## 4 Case Study Results  
### The Global Air Cargo and Express Industry: A Background Note  
Before proceeding to the case study, a review of the recent growth and trends in the global air cargo and express industry is useful as it sets the context underpinning the strategic direction of the DHL Express and Lufthansa Cargo 'AeroLogic' joint venture. The global air cargo industry has grown rapidly in recent decades and is now an integral part of the global economy, carrying around 35% of world export trade (by value) [74]. Figure 2 shows the growth in total annual world domestic/international freight enplaned air cargo tonnage and freight tonne kilometres performed (FTKs) from 1990 to 2016. Over this period, the total annual enplaned tonnage and FTKs grew from 18.4 million tons and 58.9 billion FTKs in 1990 to an estimated 52.6 million tons and 204.8 billion FTKs in 2016, respectively, as illustrated in Figure 2. This relationship is demonstrated in Figure 2 which shows that total world air cargo traffic (domestic and international FTKs) showed marked declines in 2001 and 2008 following the tragic events of September 11 and the 2008-2009 global financial crisis (GFC). A recession in the United States combined with the 9/11 terrorist attacks resulted in an unprecedented decline in global air cargo traffic [75; 76]. The global recession saw global air cargo traffic fall by around 5% in 2008 [77]. The global financial crisis (GFC) also adversely impacted world air cargo traffic volumes in 2009 (Figure 2) [78]. Figure 2: The development of global air cargo (domestic/international) enplaned tonnage and freight tonne kilometres performed (FTKs): 1990–2016. Note: 2016 preliminary data. Source: Data derived from [79]. The growth in world air cargo traffic has been driven by growing world trade volumes, technological progress, a decline in world air cargo yields, and changing manufacturing processes, such as make-to-order [80]. The liberalization of air cargo services in many markets has also enabled the expansion of air cargo services. Furthermore, the globalization of economic activity and the concomitant disaggregation of production networks have raised the importance of air cargo services not only to individual companies, but also to regions and nations [81]. Increased requirements on the supply chain, such as the reduction in times to ship products to markets, shortening of product life cycles, and the trend to source globally, have accentuated the requirement for fast and reliable transportation services [82]. Indeed, shippers have increasingly regarded the speed of the air cargo mode as compared to surface transport modes, as being ideally suited to their requirements for faster, more reliable delivery given the growing supply chain complexity [83]. Additionally, more firms around the world are increasingly recognizing that the higher costs of shipping goods by air cargo can be offset by reductions in inventory holding costs, warehousing, and packaging [84]. The rapid growth of e-commerce, and the growing importance of global companies' supply chain strategies have continually influenced the growth of the air cargo market in recent years [85; 86]. However, the largest change in the world air cargo industry over the past three decades or so has been the growth in the express parcels sector [87], spearheaded by FedEx and United Parcel Service (UPS) in the United States. The major firms in this sector are FedEx, United Parcel Service (UPS), and DHL Express. In 2016, FedEx and UPS were ranked first and third, globally, in terms of total international and domestic FTKs performed [88]. The business models of firms like FedEx, DHL, and United Parcel Service (UPS), who operate on an integrated 'door-to-door' basis, suggests an important level of control over all chain operations and the ability to achieve high levels of efficiency.