Chapter Review

Chapter Review

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Chapter Review

The Air Cargo Guide was compiled by the Air Cargo Committee of the Airports Council International – North America to guide the air cargo professionals in growing air cargo business. Of its 10 chapters, chapter 2 on developing an air cargo market and chapter 3 that deals with air cargo facility analysis have been selected for this review.  

Chapter 2 – Developing an Air Cargo Market

This chapter provides guidelines on air cargo marketing and facility development strategies for airports in an ever-changing global air cargo business environment. Airports are identified as being pertinent to the air cargo business, and as such, the marketing and strategies on developing facilities for air cargo should be aligned to those of airports to guarantee continued growth of the air cargo business. In this regard, the guide recommends the identification of the infrastructure in and around the airport to enable the development of concise and targeted objectives, which in turn would inform the creation of an elaborate air cargo marketing plan. To this end, the guide is divided into various sections that facilitate the development of an air cargo market around an airport as the main link between the producers of the goods, air cargo handlers and the customer as the end destination of the cargo. Clear headings are used to discuss the specific aspects of the market development process.

The chapter begins by identifying the regional importance of air cargo and the market assessment that would facilitate the development of an air cargo marketing plan. Airports are important to the local, regional and national economies by providing connectivity for people and goods. Moreover, by enabling inbound and outbound haulage, the infrastructure surrounding airports such as rail and road networks, and the proximity to producers and consumers, alongside the demand from shippers, presence of cargo forwarders, are pertinent considerations for the development of an air cargo market. In addition, the strengths and weaknesses of an airport related to the availability of air service, compatibility of aircraft capacity, time and cost efficiencies, economies of cargo consolidation and information about air cargo service help develop realistic objectives and ultimately, a comprehensive marketing strategy (Air Cargo Committee, 2013). Mayer, R. (2016) observed that in North America and Europe, airports that were centrally located in cargo airline networks were highly dependent on air cargo while those with high passenger traffic enjoyed high cargo volumes from belly cargo aircrafts.

Setting of the objectives of the air cargo business is informed by positioning of the airport either as an international gateway, domestic hub or trans-shipment conduit. For instance, Beifert (2016) observed that many airports in the Baltic Sea region were unprofitable because they ignored the air cargo segment of their operations. Acting as spokes in the hub-and-spoke model, these airports could market the flying trucks concept rather than the belly cargo one because of the lack on intercontinental air traffic. Similarly, Niine, Kolbre and Miina (2017) argued that the central location of Lennart Meri Tallinn International Airport in Estonia between Scandinavia, Russia and Central Europe alongside its ability to link the US, western Europe and Asia could be leveraged to promote its air cargo services. Therefore, according to the guide, the objectives should leverage the competitive advantage of the airport and address the weaknesses of the existing facilities and services. Moreover, the objectives should have strategic focus based on the unique qualities of the airport and its market (Air Cargo Committee, 2013).  

The cargo marketing plan elaborates the strategies for achieving the set objectives and the targeting of the air carriers and freight forwarders as the decision makers. The designing of the marketing plan should include pertinent stakeholders such as the federal agencies, economic development agencies, air cargo associations and transportation companies. The guide recommends the raising the awareness about the competitiveness of an airport to the air cargo community because it would help attract air cargo business. However, a more targeted approach directed towards specific cargo forwarders and carriers should be pursued as the market plan matures. In this case, detailed analytical information obtained from documents such as Form 10-K and annual reports can facilitate decision-making at the airports’ senior management levels (Air Cargo Committee, 2013). In this regard, the guide highlights the various marketing programs that could be included in a marketing plan. These can be divided into cooperative and informational based on the target groups and their setting. For instance, cooperative promotion programs utilize the social gathering format such as cocktails and luncheons targeting shippers and foreign forwarders. Contrastingly, informational programs utilize business meetings to reach airlines and freight forwarders and often encourage cargo consolidation (Air Cargo Committee, 2013). The guide also identifies advertising and cargo expositions as essential marketing program elements because they facilitate the targeting of wide audiences, inform about the air cargo service and persuade a target audience. As such, a marketing plan should include the participation in such for a through attending, exhibiting, speaking, sponsoring, and partnering with the private, local and state organizations (Air Cargo Committee, 2013).    

