Analysts offer differing views of time-definite market

By Peter Bradley, Toby Gooley, and James Aaron Cooke -- Logistics Management, 1/1/2000

Two groups of transportation-industry analysts are painting different pictures of the time-definite cargo market in the United States this year. The Colography Group, a market-research firm in Atlanta, is predicting that the market will soar, while investment firm Bear Stearns & Co. Inc. in New York City offers a more sober assessment.

A recent report by Colography, based on a survey of thousands of shippers, predicts that the U.S. expedited market will generate $82.4 billion in revenue this year--a 5.7-percent gain over 1999's levels. Colography defines that market as including all shipments moved by domestic air, ground-parcel, less-than-truckload, and air-export services. The company's analysts forecast that expedited shipments will reach some 6.8 billion, a 4.7-percent increase over 1999's figures.

Domestic air shipments also are expected to grow this year, exceeding last year's volumes by 8.8 percent. Colography's analysts believe that gains in air freight will come at the expense of the ground-parcel and LTL sectors, which are forecast to grow by just 1.2 and 0.7 percent, respectively.

Air export shipments are predicted to top 91 million, an all-time record and a 6.1-percent hike over 1999's volumes. Revenue for that segment is projected to reach $8.3 billion, accounting for more than 10.1 percent of all expedited cargo revenue. The integrated carriers are expected to handle some 69.7 percent of all U.S. air export shipments. Integrated carriers, which operate their own aircraft and ground systems, include FedEx, United Parcel Service, Airborne Express, DHL, Emery Worldwide, and BAX Global.

The robust economy is driving the surge in expedited shipments. "The projected gains in air services, especially in the higher-priced overnight-package segment, reflect continued business confidence in the U.S. economy and the growing optimism over the recovery in key export markets," says Ted Scherck, president of the Colography Group. "Companies generally don't increase their airfreight spending if they expect economies to retrench."

Colography's upbeat predictions contrast with those of Bear Stearns. The investment firm surveyed 70 shippers last fall on their use of expedited services. Based on their responses to this and an earlier survey, Bear Stearns analysts predict that growth of domestic air heavyweight and express parcels will slow, while the growth of less-than-truckload and ground-parcel shipments will accelerate--just the opposite of Colography's predictions. According to Bear Stearns, 72.0 percent of the shippers surveyed said their use of domestic air-parcel service would grow by just 2.0 percent or less. Another 31.0 percent said they planned to decrease their use of overnight and deferred parcel-express services.

When asked why they planned to make fewer domestic overnight and deferred parcel-express shipments, some 45.0 percent of respondents said they would use more e-mail and other electronic means of transmitting information. Another 25.0 percent said they would rely more often on less service-sensitive, lower-priced ground options.