Logistics Management: Air Cargo

This report reflects on Air Cargo, UK and gives theoretical knowledge about the factors that are helping and restricting the development of the air cargo, challenges which are preventing the development of the air cargo business.

LOGISTICS MANAGEMENT 0
Logistics Management: Air Cargo

LOGISTICS MANAGEMENT 1
Executive summary
This report will be going to reflect on Air Cargo, UK. This assignment will be going to give a
theoretical knowledge about the factors that are helping and restricting the development of
the air cargo, challenges which are preventing the development of the air cargo business.
Air cargo service is the major source of international trade. These companies particular works
in the private region and operates in a competitive background. There are many factors which
are helping the air cargo services to grow in the economy. It is a major aspect of
globalization, as this business helps the global division of labor and empowers the set-up
supply chains. Air cargo business comprises of various organizations that provide shippers
through freight services.
The report will compare and contrast the factors that have affected air cargo growth in the
United Kingdom and other major air cargo hubs. This was to be set together with views on
market developments and developments in direction to analyze the system in which the UK
air cargo industry presently functions and donates to the UK economy together directly and
indirectly. Trends in the business itself and in the industries that affect the performance of the
segment were to be recognized to help form an opinion, provide a recommendation on the
upcoming prospects for the business and its position within the worldwide air cargo market.
Table of Contents

LOGISTICS MANAGEMENT 2
Air Cargo- Logistics Management.............................................................................................3
Factors that help in the development and restrict Air Cargo.....................................................3
Cost reduction........................................................................................................................4
Aircraft regulations in the UK................................................................................................4
Economic Conditions.............................................................................................................5
E-commerce market trends....................................................................................................5
Compare and Contrast................................................................................................................6
Challenges in Air cargo UK.......................................................................................................7
E-commerce Glut...................................................................................................................7
Mode shifting.........................................................................................................................8
New inventory procedures.....................................................................................................8
Security Filings......................................................................................................................9
Increasing fuel price...............................................................................................................9
Recommendation......................................................................................................................10
Appoint communities and take government support...........................................................10
Appoint legal advisor and mitigate risk...............................................................................10
Deal with increases in fuel price..........................................................................................10
Conclusion................................................................................................................................11
Bibliography.............................................................................................................................12

LOGISTICS MANAGEMENT 3
Air Cargo- Logistics Management
The UK handles 230.9mn passengers in 2016. This includes 210.3mn, which is around
91.1%, and 20.6mn was local which was controlled by 47 airports in the UK (Wensveen,
2018). Entire UK airports handled 2250000 tons of freight, which involves 97.8% global and
2.2 percent local. With their high normal esteem, these merchandise motivation a somewhat
high capital cost, which can be limited via air transport in contrast with holder shipping.
EUROSTAT statistics provides the data on the prominence of Air Cargo activities in global
trade and many types of goods are transported every year (Morrell, 2016).
These numbers mirror the essential use of air freight, in particular transporting high esteem
merchandise, for example, pharmaceutical items, hardware, and important farming produce.
The 12 busiest passenger routes in the UK each carried more than 50000 people and
connected the regional airport in UK London. The UK is the fifth leading domestic market
after France, Italy, Germany, and Spain. These merchandise share for all intents and purpose
that a short transportation time from generation to the end client is basic (Rai Technology
University, 2019).
Factors that help in the development and restrict Air Cargo
There are various factors, which are helping the Air cargo business to grow such as most
association, are aims to decline the inventory cost and seek to accept just in time production
ways through the utilization of air cargo logistics for transporting the products and services.
Demand factor is its decreasing cost because of technological and liberalization progress
makes Air Cargo more difficult. As organizations move their manufacturing services to a
growth of the business to decrease, the labor cost and piece production into supply chains, for
this, companies continuously liable on Air Cargo logistics.

