Modal shift: Real or imaginary?

 

The last twelve years have been a wild roller coaster ride for the air freight industry. Every time there has been any sign of a return to the steady increase in demand once considered normal, a new crisis has hit the world. 9/11. SARS. The war in Iraq. The global economic meltdown. Recession. And each of these has directly hit the air freight industry,

 

But while these crises have gradually faded or been overcome, there has been one negative force that has been constant: Modal shift.

 

Or at least so goes the accepted wisdom. Perhaps the most commonly expressed concern in the air cargo industry in the last decade has been modal shift of air freight to ocean. Most in the industry accept that demand for air freight rises and falls in response to economic cycles and natural or man-made disasters, but there is also a widespread belief that the base level of demand is falling as shippers increasingly choose to move products traditionally shipped by air to ocean. But how real is this shift?

 

In the closing presentation at the Cargo Facts Asia event in Hong Kong last week, Boeing’s Regional Director of Cargo Marketing Jim Edgar argued that the fear of modal shift to ocean was unfounded. Using data gathered from the US Department of Commerce on the top twenty categories of goods shipped by air on the trans-Pacific lane, he demonstrated that the percentage (by weight) shipped by air has remained almost constant.

 

As the chart at right shows, in 2000 air cargo tonnage on the trans-Pacific lane accounted for 2.0% of the total tonnage. In the following years this percentage has varied from a low of 1.7% in 2006 to a high of 2.5% in 2010, and in fact was higher (at 2.2%) in 2011 than it was in 2000.

 

Mr. Edgar acknowledged that the air cargo industry currently faces many problems, but in his view, modal shift is not one of them.

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11 Comments

  1. Hi David,

    Hope you all had a safe trip home from Hong Kong.  Thanks for the organisation of a very good event, as always!  I enjoyed listening to Jim’s insightful presentation (one of many in fact!).

    While I don’t debate these numbers I disagree with the conclusion; You can find statistics to prove any point if you look hard enough (and/or limit your data set).  I think there can be a tendency to over analyze these things.  You’ve all seen the following IATA chart I guess? 

    What other conclusion can there possibly be than this: Ocean transport is growing, while we know air freight is not??  At the very least, the pie is getting bigger and air cargo is not taking its share.  I think equally not up for debate are the following;

    1. Container lines are offering better and better service (that doesn’t have to mean faster, which is a question of economics) – I.T. is facilitating a lot of that.  If you’ve been to a container port and seen a truck driver key in a number, at which point a giant crane fetches his box automatically, pre-cleared, and 5 mins later he’s out the gate, you know what I mean.

    2. We heard it from FedEx and we’ve heard it before from DHL and UPS as well – customers are trading down.  next day becomes 3-day, 3-day becomes ground.  Any way you cut it, sitting at the top of the ‘speed food chain’ like we do, air cargo will suffer from this.

    Finally I would point to a 2010 Seabury study that said; ‘Air share of global containerized international trade dropped from 2.8% to 1.8% in terms of weight between 2000-2008’.  That study stated that without modal shift, annual air freight would have been 1.5pts higher. The reasons were threefold; firstly, ocean dominated trade lanes grew faster than typical air lanes,  Secondly, trade in typical air freight goods grew more slowly than total world trade and finally the typical definition of modal shift, as goods traditionally transported by air switched to ocean.  Fair to say there was some recovery in 2009 and given the good year we had probably in 2010 as well – but it’s hard to imagine that stretched into 2011/2012.  Don’t know if anyone from Seabury follows this but an update would be interesting!

    I leave to you experts to theorise as to how this might all change again in the future, but I do think passing off the advancements made by the container lines over the last years is a little bit ‘head in the sand’.

     

    Cheers

    Jon

     

  2. Hi David,

    Hope you all had a safe trip home from Hong Kong.  Thanks for the organisation of a very good event, as always!  I enjoyed listening to Jim’s insightful presentation (one of many in fact!).

