Air cargo shippers should prepare for at least another three years of elevated freight rates as airlines will struggle to match capacity with highly uncertain passenger demand, according to believes Glyn Hughes, the new director-general of The International Air Cargo Association (TIACA).
Hughes told the TPM21 conference that as capacity remains tight with most of the passenger planes still grounded, capacity for cargo is also continues to be impacted.
Half the available global air cargo capacity is provided by the below-deck space on widebody passenger aircraft flying long-haul routes, but the majority of this capacity has been grounded since March 2020 with the onset of the coronavirus pandemic.
“The airlines have to resize their fleets based on expected passenger numbers, and you can't operate the 2020 fleet at 2015 passenger volumes,” Hughes said.
“They have to keep their optimal level of load factor to make the operations economically viable.”
Travel restrictions and quarantine measures worldwide have been extended into 2021, with carriers like Cathay Pacific, for instance, carrying 99% fewer passengers in January compared to the same month last year.
The severe space shortage that came with widespread travel bans saw air cargo rates on the trans-Pacific and Asia-Europe routes spike to record levels in April and May as urgent demand for personal protective equipment (PPE) and medical supplies overwhelmed all available capacity out of China, the statement from TPM21 said.
While rates have fallen off those high levels, they remain more than double the year over year rate.
"To secure space for customers through 2021, forwarders have extended their existing transPacific and European charter contracts for the rest of the year as strong demand and high rate levels show no sign of easing," it added.
Space in short supply long-haul passenger flights need to resume at scale to inject cargo capacity back into the network and bring down rates, but Hughes said shippers can expect capacity to remain in short supply on certain trade routes for another three years.
“When will the passenger numbers return? Some would argue that the passenger numbers we saw before the pandemic may not ever return,” Hughes said.
“Everyone is doing a lot more business, a lot more interactions, online. The quality of technology and online connections have significantly improved, to a point where maybe certain business travel may not resume.
“The leisure market is likely to come back sooner. Short-haul leisure travel where you've got people who feel more comfortable going to destinations within their regions, but the long haul leisure market will be slower to return.”
Hughes added that one of the only certainties facing the airline industry was when more traditional operations are resumed, the industry will not look the same as it did prior to COVID19.
