While passenger airlines are struggling to survive, the air cargo market is poised to recover to pre-crisis levels in 2021 on the strength of a strong rebound in international trade and huge growth in e-commerce, according to the International Air Transport Association.
For the year, IATA projects air cargo demand to be 11.5% less than in 2019 versus a 66% drop in passenger volumes, but the year-over-year difference in cargo is narrowing each month. Cargo throughput, currently where it was four years ago, could reach 2019 parity in the first quarter of 2021, while passenger traffic is expected to still be 50% below last year, the air transport group said Monday in a monthly update.
Cargo momentum slowed in October with traffic down 6.2% versus the 2019 period, as measured in cargo-ton-kilometers (CTK), a 1.6 point improvement from the prior month compared to a 4.2 point pickup from August to September in year-over-year comparisons. In September the air cargo market contracted 7.8% from the year-ago period, which was an improvement from the 12% gap between August 2020 and 2019.
International airfreight volume, which is most important for global supply chains and dominates major trade routes, contracted 7.5% in October from a year ago, which was three basis points better than the September difference.
IATA said international airfreight capacity shrank 24.8% and was 22.6% less for the entire sector versus October 2019, a direct result of passenger fleets still operating at less than half their normal schedules because of minimal passenger demand during the pandemic. Passenger aircraft typically carry about 54% of global air cargo tonnage. A large increase in dedicated freighter capacity and utilization rates this year has not been able to erase the shortage of airlift, although it has gradually improved in the past eight months. In April and May, capacity for goods was 40% less than in 2019 and was down a quarter in September.
The contraction in capacity is four times greater than the lost demand since 2019, illustrating why air cargo rates have tripled or quadrupled during the peak shipping season and companies are having trouble booking shipments.
Load factors reached a record high for October at 57.6%. Capacity is expected to tighten even more with emergency shipments of COVID-19 vaccines starting to move this week and increasing in the months ahead as more doses become available for global distribution.
Despite the sector’s overall negative growth, air shipments in North America are red hot, with volume up 6.2% in October, powered by strong domestic e-commerce sales. However, that represented a dip from the 8.6% year-over-year growth in September. International demand increased 1.3% due to strong U.S. demand for Asian goods. North American airlines also showed the smallest capacity contraction, with available cargo-ton-kilometers down 16.2%.
Weak demand in the Africa-Middle East trade corridor hampered growth for Middle Eastern airlines, which dipped 1.9% year-over-year.
Asia Pacific’s international air cargo volumes picked up for the second consecutive month despite Golden Week holidays, typically a week period for air cargo business out of China. The recent improvement in volumes is a byproduct of more available capacity in the market. The annual CTK decline eased by 3 points to -11.6%, while seasonally adjusted volumes picked up by 1.4% month-on-month.
Europe’s international air cargo business seemed to be largely unaffected by the resurgence of the virus in October. International carriage contracted by 11.9% compared to the 15.6% fall in September from the prior year.
Several factors are contributing to the strong demand to move goods by air.
Manufacturing is strong despite the resurgence of coronavirus cases in North America and Europe. Exports orders, as tracked by the Purchasing Managers’ Index (PMI), grew for the second consecutive month after being in negative territory for more than a year. Global trade is rebounding aggressively, with the World Trade Organization now forecasting 7.2% annual growth in 2021 after a 9.2% drop for the full year in 2020. By comparison, global merchandise trade grew 2.9% in 2018 and was flat last year.
E-commerce is also playing an increasing role in air cargo because 80% of cross-border online shipments move by air. Digital sales have been on a tear since the start of the pandemic, as people work, learn and recreate at home, with no signs of letting up. In the U.S., e-commerce sales jumped 37% in the third quarter versus the same period in 2019, the Department of Commerce reported. Online shopping spending during the Thanksgiving weekend, which included Black Friday and Cyber Monday, increased 20% to $29.6 billion, according to data compiled by Buy Shares.
The Global Composite PMI, which reflects changes in global output, employment, new business, backlogs and prices, indicates that economic recovery will continue in the fourth quarter despite a resurgence of COVID-19 in many markets.
Analysts and airfreight specialists expect air cargo volumes to stay at peak levels through Chinese New Year in mid-February and the rest of the first quarter, a period which typically represents a lull in air cargo following the heavy retail holiday season in many parts of the world. And growth is expected to remain relatively strong after that, although the rebound could be diminished if the new wave of COVID-19 cases slows economic activity or consumer confidence.