    While I don’t debate these numbers I disagree with the conclusion; You can find statistics to prove any point if you look hard enough (and/or limit your data set).  I think there can be a tendency to over analyze these things.  You’ve all seen the following IATA chart I guess? 

    What other conclusion can there possibly be than this: Ocean transport is growing, while we know air freight is not??  At the very least, the pie is getting bigger and air cargo is not taking its share.  I think equally not up for debate are the following;

    1. Container lines are offering better and better service (that doesn’t have to mean faster, which is a question of economics) – I.T. is facilitating a lot of that.  If you’ve been to a container port and seen a truck driver key in a number, at which point a giant crane fetches his box automatically, pre-cleared, and 5 mins later he’s out the gate, you know what I mean.

    2. We heard it from FedEx and we’ve heard it before from DHL and UPS as well – customers are trading down.  next day becomes 3-day, 3-day becomes ground.  Any way you cut it, sitting at the top of the ‘speed food chain’ like we do, air cargo will suffer from this.

    Finally I would point to a 2010 Seabury study that said; ‘Air share of global containerized international trade dropped from 2.8% to 1.8% in terms of weight between 2000-2008’.  That study stated that without modal shift, annual air freight would have been 1.5pts higher. The reasons were threefold; firstly, ocean dominated trade lanes grew faster than typical air lanes,  Secondly, trade in typical air freight goods grew more slowly than total world trade and finally the typical definition of modal shift, as goods traditionally transported by air switched to ocean.  Fair to say there was some recovery in 2009 and given the good year we had probably in 2010 as well – but it’s hard to imagine that stretched into 2011/2012.  Don’t know if anyone from Seabury follows this but an update would be interesting!

    I leave to you experts to theorise as to how this might all change again in the future, but I do think passing off the advancements made by the container lines over the last years is a little bit ‘head in the sand’.

     

    Cheers

    Jon

     

  3. Hi David,

    Hope you all had a safe trip home from Hong Kong.  Thanks for the organisation of a very good event, as always!  I enjoyed listening to Jim’s insightful presentation (one of many in fact!).

    While I don’t debate these numbers I disagree with the conclusion; You can find statistics to prove any point if you look hard enough (and/or limit your data set).  I think there can be a tendency to over analyze these things.  You’ve all seen the following IATA chart I guess? 

    What other conclusion can there possibly be than this: Ocean transport is growing, while we know air freight is not??  At the very least, the pie is getting bigger and air cargo is not taking its share.  I think equally not up for debate are the following;

    1. Container lines are offering better and better service (that doesn’t have to mean faster, which is a question of economics) – I.T. is facilitating a lot of that.  If you’ve been to a container port and seen a truck driver key in a number, at which point a giant crane fetches his box automatically, pre-cleared, and 5 mins later he’s out the gate, you know what I mean.

    2. We heard it from FedEx and we’ve heard it before from DHL and UPS as well – customers are trading down.  next day becomes 3-day, 3-day becomes ground.  Any way you cut it, sitting at the top of the ‘speed food chain’ like we do, air cargo will suffer from this.

    Finally I would point to a 2010 Seabury study that said; ‘Air share of global containerized international trade dropped from 2.8% to 1.8% in terms of weight between 2000-2008’.  That study stated that without modal shift, annual air freight would have been 1.5pts higher. The reasons were threefold; firstly, ocean dominated trade lanes grew faster than typical air lanes,  Secondly, trade in typical air freight goods grew more slowly than total world trade and finally the typical definition of modal shift, as goods traditionally transported by air switched to ocean.  Fair to say there was some recovery in 2009 and given the good year we had probably in 2010 as well – but it’s hard to imagine that stretched into 2011/2012.  Don’t know if anyone from Seabury follows this but an update would be interesting!

    I leave to you experts to theorise as to how this might all change again in the future, but I do think passing off the advancements made by the container lines over the last years is a little bit ‘head in the sand’.

