Challenges to domestic air freight in Australia: Evaluating air traffic markets with gravity modelling

With two of the busiest air traffic corridors globally, Sydney-Melbourne (SYD-MEL) and Sydney-Brisbane (SYD-BNE), very liberal open skies agreements, and the world's most isolated large city in Perth, air freight in Australia should be destined for substantial growth, but has in contrast to other regions such as the US not yet materialised. This paper identifies challenges surrounding domestic air freight markets in Australia and compares the provision of road vs air freight services utilising gravity modelling methods. Our findings suggest the impedance of domestic air freight services in Australia is greater for regional areas between the primary cities (such as Canberra, between Sydney and Melbourne) than remoter areas (such as Cairns in Northern Australia). Our models show further that in addition to distance, air freight capacity on any of our analysed routes is despite being demand-pulled in terms of GDP dependency significantly attuned to factors at both the origin (in particular domestic trade capability, i.e. manufacturing and logistics) and destination.     

The impact of terminal re-organisation on belly-hold freight operation chains at airports

While it is widely acknowledged that airport re-organisation from destination to dedicated airline group terminals makes passenger travel more seamless, more efficient and also more profitable for both airlines and airports, there is little known about the impacts of such change on freight and in particular belly-hold cargo chains. Our analysis includes data from all airports in Australia but focuses primarily on the proposed re-organisation of Sydney Kingsford Smith airport. This paper reveals a significant relationship between international freight volumes, terminal organisation and freighter operations. However, our interview results only confirm the volume/aircraft type relationship. The paper aims to contribute to the general discussion on the impact of passenger terminal organisation on belly-hold freight operations and more specifically to the consultation process around airport master planning.     

The role of London airports in providing connectivity for the UK: regional dependence on foreign hubs

In a context of ongoing debate about the future UK aviation policy and its implications for regional economic development, this paper discusses the role of London Heathrow and the South East airports in providing connectivity for the UK, with particular focus on the international markets that originate from regional UK airports. Using an MIDT dataset of worldwide passenger itineraries served by the European airport network during May 2013, we first establish whether London Heathrow can currently be considered the most important hub for the UK, in terms of traffic generation, connectivity, and centrality, while also measuring the dependence of UK regions on foreign airports and airlines to remain connected with the rest of the world. Results show that, despite the competition, London Heathrow benefits from its massive traffic generation to remain the most central gateway for overall UK air transport markets. However, when only regional markets are considered, significant dependence on foreign hubs appears in many destinations, particularly to Asia–Pacific or the BRIC countries where above 80% of passengers use transfer flights. These results fit nicely with the observed trends of seat de-concentration and hub-bypassing in the airline industry. While dependence on foreign hubs can be interpreted as a sign of vulnerability, there is also the argument that bypassing Heathrow allows regional airports to develop new markets and reduce the level of congestion in the London airport system.     

The potential of horizontal collaboration in airport ground freight services

Since the global economic crisis of 2007–2011, the increasingly dynamic and challenging air cargo market in Europe has forced freight forwarders to improve their performance. In addition to improving their internal transport efficiency, they have also started to look at previously unexplored opportunities for horizontal collaboration in landside airport transport. The aim of this study is to reveal the potential of air cargo transport collaboration on a horizontal level, i.e. between multiple freight forwarders within a single airport. Reviewing existing literature on horizontal collaboration, with a focus on the air cargo industry, we propose a conceptual framework for transport collaboration in the air cargo industry. Based on a comprehensive study on air cargo transport movements within Schiphol, using a simulation model based on company data of 10,747 shipments (6977 tons of cargo) for a period of 30 days, we find several interesting results. Our main finding is that horizontal collaboration can improve the transport performance, by maintaining a high frequency of transport movements and maintaining an acceptable throughput time for air cargo shipments, and at the same time reduce transport costs by up to 40%. For smaller freight forwarders, the frequency of transport deliveries can even increase, while still allowing them to improve the average load factor of transport movements.     

Warehouse location problems for air freight forwarders: a challenge created by the airport relocation

The move of Hong Kong International Airport from the city centre to a suburban area in July 1998 provided sufficient capacity to meet the increasing demand of passenger and air-cargo flows in Hong Kong in the foreseeable future. However, the move has adverse side effects such as causing the readjustment of many existing systems and creating many imminent strategic problems. One of such problems is the warehouse location of freight forwarders: they have to decide whether they should locate their warehouses in the new airport, in current locations, or in new locations somewhere in the city. This paper delineates the results of a survey conducted in the summer of 1997 before the airport was relocated. The survey asked what decisions the freight forwarders had made and how they evaluated some potential warehouse locations. The paper also considers two mathematical models, which explain and predict, respectively, the location pattern of freight forwarder warehouses before and after the relocation of the airport.     

