The market
The global air freight market in 2011 was an estimated $57 billion industry, encompassing everything from aircraft transporting fresh flowers to Formula 1 cars for the next race. Air freight, measured in revenue ton-kilometers (RTK), accounted for $167 billion, compared to $60 trillion RTK for ocean freight. The trade value of goods shipped reached $2.7 trillion. Over the past decade, militaries have increasingly needed to rapidly deliver larger quantities of relief supplies, tanks, and even food and fuel to areas with inadequate or nonexistent infrastructure. This is not included in the revenue figures, but according to some insiders, it could easily reach $20 billion annually, or even more with extended missions in Afghanistan and Iraq. Scheduled services provide 4.5 million tons of weekly cargo capacity available at over 3,400 airports in 220 countries, while charter and express carriers provide additional capacity. Global air freight traffic is projected to triple over the next 20 years, starting from 2009, the worst year in a decade. This implies an average annual growth rate of 5.9 percent. The intra-Asian market is growing at 7.9 percent annually, and the Chinese domestic segment is experiencing 9.2 percent growth. The number of aircraft in the freighter fleet will increase by more than two-thirds over the same period, from 1,755 aircraft in 2009 to 2,967 in 2029. Freight revenues account for an average of 15 percent of airline revenues, with some exceptions accounting for as much as 50 percent. A ton of cargo by ship costs a commercial carrier between six and ten cents per ton-mile. A ship will take two to three weeks to travel from China to the West Coast of the United States. A 747 cargo plane can circumnavigate the globe in less than a day, but the cost is fifty to sixty cents per ton-mile, at least ten times more than by ship. Within air freight, international express shipments grew from 4.1% of total international freight traffic in 1992 to 12.8% in 2008, with the average size per shipment being approximately 5 kg. Express service providers offer door-to-door services, integrating the traditional coalition of airlines, freight forwarders, and stevedores, which has been influenced by the traditional logic of core business operations. Because each player must maximize its own operations, no one optimizes the entire system. This has allowed these small packages delivered through a suite of integrated services to emerge. FedEx is currently the world's largest air freight carrier with 692 aircraft, followed by UPS, Korean Air, and Emirates. Lufthansa, Europe's leading carrier, ranks 12th globally. Five Chinese airlines outnumber the German flagship.
Innovation
The issue of fuels has been raised in the shipping industry (case 72). Jet fuel is very clean compared to ship fuel, but it consumes more per ton-mile shipped. The primary objective is to reduce fuel consumption by transitioning to more efficient aircraft. In 2010, airlines spent $139 billion on fuel, $14 billion more than in 2009. This improves the profitability of those who can afford the capital investment. However, since these aircraft will not be retired from the global fleet, the inefficient consumption will be transferred to less competitive players. FedEx aims for biofuels to account for 30% of the company's jet fuel by 2030. Meanwhile, the new sorting center at Cologne Bonn Airport has rooftop solar panels that produce 800 MWh per year. The main challenge remains that global freight transport, by air or sea, continues to require massive infrastructure that relies on mortar and fossil fuels for decades to come. Alex Hall grew up in the UK, dreaming of becoming an astronaut. Unfortunately, genetics weren't on her side when she learned she was too short to even train to be a professional pilot. She lived near the Cardington airship hangars in Bedford. These immense hangars inspired her fascination with oversized aircraft and the history of airships, particularly the trans-global flights of the Graf Zeppelin. A graduate in astrophysics from the University of Leicester, she pursued a career in space-related visitor centers, first for six years at the British National Space Centre in Leicester, and then as executive director of the Chabot Space and Science Center in Oakland, California. When her fiancé Brian flew the new Zeppelin produced in Germany by ZLT (Zeppelin Luftschifftechnik) in July 2006, he partnered with Alex, who jointly developed the strategy and wrote the business plan to bring the Zeppelin airship back to the United States for the first time since 1937. A purchase agreement for the airship was reached with the German manufacturer in February 2007 through his newly formed company, Airship Ventures. The first step was to find a home for the Zeppelin. Fortunately, three of the 13 original airship hangars in the United States are located in California. Esther Dyson, a former Wall Street technology analyst, stepped in as the first angel investor, and by March 2008, the venture was fully funded. The main challenge was getting the airship laws in America rewritten, as they were approved for advertising airships, not for passengers or cargo carrying Zeppelins. The first passengers boarded in the fall of 2008, marking a surprisingly rapid turnaround in an initiative that many considered, if not impossible, at least slow and complex. Alex and his team proved them wrong.
The first cash flow
The initial cash flow was generated from the sale of sightseeing flights over the San Francisco Bay Area, Silicon Valley, San Diego, and Los Angeles. The airship is also leased for scientific research to NASA, the Woods Hole Institute, and television networks that want to use it as a platform for the Golden Globes, PGA Golf, and the Rose Bowl. Revenue is progressing according to plan, and Airship Ventures plans to expand with additional airships along the East Coast. A second source of revenue is expected to come from flight training and education, the establishment of a professional airship pilot school, and airship research and development. Alex may not have become an astronaut, but she used her visionary, creative, and entrepreneurial talents to bring an idea to life. In July 2011, she had the opportunity to become a senior director of the Google Lunar X-Prize, hoping that one day she might still walk on the Moon.
The opportunity
Now that Alex and Brian had proven their business model in airships, several other initiatives emerged. Aviation Capital was founded by venture capitalist Kirk Purdy in Calgary, Alberta, Canada, in 2009. He signed an agreement with Lockheed Martin to market their cargo airships manufactured in Palmdale, California. By 2013, Aviation Capital could transport 100 tons of cargo per flight to remote northern Canada with an airship the size of a football field that required virtually no landing infrastructure. Bob Boyd, director of the hybrid program at Lockheed Martin, was confident that by 2016, an airship the length of three football fields would be capable of transporting 450 tons of cargo in a single trip. While Lockheed Martin reserved the rights to all military applications larger than civilian ones, Aviation Capital had exclusivity in the cargo market. Current airship technology allows for the delivery of goods at 25 cents per ton-mile, comparable to the cost of air freight, while doubling or tripling the cost of maritime shipping. However, when the total cost is calculated, particularly the infrastructure, airships become clear as the least capital-intensive, most versatile, and most fuel-efficient transportation system available today. Airships do not require runways or open-sea docks. Eliminating these cumbersome, polluting, and often noisy concentrations of transportation infrastructure makes the airship a highly competitive mode of transport. Since airships take off and land like helicopters, all that is needed is a mooring truck (mobile) or a pole, and a mooring ring appropriate to the size of the airship. Previous experiences with Paolo Lugari's airship (case 15) at Las Gaviotas, Colombia, using it for fire control, or the airship used by De Beers for mineral exploration in Botswana, have demonstrated the wide range of possible applications beyond freight. A new means of transport for people and goods, requiring no major infrastructure, is energy-efficient and competitive, while also changing the game and meeting the requirements of the blue economy.
