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Air CargoNews

Coronavirus begins to sicken air cargo sector, experts say

United Airlines suspend some China flights

NASHVILLE, Tenn. – The deadly coronavirus that has shuttered several Chinese cities could provide a triple punch to an airfreight industry already in recession for 13 months, even though the more obvious risk is to passenger airlines.

The crisis is already forcing airfreight shipments to be held up, according to industry representatives at an air cargo conference here.

Travel between China and the rest of the world could soon come to a virtual stop, with airlines suspending flights if mass quarantines in China don’t stem the spread of the virus. On Tuesday, United Airlines (NASDAQ: UAL) said it will suspend some flights to China beginning on Saturday because of a “significant” drop in demand.

There have been 106 deaths and more than 4,500 confirmed cases of the coronavirus. Sixteen international locations, including in the U.S., have identified cases of this new virus. Wuhan, where the virus started, and 13 other cities in Hubei Province are under lockdown and other cities across the country are taking measures to limit exposure. 

On Monday, the U.S. Centers of Disease Control and Prevention raised its travel warning to Level 3 for the entire country and urged U.S. citizens to avoid all nonessential travel to China. Meanwhile, Hong Kong is restricting travel from mainland China. The warning was preceded by a State Department advisory that Americans reconsider travel to China.

Major international airports, notably Shanghai, Beijing and Hong Kong, remain open, but that could change as the health crisis worsens. Airlines may opt before that to suspend routes to protect crews and their bottom lines as travel demand to China dries up.

The widebody jets used on long-haul flights carry a significant amount of freight below deck and if passenger flights are indefinitely scratched a huge amount of capacity that shippers depend on goes away. Cargo supervisors at the conference didn’t want to speculate about what upper management at their airlines might decide.

But one industry official, who asked not to be identified because of ties to multiple carriers, said such a scenario is possible and that there is no guarantee all-cargo planes could pick up any of the slack because pilots may refuse to fly into the virus zone. 

There were about 50 passenger flights per day from China to the U.S. during the 12 months ending in July, the latest period for which data is available, according to U.S. Department of Transportation data compiled by Airlines for America (A4). At the time there were 17 inbound cargo flights and nine cargo flights to China from the U.S. United Airlines operates 24 daily flights to China, more than any other U.S. carrier.

That said, there may not even be cargo exports to put on planes. Factories could close their doors under government orders, to avoid liability or simply because employees can’t, or won’t, go to work. In Tangshan, a major steel producing city, officials have ordered buses to stop operating, Bloomberg reported, which would make it difficult for most workers to get to their jobs.

All factories are closed for the time being after the Chinese government announced that the Lunar New Year holiday period would be extended another three days until Sunday. Factories in the manufacturing hub of Suzhou, in eastern China, have been closed through Feb. 8. Shanghai, Zhejiang Province and Guangdong Province have announced all enterprises will remain closed until Feb. 9. 

The extended closures mean more lost days in which all-cargo operators and other airfreight companies won’t have goods to move, although once things return to normal there could be a surge in bookings for freighter aircraft to relieve pent-up demand for industrial and retail goods.

The lack of available workers is also a problem for the logistics sector. Miami-based charter company Skylease Air Cargo has suspended its Boeing 747-400 flights hauling lobsters and other seafood from Halifax Stanfield International Airport to China, Glen Boone, director of cargo and real estate development for the airport authority told FreightWaves on the sidelines of Air Cargo 2020. The event is organized by trade associations representing freight forwarders, road feeder services and airports.

“The logistical network in China is all bottled up. You don’t have ground handlers, customs clearance and obviously trucking,” he said. “Perishable products like lobster – you can’t move it if you can’t move it fast. If the logistical chain on either side is stopped you can’t send a perishable product.”

Lobsters can be out of water for about 40 hours before needing to get to a holding tank or a shower system. China purchases 50% of Nova Scotia’s lobster harvest.

The lack of available logistics infrastructure is beginning to put the brakes on all types of freight shipments, Boone added.

Another cargo effect of the coronavirus on airlines and shippers is that supply chains could be cut off from materials needed to run factories in other countries and that global economic growth will be impacted, reducing demand for airfreight services writ large.

On Tuesday, the CDC increased the number of airports where it is conducting screening of passengers arriving from China to 20 from five. The higher number of screening locations decreases the need to reroute planes. 

