Air Carriers

Malawi air carriers are operated by Air Malawi, the only air carrier in the country. Air Malawi has three aircrafts namely, a Boeing 737300, an ATR 42 and a Cessna. The Cessna was recently involved in an accident and may not get back to the sky.

Industrial Structure

Airfreight carriers may be classified as either scheduled or nonscheduled carriers. Scheduled carriers are those that adhere to a fixed time schedule in providing airfreight carriage; nonscheduled carriers do not adhere to a fixed time schedule, but provide airfreight service upon demand. Alternatively, airfreight carriers may be classified as either combination passenger/cargo carriers or as all-cargo carriers. Combination passenger/cargo carriers not only provide combination passenger/cargo service in the same aircraft, but also may provide all-cargo service, where only cargo is transported in a given aircraft. All-cargo carriers, as stated previously, provide only all-cargo service.

The service provided by airfreight carriers is generally classified into three categories, namely, freight, express, and mail. The freight classification simply refers to non-express air service, where commodities of all kinds (including small packages but excluding mail) are transported. The express classification refers to traffic that receives priority treatment over other traffic in terms of handling and delivery time, but in return is charged at higher rates. The mail classification refers to air transportation of DHL.

Cost Structure

The short-run cost structure of airfreight carriers has a relatively high proportion of variable costs, but not as high as that for truck carriers. One explanation for this relatively high proportion of variable costs is that airfreight carriers make no investment in their way; the airways are owned, maintained, and operated by government. Thus, the fixed costs related to ownership of way such as depreciation or amortization, maintenance costs not related to use, and property taxes are avoided by air freight carriers. In paying user charges for use of the airway system, the airway costs of airfreight carriers are thus variable in nature, since they vary with use.

Air cargo terminals are places where cargo is gathered after local pickup before being line-hauled by air carriers; where cargo is held for local delivery after being line-hauled by air carriers; and where, in some cases, aircraft maintenance facilities are located. If air cargo terminals (i.e., airport facilities used by air freight carriers) are owned by government, air freight carriers pay user charges for the use of these facilities, and these costs will vary with the amount of use; alternatively, if the terminals are owned by carriers, the carriers will incur fixed costs related to ownership.

Other than the costs related to the terminal facility itself, terminal costs of terminal of airfreight carriers also include labour costs and equipment costs. These costs will be partly variable and partly fixed. Terminal operations are labour intensive. Labour costs represent the largest component (about 70%) of terminal cost. However, the labour costs of loading and unloading air- craft can be reduced if aircraft with the right-size doors and the appropriate floor height are used. The design of terminal facilities and the type of handling equipment used also affect handling costs.

The major fixed costs of airfreight carriers are those costs related to ownership of aircraft (i.e., interest on investment in aircraft, maintenance cost not related to use, amortization or depreciation expense not related to use, and property taxes). However, the extent to which these costs are fixed will depend on how easily airfreight carriers can add or subtract aircraft from their fleet. The maintenance cost of aircraft is variable, as are the fuel and labour costs associated with their operation. Labor cost is the largest component of the operating cost of the scheduled airline industry. Employees of scheduled airlines have the highest level of annual compensation in the transportation industries.
 
Of all freight carriers, airfreight carriers incur the highest costs in providing freight service.

Operating Characteristics

Airfreight carriers have a line-haul speed advantage over all other freight carriers. However, this speed advantage may be offset by the time required to transport freight to and from air cargo terminals.

Delivery Time. The delivery time of a shipment is the time it takes to move the shipment from its origin point to its destination point. Delivery time includes line-haul time, local pickup and delivery time, loading and unloading time, etc. Although airfreight carriers have a speed advantage over all other modes, highway congestion and airport congestion increase local pickup and delivery time. The net effect is that despite its line-haul time advantage, airfreight service from a delivery-time perspective is susceptible to competition from truck and rail carriers in short-haul markets.