     

    Cheers

    Jon

     

  4. Hi David,

    Hope you all had a safe trip home from Hong Kong.  Thanks for the organisation of a very good event, as always!  I enjoyed listening to Jim’s insightful presentation (one of many in fact!).

    While I don’t debate these numbers I disagree with the conclusion; You can find statistics to prove any point if you look hard enough (and/or limit your data set).  I think there can be a tendency to over analyze these things.  You’ve all seen the following IATA chart I guess? 

    What other conclusion can there possibly be than this: Ocean transport is growing, while we know air freight is not??  At the very least, the pie is getting bigger and air cargo is not taking its share.  I think equally not up for debate are the following;

    1. Container lines are offering better and better service (that doesn’t have to mean faster, which is a question of economics) – I.T. is facilitating a lot of that.  If you’ve been to a container port and seen a truck driver key in a number, at which point a giant crane fetches his box automatically, pre-cleared, and 5 mins later he’s out the gate, you know what I mean.

    2. We heard it from FedEx and we’ve heard it before from DHL and UPS as well – customers are trading down.  next day becomes 3-day, 3-day becomes ground.  Any way you cut it, sitting at the top of the ‘speed food chain’ like we do, air cargo will suffer from this.

    Finally I would point to a 2010 Seabury study that said; ‘Air share of global containerized international trade dropped from 2.8% to 1.8% in terms of weight between 2000-2008’.  That study stated that without modal shift, annual air freight would have been 1.5pts higher. The reasons were threefold; firstly, ocean dominated trade lanes grew faster than typical air lanes,  Secondly, trade in typical air freight goods grew more slowly than total world trade and finally the typical definition of modal shift, as goods traditionally transported by air switched to ocean.  Fair to say there was some recovery in 2009 and given the good year we had probably in 2010 as well – but it’s hard to imagine that stretched into 2011/2012.  Don’t know if anyone from Seabury follows this but an update would be interesting!

    I leave to you experts to theorise as to how this might all change again in the future, but I do think passing off the advancements made by the container lines over the last years is a little bit ‘head in the sand’.

     

    Cheers

    Jon

     

  5. Hi David,

    Hope you all had a safe trip home from Hong Kong.  Thanks for the organisation of a very good event, as always!  I enjoyed listening to Jim’s insightful presentation (one of many in fact!).

    While I don’t debate these numbers I disagree with the conclusion; You can find statistics to prove any point if you look hard enough (and/or limit your data set).  I think there can be a tendency to over analyze these things.  You’ve all seen the following IATA chart I guess? 

    What other conclusion can there possibly be than this: Ocean transport is growing, while we know air freight is not??  At the very least, the pie is getting bigger and air cargo is not taking its share.  I think equally not up for debate are the following;

    1. Container lines are offering better and better service (that doesn’t have to mean faster, which is a question of economics) – I.T. is facilitating a lot of that.  If you’ve been to a container port and seen a truck driver key in a number, at which point a giant crane fetches his box automatically, pre-cleared, and 5 mins later he’s out the gate, you know what I mean.

    2. We heard it from FedEx and we’ve heard it before from DHL and UPS as well – customers are trading down.  next day becomes 3-day, 3-day becomes ground.  Any way you cut it, sitting at the top of the ‘speed food chain’ like we do, air cargo will suffer from this.

    Finally I would point to a 2010 Seabury study that said; ‘Air share of global containerized international trade dropped from 2.8% to 1.8% in terms of weight between 2000-2008’.  That study stated that without modal shift, annual air freight would have been 1.5pts higher. The reasons were threefold; firstly, ocean dominated trade lanes grew faster than typical air lanes,  Secondly, trade in typical air freight goods grew more slowly than total world trade and finally the typical definition of modal shift, as goods traditionally transported by air switched to ocean.  Fair to say there was some recovery in 2009 and given the good year we had probably in 2010 as well – but it’s hard to imagine that stretched into 2011/2012.  Don’t know if anyone from Seabury follows this but an update would be interesting!

