Logistics/Supply Chain/freight business
QUESTION: I was thinking of starting a air freight business considering that its a 130 billion dollar industry and was wondering if it would be a profitable idea. I would pay my own certified pilots. I wanted to buy my own A330-200F but after seeing the price I quickly changed my mind (78million).I have 21million to start my business up. I was thinking of leasing a cargo plane a boeing 337, a airbus A330-200F, or c5 galaxy. I understand that the lease is a couple hundred thousand a month but that 21mn should take care of that?So is this a good idea investment or no and how long would it take for me to make money?Whats the earning potential.
ANSWER: Hi and Good day
Thanks for the query. Its real interesting to note that you want to become an entrepreneur in the freight and logistics space.
The air freight business is large in nature, and only large freight and logistics companies control most of the market share. The main reasons being barriers to entry in terms of high initial cost of ownership, large network, last mile delivery capability, experience and expertise etc. Further more in air freight the measure is mostly FTK in billions (Freight Tonne Km).
All the airlines handle passenger and cargo and are the main players in the air freight industry. Other than airlines logistics companies like fedex have their own freighters and operate them.
If you are looking at air freight seriously, you may look at starting at a regional level freighting to start with, say you connect two parts of US only with limited fleet and allow co-loading from other players/ logistics companies so that there is traction..
To become a large player, it will need a huge investment, people, network, technology, fleet etc. Currently in the long routes, the entire air freight has shifted to US - Europe - Asia sector which accounts for more than 60% of FTK's every year. So typically you see long hauls happening due to high value shipments, just in time, made to order etc and movement of manufacturing hubs to low cost countries. So there is an opportunity here is short pickups and deliveries or like some kind of consolidation centre and connect it to the major airline hub
There are multiple ways to start the business and air freight business typically requires atleast 4 to 4.5 years for a decent RoI to happen, you need to sustain till then. There is definitely a good earning potential as typical net margins are between 8% and 15% depending on cargo, sector, delivery type etc
If you need more information, please feel free to connect with me
Thanks and wish you the best
---------- FOLLOW-UP ----------
QUESTION: Interesting, so I should stay in the US. So there would be no need for giant 747s and I would be able to use smaller twin jet planes reducing the cost. I wanted to start a trucking company because there is a HUGE demand for truckers and I thought I could make money. I was thinking of say 100 trucks but thought that air freight would be more profitable.I just want to make the most money for my investment but the airplane freight sounds more interesting and would make profit the fastest.How should I go about this regional air freight business thing?
Hi and Good day
At the outset my apologies for the late reply as I was traveling.
The regional air freight business is quite good is developed nations like USA where the price point is comfortable for shippers as well and there could be a definitive reductions in supply chain cost even after air freighting the cargo.
In order to go about a business like this you need to quickly start off with a business plan, which covers
1. Market size in terms of players, market value, growth rates, services offered, price points, segmentation etc
2. List down the entry parameters like cash, ownership/ lease of fleets, regulatory/ compliance factors, resources, technology etc
3. Go to Market/ execution plan in taking off the business from plan to earning money
4. Talk to a few customers, partners, friends in your network who are knowledgeable in this business or similar kind of business to get a complete understanding and specifically the problems/ issues they faced setting a build a business of this kind
5. Create a project income statement detailing all the investments, marketing/ people costs, technology costs, infrastructure, assets etc and project it with very conservative numbers for income and high range values for expenses and get a 3 year project done
If you do the above, you shall start getting into the right path and then you can look at evaluating the entire work in terms of an investor than an entrepreneur and still you see its wise to go for this - suggest take it up
In parallel, you can also deploy a consultant who can do all this for you, maybe look at knowledgeable free lance/ independent consultants - as they may not charge very high but can deliver
Thanks and please feel free to connect for more support/ information