Maersk continues to move ahead with plans to grow its air cargo business in 2024 even as many competitors pull back in the wake of a painful downturn, culminating with a milestone next quarter when Boeing expects to deliver the first two 777s for the airline operation.
The developments underscore the strategic shift in recent years of Danish shipping power A.P. Moller-Maersk (CSE: MAERSK) into an integrated logistics provider that can provide customers a full menu of supply chain and freight transportation services tailored to their specific needs.
Maersk Air Cargo in April opened a 90,000-square-foot airfreight station about 20 minutes from Miami International Airport to facilitate the movement of transshipment cargo from Asia to Latin America. The Miami gateway offers an alternative for Maersk’s Asian customers looking to serve the Latin American market with predictable transit times and adds another node to Maersk’s air cargo footprint in the United States. It follows the establishment of foreign carrier rights 18 months ago and processing centers near Chicago O’Hare, Atlanta and Los Angeles airports.
Most shipments to Latin America will move on Maersk Air Cargo’s private cargo airline to hubs at Chicago Rockford International Airport and the Greenville-Spartanburg airport in South Carolina, and be trucked to the customs bonded facility in Miami for consolidation and rebooking on outbound commercial carriers, said John Wetherell, global head of airfreight, in a phone interview.
Wetherell was promoted last month from his role as regional head of airfreight in North America to run the commercial side of Maersk’s air cargo business, including managing relations with commercial carriers and strategic network planning. His career includes management stints at major global freight forwarders Ceva Logistics, Kuehne+Nagel and DHL.
Maersk Air Cargo offers nine flights per week from China to the U.S. with three Boeing 767-300 freighters. The aircraft are owned by Maersk but operated on its behalf by Miami-based Amerijet International. Six flights shuttle between Rockford and Hangzhou on the central China coast near Shanghai, with a connection each way in Seoul, South Korea. The other flights operate between Shenyang in northern China and South Carolina, also stopping in Seoul.
Some customer shipments will be routed directly to Miami on commercial flights from China, Maersk managers said.
Meanwhile, Maersk Air Cargo recently began flying into the United Kingdom on a scheduled and charter basis after receiving permission to temporarily operate a handful of 767 cargo jets on routes between its base in Billund, Denmark, and Birmingham, England, Wetherell said. The exemption follows last month’s application to the civil aviation authority for a new subsidiary to conduct commercial operations in support of European and U.K. customers.
In December, the airline ran a handful of trial flights between Hangzhou and Bournemouth Airport to test the trade lane’s viability for regular service, but the current flights are utilizing other airports.
Bigger freighters
The next major expansion will involve the fleet itself. Maersk currently operates 21 Boeing 767-200 and 767-300 freighters, the majority of which were converted after life as passenger aircraft. Two factory-built 777s are expected to arrive by late summer or early autumn and could enter service in time for the busy fourth quarter, according to company representatives.
Wetherell said Maersk will use its own crews to fly the 777s, which will represent the largest cargo jet the airline has ever flown. The planes will be stationed at Maersk’s main base in Billund and fly under a Danish license. He said Maersk is hiring pilots with previous experience in the 777, but a job opening for 777 instructors and examiners posted on Maersk’s website suggests the airline is also training some members from its existing 767 pilot group for the new aircraft type.
In addition to the trans-Pacific flights operated by Amerijet, Maersk regularly flies between Billund and Hangzhou. A large number of Maersk’s 767s are also contracted out to UPS, supporting its parcel delivery service in Europe from a hub in Cologne, Germany. And the freight forwarding side of the business has dedicated Boeing 747-400 charter aircraft leased from Magma Aviation flying scheduled service between Frankfurt Hahn Airport and both Rockford and Greenville-Spartanburg multiple times per week.
Maersk Air Cargo’s expansion comes as other airlines have paused growth ambitions due to financial strains from an 18-month downturn in freight demand that began to ease in the fourth quarter of 2023. Air Canada, for example, recently backed out of reservations for production slots to convert two Boeing 767-300 aircraft from passenger to cargo configuration, and last year canceled an order with Boeing for two 777-200 production freighters. Another Canadian airline, Cargojet, last year shelved plans to acquire eight 777 aircraft and convert them to freighters. And Maersk partner Amerijet this year returned six Boeing 757-200 converted freighters to lessors.
Executives have a goal of carrying about one-third of the company’s annual air tonnage within its own controlled freight network through a combination of owned and leased aircraft. By controlling its own capacity, Maersk can deliver more reliable service and fly to smaller, less crowded airports where shipments can be processed without delay.
Maersk incorporated air cargo into its integrated logistics strategy in early 2022 by expanding the scope of an existing cargo airline, beyond being a provider of dedicated transport for UPS and Royal Mail in Europe, to carry goods for its own customers. It acquired extra aircraft and Senator International, a large air forwarding company based in Germany, to give shippers more air transport options in addition to ocean, trucking, rail, warehousing, import/export services, shipment pickup and last-mile delivery.
In February, Maersk launched fully digital airfreight booking on its website. The online tool provides instant pricing to 70,000 airport connections around the world.
The forwarding unit arranges shipment itineraries for businesses utilizing the capacity of Maersk Air Cargo, charter aircraft under its control and regular commercial airlift. Specialized services it can provide include sea-air transits, standby flights and charters. Having Maersk-owned and controlled aircraft is intended to give the logistics provider more end-to-end control of the delivery process.
“Integrators have lots of options and options are basically power,” especially when there are supply chain disruptions or capacity is tight in certain geographic areas or modes, said Yohei Sato, a business development manager for airfreight based in Japan, on a recent FreightWaves webinar about the airfreight market.
Colleague Marcus Ng, regional head of airfreight for Asia-Pacific, stressed the importance of shippers sharing information about freight requirements with their air logistics partner to guarantee shipments can be moved cost-effectively as e-commerce platforms in China soak up huge amounts of available capacity this year.
In addition to updated forecasts and longer lead times, cargo owners need to provide more granular shipment details beyond the weight and dimensions, such as whether or not the shipment can lie down for better consolidation in a pallet and the company’s primary ship out days, to enable forwarders to pick the best speed and pricing options, he said.
Maersk earlier this month reported logistics services’ revenue increased 1% to $3.5 billion, but gross profit decreased by $35 million, to $1 billion, and profit margin by 1.3 points primarily due to lower rates across modes for managed transportation. Transported revenue increased $28 million, to $1.6 billion, on higher volumes from air, less-than-container load and first-mile truck service.
Airfreight volumes grew 52% year over year in the first quarter, to 94,000 tons, and were on par with the fourth quarter of 2023, the time of year when shipping is traditionally at its peak.
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