In the complicated world of global shipping, companies have traditionally relied on large cargo ships to ferry goods from overseas producers to domestic distributors. Recently, though, these enormous vessels just haven’t been quick enough for firms who need to send products to customers within a matter of days. These time-crunched companies often turn to air carriers that can move products faster but often with added costs. Along with simply being more expensive than cargo ships, increased demand also caused air freight rates to jump by more than 17 percent over the course of last year.

Still, many companies are grateful to pay higher costs if it means they can get their goods onto a plane. With firms now using air freight to ship everything from smartphones to toys, they must compete for space with products that have long been transported by air, such as car and manufacturing parts. “You’re literally begging and pleading to get on airplanes, leveraging any contact you can,” said Neel Jones Shah, global head of airfreight for the logistics company Flexport. Some companies are beginning to route freight shipments through airports in Detroit and Charlotte so as to avoid bottlenecks in high-traffic hubs like New York and Atlanta.

Then there’s Amazon, which is tackling the problem by creating its own airline. By the end of the year, the e-commerce giant plans to convert 40 Boeing 747s into freighters that can quickly distribute Amazon Prime orders across the nation. In 2017 the company acquired three jets built in the early 1990s that had been parked in the Arizona desert to avoid corrosion. While certainly cheaper, some experts fear that Amazon’s reliance on older planes will inevitably lead to increased maintenance costs down the road. Broken-down planes could also delay orders, placing the company at risk of damaging their reputation for providing quick shipping. Amazon doesn’t appear to be too worried, though, with the company planning to open its own cargo hub at a Cincinnati airport by 2020.

Questions:

1. What are the advantages of using air freighters to ship products rather than large cargo vessels? What are the disadvantages?
2. Do you think Amazon’s reliance on older planes could harm the growth of their new airline? Could it even damage the company’s reputation for quick shipping?

Source: Doug Cameron and Jennifer Smith, “Why Airfreight Traffic Is Up: Dog Food and Semiconductors Are Vying for Space,” The Wall Street Journal, January 9, 2018.