Evolution in the cargo transportation industry

Following recent articles in the press regarding the restructure of Air Malta, the subject of cargo has been a recurring topic for debate.

It has been argued that as Air Malta enjoys market leadership on the Malta-London Heathrow route, why can it not enjoy the same market leadership on the same route for cargo?

The question sounds eminently reasonable, yet, by its very nature, it is posed from a passenger centric perspective and, therefore, the answer lies in understanding the market for cargo transportation.

When a company needs to send goods to a particular destination, a number of key factors influence its decision including: the type and value of the goods, the price, the safety of the mode of transport, the speed of delivery and also the reliabi-lity and reputation of the provider.

All will have an impact on the choices available and, usually, an expert in good transportation will be contacted, namely a freight forwarder, who will be able to advise on the most suitable options.

In addition, when booking goods into or out of Malta, not only are there alternative modes of transport, a key factor benefiting shippers are the many different routings available to and from any given European destination.

The movement of cargo within Europe is driven to a greater degree by price over speed, of course with the exception of perishable goods, courier shipments and also mail, to a lesser extent.

With the global economic downturn and the sensitive economic situation in Europe, keeping costs of transporting goods to a minimum remains a strong determining factor in choice of mode of transport and carrier. Air cargo is the most expensive form of transportation for goods, therefore land or sea transportation is the preferred solution to ensure best price.

In 2009, according to mobility and transport statistics issued by the European Commission, goods transport activities within the EU are estimated to have amounted to 3.632 billion tonne kilometres.

This figure includes intra-EU air and sea transport but not transport activities between the EU and the rest of the world. Road transport accounted for 46.6 per cent of this total, maritime transport had a share of 36.8 per cent while air transport accounted for only 0.1 per cent of the total. (As a comparison for passenger transportation, road transport accounted for 83.7 per cent of total and air transport had an eight per cent share.)

The statistics showing the relative share of the different modes of transport within Europe speak for themselves.

For Malta, as an island nation, the seaport enjoys the lion’s share of import and exports of cargo.

Malta is a key transit point in the Mediterranean for maritime cargo destined for Europe and beyond.

Maritime cargo saw 5,507,000 tonnes of goods through Malta’s port in 2009, in comparison with 17,503 tonnes of freight and mail for air cargo on the airlines operating into Malta International Airport (source MIA).

The main air exports consist of pharmaceuticals, microchips, electronics and fish.

There are over 25 airlines servicing the island, including dedicated all cargo freighter services. This increased competition has been of benefit to the end customer by keeping prices down and boosting the number of options for local shippers and freight forwarders to get their shipments to and from the required destinations in Europe and beyond.

While passengers would favour direct flights to a destination rather than transiting in a hub airport, as far as cargo is concerned, this is virtually irrelevant. In many situations, even though there may be a direct flight to a required destination, cargo will be routed via a transit point in another country, or even trucked part of the way, even across borders, to ensure the best price to the shipper.

For Air Malta, which is primarily a passenger airline, cargo represents an opportunity to earn incremental revenue by “filling the bellies”.

Understanding the nature of cargo, it is therefore clear that, while Air Malta is a player in the cargo market, berating it for not being a market leader on specific point-to-point routes is not a helpful argument.

As part of the restructuring of the airline, Air Malta cargo should focus on maximising its revenue-generating ability in the markets it serves while offering a service that allows it to grow loyalty from its freight customers.