Components The larger the airport, the greater demand for

Components of Aggregate
Demand

 

•           Fuel Costs – Fuel
is number one concern with regard to all cost components and it has dramatically
increased over the last decades. Rising fuel costs make air movement a very
expensive option for cargo transportation.

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•           Road Transport
Competition – Although air transportation is more expensive relative to other
modes of transport, it provides faster shipping times and a good level of
security. However, on some short
distances (up to 300…400 km), trucking companies can compete with the cargo
planes.

•           Global Trade and
Economy – Economic activity and consumer spending directly influences demand
for air cargo transportation. When warehouse costs are high, air delivery is
preferred (InterVISTAS Consulting Inc., 2011).

•           Industrial Factor – Companies with
sudden changes in their manufacturing base either within a region or between
countries can shift their distribution networks, and as a result, can increase
or decrease their demand for air cargo at a particular airport. Recent on-shoring
of manufacturing activities has been seen as a threat to global air cargo
activity as companies move manufacturing operations to North America (including
Mexico) from overseas to save on travel costs. 3D manufacturing (the process of
using special printers to create mechanical parts and other goods) could also
disrupt global supply chains by reducing the production and shipping needs of
valuable, time sensitive products (Copeland, 2012).

•           Supply Chain
Strategy – Typically, air-travel has been used for “last-minute” or “Just in
time” delivery of products, especially for personal packages or retail items. A
firm’s supply chain strategy can affect demand for air cargo, depending on how
they structure their inventory between their local distribution centres and
product suppliers. Some firms elect to “front-end” their inventories at their
local distribution centres versus relying on air-travel to make up for out of
stock products, while some firms elect to “back-end” their inventories by
expediting items by air based on demand.

 

Airport Supply Components

•           Airport Size – The
volume of passengers and cargo at an airport is an important determinant for
the scale of activity around airports. The larger the airport, the greater
demand for a variety of groups involved in air cargo such as integrators and
freight forwarders. Airports which have a limited flight network or small
passenger volumes require less diversity in terms of air cargo providers.

•           Connectivity and
Multi-modal Infrastructure – The availability and access to different
transportation modes can also increase demand for air cargo. Sea-to-air and
rail-to-air connections for example are methods whereby goods come off an ocean
vessel or intermodal rail yard and go onto a pallet at an airport. This
provides more expedient delivery than transporting strictly by sea or rail;
however, it is less expensive than transporting by air only and airports can
greatly benefit from these connections.

•           Capacity – The size
of airport facilities, the size of the airplanes and the infrastructure
surrounding an airport are key components for airport demand. Freight often is
included in passenger trips in the “belly” of planes and the increase or
reduction in plane size and/or passenger capacity can affect total cargo
volume.

•           Regulation and
Security – taxes, fees and security regulations for air cargo are increasingly
complex, and can affect air travel. Security regulations in Canada for example
have increased in line with higher security standards set by the US. Airlines,
freight forwarders and shippers have had to adjust to changing trans-border
security regulations post 9/11 (Putzger, 2012).