California would be the seventh largest economy in the world, if it were a nation. Efficient goods movement is crucial to California's economy. To support continued growth of the State's economy, Caltrans is leading the development of a Statewide Goods Movement Strategy. This strategy is being prepared as a response to a recommendation of the 1993 California Transportation Plan. It serves as one element, together with the Transportation System Performance Measures report being prepared in parallel by Caltrans, of the 1998 California Transportation Plan update. Air cargo consists predominantly of high-value, time-sensitive or time-definite goods, e.g., electronic equipment, emergency shipments, overnight packages, etc. Timely delivery of these goods has been an important element of many manufacturing and service operations in California. Therefore, the air cargo industry is a vital part of the State's economy. Continued ability of the State's air cargo industry to serve the other industries in the State and the State's ability to capitalize on the forecast growth of air cargo routes between Pacific-Rim countries in Asia and North America are essential to the prosperity of California. However, future demand on California's air cargo system may continue to outpace the future supply of the system's capacity. Faced with these challenges, Caltrans began a systematic investigation into the role of air cargo in California's goods movement, as part of the larger development effort for a statewide goods movement strategy, and funded a research project in 1997 for the Institute of Transportation Studies at U.C. Berkeley to (i) gain a broader understanding of the State's air cargo industry and the role of air cargo in California's goods movement, (ii) assess the importance of air cargo to the State's economy, (iii) begin identification of issues hindering efficient air cargo movement in the State, and (iv) explore possible State roles for resolving the issues. This "white paper" documents the findings of that research and serves as an input to the development of the Statewide Goods Movement Strategy.