SIC 4513 Air Courier Services

 
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SIC 4513

The air courier services industry includes establishments primarily engaged in furnishing air delivery of individually addressed letters, parcels, and packages (generally under 150 pounds), except by the U.S. Postal Service. While these establishments deliver letters, parcels, and packages by air, the initial pick-up and the final delivery are often made by other modes of transportation, such as by truck, bicycle, or motorcycle. Also classified in this industry are separate establishments of air courier companies engaged in providing pick-up and delivery only, "drop-off points," or distribution.

Establishments of the U.S. Postal Service are classified in SIC 4311: United States Postal Service; and establishments furnishing delivery of individually addressed letters, parcels, or packages (generally under 100 pounds) other than by air are classified in SIC 4215: Courier Services, Except by Air.

Establishments primarily engaged in undertaking the transportation of goods from shippers to receivers for charges covering the entire transportation but making use of other transportation establishments for delivery, are classified in SIC 4731: Arrangement of Transportation of Freight and Cargo.

NAICS CODE(S)

492110

Couriers

INDUSTRY SNAPSHOT
Definition of Service

The air courier industry is a division of the air cargo industry. As defined by the Air Transport Association (ATA), cargo is the total volume of freight, mail, and express traffic. The air courier division includes both freight (generally under 150 pounds) and express mail. As defined by the ATA, freight and express mail are commodities of all kinds, including small packages, counter service, express service, and priority-reserved freight. Air courier service does not include the delivery of U.S. mail.

Major Integrators

In general, two kinds of companies have provided air courier service in the United States. First have been the integrators or all-cargo companies, such as Fed Ex, United Parcel Service (UPS), and DHL. These companies have a fleet of planes, carry cargo only, usually fly at night, and have ground transportation and personnel for door-to-door pick up and delivery. Integrators control 90 percent of the domestic market for envelopes, packages, and freight.

Combination Carriers

Air courier service also has been provided by passenger airlines, such as American Airlines. These companies transport cargo (freight, express, and mail) in the holds of their passenger aircraft. They fly during the day, since passenger traffic is their first priority. Passenger airlines have provided service similar to integrators, except most airlines have to subcontract ground transportation. Airlines also provide airport-to-airport deliveries.

Eleven passenger airlines once included all-cargo aircraft in their fleets. As of 2004 Northwest Airlines, with 12 747-200s (with plans to add two more during 2005), was the only U.S. passenger airline operating all-cargo equipment. The other ten retired the all-cargo aircraft from their fleets by the end of 1984.

Air Forwarders

Both major integrators and combination carriers have worked with air forwarders to provide shipping services. Air forwarders are companies that arrange the complete shipping process and receive charges for the entire transportation. These companies do not own or operate aircraft and have to purchase space on the planes of airlines or integrators for their packages. Although air forwarders were the precursor to the air courier industry, these companies are not represented in this industry but are classified in SIC 4731: Arrangement of Transportation of Freight and Cargo.

Revenue Generated by the Industry

According to the Air Transport Association (ATA), cargo services (freight, express, and mail) reached 26.7 billion revenue ton miles in 2004. A revenue ton mile (RTM) equals one ton of revenue traffic transported one mile. Freight, express, and mail cargo traffic dropped 7.9 percent from 2000 figures, due mainly to the increased security measures initiated after the September 11, 2001, terrorist attacks on the World Trade Center towers and the Pentagon. As a result, cargo revenue fell 10.4 percent to $13 billion in 2001. However, the air cargo sector regained momentum faster than the passenger traffic, increasing to $13.5 billion in 2002 and $14.1 billion in 2003.

Most Used Airports

The airport that received the most air cargo (freight, express, and mail) in the mid-2000s was Memphis with 3.39 million tons of cargo enplaned and deplaned in 2003. Anchorage came in second, with approximately 2.1 million tons that year. Los Angeles International (1.81 million tons), Miami International (1.64 million tons), and New York's John F. Kennedy Airport (1.63 million tons) followed. Chicago's O'Hare and Louisville each had a total of 1.6 million tons.

Kinds of Service

Companies within the freight/express mail division of the air cargo industry have offered various services related to time-sensitive delivery conditions. Customers can request next-morning or afternoon delivery, same-day service, or second-day delivery. Most international express services require a few days for delivery, depending upon the country's customs procedures and regulations.

BACKGROUND AND DEVELOPMENT

The U.S. airmail system was the forerunner to the air courier industry (or express mail industry). The U.S. airmail system also spurred the growth of the air passenger industry and the creation of the modern airlines. Yet the air courier industry and the time-sensitive delivery of letters and parcels remained dormant until the late 1970s.

Prior to deregulation of the air cargo industry in 1977, air transport of packages was made by the U.S. Postal Service or air forwarders. Time-sensitive shipments were not possible because air forwarders did not operate their own planes and had to depend upon the scheduled service of the airlines.

Deregulation in 1977

Following deregulation, the air cargo industry underwent dramatic changes, as air forwarders and ground transportation operators acquired their own aircraft and became integrators. Some passenger airlines also began to pick up market share, but it was the all-cargo carriers (or integrators) that created the express delivery service that has been most commonly known as air courier service.

Creation of the Hub System

Development of the hub system made possible the large-scale, overnight deliveries and the very existence of the modern air courier industry. Fed Ex initiated the hub system, and it has remained the standard operating method in use.

Using this system, all freight is originally shipped to the company's central hub, where it is sorted and rerouted to its final destination. As the air courier industry has grown, some regional hubs have been formed to serve particular areas of the country. Integrators as well as passenger airlines use the hub-and-spoke system.

Air Express Service

The rapid growth of the air courier industry during the 1980s was primarily due to the success of express delivery service. Integrators have dominated this particular service. From 1982 to 1990, the domestic air express market grew at an annual rate of nearly 19 percent. In 1999 the air express industry continued to grow, along with air cargo. Air express deliveries accounted for 60 percent of air shipments in 1998, with overnight letters and envelopes alone accounting for 27 percent of the industry (in both shipments and revenues).

Competition

A flurry of overnight express companies appeared on...

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