U.S. shippers can look forward to continued low air freight rates for their international exports this year, according to top airline cargo officials.
Even if the weakening U.S. dollar boosts volume considerably, they say the large amount of outbound capacity available on both the Atlantic and the Pacific will diminish any impact.Rates on the Pacific range from a low of about 45 cents a pound westbound and about $1.25 eastbound, according to one estimate. The same source says rates on the Atlantic range as low as 35 cents a pound eastbound and $1 a pound westbound.
We're really beating the bushes to get some freight," says another top cargo executive, adding that the outbound situation from the East Coast remains very, very poor in terms of rates.
On the Pacific, the close tie-in between the dollar and the currencies of many nations in the Far East lessens the potential impact of a weaker dollar, the executive says. However, he notes that the growing number of Japanese companies establishing U.S. manufacturing operations should help bring back a two-way air freight market.
Air cargo experts remain divided, however, on several key issues including the impact air express carriers will have on the airport-to-airport market as they quickly expand their international business.
Sergio Orlandini, KLM president, predicted recently that door-to-door traffic emphasized by air express companies such as Emery Air Freight and Federal Express could capture about 40 percent of the total cargo market by 1990, up from about 10 percent today. KLM recently introduced a door-to-door product of its own in an attempt to establish its own niche in this market.
However, Klaus Zimmermann, general manager cargo-North and Central America for Lufthansa Ger man Airlines, believes the whole issue has been somewhat overplayed. The air express companies haven't convinced me they are going to do all the things they want to do, he says.
A cargo executive for one Pacific carrier predicts the new breed of integrated freight forwarder/carriers will run into some serious problems of its own. The yields integrated freight forwarders are getting are declining, he notes, adding that as profits are squeezed, they may turn to moving larger freight. The squeeze could contribute to the demise of some of them, he says.
Meanwhile, air cargo officials view the resurrection of Flying Tiger Line with mixed feelings at best. While avid promoters of the industry such as John Emery Jr., Emery Air Freight chairman, acknowledged sadness when the company appeared likely to go out of business a few months ago, its decision to acquire a fleet of DC-8s adds still more capacity to the market.
The biggest pressure is going to be airport-to-airport, says Richard Ball, Emery vice president and treasurer. With Tiger getting back on its feet, I think the whole market will really heat up. Mr. Ball notes that the DC-8s will give Los Angeles-based Tiger much more flexibility. It has been operating with a fleet of 747 freighters on international routes.
Air cargo executives also differ on whether rates have reached their nadir. Bob Bemis, new sales development manager-cargo for United Airlines, says he has noticed a drop of up to 10 cents a pound westbound on the Pacific in the past few months.
Mr. Bemis suggests that some carriers flying freighters are apparently willing to pick up air freight to the Orient at rates that do not do much more than pay for the gas and crew.
United, which does not fly freighters and which entered the Pacific market in a big way last year through the acquisition of Pan American World Airways, has been accused of low-balling prices itself. Mr. Bemis stresses that the Chicago-based airline tries to price com petitively, but he acknowledges that United cannot offer shippers ideal departure times in many cases because all of its flights also carry passengers.
A somewhat different perspective comes from Buz Whalen, staff vice president, cargo-the Americas, for Japan Air Lines. Our feeling is that rates have stabilized somewhat, he says, adding however that where you do see a fluctuation is in the big spot shipments, something scheduled for surface that has to go by air." Despite his optimistic outlook, Mr. Whalen acknowledges that a strong increase in tonnage on the Pacific markets has not translated into an improvement in yields.
Mr. Zimmermann echoes a theme he has sounded often in the past when asked about the potential for a fundamental improvement in the export environment. He believes U.S. companies must be willing to commit themselves to greater international marketing efforts. He predicts aresurgence in this area, but he believes it will be led by giants such as IBM, not by new entities.