Global air freight's future

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The air cargo industry has proven itself to be remarkably resilient to the impact of the COVID-19 pandemic. Indeed, the pandemic has shone a spotlight on the air cargo industry and its critical importance to the aviation industry as a whole and the global economy more generally. Many players in the industry who previously paid little attention to air cargo are now looking to it as a long-term opportunity to diversify and invest in a growing sector.

COVID-19 reduced demand for passenger flights but stimulated air freight demand

COVID-19’s impact on the aviation industry is well documented. At the peak of the pandemic in May 2020, the weekly flight frequency for global passenger airlines declined by about 70 percent (as compared with data for May 2019).

Before the pandemic, much of the world’s air cargo (around 54 percent) was transported in the hold of passenger aircraft (so-called “belly cargo”). Accordingly, and with such a large proportion of the global passenger aircraft fleet not being operated, the air cargo industry has been significantly impacted.

Although cargo operators and freight forwarders have continued to operate freighter aircraft, many of these aircraft are hub-focused and cannot access the same extensive route network as commercial passenger aircraft. As a result, the air cargo industry has also lost the convenience and efficiency offered by transportation via belly cargo.

Coupled with the decline in air cargo capacity, the pandemic has itself precipitated an increase in the volume of cargo requiring transportation. The rapid transportation of pharmaceuticals, medical equipment, personal protective equipment, etc., has been critical in the global fight against the pandemic. However, this spike in demand for air cargo capacity will (hopefully) be relatively short-lived; although there is every likelihood that similar humanitarian crises will occur in the future.

Another important factor to bear in mind when considering the demand for air cargo capacity is the growth of e-commerce. The pandemic is believed to have hastened the global transition to e-commerce (by as many as five years, according to IBM) and thereby increased the volume of goods requiring transportation. This is likely to have a long-term impact on the air cargo industry.

E-consumers expect speed, predictability of delivery times, and visibility. In the context of cross-border e-commerce, this means that air cargo logistics providers are very well positioned to take advantage of this growing sector of the market.

As a result of present circumstances, many airlines have redeployed their passenger aircraft as “preighters.” This has enabled those airlines to take advantage of the buoyant air cargo market to mitigate the massive losses caused by the drop in passenger ticket sales. Unlike the conversion of a passenger aircraft to a freighter, the conversion to a “preighter” is comparatively low cost and offers the airline the flexibility of converting the aircraft back to passenger configuration as demand returns.

A white paper issued by IATA in March 2019 (The Cargo Facility of the Future), forecasted an annual increase in the air cargo market of around 4 percent in the next 20 years. However, in a post-COVID world, this forecast would seem conservative. Even as the impact of the pandemic subsides, air cargo demand remains strong and we have every reason to believe that this will continue for the foreseeable future.

The bottom line is that with the continued growth in the volume of global air freight, and as “preighter” aircraft are returned to passenger-carrying duties, the air cargo market desperately requires increased capacity. Unfortunately, slots for passenger-to-freighter conversions, and the delivery of new freighter aircraft, can’t currently keep up with demand.

Key takeaways
  • Material growth of the global freighter fleet is necessary to meet demand
  • Growth of e-commerce and emerging market economies are key drivers
  • Environmental issues will have an increasing impact on the air freight industry
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