Guest Post: The unique air cargo industry

The air cargo industry is quite obviously different from the passenger airline industry. Beyond both offering services that mostly focus on transportation via air the two industries share little else. Let’s get into it.

For passenger airlines, the exchange of services (and in some cases, goods) is pretty much entirely contained within the airport or the aircraft. Passenger airlines offer an airport to airport service where travel and accommodation beyond these gateways is ultimately up to the passenger.

The cargo industry offers a very different service. When I worked for a major international cargo service (full disclosure: DHL is the company I previously worked for so my goal is to approach this from an academic and unbiased narrative), we offered what we called “door-to-door” service. That is, a company employee would pick up a package from a customer’s home or warehouse and the package(s) would be delivered to the home or final destination of wherever the customer required. Customers were not required to drive to the airport and check their cargo in with the airline and then have another person at the closest airport that the airline served to the package’s final destination waiting to pick it up.

Cargo carriers also deal with the logistics of offering a “door-to-door” service. That means massive fleets of everything from vans and trucks to aircraft, bicycles, motorcycles, cargo ships, trains, and I’ve even seen branded segways. It is easily surmised from this point that there is a lot more overhead and operational costs to be able to maintain these kinds of service. To be able to control these extra costs there are some operational differences that vary from the passenger transport business.

First is the aircraft. Cargo aircraft operate entirely different schedules and have an entirely different set of costs than passenger aircraft. The biggest advantage is the regulations that mandate the amount of maintenance required on the aircraft on a regular basis. Now don’t think that these cargo aircraft are deathtraps – they just aren’t. They are immaculate aircraft. They just don’t require some of the more in-depth inspections that passenger aircraft are required to go through. This provides a benefit to the cargo airlines in the form of reduced operating costs.

This also allows many cargo carriers the ability to operate much older aircraft. This is another huge economic benefit. Buying a used MD-11 with tens of thousands of hours on the airframe is worlds cheaper than a brand new 747-400F(reighter). This directly puts the cargo carriers at another economic advantage. With lower costs for the acquisition of these assets cargo carriers can afford, in many cases, to purchase these aircraft outright instead of leasing them. This is just like purchasing a car and paying in full with cash – it just means no monthly payments, no interest payments, no outstanding liabilities in the ledger, and in a pinch assets that they can potentially liquidate to free up some cash. All of these aspects of the industry are utilized, particularly by the American based cargo carriers.

Cargo carriers almost exclusively operate at night. This provides a multitude of benefits as well. First of all these night operations are essential for their time-sensitive deliveries. The deadline to ship a package is usually in the late afternoon so that people can still drop off packages one their way home from work and still be delivered to the other side of the country before noon the next day. This means mostly having night time operations to move the cargo.

Some cargo airlines deviate from this route though. One way this is done is by contracting out the air portion of cargo movement. Mostly that is done by paying a passenger airline or other carrier to carry cargo for them. You may be surprised to learn that some of the largest cargo carriers (measured by total tonnes carried) are passenger airlines. Delta and Southwest are constantly in the top 10 largest cargo carriers in the world, and it makes sense. Delta operates over 4,000 flights a day and there is cargo on just about every flight where UPS operations only about 1,000. Granted those 1,000 UPS flight are pure cargo and the 4,000 Delta are mostly passengers, they are still comparable.

Another way this is done is by purchasing space on a contract cargo carrier. FedEx does this with one company called Mountain Air Cargo. All of Mountain’s aircraft are painted in FedEx logos and fly routes specified by FedEx but have their own non-FedEx call-signs and flight numbers. This is a great way for FedEx to be able to server smaller markets without having to purchase, maintain, and staff the smaller aircraft. This also allows for some cities to receive important and sensitive air cargo that can not be delivered by the large MD-11’s or 747’s. It is obvious that in some cases passenger and cargo operations are one in the same. The two may travel in different cabins of service but still are essential to quick and on-time delivery.

In some aspects cargo and passenger air carriers are very alike. When it comes to pure cargo carriers though, the air cargo industry leverages important economic benefits to create a very resilient and sustainable industry.

Jesse Ziglar works as an analyst for a major carrier in the southern United States. More of his writing can be found at his blog Air Transparency. He can also be found on Twitter: @airtransparency

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