Air charter services will continue to be in-demand the rest of the year as capacity remains under pressure with bellyhold space still missing as passenger planes remain largely grounded.

Risks remain, however, as the world economy faces dimmer prospects for 2020.

Global aircraft charter provider Air Charter Service (ACS) said the start of the year is typically a “seasonally quieter time” for cargo charter flights, but the onslaught of the coronavirus pandemic saw “enormous spike in bookings” as early as January, all to transport medical supplies into China to support efforts to contain the initial outbreak there.

This continued into the first half of February before making a 180-degree turn by the second half of the month when carriers were suddenly flying medical supplies out of China. Such traffic remains ongoing, as the coronavirus continues to grip many parts of the world.

“I see demand for chartering aircraft to remain high throughout 2020,” Stephen Fernandez, ACS regional director – APAC, told Asia Cargo News.

“Normality feels a very long way away. So long as passenger scheduled service operations are reduced, and cargo demand doesn’t reduce by an equivalent amount, the need for charters will remain higher than normal,” Fernandez added.

Even if travel restrictions globally were to be lifted, the ACS executive noted that there is no certainty that passenger numbers would return to normal levels any time soon.

Taiwanese carrier EVA Air said that with the international travel ban expected to continue “for some time,” the growth of cargo capacity would mainly come from the passenger aircraft used for cargo-only flights.

And while airlines flying all-cargo missions on passenger planes will persist, dropping air freight rates could prompt companies to rethink the feasibility of continuing such operations in the long term.

“As more passenger jets are used to meet cargo demand and increase capacity supply, air freight rates are currently on a downward trend,” EVA Air said in a statement to Asia Cargo News, noting that compared to freighters, passenger jets used for cargo-only flights “incur higher operating unit costs and generate lower profit margins.”

“If air freight rates drop below break-even levels for cargo-only services by passenger jets, airlines will have to re-evaluate the feasibility of such flights. As a result, it depends on the level of air freight rates whether the cargo revenue can continue to grow,” the airline added.

Airfreight rates have plunged off the record highs seen in May with demand for urgent medical supplies softening as the major markets of Europe and North America slowly emerge from coronavirus lockdowns.

According to the TAC Index, the rate from Shanghai to North Europe on June 15 was US$5.35/kg, 52% lower than the 2020 high of US$11.18/kg seen four weeks prior. The Shanghai to North America rate of US$5.06 was also down 59% from US$12.27/kg recorded on May 18, showing air cargo rates out of China continue to drop toward “more standard levels.”

Fernandez of ACS noted that even though prices peaked in the first week of May and have been heading down ever since air freight rates “are still at a multiple of pre-Covid levels.”

During the height of the Covid-19 outbreak, EVA Air helped transport PPEs from major production centers including China, Vietnam, Thailand, Malaysia, and Cambodia, to both North America and Europe.

Aside from PPEs, the airline also transported electronic products, vehicle spare parts, e-commerce goods and perishables in its trans-Pacific and the Asia-Europe market

“Since the Covid-19 outbreak, EVA has made full use of its five Boeing 777 freighters and allocated some passenger aircraft to provide cargo-only service ... we are also allowed to transport cargo in the cabins of passenger jets and are able to maintain almost the same air freight network and capacity as before the pandemic,” the EVA statement said.

Meanwhile, ACS said it recorded increases in demand for charters moving both people and cargo with the percentage of bookings “up considerably more than 100% across all its divisions” year on year.

“Both intra-Asia and Asia to the world we’ve seen a sizeable increase in demand for cargo charters for both medical supplies and commercial cargo. Underlying the demand is, of course, the huge reduction in passenger aircraft cargo capacity,” Fernandez said.

“China, Thailand, Malaysia, Singapore, Japan and Indonesia have been where we’ve seen the highest demand, but across the region, it’s above normal,” he added.

E-commerce also boosted intra-Asia charter bookings. Fernandez noted that in recent years, the aircraft charter provider has seen an increasing number of charter flight bookings for e-commerce products.

“These charters are on intra-Asia lanes and our expectation is that the trend will continue and, if anything, be hastened by the current situation,” Fernandez said, sounding optimism about volume growth in the region.

“If intra-Asia passenger aircraft cargo capacity remains at a significantly reduced level, as is our expectation, we expect to see ongoing supernormal demand for cargo charter flights,” he added.

The global aircraft charter provider is also expecting a strong peak season this year as demand for charters continues although it warned that “prolonged global recession or worse depression” is the “biggest risks” for the industry in 2020.

“We’re expecting a fairly strong peak season and the associated demand for charters from Asia to the rest of the world for consumer goods,” Fernandez told Asia Cargo News.

By Charlee C. Delavin

Asia Cargo News | Hong Kong