Significance of Aviation Infrastructure in Air Freight Industry
Discuss about the Development Of Air Cargo Industry.
Aviation industry has been playing the essential role in the economic development of the European countries. Ahmed, Calders and Pedersen (2015) stated that the air transport is one of the significant infrastructure of globalization. Establishment of the aviation infrastructure is crucial for the air freight industry. Air cargo has been contributing much significantly to the global economy. It is reported that only 1% of the entire exports by volume a failure craft since they tend to be the most expensive goods (Boonekamp and Burghouwt 2017). It has been observed that these export services account for almost 35% of the entire Global trade in the value proposition (Huang, Tseng and Hsu 2016). Establishment of the aviation infrastructure is one of the most critical components for the air freight industry. Air cargo has been contributing March significantly to the global economy. It is reported that only 1% of the entire exports by volume a failure craft since they tend to be the most expensive goods (Boonekamp and Burghouwt 2017). It has been observed that these export services account for almost 35% of the entire Global trade in the value proposition (Huang, Tseng and Hsu 2016).
The development of the air transport infrastructure in the aviation industry holds the much significant place in the post globalization era. According to Rincon-Garcia, Waterson and Cherrett (2018), air cargo transports are connecting cities and regions to the distant markets to develop the speedy global supply chain. The major focus of this air cargo is to establish the reliable supply chain process. It is noticeable that in spite of establishing the positive relationships between the globalization and air transport, some of the negative phenomenon is also observable in the air cargo industry. The literature study will thus focus on exploring the conceptual analysis of the air cargo industry. The study also attempts to identify the reasons of shrinkage observed in the air cargo industry in past few years. The transformation of the industry will be discussed in this literature section.
Air Cargo is conceptualized the carriage of goods and commodities in an aircraft. Scott and Trimarchi (2017) explained that air cargo are generally defined into two segments, such as airmail and air freight. The air freight segment holds the most of the market share, especially during the forecast period. The rapid development in establishing the cargo hubs as well as the rapid growth of the e-commerce business model is supposedly driving the growth prospects in the air freight process. It is predicted that the global air cargo market is estimated to reach up to US$130.12bn by the end of the year 2025. Boonekamp and Burghouwt (2017) recognised that the air cargo industry is now complied with new policies and strategies that ensure growth in this market. For example, an international policy called ‘Open Skies’ that demands for the liberalization of the associated rules and regulations in the aviation industry (Beifert 2015). It has been observed that this specific policy has created greater impact on the air cargo industry.
Conceptual Analysis of Air Cargo Industry
The aircrafts are divided into diverse sections, such as passengers, cargo, and combi-aircraft. Among these sections, it has been observed that the cargo aircrafts are generally used for carrying parcels and carrying the freights for side loading. It is noticeable that the aircraft passengers are quite different to the cargo aircraft. Combi aircraft, on the other hand, carry the commodities by side loading on the main deck. In the year of 2013, Cargo airlines in the European Union took the cyclical upturn and considered the significant improvements in the profitability level. However, the negative effects of the entire global recession in 2007/2008 impacted negatively in terms of freight tonne-kilometers (Trzepacz 2014). There are the considerable changes noticed in this cargo industry. The further section of the study will focus on the past trends in the air cargo industry to determine the observable shrinkage.
In the year of 1910, the first Cargo was moved by aircraft to transport silk by airway. It has been observed that air cargo industry used to maintain the traditional values in different segments in past. Taneja (2016) implied that due to the high value and high cost, the commodities tend to move in a smaller size that became much suitable for the air transport. This small shipment size was one of the most significant trends observed in the past era. The high value commodities required more securities from damage, loss, or theft than the lower values. During the past genre, the aircraft ensued that the commodities will not only be delivered faster, rather in a most secured way for moving cargo from point to point. Doll et al. (2017) also observed that the cost of the high value commodities often charged higher due to which a larger amount of capital were invested. The commodity value influenced the shippers’ modal selection process in a significant manner. In the previous time, it was noticed that the air cargo operations had the ability to offer a shipper the benefits related to the speedy delivery and constant resupply. Later, the air cargo industry restructured their strategy and cut down the costs of the inventory levels to free up more capitals. In fact, the air cargo industry previously comprised a smaller group of the airline industry. The changes brought to the globalised world transformed many activities in this industry. The further section will thus identify the current trend in air cargo industry and the identifiable shrinkage.
