Overview of Air Cargo Research Assignment Paper

Overview of Air Cargo
Name
Institution
Contents TOC \o "1-3" \h \z \u Abstract PAGEREF _Toc485036204 \h 3Introduction PAGEREF _Toc485036205 \h 4Historical Background of the Air Cargo PAGEREF _Toc485036206 \h 5Current State of Air Cargo PAGEREF _Toc485036207 \h 6Current Aviation Related Activities in Air Cargo PAGEREF _Toc485036208 \h 8Air Cargo Security PAGEREF _Toc485036209 \h 9Factors Affecting Air Freight Rates PAGEREF _Toc485036210 \h 10Demand PAGEREF _Toc485036211 \h 10Time and Temperature for the Case of Sensitive Cargos PAGEREF _Toc485036212 \h 11Volume and the Weight of the Freight PAGEREF _Toc485036213 \h 11Recommendation PAGEREF _Toc485036214 \h 12References PAGEREF _Toc485036215 \h 13
Abstract
This paper reviews an overview of operations of air cargo since it was invented and was first used in 1910 to move cargo. The advent of air cargo boosted international business as it made transport reliable and quick. In the early 1970s, the airline that was capable of transporting all cargo was established with the argument that it was inefficient to carry both the passengers and the freight in a one airline as compared to servicing them separately. The Airline industry in the United States is made up close to 3,000 companies that produce total annual revenue of $120 billion. Some of the major airlines in the United States the Delta, United and American and also other cargo and courier companies like UPS and FedEx. This paper will also look into the current status of air cargo and other air cargo related activities. The Asia- North America and the Europe-Asia markets are also projected to grow slightly faster than the growth rate in the entire world. Another important issue that should be noted is that the growth rate in both Europe and North America is currently below the world’s average growth rate.
Introduction
Ever since the advent of airline transport, it has led to the improvement of both transport industry and the trade across different countries in the world. As a matter of facts, the airline industry has led to the expansion of international trade due to the availability of quick and safe transport that is capable of carrying both passengers and their freights. In the early 1970s, the airline that was capable of transporting all cargo was established with the argument that it was inefficient to carry both the passengers and the freight in a one airline as compared to servicing them separately. The Airline industry in the United States is made up close to 3,000 companies that produce total annual revenue of $120 billion. Some of the major airlines in the United States the Delta, United and American and also other cargo and courier companies like UPS and FedEx. There are so many players that make it to be highly concentrated with close to 90% the revenues that are generated from the airline industry comes from the top ranked 12 companies. The federal government has categorized airlines as National, Major and/or Regional. The airline industry in the United States mainly depends on the state of the U.S economy that affects air travel by consumer passengers and businesses. In addition to that, considering the fact that costs are fixed, the profitability of different companies is mostly determined by fuel and labor costs and the efficiency of operations (Chang & Chang, 2009).
This paper explores historical overview, current position, current aviation related activities of the Air Cargo.
Historical Background of the Air Cargo
Before the advent of aircraft mails and parcels were being moved by balloons and other carrier pigeons. The first cargo that was transported by an aircraft took place in November, 7, 1910.After the Wright Brothers were able to fly in a powered and a controlled aircraft; the first practical attempt of the air cargo took place seven years later and to be specific the demonstration of air freight took place in the year 1910. This news was received with a lot of excitement due to the potentiality of commercialization of the air cargo that will result in the reduction of distance has been shortened between the manufacturers, businesses and the consumers. Basically, this led to the increase in the value of products; this was because the time taken for the products produced to reach the consumer could be shortened in a big way. As a matter of facts, this led to the increase in demand for those goods that could be delivered efficiently, reliably and quickly. However, it was after the Second World War and moments after airline deregulation were when the market had ripened for the establishment of the all-freight airline. In the year 1973, the first cargo airline was developed with an intention of optimization of business process for the freight traffic without any worries about passenger traffic. This took place at a time when dual optimization methods had not been developed; it was either cargo traffic or passenger traffic had to be forced to take a back seat when the other is being optimized. The first company to separate the passenger traffic and the cargo traffic was called Federal Express (FedEx) that was based in Memphis, TN, the chief business models that guaranteed the following delivery of products. The Company had the opinion that if they could separate the passenger traffic and the cargo traffic to allow for the company to concentrate on the delivery of high quality services that could sustain a company that was specifically dealing with frighter planes. Within a period of three years the company had already made its first net profit. Since then FedEx, has continually made profit and expanded and has remained the largest air player in the air cargo industry in the United States. On the other hand, in the year 1988, United Postal Service (UPS), was authorized by the FAA to begin operating its cargo airline. Currently, the United Postal Service is the main cargo airline in the United States. Its major competitor in the cargo airline industry is FedEx, which is based in Louisville, KY (Allaz, 2005).
However, the history of the UPS airline can be traced back to the 1907, when deliveries were done using a bicycle. During the early days of operations, UPS mainly paid an attention to deal with the service and later to a retail shop. It was during the 1950s, when the firm started to diversify in the parcel delivery to a vast range of clients that included private and commercial ones. Although UPS started operating a short-term air service from the start of the year 1929, the company started proper air service in the year 1953 through its UPS-Blue Label Airline. The Company started operating a proper cargo airline service later in 1988, when it received authority from the FAA (Allaz, 2005).
Current State of Air Cargo
On the global level, transportation of commercial cargo has been used as the vital indicator for economic growth of international trade and also a measurement for the state of the global economy. The reason being that, as people are becoming more productive, the more they are becoming richer and therefore there will also be an increase in demand for consumer goods. According to Wensveen (2016), the revenue that was generated from the cargo airline industry globally in the year 2012 was around $73.3 billion. That amount was shared between the major global airlines like the FedEx, UPS, Pacific, Emirates, Lufthansa Cargo and Air France-KLM. It is important to note that cargo airline is mainly dominated by the United States all-cargo carriers like the FedEx and the UPS.
According to CARGO FACTS (2017 June 1), the April data that was gotten from some of the world’s biggest cargo carriers and airports, it was predicted that when the International Air Transport Association produce their analysis, there are chances that there will be an increase in demand for the air freight by close to 10% across the world. However, when the IATA finally reduced its report for the month of April 2017, the demand for the international cargo had grown by 9.8%. The trend in the market analysis mostly focused in the air cargo and that was according to the revenue tonne kilometers flown quarterly. From the report it was shown that the major growth was reported from three regions and that was Asia, Europe and North America. The leading were European carriers that reported an increase in demand of 13.1%. North American carriers reported a growth in demand for airline freight of 12.5% and the Asian carriers reported an increase in demand for the Airline Freight of 9.4%. Nonetheless, the overall growth in demand for the airline cargo services was held at 8.5% due to the slower growth that was reported in Middle East (Cargo Facts., 2017).
In the last two years, e-commerce ha...