International air cargo rates will be under pressure in 2008 due to overcapacity in lift, particularly on the key China-US route.
Freighters, from brand new triple 7s to ancient (by airline standards) 747-200s, will be taking to the skies in record numbers, making needed rate increases difficult to bestow or sustain.
This is the prediction of Chris Coppersmith, President & CEO at Target Logistic Services, a Carson, CA-based logistics provider with domestic and international freight forwarding operations.
“Before shippers congratulate themselves in benefiting from low rates, they should realize higher fuel and security surcharges are expected next year which will raise overall transportation costs. With oil approaching $100 a barrel and new, onerous security regulations anticipated, fuel and security surcharges may actually run higher than actual shipping rates on a number of routes,” stated Coppersmith.
The Target executive noted that while air cargo volume between China and the US will increase in 2008, “the number of aircraft serving this single most important air cargo route may increase even faster. New cargo airlines like Jade Cargo, Cargoitalia and Cargo B are rushing to offer service between China, the US and Europe. Combined with increased capacity by the legacy carriers serving China, conditions may arise where too many airplanes are chasing too little cargo.”
Coppersmith sees a healthy trend accelerating in 2008 with shippers renewed interest in service. “Thoughtful shippers increasingly realize that low, non-compensatory rates are meaningless if cargo does not arrive on time, in good condition and with no hassles,” stated the cargo veteran who has led Target since its founding 37 years ago. “The successful forwarder in ‘08 will be the one with the skill and experience to have customer cargo arrive at destination when promised despite changing lift conditions, onerous security restrictions and ground obstacles,” affirmed Coppersmith.
Domestic air cargo will continue to struggle in 2008, with either flat or declining volume,” believes the Target chief. “The bankruptcy and recent liquidation of Kitty Hawk, a major domestic cargo airline, is another indication of the difficult status of domestic air freight,” commented Coppersmith. “Target, like other forwarders, increasingly are turning to less expensive yet time definite surface transportation that fit into customers’ production and distribution schedules,” said Coppersmith. “We are fulfilling that need,” he emphasized.
Coppersmith also noted that air freight volume traditionally has been tied to the health of the US economy. “Economic signals are mixed for the coming year,” he averred. A number of economists is predicting a continuation of GDP growth at about two to three percent. Others are expecting a ‘mild’ recession. If our economy continues to grow, I expect an increase in international air cargo volume at about the 4percent level. If our economy stops growing, air freight will be flat,” Coppersmith concluded.