Highway congestion enters the picture because of the local pickup time in moving a shipment from its origin point to the airport (or air cargo terminal) and the local delivery time in moving a shipment that has been line- hauled by an air carrier from the air cargo terminal to its final destination point. If the airport, or air cargo terminal, is located within a city, truck carriers who pick up or deliver line-hauled air freight often experience high- way congestion, with the consequence being greater local pickup and delivery times for the air freight. In response to this problem, a number of airports are now located considerable distances from urban centres. The airport congestion problem arises when airports operate at flight levels that approach their maximum capacity. As a result, aircraft in flight must circle the airport and await landing instructions; furthermore, aircraft not in flight must wait longer on runways for takeoff instructions. Again, the consequence, as with highway congestion, is an increase in the delivery times of airfreight shipments. Efforts to lessen this problem have involved limiting the number of flights at a particular airport or increasing the maximum flight capacity of the airport.

Another factor that may affect delivery times is that air freight carriers provide an airport-to-airport service rather than a door-to-door service and therefore have to rely upon truck carriage and air freight forwarders to provide pickup and delivery service to and from airports. In using for-hire local pickup and delivery service, coordination difficulties may arise between air and truck carriers, resulting in delays in local pickup and delivery.
One innovation adopted by airfreight carriers that not only reduces handling costs (and therefore terminal costs) but also can reduce delivery time is containerization. A container is a piece of equipment that allows consolidated containment and handling of a number of individual shipments as a single consolidated shipment. Containerization is especially advantageous for shipments involved in intermodal carriage such as in air- truck carriage, when shipments are line-hauled by air carriers but locally picked up and delivered by truck carriers. In air-truck carriage, containers are packed by shippers at their own facilities and then transported by truck carriers to an airport to be line-hauled by an air carrier. Upon reaching the destination airport, the container is unloaded from the aircraft and transported by a truck carrier to its final destination. At both origin and destination airports, the cost and time of rehandling small shipments is avoided through containerization, thus providing an opportunity for reducing the delivery time of air freight shipments.

Reliability. Since the flight schedules of airfreight carriers are affected by airport congestion and weather conditions, airfreight service is generally less reliable than that of carriers that are not affected by these problems. Since airfreight carriers must rely on truck carriage and on air freight forwarders for pickup and delivery service to and from airports, the reliability of air freight service will also be affected by the reliability of local pickup and delivery carriers.

If airfreight is interchanged between two airfreight carriers, air freight service is expected to be less reliable than when freight is not interchanged or interlined. When large rail and truck shipments are interlined, it is customary for the equipment containing the freight to be interchanged. With air shipments, however, the freight itself must be transferred to another aircraft, a time-consuming process.

Loss and Damage Airfreight carriers have a better loss and damage record than rail and truck carriers.

Freight Users

Users of airfreight service are usually shippers and receivers of time- sensitive commodities such as perishables, emergency items, and high-valued commodities. Perishables include such items as fruits, and vegetables. Perishability may be physical or it may be related to the demand for the product. Examples of the latter are daily newspapers and fashionable clothes whose value depends upon fast delivery.
Emergency items shipped by airfreight carriers include machine parts and medical supplies. The need for fast delivery may not be as obvious with machine parts as with medical supplies, but the lack of a machine part may necessitate the entire shutdown of a plant's operations. Unlike perishable freight traffic, which is planned, emergency traffic is unplanned.

As stated previously, airfreight carriers incur the highest costs of all modes in providing freight service. When these costs are passed on to users, air carriers' freight rates are thus higher than those for all other modes. In the case of perishables and emergency items, it is obvious why users are willing to pay the higher rates for the delivery-time advantage of airfreight service. But why are shippers of such high-valued commodities as electronic equipment, television sets, photographic equipment, radios, machinery, and wearing apparel willing to pay the high airfreight rates? In selecting a freight carrier, the logistics manager chooses the carrier that will minimize the logistics cost of the firm. For high-valued commodities, the inventory-related cost savings of holding inventories in transit may be of such an amount that the sum of in-transit inventory costs and the freight rate may be less than that for any other mode. If so, airfreight service is a rational choice. With the fast delivery times of airfreight service, shipments will be held as in-transit inventory a shorter length of time. Hence, the higher the value of a commodity, the greater will be the in- transit inventory cost savings from shorter delivery times. Alternatively, the higher the value of a shipment, the greater the likelihood it will be transported by air.