LOGISTICS MANAGEMENT 4
Apart from these general factors, some essential factors drive the demand and help for the
evolution of Air Cargo in the UK. This is the fastest and reliable way of transferring goods
and services. According to the market position where goods are perishable this way is the
fastest way to supply the goods. There are some more essential factors apart more these
general factors that drive the demand and help for the evolution of Air Cargo in the UK
(Becker, 2010).
Cost reduction
Air cargo is an alternative approach to keep costs stable, distinguished with playing the
market with impromptu appointments. The benefits of solidification are many. For instance,
set flight booking conveys consistency in your production network. Littler and progressively
standard dispatches, instead of bigger, a minute ago appointments, will help lessen invest on
airfreight over energy. Normal dispatches furthermore give access to increasingly premium
management levels at a lower cost of lengthier timeframes (Lin, 2012).
Aircraft regulations in the UK
CAA grips aviation issues in the UK. The HMC&E information is an information of the
considerable number of importations and fares into and outer of the UK via air, for which
traditions certification is essential. Since the presentation of the Single European Market in
1992, the information accumulation framework altered, bringing about various traditions
routines for interchange inside the European Network (EU) (the Intra-Stat framework) and
outer exchange with nations exterior of the EC.
The additional EC certification delivers progressively point by point information, comprising
UK port and way, permitting air exchange to be related to specific UK airplane terminals.
The CAA info is a data of all the cargo and mail taken care of at the real UK airplane
terminals. It integrates household & global streams, just as transhipments of non-UK

LOGISTICS MANAGEMENT 5
exchange tons at UK air terminals. The Intra EC certification is controlled through the Tank
framework, and it includes an approximation of the littler committals (Murawski, 2011).
Economic Conditions
Economic conditions straightforwardly sway free market activity - factors at the core of all
evaluating choices, paying little heed to business. That is positively valid for air payload. In
blasting markets, interest for airship cargo administrations can surpass the limit, which
prompts more expensive rates. On the other hand, amid monetary recessions or explicit low
burden element courses, falls. Transporters lower costs to top off universe that would
somehow go vacant (Fernandes, 2019).
The April 2015 Airline Business Confidence Index, issued by IATA, depends intensely on
that recorded relationship. The report extends that capacities will keep on extending
throughout the following a year because of increments in business certainty and financial
development in created nations. 63% of overview defendants, for instance, demonstrated that
they anticipate that capacity should increment, and that desire is bolstered by additions in
global exchange and industry action. That expanded interest ought to be viewed as when
setting costs, however, should be offset with different variables. Bearers should likewise be
prepared to react rapidly to intensifying monetary conditions. Bringing down costs is a
standard reaction, yet there are different systems, as well, for example, consolidating courses,
diminishing flights, upgrading courses for eco-friendliness, and surveying extra charges for
halfway loads (Fernandes, 2019).
E-commerce market trends
Demand progress is expected to diminish in 2019 due to a feebler world trade environment,
which has been compressed by increasing protectionism, with tonnage predicted to nearly
four percent, according to the International Air Transport Association (IATA). Payload yields

LOGISTICS MANAGEMENT 6
are required to grow two percent, well underneath the "outstanding" 10 percent development
in 2018. IATA says these proceeds to late fortifying of the load business since cost
increments are lower. By and large payload incomes are relied upon to reach $116.1 billion
out of 2019, up from $109.8 billion of every 2018.
The affiliation gauges that worldwide aircraft net benefits will be $35.5 billion out of 2019,
up from $32.3 billion of every 2018, making 2019 the tenth year of benefit and fifth
successive year where carriers convey an arrival on capital that surpasses the business'
expense of capital (Canadianshipper, 2019).
During a presentation, IATA's main financial expert Brian Pearce, called attention to that air
load has outflanked the languid world economy and developed more in the course of the most
recent five years than different methods of transportation. He additionally referring to the
sensational development in web-based business for keeping the air a lot of delivery higher
(Taneja, 2017).
Compare and Contrast
At some time there are factors which affect the growth of the air cargo industry such as the
period of recession. In the case of the recession period, the growth of the company will
restrict because it will decrease the demand for the goods that will overall be going to affect
the industry. E-business helps the business to grow in the market but sometimes also leads to
loss, for instance, when the customer order the goods and the company send the goods to the
buyer and if the customer sends back the goods in case of a defect, then the company has to
born a loss of freight. However, on the major basis E-commerce help the companies in
enchaining the business worldwide. However, when we compare its consolidation process it
keeps inventory cost stable.

