Factors Affecting Air Cargo Growth in the UK and Other Hubs

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Logistics and Supply Chain Management
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Introduction
In the modern supply chain, air cargo plays a crucial role. Most of the air cargo is usually
carried in the aircraft’s belly hold which is located under the passenger cabin. However, some
airlines such as Alaska Airlines do operate ‘combi’ aircraft whereby the cargo does share the
primary deck with the passengers. Nonetheless, some operators have aircraft that are dedicated to
carrying cargo. Airports provide an important connection between air and surface modes. Most
of the air cargo hubs are situated in Asia, reflecting the growth in trade in the region. In respect
to the UK’s airport network, in 2014, approximately 2.5 million tonnes of mail, as well as cargo,
was handled. However, this is only a small amount if compared with the volume handled by the
United Kingdom’s port within the same period which averaged at 490 million tonnes. The high
demand for cargo shipments in recent decades has resulted in the growth of air cargo both in the
United Kingdom and across the globe. However, there are many factors that restrict the growth
and development of air cargo in the United Kingdom and in the world. The report seeks to
identify these factors, including comparing and contrasting these factors with those that have
affected air cargo growth in the UK and other main air cargo hubs.
Factors Helping Growth of UK’s Air Cargo
The two themes that best describes air cargo demand in recent decades are persistence
and resilience. The factors that have facilitated the growth of air cargo in the UK include:
Infrastructural development: As it is common with other countries, the UK cannot attract
investors if does not have developed infrastructure that meets the investors’’ needs. The United
Kingdom has invested heavily on infrastructure and boasts being among the states with the best
infrastructure globally. UK’s road, sea, as well as air networks are well developed, hence easing

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the movement and transportation into and out of the city. The UK boasts off having an efficient
air transport, metro rail along with developed waterways. The country also has got building and
architecture that is of world class quality (Dobruszkes, 2013, pp.85). Such infrastructure has
played a crucial role in attracting investors from across the globe. I turn, thee investments have
increased UK’s economic growth which fuels air cargo growth due to increased demand for
cargo movement.
Political stability: Political stability is an essential element that influences development in
any state. Investors feel free to invest in countries that have got the reasonable expectation that
their investment will reap returns (David, 2013, pp.73). However, political instability makes it
difficult to achieve returns on investment due to the high risk involved. The UK enjoys relative
political stability over the decades and is one of the most influential countries in the EU. Hence,
this makes the UK most attractive for investment as seen through the huge investments that have
been achieved.
Trade liberalization: Trade liberalization is part of the microenvironment that is
characterized by very few trade barriers. Nonetheless, trade liberalization is also characterized
with little government interference on the macroeconomic factors. Trade liberalization
encourages investments because investors are capable of predicting the return on investment with
certainty (Freestone and Wiesel, 2014, pp.290). When they capable of doing so, obtaining
finance is made easier because the finance providers are capable of assessing the investment’s
viability. In the UK, there is minimal government interference on trade hence attracting potential
investors. Among other reasons, this makes the UK a feasible investment destination which
increases economic growth and air cargo growth.

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Factors Hindering Air Cargo Growth in the UK
Fuel Prices: In general terms, fuel prices play a crucial role in the economy. As such,
increasing or decreasing fuel prices deeply affects air cargo because fuel and the airline
complement each other. Without the existence of fuel, airlines cannot operate. In the airline
industry, gasoline, oil, as well as other products are used as irreplaceable fuels. Changes in fuel
prices results is a shift in the demand curve (Aun, 2013, pp.198). Increased fuel prices in the UK
and across the globe automatically consumes airline’s profits which could otherwise be used to
boost air cargo growth. For example, in 2004, many countries including British Airways had
added fuel surcharges and raised cargo charges with the intention of countering fuel costs.
Government policies: The other key factor hindering UK’s cargo growth is government
policy. Since the government is responsible for controlling prices, the air cargo has got two legal
prices that are price ceiling and price floor (Harvey, Williams and Probert, 2013, pp.159). The
price ceiling is the maximum amount that the airline can charge. Nonetheless, the UK has in
recent times passed a motion to withdraw from the European Union. These, together with other
factors are to affect the growth of air cargo due to limited trade.
Foreign competition: air cargo is very competitive with most countries having national
airlines that deal with cargo transport. In addition, there are private owned airlines that
specifically deal with the transportation of cargo. Air cargo within EU states has been liberalized
through directives and regulations (Lee and Hooy, 2012, pp.34). With the liberalization of the
EU airline market, there has been increased competition due to increased supply of air transport
as well as reduced tariffs, particularly in the airlines that deal with air cargo transportation.