If funneling flights through screening hubs expands to cover other Chinese cities, then airlines and logistics companies will have to figure out how to recover their freight and get it to the original destinations, said Elizabeth Merritt, A4A’s managing director of cargo services, during a panel discussion. Companies also will need to quickly find other sources for components and finished goods if their Chinese suppliers are unable to deliver.

Airlines likely will pull widebody aircraft out of the Asia market and try to redeploy them in other markets, the airline industry official said.

The combined impact of the coronavirus and the protests in Hong Kong, which have dampened air travel to a popular tourist and business destination, could be especially damaging for Hong Kong-based carrier Cathay Pacific, the airline expert said. The decline in tourism is already crimping some cargo capacity on passenger airlines, as previously reported.

The coronavirus is drawing comparisons to the severe acute respiratory syndrome (SARS), which killed 774 and sickened nearly 8,100 in 2003. At the height of the outbreak, Asia Pacific travel fell 35% from precrisis levels, according to the International Air Transport Association, and it took months to recover. Overall, airlines in the region lost 8% of their annual traffic and $6 billion in revenues.

Airline stocks had gained ground halfway through the trading session Tuesday after U.S. majors tumbled between 5.3% and 9.3% the day before.

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Eric Kulisch, Air Cargo Market Editor

Eric is the Air Cargo Market 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 won a regional Gold Medal from the American Society of Business Publication Editors for government coverage, and was voted best for feature writing and commentary in the Trade/Newsletter category by the D.C. Chapter of the Society of Professional Journalists. As associate editor at American Shipper Magazine for more than a decade, he wrote about trade, freight transportation and supply chains. Eric is based in Portland, Oregon. He can be reached for comments and tips at ekulisch@freightwaves.com

7 Comments

  1. Speaking of “Air Cargo” , FedEx is doing fine . They shipped medical supplies on the 26th & 27th to the Baiyun International Airport . We will have to wait until March 17 to see if there was any meaningful negative impact on their business due to this coronavirus issue .

    On another note , I find their stock chart quite interesting . Currently they appear to be within a correction from the completion of the second full cycle that began since their IPO in 1978. !978 to 2007 was 1 cycle and from 2009 to 2018 is the second . Now their share price is within the vicinity of the prior cycle’s wave 4 within FedEx;s wave 4 of a higher degree .

    So wave 1 cycle at a higher degree from 1978 to 2007 . Then wave 3 of that same degree from 2009 to 2018 , and currently in the first leg of wave 4 in the same degree . Which means 1 more nice upward cycle, wave 5 in the same degree, left before one heck of a correction occurs which should correct all 3 cycles since their IPO date in 1978 ! That one will be one for the history books for sure , LOL !

    So from my perspective FedEx looks good technically !

    If you don’t understand this sort of technical jargon , that’s fine , I do , LOL !

    On another note and in simpler terms , The Dow Jones Industrial Average Index appears to be in a potential bearish flag pattern on a smaller degree intra day , LOL !

    So be vigilant !

    In my humble opinion ………..

    1. UPDATE :

      The Dow Jones Futures breached the bottom of the bear flag channel swiftly on the 4 hour time frame chart .
      Price could potentially snap back and retest the bottom of the channel trend line overnight , and then proceed lower to retest the 50 day moving average before potentially breaching it and proceeding lower over the next couple to a few days .

      Vigilance is of utmost importance at this juncture .

      In my humble opinion …….

      1. Ok another update on the Dow futures . All is well . Price broke down nicely out of the bear flag .

        Now it appears that price completed three legs . Those 3 legs can be labeled A,B, and C , or my preferred count , 1,2and 3 , leaving 4 & 5 to come . These are fractals within the first regressive leg on a higher degree .

        Currently wave 3 or C on a lower degree has completed at a retest of the 50 day moving average on a higher degree(daily) .

        Now I anticipate a proregressive(upward) bounce into wave 4 at a lower degree and then reverse down into wave 5 and penetrating the 50 day moving average at a higher degree(daily) .

        Then this would complete one full 5 wave cycle , thus correct proregressively(upward|) to potentially retest the lower trend line in the bear flag channel as I mentioned in a prior comment , and labeling that higher degree bounce wave 2 , which should reverse into wave 3 .

