Australia's International Airline Freight

Qualitative Analysis

Description:

International airline freight involves importing and exporting goods to and from Australia via the use of aeroplane travel.  Airline freight is carried on cargo planes, which are designed to have higher wings, a larger fuselage, higher tails and more wheels.  However, passenger planes carry the majority (83%) of international airline freight.  For example a standard passenger plane such as a Boeing 747-400 can hold up to 150m^3 of cargo along with 400+ passengers.  Since Australia is an island separated from other countries by a vast amount of sea, airline freight is often the only option of moving a good to or from the country.  International airline freight is a major contributor to Australia’s economy, as it accounts for approximately 70% Australia’s total freight.  The main dedicated international airline freight companies are Qantas, Toll and Virgin which operate mainly in Sydney, Melbourne and Brisbane.  The airports are owned by the commonwealth but are operated by privately owned companies which provide a wide range of services for freight.    

Advantages:

-      Accessibility – flying cargo by air is not limited to the physical terrain and is capable of reaching any part of the world

-      High speed – airline freight is significantly faster at transporting goods over long distances than other methods such as by boat.  This is particularly important for perishable goods.

-      Security – there is less handling of items during transportation, hence less risk of damaging the product

-      Does not require additional infrastructure such as roads and ports for ships

Main Markets:

Airline freights main markets are goods that have a high value or a perishable.  Australia’s main exports by weight are perishables such as meat, vegetables and fruit, where the top exporting countries are New Zealand, Singapore and China.  Additionally, imports by weight are machines and appliances where the top importing countries are China, US and New Zealand.  In comparison to this the main export and import of goods by value are gold, medicinal and pharmaceuticals.

Other Competing Modes – Maritime

Since Australia is an island, the only mode of transport of goods for was via sea.  Moving goods through the ocean took a very long time and it was not possible to move perishable or time sensitive items.  World War II encouraged the development of airline freight, where large machinery and supplies had to be transported quickly to support the movement of troops.  The use of passenger planes        

Invention of Airline Freight:

Early Market Development:

High global inflation partly triggered by the 1973 oil crisis resulted in a stronger export growth in the 1970s.  Later on, in the 1980s and 1990s economic deregulation opened Australia’s economy to the world, this consequently resulted in stronger export growth.  In regards to Australia’s imports, growth was initially slow during the 1970s due to Australia’s tariffs.  However, they were soon lifted in 1973-4 which resulted in an increase again.  During the 1980s, other factors such as a contraction in economic growth and a reduction in oil prices resulted in reduced import growth, until tariffs were lifted further again in 1983-4.  From then onwards until the 2000s, imports grew steadily.  

Turbulence in Australian international airline freight from 1998 onwards was due to multiple factors such as the Asian Financial Crisis, 9/11 Twin Towers terrorist attack and the GFC.  This would have in turn affected policy, as security measures increased airline freight became more difficult and demand for goods.    

Kingsford Smith Airport in Sydney is Australia’s most significant international air freight gateways due to the large proportion of passenger international flights.  Relaxation of operational restrictions in particular Sydney’s curfew and capacity limitations would result in significantly higher productivity of international airline freight.  Western Sydney’s airport is expected to attract dedicated freighters which is a solution to Sydney’s current restrictions.  

With the development of the internet and consumer e-commerce practices, are changing the way products are purchased and transported.  Companies such as Amazon provide consumers in Australia the platform to easily order products from overseas and vice versa.    

Quantitative Analysis

The Data

The data collected for the quantitative analysis is shown in the table below and was obtained from the Bureau of Infrastructure, Transport and Regional Economics.  A comparison between the actual and predicted freight is also shown in the table below to show the total life cycle of international freight in Australia.    

Year	Actual Freight (tonnes x 1000)	Predicted Freight (tonnes x 1000)
1971	33.4	49.4
1972	36.3	54.8
1973	44.7	60.7
1974	58.1	67.2
1975	65.8	74.4
1976	71.1	82.3
1977	78.5	90.9
1978	89.2	100.4
1979	111.8	110.7
1980	122	122.0
1981	127.8	134.3
1982	157.7	147.7
1983	166.7	162.1
1984	193.9	177.8
1985	222.9	194.6
1986	235.8	212.7
1987	268.4	232.1
1988	296.1	252.7
1989	324.6	274.7
1990	353.9	297.9
1991	357.5	322.3
1992	379.8	348.0
1993	432.8	374.7
1994	476.3	402.5
1995	543.5	431.2
1996	564.9	460.7
1997	614.9	490.8
1998	645.6	521.4
1999	645.6	552.4
2000	687.2	583.4
2001	665.7	614.4
2002	634.3	645.2
2003	635.1	675.5
2004	627	705.3
2005	702.4	734.4
2006	726	762.6
2007	754.5	789.9
2008	781	816.0
2009	709.4	841.1
2010	760	864.8
2011	822.5	887.4
2012	856.8	908.6
2013	882.8	928.6
2014	882.4	947.3
2015	939.8	964.7
2016	996.6	980.9
2017	1044.8	995.9
2018	-	1009.7
2019	-	1022.5
2020	-	1034.2
2021	-	1045.0
2022	-	1054.9
2023	-	1063.9
2024	-	1072.1
2025	-	1079.6
2026	-	1086.4
2027	-	1092.6
2028	-	1098.2
2029	-	1103.3
2030	-	1107.9
2031	-	1112.1
2032	-	1115.8
2033	-	1119.2
2034	-	1122.3
2035	-	1125.1
2036	-	1127.6
2037	-	1129.8
2038	-	1131.9
2039	-	1133.7
2040	-	1135.4
2041	-	1136.8
2042	-	1138.2
2043	-	1139.4
2044	-	1140.4
2045	-	1141.4
2046	-	1142.3
2047	-	1143.1
2048	-	1143.8
2049	-	1144.4
2050	-	1145.0

Predicted Value

The following 3-parameter logistic function was used to predict the freight:

Defined variables used in the analysis:

·     S(t) – status measure

·      t – time (year)

·     t0 – inflection time (year)

·     K – saturation status level

·     b – a coefficient

A range of k values from 1000 – 2000 were estimated, in which K=1150 was found to be the value that provided R^2 = 0.97 (a very good fit) which was the closest to 1 and hence the best value to use.  The resultant b and t0 was 0.11 and 1999 respectively.  Therefore, it is clear that growth of the freight life cycle began to slow after the year 1999.

 

Model

From the above figure the components of the life cycle were determined and are shown in the following table.  The model indicates that a maximum freight of 1,150,000 tonnes will be reached by 2035, which suggests that the current freight industry is currently at the end of its growth phase and close to reaching maturity. However, IATA predicts that Australia’s international airline freight will grow considerably (by 70%) over the next 20 years.

Life cycle Phase	Year
Birth	1971
Growth	1996
Maturity	2035