UK air freight study report Contents 1. Introduction ................................................................................................................2 2. Description of structure of UK air freight industry................................................5 3 The demand for airfreight........................................................................................33 4 Airports and their facilities ......................................................................................48 5 Air freight charging structure..................................................................................63 6 Characteristics of air freight demand .....................................................................68 7 Shipper requirements ..............................................................................................70 8 The value to the UK economy of the air freight industry......................................73 9 Summary and conclusions........................................................................................93 1 UK air freight study report 1. Introduction 1.1 Study aims and objectives Following publication of the Integrated Transport White Paper and a commitment to prepare a National Airports Policy and potential future policies on the air freight industry, the Government has commissioned a series of research projects. This report represents the first part of an exercise to examine the structure of the air freight industry and its economic, environmental and social significance, leading to recommendations for potential future government policy to capitalise upon the benefits which the air freight sector can offer. The overall objective of this report is to assemble a set of data to describe the current state of the airfreight industry in the UK. This was to be set alongside views on market trends and developments in order to analyse the way in which the UK air cargo industry currently functions and contributes to the UK economy both directly and indirectly. Trends in the industry itself and in the industries that influence the performance of the sector were to be identified to help form a view on the future prospects for the industry and its position within the global air cargo market. This report is designed to summarise the state of the industry through the presentation of data and information; as such it represents a snapshot. It brings together descriptions and views of the airfreight industry from different perspectives. It does not follow through any argument for changes in government policy or the regulatory framework as this debate will be the subject of a second stage of research. 1.2 Study approach and methodology In the initial approach to the study it was determined that an attempt should be made to explore the collection of primary data where that would add to the existing body of knowledge on the air freight industry. In particular, in order to be able to make an estimate of the value of the industry and to then quantify the significance of the sector to the UK economy, it would be useful to collect financial information on sectors of the industry for which little published information was available. Information was sought from a variety of source: an interview programme collected information from shippers, airlines, freight forwarders, road hauliers, express service operators including the integrators transit shed operators, general sales agents and aircraft manufacturers collection and analysis of statistics from a wide variety of sources, including Customs and Excise Trade Statistics, UK Airport Traffic statistics, CAA statistics and data from the Cargo Account Settlement System (CASS) extensive questionnaire survey of organisations in the air freight industry which were not included in the interview programme. Responses to the questionnaires were poor from some sectors of the industry which restricted the scope of the analysis of some primary data. In addition to the above, three seminars were held in Glasgow, London and Manchester, the objectives were to: describe the surveys aims and its progress, seek affirmation of the approach and the statistical base which was being used and canvass views and opinions across the broadest cross section of the air freight industry to validate the findings from other sources and to ensure an informed debate on any issues of concern to the industry. Accordingly, the report structure reflects the broad aims of the project in: 2 UK air freight study report describing the industry's structure and identifying the principal players; quantifying the volumes and types of air freight; factors affecting supply and demand; estimating the value of the industry to the UK economy in monetary and employment terms and outlining the environmental issues that will have an impact upon the future development of the airfreight sector. 1.3 Air freight industry structure The industry consists of a number of different commercial organisations who provide shippers with through freight services. These organisations, mainly within the private sector, operate in a highly competitive environment. Airports: generally the airports act as landlords and infrastructure providers charging landing fees and stand rentals or parking fees to airlines (their main customers) and charging rent to service companies for passenger reception terminals, retail and catering outlets offices, cargo transit sheds, air craft maintenance work shops etc. Airlines: the suppliers of air cargo capacity into and out of the UK are either scheduled operators, charter operators, freighter operators or integrated carriers. Scheduled operators provide air cargo capacity principally in the belly holds of passenger or combi aircraft, though some also operate freight only capacity. Charter operators operating on holiday routes also offer freight capacity, which in line with their passenger business is seasonal. Freighter operators are the operators of freight only aircraft. Integrated carriers operate their own aircraft (and use belly hold capacity) to carry their own cargo, as part of a door-to-door express service for shippers and importers of goods. Air freight forwarders: provide a service to shippers and importers which originally involved receiving a consignment of freight from a shipper, arranging its routing, transportation handling and documentation to either the final receiver or to a foreign airport. The role of the forwarders has developed over the years with the largest forwarders describing themselves as logistics providers. General sales agents: appointed by some airlines (both scheduled and charter) to sell air freight capacity on their behalf, thereby allowing the airlines to avoid the potentially high fixed costs of sales and marketing. Integrators: provide a door-to-door service, usually using their own road transport, handling, transit warehousing facilities and aircraft. Normally integrators contract directly with the shipper. They started principally as express operators, but are now competing more directly with freight forwarders and the airlines. Transit shed operators: provide a transit handling service for airlines and sometimes forwarders. Their function is to receive cargo from the aircraft, de-palletise and deliver to truck or vice versa via a transit shed where customs clearance is required. Specialist air trucking companies: provide road transport between the UK regions and the London airports, or continental airports, as well as intra-European services, where trucks substitute for aircraft, usually to a schedule. Most companies work on behalf of the airlines in servicing the forwarders requirements. Express operators: provide services for the movement of mail and small packages, where the timescales for transit are measured in hours by contrast to air forwarders whose service transit times are generally managed in days. Wholesalers: buy capacity from airlines and sell this on to small and medium-sized forwarders. This enables the latter to buy freight space more economically than they might otherwise by contracting directly with the airline. 3 UK air freight study report Couriers: these services are often provided by express services operators, using the services of passenger airlines and on many occasions courier bags are delivered to airlines across passenger check in desks and carried provisionally by a passenger. Courier parcels are therefore carried on passenger tags and not classified as cargo. The advantage of these services to the shippers or importer is the more rapid transfer at the airport, of origin and destination. At London-Heathrow a purpose built courier reception facility has been built thus avoiding the need for courier bags to be handled across the passenger baggage desks. 4 UK air freight study report 2. Description of structure of UK air freight industry 2.1 Introduction The air freight industry can broadly be defined as encompassing all those activities related to movement of goods by air. There are various activities which are inter-related but which are also industries in themselves. The principal activities are: airport control and management airlines, whether passenger or freighter operators, scheduled or charter freight forwarders and wholesalers express operators and integrators, couriers truck operators x transit shed operators In addition to the above there are numerous related activities supporting these primary providers - ground support services, IT support companies, charter brokers, packing companies,