    I leave to you experts to theorise as to how this might all change again in the future, but I do think passing off the advancements made by the container lines over the last years is a little bit ‘head in the sand’.

     

    Cheers

    Jon

     

  6. Hi David,

    Hope you all had a safe trip home from Hong Kong.  Thanks for the organisation of a very good event, as always!  I enjoyed listening to Jim’s insightful presentation (one of many in fact!).

    While I don’t debate these numbers I disagree with the conclusion; You can find statistics to prove any point if you look hard enough (and/or limit your data set).  I think there can be a tendency to over analyze these things.  You’ve all seen the following IATA chart I guess? 

    What other conclusion can there possibly be than this: Ocean transport is growing, while we know air freight is not??  At the very least, the pie is getting bigger and air cargo is not taking its share.  I think equally not up for debate are the following;

    1. Container lines are offering better and better service (that doesn’t have to mean faster, which is a question of economics) – I.T. is facilitating a lot of that.  If you’ve been to a container port and seen a truck driver key in a number, at which point a giant crane fetches his box automatically, pre-cleared, and 5 mins later he’s out the gate, you know what I mean.

    2. We heard it from FedEx and we’ve heard it before from DHL and UPS as well – customers are trading down.  next day becomes 3-day, 3-day becomes ground.  Any way you cut it, sitting at the top of the ‘speed food chain’ like we do, air cargo will suffer from this.

    Finally I would point to a 2010 Seabury study that said; ‘Air share of global containerized international trade dropped from 2.8% to 1.8% in terms of weight between 2000-2008’.  That study stated that without modal shift, annual air freight would have been 1.5pts higher. The reasons were threefold; firstly, ocean dominated trade lanes grew faster than typical air lanes,  Secondly, trade in typical air freight goods grew more slowly than total world trade and finally the typical definition of modal shift, as goods traditionally transported by air switched to ocean.  Fair to say there was some recovery in 2009 and given the good year we had probably in 2010 as well – but it’s hard to imagine that stretched into 2011/2012.  Don’t know if anyone from Seabury follows this but an update would be interesting!

    I leave to you experts to theorise as to how this might all change again in the future, but I do think passing off the advancements made by the container lines over the last years is a little bit ‘head in the sand’.

     

    Cheers

    Jon

     

  7. Hi David,

    Hope you all had a safe trip home from Hong Kong.  Thanks for the organisation of a very good event, as always!  I enjoyed listening to Jim’s insightful presentation (one of many in fact!).

    While I don’t debate these numbers I disagree with the conclusion; You can find statistics to prove any point if you look hard enough (and/or limit your data set).  I think there can be a tendency to over analyze these things.  You’ve all seen the following IATA chart I guess? 

    What other conclusion can there possibly be than this: Ocean transport is growing, while we know air freight is not??  At the very least, the pie is getting bigger and air cargo is not taking its share.  I think equally not up for debate are the following;

    1. Container lines are offering better and better service (that doesn’t have to mean faster, which is a question of economics) – I.T. is facilitating a lot of that.  If you’ve been to a container port and seen a truck driver key in a number, at which point a giant crane fetches his box automatically, pre-cleared, and 5 mins later he’s out the gate, you know what I mean.

    2. We heard it from FedEx and we’ve heard it before from DHL and UPS as well – customers are trading down.  next day becomes 3-day, 3-day becomes ground.  Any way you cut it, sitting at the top of the ‘speed food chain’ like we do, air cargo will suffer from this.

    Finally I would point to a 2010 Seabury study that said; ‘Air share of global containerized international trade dropped from 2.8% to 1.8% in terms of weight between 2000-2008’.  That study stated that without modal shift, annual air freight would have been 1.5pts higher. The reasons were threefold; firstly, ocean dominated trade lanes grew faster than typical air lanes,  Secondly, trade in typical air freight goods grew more slowly than total world trade and finally the typical definition of modal shift, as goods traditionally transported by air switched to ocean.  Fair to say there was some recovery in 2009 and given the good year we had probably in 2010 as well – but it’s hard to imagine that stretched into 2011/2012.  Don’t know if anyone from Seabury follows this but an update would be interesting!