The guide then discusses the paradox experienced in the new century in air cargo marketing and development emanating from the different and difficult financial realities and the ambitions of a marketing plan. The inability to secure credit and dictate the pace of facility development challenges the air cargo business and hinders speculative development. The inability to guarantee timely availability of facilities derails the conduct of aggressive marketing and risks clients moving to alternative airports. Wesesa et al. (2015) recognized the importance of stakeholders conditioning when studying the relocation of an air cargo terminal to meet the large air cargo demand of existing large south-east Asian airports. The smooth transition of air cargo services to the new terminal required the involvement of the multiple stakeholders in the relocation strategy. Therefore, to address these issues, the guide recommends a reassessment of the risk surrounding the air cargo development strategy. Operating agreements can help the distribution of risk between the airport, airlines and private developers. Residual and compensatory ratemaking methodologies are used to allocate risk to the various stakeholders, usually in a hybrid format (Air Cargo Committee, 2013). Nonetheless, joint ventures presented significant flexibility by allowing the pooling of resources to fund cargo facility development. As a solution, the guide discusses three air cargo development strategies that would facilitate the responsiveness of the airport to the issues emerging from the marketing program. These include the airport discretionary revenue development strategy, the third-party development strategy and the joint venture development strategy. Baxter and Srisaeng (2018a) present AeroLogic, an all-cargo airline that is a joint venture between DHL Express, which is an international air courier and Lufthansa Cargo AG, and cargo airline. The air cargo courier benefits from the extensive hubs and global network of the two companies, financial muscle that enables the creation of a modern aircraft fleet of Boeing B777-200LRFs, and sharing of operational risks.     

The chapter concludes by reiterating that the marketing and facility development strategies were continually evolving to match the changing needs of customers and global air cargo industry. Therefore, they needed to be conducted simultaneously to realize the growth of the air cargo business. 

Chapter 4 – Air Cargo Facility Analysis

This chapter focuses on the air cargo industry trends that influence facility development. It also discusses the impacts of these trends and makes recommendations on facility development standards. As such, the guide addresses the various considerations of air cargo facilities through topics such as capacity concepts in use currently, facility requirements, operational considerations and facility layout planning.

The guide notes that the development of air cargo facilities was more complicated than and lagged behind that of other airport facilities such as runways, passenger terminals and parking areas. Therefore, it outlines a three-phased air cargo facility development process starting from market diagnostics, through project planning and finally, project implementation (Air Cargo Committee, 2013). In the market intelligence phase, airport operators should define the cargo facility process by first identifying the cargo market and its development and marketing, and the facility requirements based on the existing ones and the ability to develop new ones. This provides a link to chapter two and sets the tone to delve into the facility development process.

Under capacity concepts, the guide notes that facility overcapacity was the current norm compared to the delayed development of air cargo facilities in previous years. However, overcapacity and undercapacity of air cargo infrastructure challenged airports. To reduce capacity difficulties, airports needed to build flexible facilities that can accommodate future changes in demand from successful marketing while keeping rental costs low. The current trend of downgrading of aircraft size alongside cargo carrier and handling consolidation caused overcapacity. To address the capacity challenges, an infrastructure strategy was pertinent. As part of the strategy development, evaluation and modification, the guide advocates prioritizing service to existing customers to facilitate their retention and growth before venturing into attracting new ones (Air Cargo Committee, 2013). This could be facilitated by undertaking regular evaluation of the existing infrastructure against the projected service improvements through qualitative and quantitative information. In the same regard, Wang, Zhuo and Niu (2017) added that the promised delivery time (PDT) in the air cargo industry was pertinent because it informed on the facility development strategy that was required to improve operational efficiency. Decisions on whether to operate the air cargo business individually of involve other partners through a joint venture arrangement could be made using the PDT competition among different air cargo terminals across airports. Other issues to be considered include cargo security, technology changes, and industry growth trends such as horizontal and vertical integration, new operational concepts, entry of wide-body aircrafts, multi-modal transportation and economic development. Da Cunha, Macário and Reis (2017) highlighted the importance of cargo security considerations in airports because of the heightened security concerns. The supply security chain (SCS) involving the regulated agent should be evaluated using a risk-based approach to not only determine the security needs accurately but to also rationalize the security procedures and costs (Da Cunha, Macário & Reis, 2017). 

Cargo facility requirements are determined using quantitative methodologies applying benchmarking techniques in various functional areas. Specifically, air cargo buildings, aircraft parking positions, landside effectiveness, truck docks, maneuvering and staging areas, employee and customer parking, and access roadway flow and capacity (Air Cargo Committee, 2013). Chung, et al. (2015) investigated the use of a multi-dimensional scaling cluster analysis using the R-squared method to identify the factors influencing operational efficiency and therefore, determine the efficiency benchmarks of the air cargo business at Incheon airport in South Korea. This approach can be used to compare the efficiencies of air cargo activities in different airports to identify the issues afflicting cargo handling challenges that adversely impact the airports’ competitive advantage and inform their improvement strategies (Chung, et al., 2015).

