Consultant’s Insight: Air carriers and forwarders credit e-commerce for growth

Air carriers and forwarders are benefiting from the growth in e-commerce . But is it sustainable and, more importantly, profitable? For the first two months of 2024, air cargo demand increased by 13% compared to the corresponding period last year. January demand increased by 17%, while February demand increased by 8%, according to WorldACD . [caption id="attachment_76185" align="alignright" width="269"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] DHL Group Chief Financial Officer Melanie Kreis told analysts on the company’s earnings call March 6 there was “quite a good volume development on the e-commerce side, in line with the usual seasonal trends. So, there was a peak season, and this has been supportive to P&P [ DHL Parcel & Post ] and [DHL] eCommerce EBIT.” Kreis noted, however, that express volumes were imbalanced in its network. DHL Express TDI volume growth was noted from Asia, including China; however, Europe’s volumes were still down by almost 5%. As a result, the unbalanced Asia outbound, including China, came with “a detrimental cost development on that lane,” Kreis said, noting that outbound China is a lane that “isn’t as profitable and accretive as other parts of the network.” Meanwhile, according to UPS Chief Financial Officer Brian Newman , fourth-quarter export volume on the China-to-U.S. trade lane, which is UPS’ most profitable lane, increased by 2.7%, driven by SMBs. Many of these SMBs are likely e-commerce businesses. Some freight forwarders are also experiencing a rise in e-commerce . “Apex supports this e-commerce trend much more than the Kuehne+Nagel legacy,” Kuehne+Nagel Chief Executive Stefan Paul told analysts on March 1 “However, the utilization roughly on our charters and overall is around 20% to 25%. So we are benefiting from that.” While other freight forwarders have not reported e-commerce growth, “we don’t have a significant exposure …[on] e-commerce exports out of the Asia-Pacific, DSV Chief Executive Jens Lund told analysts on Feb. 1. E-commerce growth After record-breaking e-commerce growth during the pandemic, the growth rate eased as consumers returned to brick-and-mortar stores. According to the U.S. Census , retail e-commerce sales for Q4 2023 increased 7.5% to $285.2 million from Q4 2022 and total sales increased 28.18% from Q4 2022. However, low-priced Chinese e-commerce providers Temu and Shein have attracted much attention as consumers continue to be affected by rising inflation. According to the initial findings of a U.S. House of Representatives Select Committee on the Chinese Communist Party last year, Temu and Shein are likely responsible for more than 30% of all packages shipped to the U.S. every day under the de minimis provision, and for nearly half of all de minimis shipments to the U.S. that originate from China. The de minimis provision of Section 321 of the Tariff Act of 1930 waives import tariffs if the fair retail value of the shipment does not exceed $800, and almost all shipments from both e-commerce providers fall well below this limit. “According to CBP [Customs Border and Protection], more than 485 million de minimis shipments have already entered the United States in FY24, on top of the 1.05 billion shipments that entered tax-free under de minimis rules in 2023, itself a shocking 53% increase from 2022. No less than 94% of all import transactions now enter the U.S. through de minimis rules, accounting for 90% of all illegal narcotics, agricultural goods and counterfeit seizures by customs,” U.S. Rep. Mike Gallagher told the Wall Street Journal on March 1. Will air carriers and freight forwarders continue to benefit from e-commerce? Perhaps, depending on the shipper. What we’re seeing in the market is mostly B2C e-commerce volumes from Temu, Shein, Amazon and others. Often, these volumes rely on low air rates, which do not fit the typical express business model. Hence, freight forwarders may be needed to negotiate rates with carriers. Once B2B e-commerce recovers, however, air carriers and freight forwarders will not only see more volumes but also profitable volumes. Register here for Air Cargo Next ’s free webinar, “The Role of Drones in the Future of Air Cargo,” on Tuesday, March 26, at 11 a.m. ET .

Consultant’s Insight: Air carriers and forwarders credit e-commerce for growth

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