    I leave to you experts to theorise as to how this might all change again in the future, but I do think passing off the advancements made by the container lines over the last years is a little bit ‘head in the sand’.

     

    Cheers

    Jon

     

  8. Hi David,

    Hope you all had a safe trip home from Hong Kong.  Thanks for the organisation of a very good event, as always!  I enjoyed listening to Jim’s insightful presentation (one of many in fact!).

    While I don’t debate these numbers I disagree with the conclusion; You can find statistics to prove any point if you look hard enough (and/or limit your data set).  I think there can be a tendency to over analyze these things.  You’ve all seen the following IATA chart I guess? 

    What other conclusion can there possibly be than this: Ocean transport is growing, while we know air freight is not??  At the very least, the pie is getting bigger and air cargo is not taking its share.  I think equally not up for debate are the following;

    1. Container lines are offering better and better service (that doesn’t have to mean faster, which is a question of economics) – I.T. is facilitating a lot of that.  If you’ve been to a container port and seen a truck driver key in a number, at which point a giant crane fetches his box automatically, pre-cleared, and 5 mins later he’s out the gate, you know what I mean.

    2. We heard it from FedEx and we’ve heard it before from DHL and UPS as well – customers are trading down.  next day becomes 3-day, 3-day becomes ground.  Any way you cut it, sitting at the top of the ‘speed food chain’ like we do, air cargo will suffer from this.

    Finally I would point to a 2010 Seabury study that said; ‘Air share of global containerized international trade dropped from 2.8% to 1.8% in terms of weight between 2000-2008’.  That study stated that without modal shift, annual air freight would have been 1.5pts higher. The reasons were threefold; firstly, ocean dominated trade lanes grew faster than typical air lanes,  Secondly, trade in typical air freight goods grew more slowly than total world trade and finally the typical definition of modal shift, as goods traditionally transported by air switched to ocean.  Fair to say there was some recovery in 2009 and given the good year we had probably in 2010 as well – but it’s hard to imagine that stretched into 2011/2012.  Don’t know if anyone from Seabury follows this but an update would be interesting!

    I leave to you experts to theorise as to how this might all change again in the future, but I do think passing off the advancements made by the container lines over the last years is a little bit ‘head in the sand’.

     

    Cheers

    Jon

     

  9. Hi David,

    Hope you all had a safe trip home from Hong Kong.  Thanks for the organisation of a very good event, as always!  I enjoyed listening to Jim’s insightful presentation (one of many in fact!).

    While I don’t debate these numbers I disagree with the conclusion; You can find statistics to prove any point if you look hard enough (and/or limit your data set).  I think there can be a tendency to over analyze these things.  You’ve all seen the following IATA chart I guess? 

    What other conclusion can there possibly be than this: Ocean transport is growing, while we know air freight is not??  At the very least, the pie is getting bigger and air cargo is not taking its share.  I think equally not up for debate are the following;

    1. Container lines are offering better and better service (that doesn’t have to mean faster, which is a question of economics) – I.T. is facilitating a lot of that.  If you’ve been to a container port and seen a truck driver key in a number, at which point a giant crane fetches his box automatically, pre-cleared, and 5 mins later he’s out the gate, you know what I mean.

    2. We heard it from FedEx and we’ve heard it before from DHL and UPS as well – customers are trading down.  next day becomes 3-day, 3-day becomes ground.  Any way you cut it, sitting at the top of the ‘speed food chain’ like we do, air cargo will suffer from this.

