How Integrators Changed the Air Cargo Industry
Cargo integrators such as FedEx, UPS, Purolator, and yes, even Prime, play a very important role in global logistics as a whole.
Cargo integrators such as FedEx, UPS, Purolator, and yes, even Prime, play a very important role in global logistics as a whole.
DALLAS — Getting a package or letter can be exciting or just mundane, but that package or letter could have had an extraordinary journey to reach its final destination. Perhaps it crossed an ocean or a country; maybe it only crossed a city.
Whatever the case, cargo integrators such as FedEx, UPS, Purolator, and yes, even Amazon Prime, play a very important role in global logistics as a whole.
Integrators are a type of logistical company that takes full custody of a package or delivery from pickup to drop-off. Integrators have their own fleet of trucks, planes, and sorting centers, ensuring they maintain complete control from start to finish.
The most well-known integrators worldwide are the likes of FedEx, UPS, and DHL, all of which have large fleets. Aircraft and truck types can differ; however, the core values of an integrator stay the same. All integrators share the following elements:
Since the start of the decade, the popularity of online shopping with delivery right to your door has skyrocketed. All this ultimately made integrators one of the most popular means of shipping. Shipping has gotten to a point where we can determine exactly when a package will arrive and where it is, which is all thanks to integrators.
Airlines around the world have cargo brands. Airlines such as Lufthansa, Korean Air, and Qatar Airways all have all-cargo aircraft. However, aircraft such as these are only useful from airport to airport. More often than not, any cargo from these airlines is put on a truck to be taken to its final destination. It is this transfer where integrators truly shine.
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If a package is shipped with FedEx from Moncton, Canada, to Birmingham, England, the package will first be picked up by a FedEx truck. After the truck arrives at the FedEx sorting facility, the package will be sorted onto a FedEx aircraft (probably even two aircraft).
Upon arrival in England, the package will be placed back on a FedEx truck to its final destination. It is evidently easy to see the trend of FedEx always having custody of the package from door to door.
Shipping a similar package with an airline as cargo would be a very different routing. For starters, the package will most likely be shipped as belly cargo on a passenger flight rather than an all-cargo flight.
Palletized cargo and ULDs (unit load devices) can equal extra profit on top of passenger ticket sales to an airline. The package will be part of a load assembly that is put in the belly of a wide-body aircraft which also carries passengers up top.
To get to and from the airport, contracted trucking companies will transport the package from the pickup point to the departure and vice versa upon arrival, thus the airline with which the cargo was originally shipped with will most likely not retain full custody of the package throughout its journey.
Integrators are as large as an oligopoly. Primarily, this is because startup costs for integrators are very high. Airplanes, trucks, and real estate are just a few of the costs associated with starting an integrator. Even if an integrator is formed, the large market shareholders (FedEx, UPS, and DHL) tend to acquire smaller companies for their assets plus control in a specific market.
FedEx is a perfect example.
Starting operations with 14 Dassault Falcon 20 aircraft, FedEx grew exponentially, quite literally overnight. A major acquisition in 1989 helped FedEx break into the Asian market with the purchase of Flying Tiger.
Acquisitions such as this aided FedEx in expanding into different markets as it was more often a better choice economically to purchase a smaller integrator rather than purchase assets and real estate themselves.
UPS is another largely recognized integrator. UPS however started almost 70 years before FedEx, in Seattle. Another key differentiation is that UPS is heavily focused on the US domestic market which accounts for over half the company's revenue. The rest is a combination of international packages and freight/supply chain deliveries.
One of the newest players in the game of integrators is Amazon Air. Amazon Air is a very special integrator, to say the least. While the aircraft may sport the blue-and-gray livery with the words "Prime Air" painted on the side, the aircraft is most likely not owned and operated by Amazon.
Airlines such as Sun Country, Atlas Air, and ABX Air all operate under the Amazon Air banner. In most cases, Amazon even has part ownership in some of its contracted airlines. Amazon even operates its own trucks on the ground, but some of this is still contracted to a third party.
This means Amazon is in a unique section of integrators. But with recent acquisitions, Amazon is inching ever so slightly forward to becoming a true integrator.
Ever-growing e-commerce and freight forwarding are all positive metrics for the growth of air cargo. Air cargo through both integrators and contracted airlines will continue to increase revenue for years to come.
However, as the technology of unmanned aircraft gets better, the prospect of automated delivery gains traction. Amazon (of course) is one of the forerunners of automated drone delivery. Short-range drone delivery seems to be the future of feeder services, replacing antiquated trucks.
The air cargo industry often refers to feeders as RFS (or road feeder service), which are any road routes that can transport cargo. Could drones be the RFS replacement? Or will air cargo continue to be supplied by trucks?
The one upside to drones is that they are mostly electrically powered by batteries. A battery-powered drone is much more environmentally friendly than a typical truck. This could aid an integrator's net zero emissions goal, should they decide to have one.
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Featured Image: FedEx 757. Photo: Liam Funnell/Airways
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