or 1-metre x 1.6 meters to help ship large items such as furniture.
- Daily air and sea freight connections. Shipping frequency will almost double to seven times weekly to maintain resilience and efficiency.
- Compensation for lost or damaged packages. Customers will be reimbursed up to RMB 2,000 (US$311).
Where is the Company Headed?
From June 1st to June 20th, the finale of Tmall, Cainiao will ensure that its customers feel confident in the company’s ability to deliver their packages. Despite global shipping delays due to COVID, the show will go on. Said Fan: ‘This series of customer-centric logistics upgrades reaffirms our goal of pursuing value-added services to enhance customers’ shopping experience while mitigating challenges posed by external factors’.
Furthermore, Cainiao has recently expanded its Southeast Asian operations, achieving revenue growth of 68% year-over-year. In Malaysia, the logistics operation has partnered with BEST Inc. and Yunda; in Singapore, the company has partnered with Roadbull, Park & Parcel, and the Singapore Post. And if its recent measures help retain and grow its customer base, the company will be well-poised to lead the industry in resilient and customer-centric global logistics. ‘COVID-19 made everyone realise how important the logistics infrastructure backbone is’, said Wan. ‘And it gave us a peek at what Cainiao should look like in three years’.