        So let’s see how this pans out . I’m calling this live ! No hocus pocus Monday quarterback BS !

        In my humble opinion ………….

        1. Update :

          So far so good .

          The Dow Futures appear to have completed wave 4 in a typical 3 wave correction , ABC , wave be forming a triangle pattern and broke out swiftly as typically occurs . Still near its peak in wave C as I write this while forming what appears to be a reversal pattern . Now it’s at an interesting juncture . Will it proceed to reverse and collapse into wave 5 ? I think so !

          Stay tuned !

          1. Oops my bad , omitted stating , IN MY HUMBLE OPINION !

            There you go , done , LOL !

            Can’t forget that now .

            In my humble opinion (wink)

          2. Update .

            Due to the alternation “rule” between wave 2 & wave 4 , wave 4 in this instance is extending its time due to wave 2 being deep, swift, and a zig-zag . Wave 4 will be shallow and form a more complex pattern . The peak in wave 4 is still in(complete) as called previously . However rather than being a zig-zag type of pattern , it’ll be a little more complex . Most likely a triangle from its current appearance .

            That’s not to say that it can’t form combinations such as doubles and even triples combinations of 3-3-5’s or a 3-3-5 combined with a triangle(3-3-3-3-3) LOL .

            Triangles are like watching paint dry . They can take a little more time . They tend to form 5 waves horizontally . Each wave tends to subdivide in 3’s and labeled ABCDE . Sometimes wave “e” within the triangle can form a smaller triangle , LOL ! Therefore they’re complex patterns and patience need to be applied . As the pattern progresses and nears completion it becomes easier to recognize . That being said , a triangle is equivalent to a coiled spring . Once completed , price will swiftly thrust out of them . There are different types of triangles as well . LOL !

            At this point if wave 4 is forming a symmetrical triangle , wave C is completed and the Dow futures price currently in wave D .

            Stay tuned .

            In my humble opinion …..

  2. Let’s have a little intermittent ,

    And a 1 and a 2 :

    Follow the yellow brick road,
    Follow the yellow brick road,
    Follow, follow, follow, follow, follow the yellow brick road.
    Follow the rainbow over the stream,
    Follow the fellow who follows a dream,

    Follow, follow, follow, follow,
    Follow the yellow brick road.

    We’re off to see the Wizard,
    The wonderful Wizard of Oz.
    We hear he is a whiz of a Wiz if ever a Wiz there was.
    If ever, oh ever a Wiz there was,
    The Wizard of Oz is one becoz, becoz, becoz, becoz, becoz, becoz,

    Becoz of the wonderful things he does.

    Do you have a dream ? If not then follow the fellow that does ! Why ? Becoz of the wonderful things he does.(wink) LOL !

    Are you gonna “Drift Away ” OR UNITE ?

    Quote :

    Day after day I’m more confused
    Yet I look for the light in the pouring rain
    You know that’s a game that I hate to lose

    I’m feelin’ the strain, ain’t it a shame

    Oh, give me the beat, boys, and free my soul
    I wanna get lost in your rock and roll and drift away
    Oh, give me the beat, boys, and free my soul
    I wanna get lost in your rock and roll and drift away
    (Won’t you take me away?)

    Beginning to think that I’m wastin’ time
    I don’t understand the things YOU do
    The world outside looks so unkind
    I’m countin’ on you to carry me through

    Oh, give me the beat, boys, and free my soul
    I wanna get lost in your rock and roll and drift away
    Oh, give me the beat, boys, and free my soul
    I wanna get lost in your rock and roll and drift away
    (Won’t you take me away?)

    And when my mind is free
    You know a melody can move me
    And when I’m feelin’ blue
    The guitar’s comin’ through to soothe me

    Thanks for the joy that you’ve given me
    I want you to know I believe in your song

    Rhythm and rhyme and harmony
    You help me along makin’ me strong

    Oh, give me the beat, boys, and free my soul
    I wanna get lost in your rock and roll and drift away
    Oh, give me the beat, boys, and free my soul
    I wanna get lost in your rock and roll and drift away
    (Won’t you take me away?)

    A BIG THANK YOU TO ALL YOU TRUCKERS OUT THERE CATERING TO OUR NEEDS !

    In my humble opinion ……..

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