A wake up call from Amazon

Amazon has recently announced that it has signed a five to seven year lease for 20 cargo planes.

As Amazon has grown, and especially it has built out its lucrative Prime business, taking control of its logistics chain has been seen as key to cost cutting and on-time delivery. Amazon’s growth has been about 30% per year while logistics costs have been going up by 33%.

The announcement by Amazon that it plans to save over US$1bn annually in its air freight bill by starting its ‘own account’ air freight operations has been referred to as a wake-up call for the air cargo market.

Speaking on ‘The Value of Air Cargo’, Chris Welsh, the Secretary General of the Global Shippers\’ Forum said: “Against the backdrop of weak growth in international trade, shippers are looking for even greater value from the air cargo industry. While the industry enjoys traditional benefits of speed over other modes, it needs to ensure that it is worth the premium service cost versus ocean, road and rail.”

Air cargo is vital to the functioning of a modern globalised economy. Globally, air cargo represents more than 35% of international trade by value, equivalent to approximately US$6 trillion worth of cargo shipped each year.

Despite this, according to IATA, the air cargo industry has lost its dominance and experienced lower yields in recent years.

\”The air cargo product needs to be quicker and slicker in providing end-to-end services. Shippers are calling for door-to-door shipment time to be cut by a half. That means acceleration and implementation of e-commerce and enhanced communications in providing real-time track and trace systems. Customers need to know where their freight is at any point in time,” Welsh explained.

Major logistics customers could look to set up their own transportation if existing providers do not increase efficiencies and keep costs low, delegates heard yesterday at the World Cargo Symposium in Berlin.

With much of the talk centred on “the disrupter”, Amazon, which is starting its own air freight operation, Chris Welsh, head of the Global Shippers Forum, warned that ocean freight might also see customers taking control.

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