Cold comfort for airlines as container shipping gobbles perishable cargoes

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The air freight industry has lost the equivalent of around 4,000 B747 freighter flights in the movement of perishable cargoes as a result of modal shift to ocean transport over the last decade, according to research from Dutch transport consultancy group Seabury.

Presenting its latest analysis at last week’s Cool Logistics conference in Antwerp, senior analyst Mathijs Slangen said that without cargo leaking from air to ocean transport, volumes in the air freight industry would have been considerably higher.

Seabury data shows that the air freight industry transported 2 million tonnes of perishable goods in 2000, which ought to have grown to 2.9 million tonnes by 2011 given a 3.3% compound annual growth rate in the trade over the period. Instead, the air freight industry carried 2.5 million tonnes in 2011, representing a CAGR of 2.1% and the loss of some 400,000 tonnes of goods to sea transport during the period – equivalent to 4,000 fully-loaded B747Fs.

Mr Slangen said: “For the ocean business it’s nice to have, but for the air business it’s critical. A much larger percentage of the total business is perishables, and if you are losing share on that scale, that really impacts the business.”

While he cautioned that many of the respective carryings of perishables in air and ocean transport figures can be misleading, the conclusion that ocean carriers – and in particular container shipping lines carrying reefer containers – are winning market share from airlines was inescapable.

“Do we see modal shift happening? Yes. There is a lot going from air to ocean, and my colleagues on the air freight side are very worried about this.”

The vast majority of perishable cargo switching was food stuffs, he said. While food accounts for around 75% of perishable air trade by weight, it was responsible for more than 90% of the modal shift since 2001, according to Seabury data.

Additionally, since 2009 there has also been a substantial leakage of pharmaceutical cargo, and Seabury data records that $2.1 billion in terms of the value of the goods shipped switched from air to ocean modes between 2009 and 2011.

Aside from the issue of cost of transport, he said that global risks, such as the volcanic ash cloud had “changed the reasoning of the supply chain”, while the development of better refrigerated container technology had meant shippers were more confident that despite longer supply chains, cargo damage was kept to an acceptable level – although he added that continuing investment in controlled atmosphere technology would be need to support that growth.

Another important factor behind the modal shift was a change in the balance of power within the supply chain itself, argued Damco’s head of perishable logistics, Ole Schack-Petersen, who said that retailers of perishable products – particularly the larger multinational supermarkets – were taking an increased control over the supply chain, which had previously been dominated by fresh goods wholesalers.

“In the next two to three years retail will become much more involved in the supply chain. Our industry is being influenced by newcomers,” he said.

This was leading to “a pull model rather than a push model”, he said, which meant that volumes could disappear from transport “because we will only carry what is being eaten rather than what is being produced”.

And retailers were likely to continue the drive towards ocean transport as they continually sought lower costs, he argued, although that ratcheted up the pressures within the perishable supply chain.

“Retailers will always look for the lowest cost. There’s tremendous pressure backwards in the chain because the retailer is always looking to make the produce available at the lowest possible cost – because for him it is a market share issue to have low prices,” Mr Schack-Petersen said.

Facing pressure from ocean carriers desperate to fill ships on both the food and pharma fronts, a permanent change to the dynamic of the air freight industry appears to be underway.