This was the takeaway from the World Cargo Summit’s Air Cargo Market Update & Outlook, which focused on the market outlook for 2022 and beyond, hot spots for growth and the outlook for cargo charters.

Niall van de Wouw, managing director at CLIVE Data Services, said the company’s data comparing the fourth quarter of 2021 to the same period in 2019 showed that rates continued to increase on a global level, on average two and half times as high as pre-Covid.

It became tougher to move goods because of the challenges ground handling staff faced in loading/unloading/preighters. This led to congestion, which affected throughput.

“The difficulty in getting goods from A to B pushed up the rates to unprecedented levels.”

In the first two weeks of January 2022 compared to the same period in 2021 rates were up more than 40%.

“Looking ahead we currently see no fundamental changes in the dynamics that are causing these rates to be at these levels that we expect any easing soon.”

Abel Alemu, managing director, Ethiopian Cargo & Logistics Services, added that Covid-related labour shortages and quarantine restrictions “will keep capacity tighter for longer” and this may result in “persistently elevated airfreight rates”.

He added that reduced bellyhold capacity will also contribute to this “upwards pressure on airfreight rates”.

The industry stakeholders agreed that due to full order books for freighters, capacity remains in demand.

Reto Hunziker, group cargo director for charter broker Chapman Freeborn said the company has managed this by using in-house own control capacity including Bluebird Nordic 737s and Magma Aviation 747s, plus third-party carriers. He said that zero LOPA configuration aircraft also helped.

Konstantin Vekshin, chief executive officer of  Volga-Dnepr Group said the company resumed its Antonov 124-100 operations in 2021, but the fleet of 12’s estimated lifespan of 10-12 years is a concern. “It is a very unique piece of equipment and there is no replacement for it.”

Ethiopian Airlines Group is working with Israel Aerospace Industries (IAI) to launch a B767-300ER freighter conversion line in Ethiopia. Alemu confirmed Ethiopian Cargo also currently has 20 preighters.

Ground handling support with regards to staff shortages and restrictions is a major concern.

Alemu pointed out some airports in Europe have said they will not handle preighters, while US ground handlers also have restrictions.

Hunziker said Chapman Freeborn has faced cancelled flights and delayed cargo clearance from airports of up to five days. “We have very big challenges with preighters especially out of China and Kong Kong both into Europe and the US.” As a result, there has been a shift to Vietnam and Korea, where the company operates preighters long term.

Vekshin added that Volga-Dnepr will await China’s legislation this year following the country’s ban on preighters. “If they’re sticking to their plans that maybe a game changer for the industry, at least for 2022…as it will affect all of us.”

Pharmaceuticals, PPE and e-commerce demand are set to continue to be strong drivers for the air cargo industry, according to Hunziker and Alemu.

Alemu said in the second half of 2021 major trade lanes were China-Europe, China-Latin America and South East Asia–US. The company saw major growth in South East Asia and recorded the largest expansion in Latin America.

Hunziker said growth was recorded worldwide in 2021 with China the driver for this.

Van de Wouw said US growth was up 30% in 2021 compared to 2020 when it was hit hard by Covid. APAC growth remained high in 2020 because of PPE trade, so 2021’s growth was not high.

He explained the Europe to US market is much stronger than from the US to Europe, adding Asia Pacific into the US “dwarfs” the market from the US to APAC.

While continued ocean freight congestion and reduced belly capacity is driving air cargo demand, the industry has no control over these factors, so uncertainty over the sustainability of growth remains, said van de Wouw.

He thinks as passenger demand returns “things will get worse” initially as there will be less room for cargo and pressure for capacity, until flight frequency increases but he doesn’t “see that happening anytime soon”.

Source: www.aircargonews.com

Image: www.pexels.com

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One reason for this is the weak start to 2021. It is already clear that the first half of 2021 will be worse than earlier anticipated. This is because governments have tightened travel restrictions in response to new COVID-19 variants. Forward bookings for summer (July-August) are 78% below levels in February 2019 (comparisons with 2020 are distorted owing to COVID-19 impacts).

From this lower starting point for the year, an optimistic scenario would see travel restrictions gradually lifted once the vulnerable populations in developed economies have been vaccinated, but only in time to facilitate tepid demand over the peak summer travel season in the northern hemisphere. In this case, 2021 demand would be 38% of 2019 levels. Airlines would burn through $75 billion of cash over the year. But cash burn of $7 billion in the fourth quarter would be significantly improved from an anticipated $33 billion cash burn in the first quarter.

A pessimistic scenario, however, would see airlines burn through $95 billion over the year. There would be an improving trend from a $33 billion cash burn in the first quarter reducing to $16 billion in the fourth quarter. The driver of this scenario would be governments retaining significant travel restrictions through the peak northern summer travel season. In this case, 2021 demand would only be 33% of 2019 levels.

“With governments having tightened border restrictions, 2021 is shaping up to be a much tougher year than previously expected,” said Alexandre de Juniac, IATA’s Director General and CEO. “More emergency relief from governments will be needed. A functioning airline industry can eventually energize the economic recovery from COVID-19. But that won’t happen if there are massive failures before the crisis ends. If governments are unable to open their borders, we will need them to open their wallets with financial relief to keep airlines viable.”

With airlines now expected to burn cash throughout 2021 it is vital that governments and the industry are fully prepared to restart the moment governments agree that it is safe to re-open borders. That makes three initiatives critical:

• Planning: Preparing the industry to safely restart after a year or more of disruption will take careful planning and months of preparation. Governments can ensure that airlines are prepared to reconnect people and economies by working with industry to develop the benchmarks and plans that would enable an orderly and timely restart.
• Health Credentials: It is becoming clear that vaccines and testing will play a role as the pandemic comes under control and economies ramp up, including the travel sector. The IATA Travel Pass will enable travelers to securely control their health data and share it with relevant authorities.
• Global Standards: As vaccination programs and testing capacity expand, two developments have become critical—global standards to record tests and vaccines; and a plan to retrospectively record those who have already been vaccinated.

“Working in partnership is nothing new for airlines or for governments,” said de Juniac. “It’s how we have delivered safe, efficient, and reliable connectivity for decades. For a year, it’s been lockdowns and restrictions as vaccines were developed and testing capacity expanded. The reason for all the pain that this has caused is to keep people safe and to eventually be able to retore their wellbeing and that of the economy. With good news on vaccines and growing testing capacity, there is a glimmer of light at the end of the tunnel. So, it’s the time to ask governments for their restart plan and to offer any support from industry that could help.”

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