Past Trends in Air Cargo Industry
The air freight industry has been experiencing the considerable changes throughout the years. The development of the headwinds is now in store for the international air freight transporters to enable the air capacity, especially when there is much requirement. The small and medium sized shippers are expected to find it much problematic to secure the air pace if the larger shippers acquire a larger slice of the available capacity. During the peak season increases the pressures on the available capacity. It was even noticed that the freight flowing put the more pressure on the supply chain than the capacity. The report received from the The International Air Transport Association confirmed the full year data of 2017. It was reported that the demand has grown by 9.0% that was the double amount of the annual growth signified during 2016 (Beifert 2015). This growth outperformed the entire growth of the industry in both passenger demand and cargo capacity. In fact, the increasing demands in 2017 were observed in the regional countries as well. For example, European airlines posted for almost 5.0% year-on-year increase in the demands of the air freight in December whereas the capacity increased of 3.2% (Babi?, Kuljanin and Kali? 2015). The establishment of the flexible warehousing is one of those suggestive changes altered the logistics activities into dynamic avenues. The implementation of block chain started automates and secures the mechanics of the supply chain management. Such record transactions generate exclusive access to data in real time (Rincon-Garcia, Waterson and Cherrett 2018).
The air cargo industry has been experiencing the greater shrinkage in last few years. Considering the current atmosphere, a study conducted among 260 airlines comprising 83% of the global air traffic. The result obtained from this study indicated that the growth in the global air freight industry has been slowing down since 2015. In the year of 2014, the growth in FTK (Freight Ton Kilometer) was almost 2.1% as per the data published by International Air Transport Association (IATA) (Livingstonintl.com 2018). This percentage was the slowest rate in the year. However, a month in this year highlighted the higher capacity by expanding up to 4.3%. The monthly report published by IATA confirmed such slower growth in this industry. In fact, the global trade volumes fell down throughout the year of 2015.
The analysis of the report indicates that one of the major reasons behind such slower growth rate was the emerging issues identified in the Asia Pacific Region (Taneja 2016). The freight volumes in this region have seen the slowdowns in both exporting and importing activities. On the other hand, the airlines in North America, Europe, and Latin America reported that the declines in the demand level have been decreasing the growth rate much significantly. The shrinkage is observed in Europe as well. The anticipated reason for such decreasing rate of the growth was the exit of Greek from Euro-zone. The scenario in North America is highlighting the issues with harsh weather and the West Coast Port Condition as the major concerns due to which the demands are pulled down much recognizably.
Current Trends and Identifiable Shrinkage in Air Cargo Industry
Tony Tyler, the CEO of IATA, commented in a press release, “Cargo growth has undoubtedly come off the boil” (Livingstonintl.com 2018). It was also mentioned that the load factors are falling. In fact, the continuous practices are still contributing to develop the economic fundamentals in the second half of the year. The exit of Greek from Europe created the strong impact on economic structure as well. On the contrary, it was reported that two regions, such as Middle East and Africa experienced the growth in the air freight industry in the year of 2015. Africa experienced almost 3% rise in the cargo demands whereas Middle East faced 1.3% capacity increase (Scott and Trimarchi 2017). The Air Cargo Freights have been facing the considerable challenges due to the technological impacts. It is noticeable that the most observable issue in the freight industry is the rapid and drastic growth in the e-commerce business. The announcements of the online sales volume is much higher due to which the shipping necessity is also increasing drastically. Merkert, Van de Voorde and de Wit (2017) observed that the shipping companies face the considerable challenge in understanding the rapidly changing and ever increasing demands of the current environment. For example, Alibaba-led Cianiao network is subjected to deliver over 30 million packages each day. In spite of such larger amount of delivery, the demands in China are still exploding. The current innovativeness brought to the freight industry in Denmark is quite appreciable. Especially, managing the high-end technologies for bringing more innovations to the baggage handling system is quite observable in current time (Poulsen, Ponte and Lister 2016). Observing such shrinkage in the air freight, some of the anticipated challenges are described further:
- The ever increasing fuel prices in the air freight industry are the most considerable issues for the slower growth in past few years. The skyrocketing fuel prices are quite fuel price is reducing the demand level and looking for the optional sources of supplying the products.