Lessons learnt from the market for air freight ground handling at Amsterdam Airport Schiphol

On 16 April 2013, the European Parliament adopted a new, amended airport ground handling Regulation, which will replace the old Directive 96/67 EC on ground handling services. The new Regulation will further open up European airports for competition on the ground handling market. Even long before the introduction of Directive 96/67/EC, Amsterdam Airport has had a liberalised handling regime. Against the background of the further liberalisation of the European ground handling market, this paper investigates the characteristics of the open ground handling market for air cargo at Amsterdam Airport and the lessons that can be learnt from the Amsterdam experience. We find that an open handling market brings greater freedom of choice for airlines and lower handling fees. However, we do not see any (serious) market failure for the airport that would justify intervention by the market regulator, by limiting the number of handlers for example.     

The effects of deregulation, changed customer requirements and new technology on the organisation and spatial patterns of the air freight sector in Europe

Customer requirements, new technologies and the deregulation and liberalisation measures of the last 15 years have had a significant influence on market structures in air freight transport in Europe. The study examines the sector using the concept of global production networks. It describes the reorganisation in various dimensions. Firstly, there is the development from single air freight forwarders to global networks of firms. Secondly, we find a reorganisation of inter-company relations. Thirdly, airlines around the world organise their air traffic as a hub system. This lends added importance to the selected hub airport, and puts pressure on them to enlarge. As spatial consequences there is greater competition among international airports.     

Shift designs for freight handling personnel at air cargo terminals

This paper presents an integrated mixed integer linear programming (MILP) model for determining manpower requirements and related personnel shift designs for the build-up and break-down of the unit load devices (ULDs) at the air cargo terminal to minimize manpower costs. To utilize the manpower resources efficiently, we implement a new mechanism for demand leveling. In addition, we consider the qualification hierarchy between build-up and break-down workers. A case study based on the real-life data shows that the model is useful for manpower planning at air cargo terminals and the integrated approach is far superior to a traditional two-stage approach.     

Differential pricing strategies of air freight transport carriers in the spot market

The single pricing approach fails to reflect different demand changes in response to its cargo space prices at different sales periods. This might be an obstacle to maximize the cargo space revenue of air freight carriers. This paper conducts the empirical analysis on pricing strategies in the spot market for two competitive air freight transport carriers operating on the same segment. It concludes that two carriers gain more revenues with the optimized differential pricing approach than with the single pricing approach. In theory, the research enriches the current literature in terms of pricing strategy optimization under the competition of two parties. In practice, it provides references for air freight transport carriers in their decision-making of applying the differential pricing strategy.     

Multi-criteria decision-making for complex bundling configurations in surface transportation of air freight

Airlines typically carry out freight transportation in a hub and spoke structure, where the movements between the outstations and the hub are served by trucks. To transport freight efficiently, air carriers must consider bundling options for shipments that are delivered at outstations and have to be moved to the hub. There are three options when it comes to bundling freight: on ‘through unit load devices’ (T-ULD) (all freight for the same flight at the hub), on ‘mixed unit load devices’ (M-ULD) (freight for different flights at the hub) and loose freight in trucks. The optimal freight bundling configuration for carriers, taking into account their main KPIs (key performance indicators), is unknown. This research formulates the problem as a multi-criteria decision-making (MCDM) problem, allowing carriers to decide which configuration is optimal for a given outstation. The selected KPIs (cost, (un)loading time, and quality) are formulated as mathematical functions. A new MCDM, called best worst method (BWM), is then used to identify the best configuration with respect to the three KPIs. The proposed methodology is applied to KLM Cargo to identify the best configuration for the selected outstations that supply freight to the KLM hub at Schiphol Airport. This case study shows that there are different optimal freight bundling configurations for different outstations and that trucking costs and freight handling tariffs are among the key factors in deciding which configuration is optimal.     

Air freight hubs in the FedEx system: Analysis of fuel use

This paper provides a data based analysis of FedEx air freighter activities from selected hub locations. The basic idea is that air freighters have a set of range and payload parameters and their corresponding fuel burn depends on weight and distance. Data from 2011 to 12 (FlightAware) are used for 180,000 + flights on origin, destination and aircraft type. The particular aircraft vary widely in payload, but additional parameters may be derived from industry web sites and BTS. The research uses flight activity at hubs such as Memphis and Indianapolis (among others) and computes the aggregate distance flown on specific aircraft. The linkage between the hub and aggregate fuel use (assuming that the out bound flights are allocated to the hub) will give some quantifiable measures of the costs allocated to the hub. The paper examines particular aspects of the air freight system that are especially vulnerable to a spike in the costs of aviation fuel. These observations suggest that traffic to regional air express and air freight hubs is likely to respond in complex ways to fuel costs.     

Intermodal integration in air transportation: status quo, motives and future developments

Soaring air traffic, increasing urban expansion and airports operating at full capacity are reasons that have caused a discussion about improvements in airport landside access systems. One approach to better match customer demands and address airport congestion is to facilitate the intermodal integration of airports. Building on a survey on intermodal passenger air transportation, we elaborate on the current and future situation at major airports. Our findings indicate a high modal concentration and dependence on individual access modes. However, while airport managers intend to reduce the share of these modes, they plan to increase that of high-occupancy airport access modes. We analyze the underlying motives that cause airports to extend their connections to surface infrastructure. In a case study, we assess an intermodal best practice solution for the integration of air and rail.     

