During the unprecedented Global Covid-19 pandemic period from 2020 – 2022, the aviation industry faced some of its biggest challenges and threats to its own existence: the increasing demand for vaccine and PPE distribution by air. At the same time this need also created a massive opportunity.
Existing Cargo operations were pushed to the limits, but demand has remained. What has been causing this demand has multiple facets and changes to the logistics industry since the pandemic.
An interesting trend has been on the rise that does not appear to be dwindling – the conversion of older bigger widebody aircraft which airlines consider to be outdated and too costly to operate.
With many widebody aircraft going by the wayside since the pandemic, several things happened that made these aircraft more attractive for freight – the value of older widebodies like B767s and A330s plummeted which resulted in some very favourable lease options – reducing the operating cost of the aircraft.
Whilst everyone speaks of widebody aircraft being too expensive to operate for passenger and freight – have the cargo operators found a completely new niche by striking not only incredible lease rates, but operating these aircraft filled to the gunnels with the selective supply chain cargo, and only flying a sector every couple of weeks? This strategy of flying only one sector a week, or every other week reduces the racking up of cycles and fatigue – reducing the operational costs even further.
Data from the International Air Transport Association (IATA) Air Cargo Market Analysis shows that after a strong 2017, early 2018 exhibited signs of growth softening. Later data showed that the market went from slowed growth to a continuous decline, as Cargo Tonne Kilometres (CTK) measures dropped nearly every month in the second half of 2018 and for all of 2019. While CTKs plummeted at the onset of the pandemic in March and April 2020, the cargo sector had seen a robust resurgence each month since. Monthly 2021 CTK levels were higher than those for 2019. Air cargo revenue has been crucial for all airlines with total revenues from cargo increasing to 35.0% in 2020 and 37.0% in 2021, according to IATA’s Economic Outlook.
In September 2022, “while air cargo’s activity continues to track near to 2019 levels, volumes remain below 2021’s exceptional performance as the industry faces some headwinds” – said Willie Walsh, IATA’s Director General.
“At the consumer level, with travel restrictions lifting post-pandemic, people are likely to spend more on vacation travel and less on e-commerce. And at the macro-level, increasing recession warnings are likely to have a negative impact on the global flows of goods and services, balanced slightly by a stabilization of oil prices. Against this backdrop, air cargo is bearing up well. And a strategic slow-down in capacity growth from 6.3% in August to 2.4% in September demonstrates the flexibility the industry has in adjusting to economic developments”.
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Airline Economics “The Aviation Industry Leaders Report 2022” by KPMG