- Another most recognizable issue observed within the industry is the looming security threats. The security related to the baggage management is not satisfactory, which posed the identifiable threat to the industry (Iata.org 2018). The growth is slowed down due to such lack of security in the maintenance of the air freight exports and imports
- The technological development is continuously increasing the level of competition and creating the higher value of goods (Ahmed et al. 2017). It creates the opportunistic scenario for the market competitors. On the other hand, the customers themselves are using some of the technologies at their homes instead of asking for shipping. For example, the 3-D printing can be used at home or factory (Feng, Li and Shen 2015). The customers do not need to order for shipping it. Therefore, the technological advancements are creating such disruption in the shipping process now-a-days.
- The inefficient supply chain process is also quite acceptable issue in considering such slower growth in this industry. Due to the revised policies in air cargo industry, the supply chain procedures need to undergo several steps, which cause delay in delivery.
- Decreasing demands of the air freight is also suggested as the specific reason behind such slower growth in the air freight industry.
- The automation process implementation has created the job retention risks for the associated workers (Doll et al. 2017). The advanced technologies are replacing the human efforts, which is a considerable risk in terms of employment. On the other hand, if these technologies do not function properly, it might create a huge loss of data (Singh, Singh and Saha 2015). The lack of appropriate technical knowledge can be riskier in such context. It is thus necessary to obtain adequate knowledge based on this parameter.
The above scenario is highlighting the major issues suggested for the slower growth in the air freight industry. There is the huge opportunity lies in exploding in India. Kupfer et al. (2017) pointed out that he emergence of the disrupt technologies is also one of the most considerable challenging factors for the air freight industry.
Using the appropriate research methodology helps the research subject to be analyzed in a synchronized and systematic way. Understanding the appropriate focus based on the research subject helps in identifying the adequate use of the research method that can enhance the quality of the research. This study is based on the identification of current issues and opportunities in the freight industry with the reference of Denmark. The study requires identifying the present concerns associated with the baggage handling and technological advancements in the freight industry. The information regarding to such context can be gathered by utilizing the qualitative research method. This research method helps in generating the informative responses from a number of populations that have been dealing with the real life scenario (Larsen and Lassen 2017). The interview strategy has been selected to gather the responses based on the scenario in freight industry. It would provide the considerable knowledge regarding the challenges and benefits experienced by the people associated with the air cargo industry in Denmark. The positivism philosophy is applied to this research for extracting the hidden truth based on the current situation in the freight industry. The use of the deductive approach is quite beneficial for understanding the existing theoretical concept, which can further be linked with the collected information received from the respondents (Ahmed, Calders and Pedersen 2015). The explanatory design is used in this study to interpret and explain the responses derived from the qualitative data collection process.
Anticipated Challenges in Air Cargo Industry
The non-probability, convenience sampling technique is utilized to develop this interview session with some of the workers associated with the freight industry. This qualitative data collection process would engage 4 associates for the interview sessions. Two of them work in the cargo centre and Trafikkontor department of Aalborg Airport and other two are from Billund Airport. The responses gathered from their experiences would be analyzed to identify the comparison between these two airports and the probable challenges emerging in the Air Caro industry.