The geography of air freight: connections to U.S. metropolitan economies

Despite the rapid growth of air freight shipments, much of the existing literature on the geography of air transportation has paid more attention to passenger travel than air freight. The purpose of this paper is to elevate our understanding of air freight by determining which specific variables most influence and shape the geographic distribution of air freight by metropolitan area using stepwise regression analysis. The empirical results suggest a regression model of five independent variables was the most parsimonious solution where the final model accounted for 71.1% of the variation in air freight shipments by metropolitan area (MA). The most important predictor was the traffic shadow effect, where less populated MAs under the traffic shadow of larger MAs tended to generate lower levels of freight. The model also suggested that other key predictors included the employment market share in transportation-shipping-logistics industries, per capita personal income, the number of medical diagnostic and supplier establishments, and above average wages in high technology. Overall, metropolitan markets with diverse and efficient ground support systems, freight forwarders and other transportation services, a more affluent population, an intense agglomeration of medical laboratories and related suppliers, and a well paid skilled workforce engaged in computer systems design and electronic product manufacturing are more likely to ship freight by air.     

Recovering from demand disruptions on an air cargo network

In this work we introduce the Air Cargo Schedule Recovery Problem (ACSRP). In this problem, a carrier airline has to reschedule flights and requests to adapt to last-minute demand changes. We consider three different possible crew management policies that translate into three different way to evaluate the costs of deviating from the original schedule. We formulated the ACSRP as a mixed integer linear programming problem, and tested our implementation on 24 original schedules with up to 30 orders and 8 airports, and 4 different disruption scenarios for each one. Our results show that, against a benchmark recovery policy where only cargo is re-routed, recovery can yield savings of roughly 10%.     

Assessing the air cargo business models of combination airlines

Notwithstanding the fact that the air cargo business is generally a secondary one to the passenger business for combination airlines, it can have an important role to play in their profitability. However, growing challenges are threatening the market positions of the combination airlines. Improving their market positioning depends, amongst other factors, on appropriate business models. Yet, the literature on the air cargo business models of combination airlines is scarce. This paper aims to contribute to closing this gap.The research presented herein aimed to identify the representative business models of the combination airlines' cargo strategies. Three strategies have been considered. The research method included a series of structured interviews with key informants from combination airlines, namely: TAP Cargo, Brussels Airlines Cargo, SATA Cargo, Turkish Cargo, SWISS WorldCargo, Finnair Cargo, AF-KLM Cargo, Emirates SkyCargo, Lufthansa Cargo and IAG Cargo.The ten air cargo business models and the representative business models of each strategy are described. The results suggest an overlap between the business models of different strategies. In addition, the results show that an evolution in strategy does not necessarily require a redesign of the business model, but tailored changes in specific components.     

Responses of air cargo carriers to industrial changes

This study examines how product characteristics, values, inventory cost, shipping charges, shipping distance, and time affect an international firm's choice of air carrier. An individual choice model is constructed by assuming that the shipper in a specific industry chooses the optimal air cargo carrier with the minimal logistics cost. The study further aggregates air cargo demands on different routes for the carriers by considering the spatial distribution of the origin-destination pattern and any temporal changes in the industrial structure. A case study is used to illustrate the application of the proposed model using data from Taiwan Taoyuan International Airport and the industrial economics database in Taiwan. The results show that shippers with high product value and short delivery distance focus on the shipping charge and prefer choosing the air cargo carrier that offers more flights. Further a carrier may achieve a larger market share if its supply attributes match the industrial structure and the product characteristics of the market on the route. Finally, because dynamic changes in the industrial structure and product value have been captured, the results are more accurate than that from the Grey model.     

Making or breaking - Key success factors in the air cargo market

This introductory paper considers a number of major evolutions in the air freight market. In the first instance, it describes the heterogeneous environment in which air cargo services are performed. Subsequently, it looks at some of the most notable developments in air freight. Lastly, it deals with the market structure and with possible future strategies.     

Robustness of the air transport network

This paper presents a methodology for the detection of critical airports (those whose isolation would cause the largest losses in network connectivity) in the global air transport network (ATN), based on simulating an attack on selected ATN airports using different adaptive selection criteria. The performances of several node selection criteria are compared, together with a new criterion based on Bonacich power centrality. The results show that most critical airports can be detected with an adaptive strategy based on betweenness centrality. The detection of such airports may help the development of contingency plans to develop an appropriate response to any airport closure.     

An assessment of the regulation of air cargo security in Europe: A Belgian case study

The discovery of explosive devices concealed in air cargo in October 2010 triggered an action plan to strengthen air cargo security in Europe. This paper addresses the potential implications for different actors with respect to the introduction of recent European Union (EU) regulation. The focus is on the legislative efforts to reinforce air cargo security and, in particular, the issue of third countries flights to Belgium. Based on existing literature, a review of the legislation and several interviews with experts and different stakeholders in Belgium, it can be concluded that the current air cargo and mail security framework is not satisfactory. Evidence from both the literature review and the interviews points to a necessary policy paradigm shift towards a risk assessment based security process. Special emphasis should be put on a collaborative industry driven supply chain security and the urgent need to harmonize air cargo security procedures at EU level.