Major growth in carriers' fuel costs underpins significant price increases for international air cargo transportation during the past three years.
Los Angeles, CA (PRWEB) April 11, 2014
International air cargo transport has a buyer power score of 3.0 out of 5, where a higher score indicates greater buyer power. “Demand for international air cargo transport has grown slowly compared with increases in trade volumes during the past three years,” according to IBISWorld procurement analyst Haydenn Shipp. Many shippers have been priced out of the market due to major rate and surcharge hikes, which have primarily stemmed from carriers' volatile and steeply rising fuel costs. As a result, many shippers have increased their usage of surface transport modes such as container ships and trucks.
However, not all shippers can use these substitutes, because their goods are time sensitive and must be sent by air. “Airfreight's significant price growth has curbed the buyer power of such shippers,” says Shipp. Further hampering buyer power is the market's high level of concentration; the dominant players operate with only a moderate level of competition. The international air cargo transport market's three largest carriers (FedEx, UPS and DHL) are freight integrators, meaning they are vertically integrated door-to-door carriers. The freight forwarding services they provide along with jet capacity enable higher markups than the other major type of carrier, passenger airlines with cargo operations. Freight integrators have, therefore, remained somewhat immune to the high level of price-based competition that occurs among passenger airlines with cargo operations, a less concentrated market segment where buyers have greater power.
For this latter type of carrier, cargo has declined as a share of revenue, according to the International Air Transport Association. This decline, alongside the segment's higher competition, signals an opportunity for shippers that intend to ship through six-month contracts (the industry standard) and grow as a portion of a carrier's freight business. Airfreight in general will become more attractive in the next three years because price is forecast to grow at a relatively subdued pace. Buyers should note that shipping through a passenger carrier typically requires going through a third-party freight forwarder; freight integrators can be contacted directly, easing the process for those that ship irregularly.
For more information, visit IBISWorld’s International Air Cargo Transport procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of scheduled international air cargo transportation. Such transportation, also called airfreight transportation, involves moving parcels, letters and perishable goods on regularly scheduled routes that either originate or end internationally. Buyers of the service are also called shippers in this report; suppliers are cargo airlines and are also called carriers. This report does not cover passenger air transportation or nonscheduled air transportation.
Executive Summary
Pricing Environment
Price Fundamentals
Benchmark Price
Pricing Model
Price Drivers
Recent Price Trend
Price Forecast
Product Characteristics
Product Life Cycle
Total Cost of Ownership
Product Specialization
Substitute Goods
Regulation
Quality Control
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Imports
Competitive Environment
Market Share Concentration
Market Profitability
Switching Costs
Purchasing Process
Buying Basics
Buying Lead Time
Selection Process
Key RFP Elements
Negotiation Questions
Buyer Power Factors
Key Statistics
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