LOGISTICS MANAGEMENT 7
Air freight rules and regulation affects Air Cargo growth and restricting its services. As a
beginning stage, bearers utilize a shipment's weightiness and volume while ascertaining the
expense. From here, they will decide rates by picking among the higher of two choices,
choosing what is known as chargeable cargo. Each cargo forwarder works distinctively and
likely has an alternate way to deal with showing bearer base rates. This factor affects the e-
business as well such as every country has its regulations and airline industry has to buy a
license for that. Therefore, it reflects the factor of inventory cost reductions factor.
Development in the E-business and international trade is helping the Air cargo hub and also
help in its growth. The different estimates for Hong Kong are additionally in accordance with
worldwide figures of the Asian market. These provincial projections are an indication of
supported financial development and sound exchange volumes. The Boeing World Air Cargo
Forecast 2006 ventures strong development for the Intra-Asia, Asia-North America and
Europe-Asia showcase in the following 20 a long time, from 2006 to 2025, at a yearly rate of
8.6%, 7.1% and 6.9% individually (Boeing, 2018).
Challenges in Air cargo UK
There are numerous issues and challenges related to Air cargo actions in the UK. The
challenges are how to grow the service level and progress the capacity to keep up the
demand. There are various challenges Air cargo industry facing such as:
E-commerce Glut
Chief amongst them is the necessity of everybody engaged with the air coordination chain-
transporters, intermediaries, forwarders, air bearers, and drivers—to execute perfectly to
quicken the development of products, accomplish speedy clearances from traditions and give
fresh dimensions of permeability to clients all through the shipment lifespan.

LOGISTICS MANAGEMENT 8
The air cargo business is amidst a huge change, one that becomes more grounded in lock
venture with the need to move freight more expense adequately and quicker than any time in
recent memory (John, 2019).
Regardless of difficulties ahead, innovation holds the way to helping organizations
mechanize forms, rearrange consistence prerequisites and accomplish new dimensions of
information quality and data imparting to air load accomplices. While the global web-based
business blast should be useful for air load, the total volume of online business bundles poses
new difficulties for together local and universal cargos.
For the industry to keep on modernizing itself, its procedures and frameworks should
likewise keep pace with change.
Mode shifting
Tougher security system and higher cost requirements are causing organizations to re-
analyze their use of Air Cargo service. Shippers are continuously enhancing supply chains to
depend on the low-priced ground improved occasional air precise shipments.
Organizations are finding ways to evade costly air transport and move to regional
manufacturing and supply ways. These challenges replacing air demand with other
transportation facilities such as accelerated oceanic and truck services that are recently
presented by Con-way freight (Kupfer, 2017).
New inventory procedures
With the supply chain hazards also the possibility of disruption increasing; organizations are
arguing the sense of continuing lean inventories. Manufactures and retailers are now
determining to keep more care goods to recover the request and escape emergency air freight
(May, 2014).

LOGISTICS MANAGEMENT 9
Security Filings
From a security filings point of view, an ever increasing number of countries presently
require air bearers to supply propelled data to traditions as well as fringe control on
approaching shipments.
Countries that as of now have this ability set up to understand that they need the data prior
and with better information quality. Subsequently, activities like Air Cargo Advance
Screening (ACAS) in the US (or, all the more conventionally, Pre-Loading Advance
Commercial Information (PLACI)) have been presented and are getting to be required
(Nuijten, 2018).
Along these equivalent lines, the sending out air forwarder is additionally required to give
data either to the transporter or legitimately to traditions in the bringing in the nation before
stacking at the airplane terminal.
However, maybe the greatest test identified with security filings is knowing which data
traditions offices globally will require starting with one month then onto the next.
Increasing fuel price
As indicated by IATA's most recent fly fuel value investigation, on May 2018, worldwide fly
fuel cost was rise by 3.7 percent at $92.1/bbl from a similar time multi-week sooner, which is
5.4 percent higher than a similar time 1 month back, and 54.2 percent greater than a similar
time 1 year prior. At a more extensive point of view of cost improvements: stream fuel cost
was at its least for very nearly 5 years in January 2016, at just shy of $40/bbl. Starting there
onwards, the value climbed moderately consistently to the $92/bbl in May 2018. To separate
the information by districts, the fuel cost as of May 2018, ran from $90/bbl in the Middle
East and Africa to nearly $95/bbl in Central and Latin America. In the interim, Europe
alongside the CIS (The Commonwealth of Independent States) just as North America was