The qualitative data has been gathered for understanding the current issues faced by the air cargo industry or freight industry in Denmark. The responses of the associated interviewees are structured further.
Does the current innovation is helpful for the baggage system in the air cargo departments of the airport? Justify your answer
The question implies the effectiveness of the current innovative technologies used in the air cargo freight management system. One of the associates from Trafikkontor department of Aalborg Airport mentioned that the reduction of the manual system in baggage handling process has increased the risks with the baggage loss. It is true that the automatic baggage information through the innovative technologies has the storing capability of the baggage, but the risks persist due to the lack of proper monitoring. The associate also mentioned that the storage capacity for the parcels, paller, and packages in the systems from the pickup sites of Jetpack is quite limited. Therefore, it is quite challenging for them to manage the increasing baggage, which might lead to the issue, such as baggage loss. On the contrary, another associate from the Air cargo department of Billund airport described that the baggage capacity in this system is quite higher. Therefore, it becomes easier for them to manage the heavy baggage. In fact, the frequent monitoring process in this airport helps in keeping the updated information presented through the RFID technology. There is thus a minimal risk associated with the baggage storing factors.
What are the major challenges your department has been facing with the technological innovations?
In responding back to the question regarding the considerable challenges faced in the Air Cargo department due to the innovative technologies. One of the associate from Cargo centre department of Aalborg Airport mentioned that due to such technological innovations, the shipping demands have increased much significantly. Therefore, the associates have to face much pressure to deliver orders more than the previous time. The respondent also mentioned that it became quite difficult for them to monitor each of the baggage system and the information storing capacity simultaneously. On the contrary, another associate from Billund Airport highlighted that due to the innovations, the storage capacity has increased. It provided them with extra benefits in managing a larger number of passengers all at a time. Moreover, the airport could even increase the annual business amount much significantly. Therefore, it can be implied that the Billund airport has faced the commendable growth after developing the innovative technologies.
The information obtained from the interview clearly indicates that the Billund airport could achieve more benefits in compare to Aalborg Airport due to the innovative technologies. The literature study indicates that in spite of developing the innovative technologies in Aalborg baggage system, it received several complaints regarding the missing baggage system due to which the profits were decreased. As per the information gathered from respondent of the associate working in this airport, the lack of proper monitoring system is the reason behind such technological disruption. On the contrary, the similar innovativeness implemented in Billund Airport turned out to be positive changes. The airport increased the capacity of handling more passengers that is quite beneficial in increasing the annual sales. There is the facility available to track the baggage information through the mobile devices. The literature study indicates that the small and medium sized companies can generate benefits from such services while participating in the international trade with much efficiency. Shipping through the Airways sometimes becomes advantages in terms of maintaining security since the cargo control is highly managed. The information obtained from the qualitative data collection process indicates that the automatic baggage information through the innovative technologies has the storing capability of the baggage, but the risks persist due to the lack of proper monitoring. The current changes brought to the freight industry is thus facing the considerable challenge in understanding the rapidly changing and ever increasing demands of the current environment.
Conclusion
The study explores the ideas of the identifiable shrinkage of air cargo in last few years with a special reference of Denmark shipping ports. It has been observed that the Air Cargo Freights have been facing the considerable challenges due to the technological impacts. It is noticeable that the most observable issue in the freight industry is the rapid and drastic growth in the e-commerce business. The obtained ideas from the literature study and the secondary research process indicates that the Aalborg Airport has implemented the innovative RFID baggage handling system to reduce the risks with the lost baggage. However, it is still facing the challenges with the lost baggage issues. On the other hand, Billund Airport has been managing the air freight activities much significantly due to which the capacity of accommodating more passengers has been increased. This innovative approach adopted by the airport has increased the profit revenue in a significant way.
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