Shipping lines encroach into the aviation industry, 'a kick in the face' for those that won't change

Shipping lines encroach on the aviation industry

"I like it. It’s a kick in the face for all those people who didn’t want change." The CEO of an cargo airline shared on the moves of shipping lines this year when they entered the airfreight sector.

While some are unhappy about the new airlines run by shipping lines, others believe it could help reshuffle the airline industry.

Maersk and CMA CGM are establishing one-stop solutions to attract large shippers to them. If shippers want to use Maersk's services, the carrier also wants shippers to use their integrated services, including airline services. Freight forwarders are no longer welcome. Instead, there are large beneficial cargo owners (BCOs).

Even the use of the term 'BCO' has now begun to creep into the air freight sector. That was the first visible effect of this encroachment.

CMA CGM is a slightly different behemoth, with forwarders saying that at times this year they were allocated space through CEVA - a subsidiary of CMA CGM - rather than from the shipping line itself.

“End-to-end solutions is exactly what BCOs want,” said an executive familiar with both shipping lines. “It meets their demands. Maersk and CMA had to react to the own-controlled capacity of the forwarders.”

"Look at people like Jeff Bezos (Amazon), and Jack Ma (Alibaba)," argues the airline CEO. "They make money by controlling the money, rather than the retailers. They control the data and know exactly what’s what. Just like the integrators, FedEx and so on, also control the data.”

But he argues that airlines, which have ceded ground transportation to integrated service providers in previous years, have learned nothing from that lesson: that data control and and movement on the ground, is a recipe for success and a competitive advantage. Airport-to-airport doesn't help shippers and doesn't give airlines any competitive advantage.

“The air cargo industry has refused to change. Airlines have failed miserably to create an integrated structure, and that has forced the hand of companies like CMA and Maersk. Did Bezos want to set up a domestic airline? No. But most airlines weren’t offering to do it."

“NYK, which owns Nippon Cargo Airlines and Evergreen, which owns EVA Air, will have to start doing the same thing, offering an integrated process.”

However, he admits that Maersk and the CMA have some way to go.

“Some 5% to 10% of their cargo will need to move by air, and they don’t have the fleet size for that. It’s an amateurish start. But I love it. It’s a kick up the arse, and airlines will have to start meeting BCO expectations. Or, they can just keep moving low-yield cargo?"

He added that companies like BMW, which worked with the Senator on flights between Germany and the US, demanded speed, transparency and quality.

“Only after those were fulfilled did it talk about price. So it was at a huge cost – but did everything BMW wanted."

But the air cargo industry failed to fix the problems on the ground; The airline industry didn't talk to shippers and didn't really understand what shippers wanted. And now the airlines have a competitor with a complete logistics solution - like integrated service providers that did a high-performance business, and then the airlines lost customers.

"It's time for airlines to change."

Read more:

• Maersk acquires Senator International to boost aviation business
• Air freight rates hit record highs
• Air freight rates skyrocketed due to the difficulties of sea freight
• FedEx forecasts air freight capacity will continue to short in 2022
• CMA CGM ordered two B777 freighters to expand in air cargo
• Air freight market expects an exciting peak season to come

Source: Phaata.com (According to The Loadstar)
Phaata.com - Vietnam's First Global Logistics Marketplace

► Connect Shippers & Logistics companies faster