Airfreight Study Projects Positive '05
The Atlanta company's annual report released last month, "Expedited Cargo Market Projections for 2005," forecasts trends in the U.S. time-definite, or expedited cargo, industry.
It projects year-over-year shipment gains for three of the five domestic airfreight categories: 1.6 percent for overnight packages (2 to 70 pounds), 1.2 percent for overnight freight (more than 70 pounds) and 1 percent for deferred, or non-next-day, freight.
The overnight letter/envelope category is to dip 0.8 percent. The deferred-package category faces a 3.4 percent decline, mostly from weakness in the U.S. Postal Service's Priority Mail product.
U.S. air exports are projected to rise 4.4 percent in 2005 to 87.8 million shipments.
The total U.S. expedited cargo market -- including domestic air, air exports, ground parcel and less-than-truckload -- will transport 6.76 billion shipments this year, surpassing 2000's total of 6.7 billion. The ground parcel segment will control 60.8 percent of shipment share, adding 175 million shipments over 2004.
"The improving outlook for domestic airfreight is encouraging after four years of poor results," said Ted Scherck, president of The Colography Group. "As shippers and consignees grapple with driver shortages, tightening truck capacity and higher rates for LTL and ground parcel services, airfreight may become an attractive alternative, particularly on medium-length hauls.
"Increasingly, businesses are sold on ground parcel and regional LTL services as a cost-effective means of transporting and distributing their inventory. The migration from air to surface transport will persist through 2005, continuing a trend that started at the end of last century and is likely to continue well into this century."
Other findings in the report:
· Total expedited revenue should reach $87.6 billion, up 4.2 percent from 2004. The increase is based on higher weight for deferred air shipments and the effect of fuel surcharge pass-throughs, which should stay in effect through 2005.
· The weight of the average shipment, which rose 2.1 percent in 2004, will fall 0.9 percent in 2005. The deferred air package segment will show the largest gains in shipment weight. This product has seen a drastic reduction in lightweight shipments.
· The LTL industry will report shipment growth of 0.6 percent, an improvement for an industry whose volumes have declined 9.3 percent since 2000.
The wild card in the 2005 outlook is the performance of the postal service's Priority Mail two- to three-day delivery product, The Colography Group said.
Priority Mail dominates the deferred air segment with nearly 61 percent of the shipment market. But it has lost market share in recent years, The Colography Group said, as concerns about delivery performance combined with a substantial rate increase in 2002 have diverted business to private ground carriers.
"Our research shows that nearly 85 percent of all second-day air shipments are delivered under 1,200 miles," Scherck said. "This type of traffic, much of which still moves via Priority Mail, can easily be diverted, often at no pricing premium, to ground parcel carriers, who are perceived to offer a superior service. Priority Mail is at a pivotal juncture, and how it responds to these challenges will determine how the U.S. expedited market shakes out in 2005."
Jim Cochrane, USPS manager of package services, acknowledged that Priority Mail volume drop-offs occurred as a result of the economy after 9/11 and a rate increase in 2002.
"We just had [another] year of rate stability, and we are seeing Priority Mail volume increases," he said.
Cochrane also said the USPS is improving Priority Mail and making it easier to use through services such as:
· Click-N-Ship, an online service that lets customers print and pay for labels.
· Carrier Pickup, which lets customers go online to request next-day package pickup.
· A new flat-rate Priority Mail box that costs $7.70, regardless of package weight and destination.
Meanwhile, another annual transportation study released last month found that 58 percent of shippers continue to engage one or more parcel providers, with the bulk of shipper budgets going toward overnight services.
But the "JP Morgan 2004 Transportation Outsourcing Survey," released by Gregory Burns, an airfreight and surface transportation analyst at JP Morgan, New York, also indicated a decline in overnight deliveries, from 38 percent of shipments in 2003 to a projected 32 percent in 2009.
It also indicated that DHL is set to raise its U.S. market share.
"DHL appears poised to capture increased share of U.S. shippers' parcel spend over the next two years, increasing from 13 percent of spend currently to 18 percent in 2006," the report said. The survey indicated that "competitive or lower pricing is the primary reason" driving shippers to shift spend to DHL.
It also forecast the market share of UPS, FedEx and the USPS to decline. UPS dominates the parcel market, capturing 47 percent of all parcel spending, followed by FedEx at 31 percent, the survey said.
Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters