Many countries around the world are closed to tourists, but are open to shipments from abroad. Global supply chain problems, such as the cargo ship stranded in the Suez Canal – disrupting one of the world’s busiest shipping routes – along with old ports and infrastructure infrastructure, are costing global growth.
Rising demand, along with the “cork” created by the transport of goods around the world, has contributed to rising prices in the field of shipping. Of course, the big beneficiaries of the new situation are the air and land freight companies, which mark a record year in activity.
The shipping companies are one of the few giant companies that do not belong to the world of technology, but are on the side of the big profits from the plague. This is due to a surge in demand for fast delivery services from small local companies, which do not have an independent delivery service, as well as from companies and sites that specialize in online sales, which experienced strong growth and were required to send consumers goods in a short time.
The UPS shipping company’s reports, released in April, taught well about the trend, as they reflected a 27% jump in revenue, a 14% jump in daily shipments and a meteoric jump in operating profitability of 158% – numbers that would not embarrass a start-up company, and certainly not An old and big company like UPS.
This is how air freight has become the standard
In recent years the online economy has been growing, but the Corona has given it another shot. When consumers were locked in homes all over the world, the connection to the outside world was mainly expressed in the ability to browse online sites, and buy: clothes, electrical and leisure products and home improvement products. The volume of online sales in the US, for example, jumped from 16% of total purchases to 20%. And while the volume of online sales in the US in 2020 was $ 800 billion, in China it was double that, and in the next four years it is going to grow in 55%, so that by 2024 online sales in China will reach $ 3.5 trillion.
While we hear a lot about shopping sites and digital retailers, we seem to spend very little time and thought on how all the shopping gets to our home. Amazon’s strong reports released last month have garnered a ton of headlines, largely due to strong revenue and earnings growth, but how many investors have actually noticed that the company’s shipping costs rose from $ 5 billion in 2011 to $ 64 billion in 2020? This is a 1,300% increase in shipping costs.
One of the reasons for the accelerated growth in shipping is why Amazon not only provides a great shopping experience, but the products arrive really fast, and it has already become part of the service experience. Since we have all switched to shopping online, even the fast shipping companies, i.e. companies that specialize in air and land shipping, enjoy a very sharp increase in demand for their service and they are not meeting the demand.
Although in the US Amazon already operates freight forwarding services in gliders, it is relying on a growing fleet of aircraft and trucks. In the past year Amazon has doubled the volume of its air freight, and today it already operates 140 flights a day. Amazon leases most of its cargo aircraft, but in January it Announcement of the purchase of 11 more aircraft that will put the company’s aircraft number at 85 – so Amazon is also an air transport company.
The big beneficiaries of the growth in the field of shipping are actually the old shipping companies, which are also increasing their fleet of aircraft. FedEx currently has 679 aircraft, and UPS’s fleet numbers 572 aircraft, some owned and some leased.
Shipping companies have also benefited from technological developments in recent years. These are not only skimmers but also land transport using apps like Uber and Lift, and the expectation is that with the development of the autonomous vehicle, it will become a major means of transport for them.
Against the backdrop of rising demand in shipping, the delays in the global supply chain – created by the halting of shipping shipments following the “traffic jam” in the Suez Canal, due to the blockage of the lane by the Ever Given cargo ship – have led more and more companies to switch shipping. This is also supported by the fact that the huge congestion in ports is now leading many of them to deal with workers’ strikes, against the background of the demand for more working hours in the face of congestion. The longer these difficulties last, the greater the demand from consumers and businesses for fast air and land delivery services.
No wonder sea freight prices have doubled and air freight prices have skyrocketed by 200%. Quite a few companies that do not have an independent shipping system estimate that this phenomenon will not disappear soon. This week, for example, shoe store chain CEO Steve Madden said the jump in shipping prices is the company’s biggest challenge in the coming months. Israeli solar energy company Solaredge said with the release of its first quarter financial statements that operating profitability in the second quarter will hurt.
Good things are easy to get used to
Although more and more people are getting vaccinated and leaving home after the closures, there are quite a few reasons that support the continued growth of the air and land shipping industry. At UPS for example it has been estimated that the demand for air and land shipping will continue to grow this year thanks to the opening of more new businesses and the growing need for fast shipping services; Those who have had a good service experience (and fast delivery) will surely try this in the future as well.
On top of that, many consumers today have more money thanks to government grants – so they can buy more remotely. The fact that many countries still do not receive tourists leaves more money in the pockets of consumers for online shopping.
However, it seems that most of the increase in air and land shipping activity will come from online growth. If in 2020 the global air freight market was estimated at $ 270.2 billion, by 2027 it is expected to grow by about 40% to over $ 376 billion, according to a report by research firm Valuates Reports. The fastest growing segment will be the express delivery. It is not surprising to find that the fastest growth will be in the Asian region, mainly thanks to the Chinese online giants.
The last factor in the growth of the air freight sector is precisely the struggle in Corona. Companies like FedEx and UPS are benefiting from the sharp rise in corona vaccine shipments – an area that is unlikely to go away in the coming years. UPS has so far shipped 196 million vaccine packets worldwide. Although about 200 million people have been vaccinated in the United States, in most of the world the vaccination process is far from over. No matter how you look at it, as long as it is here – and even after it disappears – the corona will continue to support air and land transport.
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