Transportation Deployment Casebook/2019/Australia's International Airline Freight

Qualitative Analysis
Description:

International airline freight involves importing and exporting goods to and from Australia via the use of aeroplane travel. Airline freight is carried on cargo planes, which are designed to have higher wings, a larger fuselage, higher tails and more wheels. However, passenger planes carry the majority (83%) of international airline freight. For example a standard passenger plane such as a Boeing 747-400 can hold up to 150m^3 of cargo along with 400+ passengers. Since Australia is an island separated from other countries by a vast amount of sea, airline freight is often the only option of moving a good to or from the country. International airline freight is a major contributor to Australia’s economy, as it accounts for approximately 70% Australia’s total freight. The main dedicated international airline freight companies are Qantas, Toll and Virgin which operate mainly in Sydney, Melbourne and Brisbane. The airports are owned by the commonwealth but are operated by privately owned companies which provide a wide range of services for freight.

Advantages:
 * Accessibility – flying cargo by air is not limited to the physical terrain and is capable of reaching any part of the world
 * High speed – airline freight is significantly faster at transporting goods over long distances than other methods such as by boat.  This is particularly important for perishable goods.
 * Security – there is less handling of items during transportation, hence less risk of damaging the product
 * Does not require additional infrastructure such as roads and ports for ships

Main Markets:

Airline freights main markets are goods that have a high value or can perish. Australia’s main exports by weight are perishables such as meat, vegetables and fruit, where the top exporting countries are New Zealand, Singapore and China. Additionally, imports by weight are machines and appliances where the top importing countries are China, US and New Zealand. In comparison to this the main export and import of goods by value are gold, medicinal and pharmaceuticals.

Other Competing Modes – Maritime

Since Australia is an island, the only mode of international transport of goods was via sea. Moving goods through the ocean took a very long time and it was not possible to move perishables or time sensitive items.

Invention of Airline Freight and Early Market Development:

World War II encouraged the development of airline freight, where large machinery and supplies had to be transported quickly to support the movement of troops. The use of passenger planes really gave birth to the freight industry. The use of passenger planes really gave birth to the freight industry, as it was soon discovered that goods and people could be moved at the same time. The modern form of international airline freight began in the 1970s when express door-to-door package services provided by companies such as DHL and FedExpress combined with the new Boeing 747, which was the first commercially flown wide body plane.

Birthing and Growth Phase:

High global inflation partly triggered by the 1973 oil crisis resulted in a stronger export growth in the 1970s. Later on, in the 1980s and 1990s economic deregulation opened Australia’s economy to the world, this consequently resulted in stronger export growth. In regards to Australia’s imports, growth was initially slow during the 1970s due to Australia’s tariffs. However, they were soon lifted in 1973-4 which resulted in an increase again. During the 1980s, other factors such as a contraction in economic growth and a reduction in oil prices resulted in reduced import growth, until tariffs were lifted further again in 1983-4. From then onwards until the 2000s, imports grew steadily.

Turbulence in Australian international airline freight from 1998 onwards was due to multiple factors such as the Asian Financial Crisis, 9/11 Twin Towers terrorist attack and the GFC. This would have in turn affected policy, as security measures increased airline freight became more difficult and demand for goods.

Kingsford Smith Airport in Sydney is Australia’s most significant international air freight gateways due to the large proportion of passenger international flights. Relaxation of operational restrictions in particular Sydney’s curfew and capacity limitations would result in significantly higher productivity of international airline freight. Western Sydney’s airport is expected to attract dedicated freighters which is a solution to Sydney’s current restrictions.

With the development of the internet and consumer e-commerce practices, are changing the way products are purchased and transported. Companies such as Amazon provide consumers in Australia the platform to easily order products from overseas and vice versa.

As mentioned earlier, the main advantage of airline freight is that it is much faster than its maritime competitors, so fast and efficient operations of an airport is extremely important. Customs clearing in which clearance involves the airway master bill and customs declaration to be processed. Depending on the country these goods can be cleared within 1–2 hours over a 24/7 hours basis. Inspection of the goods involves x ray scanners which ensures the product is what is stated in the documentation. Cargo handling is mainly done by a contracting company in which the cargo is moved to loading docks for trucks to transport the goods to its next location.

Quantitative Analysis
The Data

The data collected for the quantitative analysis is shown in the table below and was obtained from the Bureau of Infrastructure, Transport and Regional Economics. A comparison between the actual and predicted freight is also shown in the table below to show the total life cycle of international freight in Australia. Predicted Value

The following 3-parameter logistic function was used to predict the freight:

Defined variables used in the analysis:

·     S(t) – status measure

·      t – time (year)

·     t0 – inflection time (year)

·     K – saturation status level

·     b – a coefficient

A range of k values from 1000 – 2000 were estimated, in which K=1150 was found to be the value that provided R^2 = 0.97 (a very good fit) which was the closest to 1 and hence the best value to use. The resultant b and t0 was 0.11 and 1999 respectively. Therefore, it is clear that growth of the freight life cycle began to slow after the year 1999.

Model

(Image of Model could not be uploaded)

From the above figure the components of the life cycle were determined and are shown in the following table. The model indicates that a maximum freight of 1,150,000 tonnes will be reached by 2035, which suggests that the current freight industry is currently at the end of its growth phase and close to reaching maturity. However, IATA predicts that Australia’s international airline freight will grow considerably (by 70%) over the next 20 years.