Operational considerations in the contemporary air cargo industry were influenced by the trend towards the rapid increase of cargo-carrying capacity of airlines through the introduction of wide-body aircrafts and the integration of trucking in the domestic air cargo logistics.  Notably, express cargo carriers accounted for most domestic air cargo movement requiring specialized airport facilities and services to support their time-dependent cargo services (Air Cargo Committee, 2013). Therefore, contemporary airports needed to contemplate and assess specialized air cargo facilities, air cargo infrastructure support, enhanced processing and federal inspection services, regional intermodal and modal planning and investments. In this regard, Gupta and Walton, R. O. (2017) proposed the interpretive structural modeling (ISM) methodology for discerning the operational factors that influenced the competitive advantage of an airport in the air cargo industry. Moreover, Walcott and Fan (2017) presented insights from the aerotropolis model in China in which cities were developed around airports to facilitate the movement of time-sensitive goods between manufacturers, suppliers and distributors. This model had been used in Zhengzhou where corporate facilities such as those of Apple Inc were located close to the airport to facilitate the supply chain. The aerotropolis model has speeded up the development of the intermodal infrastructure across remote regions in China as well (Walcott & Fan, 2017).      

Facility layout planning required innovativeness to keep abreast air cargo industry growth and technology changes. As such, the traditional single level warehouse structure with truck docks and an aircraft parking apron on either side being replaced with flexible facilities that accommodate the various users and market segments in the air cargo industry. To ensure that the facilities continuously match the market needs, regular market analysis of the existing and proposed airport infrastructure was inevitable. This required the regular involvement of the cargo carrier planning and operational personnel.

The guide breaks down the cargo facility development process into two broad issue areas, specifically, those related to land use and those about the layout of facilities. Land use issues discussed include the development area, site constraints, facility location, compatibility of uses and potential areas of conflict. Considering the increased on-road delivery activity from cargo carriers, it was pertinent to separate the vehicular infrastructure from that of passengers when addressing the cargo facility development area (Air Cargo Committee, 2013). Besides, when considering the location of the cargo facility, the distance between the facilities and aircrafts needed to be kept at the minimum to facilitate the transfer of cargo from aircrafts. Similarly, facility layout issues include design considerations such as building dimensions and configuration, aircraft handstand positions, equipment staging areas, airside vehicular circulation networks, truck docking and maneuvering areas, parking areas for customers and employees, access road network and future considerations. The upsurge of trucking activities was inducing expanded and integration of multimodal activities around airports. Song and Yeo (2017) observed that the demand for multimodal transport services had caused logistics companies to diversify their services around major airports in China and the United States. As such, the air transport network could be analyzed using the social network analysis (SNA) methodology to identify the connectivity issues and needs that needed to be addressed by airports to support their air cargo business. Moreover, the FAA design standards that are based on the Aircraft Design Group VI and V are also discussed.

In conclusion, the two chapters explain interrelated aspects of the air cargo business, namely the marketing and the facility development aspects. Customer-centeredness emerged as the guiding principle in the development of the air cargo business. As such, satisfying the demanding and unique needs of the various air cargo customers determined the air cargo terminal development and popularization in airports. 

References

Air Cargo Committee (2013). Air Cargo Guide 2013. Airports Council International – North America.

Baxter, G., & Srisaeng, P. (2018a). Cooperating to compete in the global air cargo industry: The case of the DHL Express and Lufthansa Cargo Ag joint venture airline ‘AeroLogic’. Infrastructures, 3(1), 1-30.

Beifert, A. (2016). Role of Air Cargo and Road Feeder Services for Regional Airports–Case Studies from the Baltic Sea Region. Transport and Telecommunication Journal, 17(2), 87-99.

Chung, T. W., Ahn, W. C., Jeon, S. M., & Van Thai, V. (2015). A benchmarking of operational efficiency in Asia Pacific international cargo airports. The Asian Journal of Shipping and Logistics, 31(1), 85-108.

Da Cunha, D. A., Macário, R., & Reis, V. (2017). Keeping cargo security costs down: A risk-based approach to air cargo airport security in small and medium airports. Journal of Air Transport Management, 61, 115-122.

Gupta, A., & Walton, R. O. (2017). Assessment of air cargo airlines: An interpretive structural modeling approach. Procedia Manufacturing, 11, 1908-1915.

Mayer, R. (2016). Airport classification based on cargo characteristics. Journal of Transport Geography, 54, 53-65.

Niine, T., Kolbre, E., & Miina, A. (2017). Enablers and constraints of peripheral air cargo–a case study of Estonia. Journal of Air Transport Management, 61(C), 106-114.

Song, M. G., & Yeo, G. T. (2017). Analysis of the Air Transport Network Characteristics of Major Airports. The Asian Journal of Shipping and Logistics, 33(3), 117-125.

Wang, F., Zhuo, X., & Niu, B. (2017). Strategic entry to regional air cargo market under joint competition of demand and promised delivery time. Transportation Research Part B: Methodological, 104, 317-336.

Wasesa, M., Rahman, M. N., & Rizaldi, A. (2015). Relocating a multiple-tenants logistics center: Lesson learned from an air cargo terminal relocation project. Procedia Manufacturing, 4, 139-145.