Transportation/expedited cargo: Leading industry analyst predicts "muted" growth

It may not be the news expedited cargo shippers wanted to hear, but a noted supply chain expert reports that more time is needed for recovery.

The Colography Group, Inc. said in releasing a mid-year update to its annual projections for growth in the $101.2 billion U.S. expedited cargo market, that shippers will have to wait a bit longer to see a rebound.

“While we were disappointed with the findings, I can’t say we were really surprised," said Ted Scherck, president, The Colography Group. In an interview with LM, he said the economy is continuing to melt down.

“The nation’s economy has been victimized by a series of ‘bubbles,’” he said. “Reality has set in now, and the outlook is still pretty grim for our sector.”

Using its most-likely case scenario, The Colography Group estimates that just under 120 million new shipments will be added to U.S. expedited commerce in the coming year, with ground parcel and air export services accounting for virtually all new expedited shipping volume. Total 2010 U.S. expedited air cargo revenue is projected to be $7.1 billion, 1.5 percent above 2009 levels and roughly in line with consensus forecasts for total U.S. economic growth.

Scherk stressed that revenue data presented is y-o-y growth, not an absolute revenue number for any year.
Activity in the U.S. domestic air market will continue to suffer throughout 2010, with shipment volumes falling 1.1 percent from projected 2009 levels. The air export category, influenced by a different suite of demand drivers, will rebound during 2010, growing at a more “normal” 6.1 percent in total shipments, year-over-year.

Weakness in 2010 domestic air activity will continue to be most pronounced in the overnight delivery segment, with slight declines in package and freight shipments, and a significant year-over-year decline in overnight letter shipping. Further, overnight demand, perhaps the most critical (from a yield perspective) piece of U.S. expedited cargo demand, continues to be pressured by growth in e-mail usage and the migration of package and freight traffic to the ever-expanding service coverage of surface transport.

In a trend not seen for some time, non-integrated air carriers (forwarders, combination airlines, postal services and other intermediaries) will take share of the U.S. domestic air market from their integrated carrier rivals, the result of a lower rate of decline. Further, the non-integrated carriers will also gain share in U.S. air export shipment share in 2010.

“The secular factors driving traffic off airplanes and on to trucks will continue at least through 2010, exacerbated by a relentless need of shippers to lower costs in the face of a recession that lingers on,” said Scherck. “Businesses are increasingly reluctant to pay a premium for overnight air service and continue to build their inventory and distribution models around more economical, time-definite deliveries moving in ground parcel, LTL and TL (including renewed interest in private fleets). Further, intermodal carriers are responding by putting virtually all new investment of time and money into expanding their surface capabilities.”

Read the rest of the logisticsmgmt.com article here.