E-commerce bolsters postal, logistics businesses

Exponential growth in e-commerce and people’s purchasing habits moving online the opportunity is huge for the air mail/express industries. Reji John…

The first aerial mail transportation may be traced back to 1870, when in that year letters were carried out of beleaguered Paris by free balloons, cast adrift in the winds. The first of such flights was made on 23 September 1870, and carried 500 pounds of mail. This service, of course, was not satisfactory, as the balloons could not be controlled and were just as liable as not to land in enemy territory. Some of them were carried by the winds many miles from Paris before they came down, and some of them were never heard of after leaving Paris.

However, in 1911 demonstrations of airplane mail service were made in India, England and the United States. The first air mail service in the US, however, was conducted at the aviation meeting at Nassau Boulevard, Long Island, New York during the week of September 23 to 30, 1911. Earle L. Ovington, with his “Queen” monoplane, was duly appointed an air mail carrier and covered a set route between the temporary post office established at the flying field and the post office at Mineola, New York dropping the pouches at the latter point for the postmaster to pick up.
Fast forward to 2015; things are so dramatically different. Imagine a situation where a corporate organisation wants to get important documents delivered to its global offices at a particular date and time or think of a parent in India wanting to surprise their daughter in the US on her birthday. In both these instances and in several other similar cases it is the airmail that delivers without delay. Today postal departments of countries around the world use air transport for mail and this is despite the fact that there is a revolutionary change in the way human communication has evolved over the last century. Particularly with the digitisation of communication over internet there was a fear that the post would become redundant. But that is not the case.

It is estimated that the boom in online shopping across the world is driving huge business opportunities in the postal and logistics segments. The more connected we are the more opportunities present themselves; so the online shopping trend will continue to impact growth for the air cargo industry, in which air mail segment plays an important role.

E-commerce is currently experiencing growth at an average rate of 20 percent per year, and its rise is set to continue. As such, the internet economy can be counted as being among the fastest-growing sectors. In 2015, worldwide revenues from B2C e-commerce will reach almost 1.5 trillion euro. In the USA and Europe, e-commerce already represents a little over five percent of the GDP. The UK is ahead of the pack with 12.4 percent, followed by South Korea with eight percent and China with 6.9 percent. These trends and developments are significant drivers for growth in the airmail sector of air cargo industry.

According to Ken Allen, chief executive officer of DHL Express, “there is an internet revolution going on globally.” And Allen is one among many logistics company chief executives who want to ride on the internet revolution by offering delivery solutions to express orders placed on e-commerce websites. If in the past air mail was all amount documents and letter, today they are largely about packets of various sized ordered on online retail websites. And the parcels travel across the world.

“Over 25-30 per cent of our sales business is in the online segment. The strong growth in the online shopping and shipping arena will continue to be one of major focuses for 2015. We expect a 30 per cent growth in this segment in the next few years,” said Allen of DHL Express.
International express traffic continued to grow faster than the average world air cargo growth rate, expanding 8.9 percent in 2012 and 5.8 percent in 2013. The distinction between express and general air cargo continues to blur. Traditional providers are expanding their time-definite offerings, and express carriers, freight airlines, and postal authorities are consolidating.

The average international express shipment size has also continued to grow. “Average shipment weight is estimated to have increased from 2.7 kilograms in 1992 to 6.6 kilograms in 2013, which indicates continuing inroads of express services into the traditional province of general air cargo. As businesses continue to expand beyond domestic and nearby regional markets, the international express sector will continue to grow, albeit at more sustainable, long-term rates,” said a Boeing analysis.

According to Boeing World Air Cargo Forecast, world airmail is forecast to grow at a consistent one percent per year. Risks that could affect future airmail growth include inroads by express operators into package mail, increasing reliance on Internet communication, entry of traditional postal services into express air freight operations, and more stringent security requirements. The baseline forecast for total world air cargo predicts that traffic will more than double between 2013 and 2033. Worldwide traffic will grow from 207.8 billion RTKs in 2013 to more than 521.8 billion RTKs by the end of the forecast period. Sustained economic growth, along with decreasing yields, contributes significantly to the growth of the air cargo industry.

India Post, incidentally the world’s largest postal network, is demanding dedicated freighters from national carrier Air India to meet the rising demand for packet deliveries from India’s proliferating e-commerce sector. The demand was made known by M S Ramanujan, Chief Postmaster General (CPMG) of Karnataka (a state in India) to the country’s Minister for Communications and Information Technology Ravi Shankar Prasad (the department of posts comes under this ministry). Ramanujam said the department’s e-commerce business in the last financial year had touched Rs 100 crore and it is slated to reach Rs 200 crore in 2015-2016. “With the booming air cargo business, we need dedicated aircraft for the transfer of air mail cargo. The department has been facing hurdles in using private airlines and Air India for the purpose,” he said.