News / Integrators and e-commerce giants a real threat to air freight forwarders

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More than two-thirds of the logistics industry believes traditional air freight forwarding will lose volumes in the next five years to tech start-ups, carriers and companies such as Amazon.

According to Transport Intelligence’s (Ti) Global Freight Forwarding report, only 17% think there will be no disruption to air freight forwarding.

Air freight appears to be under a greater ‘threat’ for traditional forwarders than sea freight, where only half of the respondents to the survey thought traditional forwarders would lose market share.

The reason, says Ti, is the growth of the integrators in recent years and Amazon’s highly publicised shift into air freight. It could also be, of course, that despite far lower volumes, air freight makes up some 52% of the forwarding share in monetary terms.

“As integrators such as DHL, UPS, TNT and FedEx moved into the general freight business, traditional air freight forwarders have seen their market share eroded,” notes the report. “This trend of market share deterioration is likely to continue in the next five years, according to respondents.

“Another factor accounting for this view could be Amazon’s intentions in the air freight market, enhanced by investments in its own plane fleet. Amazon’s plans to bring shipping in-house and therefore bypass forwarders is likely to have led respondents to anticipate volume share loss to third parties.”

It is not just the western integrators which are eroding air freight forwarders’ share. A host of Chinese companies are now also starting to occupy that territory, such as SF Express and YTO Express. Dealing with just-in-time shipments means they continue to concentrate on the air freight space – and are buying up aircraft with confidence.

However, notes Ti, while the high-value express segment is large and growing, it has its limits.

“Ti expects e-commerce penetration rates to plateau at around 40%, and the rest of those goods will still require shipping. What’s more, though speed is a crucial element of international ecommerce, it is not the be all and end all. With improving visibility and a lower pricing point, it is likely that many e-retailers will opt for air forwarding over the more expensive express option provided by the integrators. Alternatively, they might take on such business in-house, threatening both forwarders and express carriers alike.”

Ironically, however, Ti’s Global Express and Small Parcels report notes that the opportunities afforded by companies such as Amazon in the e-commerce space will also boost air freight volumes.

There has been a net shift of volumes in the parcels sector from road to air, with 40% of respondents agreeing there is modal shift. The high levels of growth seen recently in air cargo can also be partly attributed to growth in cross-border ecommerce.

But there are vertical sectors outside of express shipments which could benefit air freight forwarders. Hi-tech goods, pharmaceuticals and perishables all scored highly on growth opportunities in the next five years – despite a notable trend recently for electronics to shift from air to sea.

Meanwhile, the top three air tradelanes seen as being the most promising in the next five years all start in Asia: Asia-Europe, intra-Asia and Asia-North America indicate that Asian export volumes will increase in the next five years.

Optimism over intra-Asia also suggests that there is a strong belief that rising consumption will lead to more cargo being shipped within the continent.