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Air cargo momentum builds; air travel stumbles

Renewed pullback in passenger flights because of COVID lockdowns means less cargo capacity, IATA says

There aren't enough freighters, like this Cathay Pacific 747, to make up for the loss in passenger belly space that is currently idel. (Photo: Jim Allen/FreightWaves)

(Updated Nov. 5, 2020, 8:57 A.M. with news about American Airlines.)

Airlines continued to rehabilitate cargo business in September, but the air travel recovery from the coronavirus pandemic is stalling, the industry’s leading trade group said Wednesday. The backslide in passenger growth due to the disease’s resurgence will reduce aircraft capacity for companies with goods to ship.

The air cargo sector has retained 92% of its business while almost 90% of passenger demand has evaporated because of travel fears and government restrictions. Further improvement in cargo volumes could be capped by the shortage in passenger airlift, despite carriers deploying more dedicated cargo aircraft. A number of airlines have recently announced capacity reductions for the end of the year.

“We have hit a wall in the industry’s recovery,” Alexandre de Juniac, the International Air Transport Association’s director general, said Wednesday.

IATA reported that international passenger traffic in September was only 11% of its 2019 amount and that capacity fell 79%, with only 38% of each flight filled. Demand was flat after improving during July and August when the pandemic subsided and more people resumed travel, albeit mostly short-distance trips. Overall, passenger demand fell 72.8% on a yearly basis, a marginal improvement from August. 

International flights are particularly important for air cargo customers because airlines usually deploy large, widebody planes that can carry large amounts of people, baggage and containers on long-haul routes.

Domestic traffic improved in September, shrinking 43.3% on a yearly basis compared to a 50.7% decline in August. But domestic traffic represents slightly more than a third of total traffic, and the gains were heavily influenced by improvements in China and Russia. 

Last week IATA provided data showing airlines can’t cut fixed costs fast enough to overcome the loss in passenger demand and urged governments to use testing instead of blunt instruments such as quarantines to contain the virus. It estimates airlines will deplete cash reserves by almost $130 billion this year. 

Global air cargo demand was 8% below the September 2019 level, but that was an improvement from the 12% yearly contraction in August, according to IATA. Volume has steadily improved each month since contracting 28% year-over-year in April following factory lockdowns in China and other countries. Cargo ton kilometers — the benchmark that combines distance transported and weight — grew 3.7% month-over-month, the fastest increase since May.

North American airlines enjoyed a robust September, with international volumes up 1.5% — the first growth in 10 months. Overall, North American carriers carried 8.6% more cargo thanks to a spike in e-commerce shipments and exports from Asia. Most other regions, except Africa, continued to be in negative volume territory versus last year.

Meanwhile, cargo capacity was a quarter less than a year ago, despite a 20% increase in freighter volume, leaving a gap in available space on board aircraft that is three times more than the amount of goods being shipped by air. However, the situation is better than the 42% shortage of cargo space at the height of the crisis.

The capacity situation is likely to worsen in the coming weeks as airlines idle more aircraft to minimize the cost of flying with low passenger load factors as nations ramp up travel restrictions again to contain new waves of COVID-19. American Airlines (NASDQ: AAL) is cutting more than 100,000 flights from its December schedule – a 50% reduction – because of low demand resulting from the coronavirus, the Dallas Morning News reported Wednesday.

Some all-cargo carriers have reintroduced planes that were in storage, but the bulk of new capacity has come from passenger airlines designating aircraft for dedicated cargo operations. IATA estimates there are 2,500 passenger aircraft adapted to carry in-cabin cargo. The number of cargo-only aircraft in service could be even higher because some airlines don’t want to deal with the extra time and manpower requirements associated with in-cabin hand transfers.  

Strong freight bookings and technology companies chartering full freighters for new product releases during the peak holiday shipping season are expected to support further air cargo recovery in the fourth quarter.

Leading economic indicators also point to favorable conditions for airfreight, with trade and exports of industrial products, along with business confidence, on the rise.

There is uncertainty, however, about how the coronavirus comeback will affect air cargo. A renewed need for medical supplies could lead to more air shipments. But, renewed lockdowns and restaurant closures across Europe to stop the spread of coronavirus could slow economic activity, increase unemployment and dampen confidence, economists say.

Click here for more American Shipper/FreightWaves stories by Eric Kulisch.


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Eric Kulisch

Eric is the Supply Chain and Air Cargo Editor at FreightWaves. An award-winning business journalist with extensive experience covering the logistics sector, Eric spent nearly two years as the Washington, D.C., correspondent for Automotive News, where he focused on regulatory and policy issues surrounding autonomous vehicles, mobility, fuel economy and safety. He has won two regional Gold Medals and a Silver Medal from the American Society of Business Publication Editors for government and trade coverage, and news analysis. He was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. He won Environmental Journalist of the Year from the Seahorse Freight Association in 2014 and was the group's 2013 Supply Chain Journalist of the Year. In December 2022, Eric was voted runner up for Air Cargo Journalist by the Seahorse Freight Association. As associate editor at American Shipper Magazine for more than a decade, he wrote about trade, freight transportation and supply chains. He has appeared on Marketplace, ABC News and National Public Radio to talk about logistics issues in the news. Eric is based in Vancouver, Washington. He can be reached for comments and tips at [email protected]