    Finally I would point to a 2010 Seabury study that said; ‘Air share of global containerized international trade dropped from 2.8% to 1.8% in terms of weight between 2000-2008’.  That study stated that without modal shift, annual air freight would have been 1.5pts higher. The reasons were threefold; firstly, ocean dominated trade lanes grew faster than typical air lanes,  Secondly, trade in typical air freight goods grew more slowly than total world trade and finally the typical definition of modal shift, as goods traditionally transported by air switched to ocean.  Fair to say there was some recovery in 2009 and given the good year we had probably in 2010 as well – but it’s hard to imagine that stretched into 2011/2012.  Don’t know if anyone from Seabury follows this but an update would be interesting!

    I leave to you experts to theorise as to how this might all change again in the future, but I do think passing off the advancements made by the container lines over the last years is a little bit ‘head in the sand’.

     

    Cheers

    Jon

     

  10. Hi David,

    Hope you all had a safe trip home from Hong Kong.  Thanks for the organisation of a very good event, as always!  I enjoyed listening to Jim’s insightful presentation (one of many in fact!).

    While I don’t debate these numbers I disagree with the conclusion; You can find statistics to prove any point if you look hard enough (and/or limit your data set).  I think there can be a tendency to over analyze these things.  You’ve all seen the following IATA chart I guess? 

    What other conclusion can there possibly be than this: Ocean transport is growing, while we know air freight is not??  At the very least, the pie is getting bigger and air cargo is not taking its share.  I think equally not up for debate are the following;

    1. Container lines are offering better and better service (that doesn’t have to mean faster, which is a question of economics) – I.T. is facilitating a lot of that.  If you’ve been to a container port and seen a truck driver key in a number, at which point a giant crane fetches his box automatically, pre-cleared, and 5 mins later he’s out the gate, you know what I mean.

    2. We heard it from FedEx and we’ve heard it before from DHL and UPS as well – customers are trading down.  next day becomes 3-day, 3-day becomes ground.  Any way you cut it, sitting at the top of the ‘speed food chain’ like we do, air cargo will suffer from this.

    Finally I would point to a 2010 Seabury study that said; ‘Air share of global containerized international trade dropped from 2.8% to 1.8% in terms of weight between 2000-2008’.  That study stated that without modal shift, annual air freight would have been 1.5pts higher. The reasons were threefold; firstly, ocean dominated trade lanes grew faster than typical air lanes,  Secondly, trade in typical air freight goods grew more slowly than total world trade and finally the typical definition of modal shift, as goods traditionally transported by air switched to ocean.  Fair to say there was some recovery in 2009 and given the good year we had probably in 2010 as well – but it’s hard to imagine that stretched into 2011/2012.  Don’t know if anyone from Seabury follows this but an update would be interesting!

    I leave to you experts to theorise as to how this might all change again in the future, but I do think passing off the advancements made by the container lines over the last years is a little bit ‘head in the sand’.

     

    Cheers

    Jon

     

  11. davidharris says:

    Hi Jon

    Thank you for taking the time to give us such a thoughtful response. This kind of exchange of ideas is exactly what we hoped for when we launched the website (and what we hope for at our two annual events — Cargo Facts Asia in the spring and the Cargo Facts Symposium in the fall).

    I won’t get into a point-by-point response (although I hope Jim will post some of his further thoughts about the questions you’ve raised), but I will point out a couple of things. First, the data Jim used was only for the trans-Pacific trade lane. Assuming it is accurate, then it does indeed show that while the share (by weight) of goods shipped by air and ocean does vary from year to year, it has not changed in any significant way in the 2000-to-2011 period.

    And second, while I would never claim to speak for him,  I’d be willing to bet that Jim agrees with you when you say that the air freight industry cannot afford to ignore the advancements made by the container lines in the last decade. Whether the air/ocean ratio has changed over the last decade, and if so by how much, is water over the dam. What really counts is what happens to that ratio in the future, and if we want our industry to be healthy, we absolutely can’t afford to ignore what is happening on the ocean and on the roads.

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