CNS: Are bellyholds on track for an e-commerce shakeup?

ORLANDO — Airbus and Boeing have notably different ideas about what sorts of aircraft will be plying the airways twenty years from now, and this “great freighter debate” hinges on what the broader economy will look like in 2035. The important questions are, what role will bellyhold capacity play in e-commerce, and further ahead, will predictive shipping one day make the timeliness of air cargo redundant?

One factor is indisputable – intercontinental e-commerce is exploding. Brian Clancy, managing director at Logistics Capital & Strategy introduced ‘The Changing Landscape of Cargo,’ through the perspectives of the two aircraft manufacturing companies.

The Boeing forecast expects bellyhold as a percent of the market to decline, as freighters take a larger share of total freight. Boeing, which happens to dominate the freighter market right now, sees the projected network growth of belly capacity as unaligned with routes where air cargo demand will occur. Airbus on the other hand sees the status quo holding, in line with historical values.

Both scenarios assume long term capacity in bellyholds, much of it unused. This bellyhold capacity is also much cheaper than maindeck cargo, because of the passenger dynamic.

For Clancy, this final point represents an opportunity for forwarders to gain market share in package shipments by taking advantage of existing last-mile solutions, and concentrating on getting shipments to companies like the USPS that can handle the rest. “Freight forwarders will be doing intercontinental ‘zone skipping’ if they want to get into the package game with e-commerce,” he said.

This model puts a lot more e-commerce packages into bellyholds, and actually produces a different outcome than either Boeing or Airbus seem to indicate in their forecasts.

“The air package share of trade, irrespective, wins,” Clancy said.

Today, package demand of total cargo is about 23 percent of total cargo, with 90 percent on dedicated freighters. A lot of that, in turn, flies on integrator aircraft. However, a large percentage of integrators’ costs are tied up in warehouses, ground transport and sortation.

Forwarders could circumvent a lot of these costs by adopting the ‘zone-skipping’ model, and stay relevant in a future that threatens to eliminate a lot of what they do.

Alternatively, the air cargo industry in general has cause to worry about the impact of machine learning, and its ability to predict where to have product before the consumer even makes his or her purchase. Amazon.com is working overtime to gain this level of insight, and everyone with an Amazon Prime account is a willing guinea pig.

Clancy contends that freight will increasingly travel on ships as machine learning improves, but he countered that the package side will “make up for it.” Air freight players that want to stay viable in this scenario would do well to, “think about what your e-commerce playbook is.”