Expedited Cargo Market Set to Grow; Ground Trumps Air

If you’re in expedited cargo operations, you’re in luck. You can expect another year of strong performance, predicts The Colography Group Inc. in its latest report on the $98 billion U.S. expedited cargo market.

The ground parcel and the less-than-truckload categories are projected to show shipment growth of 5.1% and 3.8%, respectively, over 2005 levels. The two categories combined will account for 86% of new U.S. expedited shipment growth in 2006. Just over 250 million new shipments will be added to U.S. expedited commerce in the coming year.

By contrast, activity in the domestic air market will be muted, with shipment volumes rising by only 1.2% over projected 2005 activity. (The U.S. air export category, influenced by different factors, will record a 7.3% increase in year-over-year shipment levels.) The weakness in air activity will be most pronounced in the domestic overnight-delivery segment, with paltry gains in package and freight shipments, and a year-over-year 0.6% decline in overnight letter shipping.

In a trend not seen for several years, non-integrated air carriers (forwarders, combination airlines, and other intermediaries) will grow their domestic air shipments at a faster clip than their integrated carrier rivals. In addition, the non-integrated carriers will gain domestic and export shipment share in 2006, albeit slightly. Still, the integrators are projected to control 61% of the domestic air market and nearly 70% of the export market.

“Businesses are increasingly reluctant to pay a premium for overnight air service, and continue to build their inventory and distribution models around more economical, time-definite deliveries moving in ground parcel, LTL, and TL (including renewed interest in private fleets),” says Ted Scherck, president of The Colography Group. “It is revealing that the fastest growing segment of air transport—projected at 2% year-over-year shipment growth—is in the second-day air package category.”

TCG also reports the following findings:

* The gains posted by the non-integrated air carriers will coincide with a continued rebound in the U.S. Postal Service’s Priority Mail product, particularly in the rural residential market where commercial carriers are raising their rates the most.

* The continuing high cost of crude oil will force carriers to maintain fuel surcharges and will become an increasingly important factor in supply chain decision-making. As jet fuel prices are more pronounced and volatile, this trend will have a disproportionately adverse impact on air activity to the benefit of the surface sector.

* Revenue from LTL shipments is projected to rise 11% in 2006, due in part to the impact of escalating fuel surcharges. Revenue for the average LTL shipment is projected to rise 7%, more than double the projected rate of revenue increases for domestic air, air export, and ground parcel. In all, U.S. expedited revenue will reach $97.9 billion in 2006, up 7.6% from projected 2005 levels.

For more information, call 678-385-2500 or visit http://www.colography.com.

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