LOGISTICS MANAGEMENT 10
both at the cost of up to $93/bbl. The general offer on the planet fuel value list for the time of
May 4-11, 2018, indicates North America and Europe-CIS driving the path with 39 percent
and 28 percent individually. They are trailed by the Asia-Oceania locale with a 22% offer
(Prentice, 2014).
Recommendation
Appoint communities and take government support
Air Cargo companies must frame various committees and policies which can help them in
dealing with environmental issues. There are many environmental policies made by the UK
government such as illegal wildlife trafficking carbon emissions. The industry should also
have support from the government to cope up with the various carbon emissions.
Appoint legal advisor and mitigate risk
Air Cargo company should appoint their legal advisors which can help them in dealing with
their legal issues. In the UK governments change in every five years and provide their
different budget. As per the budget, companies have to make changes in the operations. By
appointing legal advisor companies can forecast the risk numbers and that will help to
manage and reduce the regulations risk and effectively manage the risk in return.
Deal with increases in fuel price
The rise in Fuel price being determined by numerous components: extended interest from
China, India and the insufficient refining boundary in the western side of the equator; party-
political insecurity in the Middle East; and nonappearance of rivalry amongst fuel suppliers.
Fluctuations in fuel price caused many challenges for the Air Cargo sector in the UK. Air
Cargo industry has to manage fuel price. To manage fuel price they have to raise their freight

LOGISTICS MANAGEMENT 11
for transportation of the goods and services. As fuel price is one of the main components of
their growth. Continuous increase in the fuel price can restrict their growth (Kupfer, 2017).
Conclusion
Air cargo is one of the leading markets worldwide but there are many factors which restrict
the growth of the industry as well there are factors which help in the development of the
industry. There are many economic and political factors, which enhance the demand of the
industry. There are many challenges which have to be faced by the air cargo business such an
upsurge in the fuel price. UK local air transport will keep on confronting various difficulties
and openings. Various recommendations for the industry have been given which can help in
the development of the Air Cargo business.

LOGISTICS MANAGEMENT 12
Bibliography
Becker, B. a. W. A., 2010. Challenges and success factors of air cargo revenue management.
Journal of Revenue and Pricing Management, Volume 9, pp. 171-184.
Boeing, 2018. World air cargo forecast. [Online]
Available at:
https://file.veryzhun.com/buckets/carnoc/keys/3fa55da709101d0d937e78732a88cd9d.pdf
[Accessed 22 May 2018].
Canadianshipper, 2019. E-commerce driving growth for global air cargo market: IATA.
[Online]
Available at: https://www.canadianshipper.com/transportation-and-logistics/e-commerce-
driving-growth-global-air-cargo-market-iata/1003378652/
[Accessed 21 May 2019].
Fernandes, S., 2019. 6 Factors That Influence Your Air Cargo Pricing Strategy. [Online]
Available at: https://w3.accelya.com/blog/6-factors-that-influence-your-air-cargo-pricing-
strategy
[Accessed 22 May 2019].
John, P., 2019. Air cargo business faces headwings on protectionism and trade friction.
[Online]
Available at: https://www.pressreader.com/
[Accessed 22 May 2019].
Kupfer, F. M. H. O. E. a. V. d. V. E., 2017. The underlying drivers and future development of
air cargo.. Journal of Air Transport Management, Volume 61, pp. 6-14.

LOGISTICS MANAGEMENT 13
Lin, C. L. J. a. C. Y., 2012. The capacitated p-hub median problem with integral constraints:
An application to a Chinese air cargo network.. Applied Mathematical Modelling, 36(6), pp.
2777-2787.
May, A. A. A. W. Y. O. U. C. M. a. M. A., 2014. Prioritisation of performance indicators in
air cargo demand management: an insight from industry.. Supply Chain Management: An
International Journal, 19(1), pp. 108-113.
Morrell, P., 2016. Moving boxes by air: the economics of international air cargo. Abingdon,
United Kingdom: Routledge.
Murawski, J. a. M. S., 2011. A critique of recent air sampling data collected on aircraft: how
much exposure to neurotoxic fumes is acceptable. J. Biol. Phys. Chem, Volume 11, pp. 147-
151.
Nuijten, J., 2018. Air Cargo Faces These Four Logistics Challenges in 2019. [Online]
Available at: https://www.aircargonews.net/airlines/air-cargo-faces-these-four-logistics-
challenges-in-2019/
[Accessed 22 May 2019].
Prentice, B. a. K. R., 2014. Cargo airships: international competition. Cargo airships:
international competition, 4(3), pp. 187-195.
Rai Technology University, 2019. International Practices In Logistics. [Online]
Available at:
http://164.100.133.129:81/econtent/Uploads/International_Practices_in_Logistics_Manageme
nt.pdf
[Accessed 22 May 2019].

LOGISTICS MANAGEMENT 14
Taneja, N., 2017. Driving airline business strategies through emerging technology..
Abingdon, United Kingdom: Routledge.
Wensveen, J., 2018. Air transportation: A management perspective. Abingdon, United
Kingdom: Routledge.