Air Freight by Land
Mr. Downey spent some 20 years with United Airlines and Mr. Davis had over 10 years experience as an air freight forwarder before both of them added a trucking twist to their transportation careers.
Both men are part of the growing trend of using trucks to make time-definite deliveries that used to be the domain of air freight companies.
“It was obvious to me that there was an opportunity and a need for better ground connections for both airlines and forwarders,” said Mr. Downey. “Truckers were not really involved with the airlines — it was an arm’s length relationship. That doesn’t mean it was adversarial, but it means (truckers) were not necessarily tuned into the schedule and service commitments needed in the air freight industry.”
From just $700,000 in 1982, Towne’s revenue grew to over $99 million in 1998.
Mr. Davis took a slightly different route based on his freight forwarding experience at the Los Angeles International Airport.
“There was a real lack of daily air capacity between LAX and Miami for international shipments,” he said. “It’s a gap I decided to try and fill with daily road service that was far cheaper than service by air.”
Mr. Davis formed Sterling Transportation in 1993, contracting with owner-operators and several small trucking companies for one-way, three-day direct service between LAX and Miami. Though he declined to discuss his revenues, Mr. Davis said Sterling has gone from handling 100,000 pounds a week to nearly 2 million pounds a week in just five years. He’s added direct routes between LAX and John F. Kennedy International Airport in New York, plus service between San Francisco, New York and Miami.
The money has been so good that Mr. Davis is contemplating buying between 10 and 20 trucks in 1999.
“Having our own fleet will make our service more efficient, and we can be more profitable at it,” he said.
Mr. Downey and Mr. Davis represent the tip of a trucking iceberg that slowly but steadily has been gaining volume and revenue share of expedited shipments within the U.S.
According to the Colography Group, a Georgia-based research and consulting firm, almost 63% of the projected 5.2 billion expedited domestic shipments in 1999 will move via ground carriers, which will capture just over 48% of that market’s expected $73.6 billion in revenue.
While the ground carriers’ share of expedited shipments has stayed relatively flat over the last two years, the market is expected to increased by $4 billion — and ground carriers will put almost half of that into their pockets.
“Mode is increasingly becoming irrelevant to the expedited market,” said Theodore Scherck, Colography’s president. “What shippers are concerned with is transit time. The ability to provide consistent, thorough and on-time service determines the mode and whether the carrier is a success. Shippers don’t care whether that service is provided by a plane or a truck.”
Even Federal Express, which operates some 300 jet aircraft, would rather be using more trucks — and it already operates a fleet of over 40,000 vehicles worldwide.
“We’re the largest airline in the world, but that’s not what we do. We’d rather use trucks,” said Theodore Weise, the company’s chief executive officer. “If we had a truck that went 500 miles per hour, we’d use that instead of an airplane.” When it faced a possible strike by its pilots in December, FedEx had even planned to shift most of its package handling to ground-based operations (TT, 11-30-98, p. 1).
The growth of time-definite shipments proves to be a double benefit for trucking companies, since they can gain better margins for time-definite shipments, yet still charge rates well below those of air carriers, said Donald Braughton, an analyst with A.G. Edwards & Sons, St. Louis.
“Time-definite delivery is a trend that’s here to stay,” he said. “Almost all goods are shifting to more high-volume, low-density shipping strategies, such as machine parts, personal computers, automotive parts and even foods such as microwave meals. They are not necessarily air expedited goods, but time-definite delivery is very important.”
That time-definite trend, however, is giving rise to different kinds of air freight trucking operations.
For the full story, see the Jan. 4 print edition of Transport Topics. Subscribe today.
