Air Cargo Update: Dark clouds continue to hover

The pandemic hit the air industry particularly hard in March, taking it quickly into a nosedive. However, air cargo demonstrated some resiliency in April and May, as air carriers quickly found ways to add value to their offerings, especially in addressing shipper needs related to personal protection equipment (PPE).

But before discussing those details, let’s touch on some of the sobering data. March showed a severe capacity shortfall in air cargo performance, according to report from the International Air Transport Association (IATA). During that month, global demand fell by more than 15% compared to March 2019, while capacity plummeted almost 23%. Belly capacity for international air cargo shrank nearly 44%. The only silver lining was a 6.2% increase in capacity through expanded use of freighter aircraft, including the use of idle passenger aircraft for all-cargo operations.

Unfortunately, the April numbers are no better. That month, demand dropped 27.7% compared to the same period in 2019 (-29.5% for international markets)—the sharpest fall ever recorded. Global capacity, measured in available cargo tonne kilometers (ACTKs), shrank by 42% in April compared to the previous year (-40.9% for international markets), while belly capacity for international air cargo shrank by 75% in April compared to the previous year. According to IATA, this was partially offset by a 15% increase in capacity through expanded use of freighter aircraft.

Meanwhile, the cargo load factor (CLF) rose 11.5 % in April, the largest increase since tracking began. Still, there was insufficient capacity to meet demand because of the loss of belly cargo operations on passenger aircraft. “The magnitude of the rise suggests that there’s significant demand for air cargo that can’t be met owing to the cessation of most passenger flights,” the IATA reports.

Global industry data from CLIVE Data Services for May supports the continued small recovery of air cargo volumes, but CLIVE’s managing director Niall van de Wouw warns that a fall in demand over the last two weeks of May signals more challenging times ahead as airlines return capacity to the market.

Alexandre de Juniac, IATA’s director general and CEO, warned in April that the industry didn’t have enough capacity to meet the remaining demand for air cargo and that the gap between global demand and capacity needed to be addressed quickly. Yet the industry is continuing to reemploy aircraft with increases in passenger traffic.

CLIVE’s van de Wouw says he sees market volumes remaining erratic and continuing to be unstable for the foreseeable future. “This is one of the few certainties we have at the moment,” he says. “We can see some dark clouds gathering and this is a cause of concern for air cargo. This is why, in navigating these uncertain times, weekly data becomes not only relevant to decision-making, but crucial. Knowing what’s happening each week gives the industry the clearest direction.”

According to van de Wouw, there are no signals that capacity increases are being met by growth in demand. “With announcements of increases in passenger schedules, global air cargo revenues may suffer ‘collateral damage’ as more capacity returns to the market.”

Industry response

Given global desperation for PPE and medical supplies, airlines are doing their best to meet this demand by employing some of their passenger aircraft that’s sitting idle to provide freighter services and adapting passenger aircraft to all-cargo activity.

“Until very recently, many airlines would have bumped cargo without blinking an eye to accommodate passenger luggage,” observes van de Wouw,

Consider this move: In late April, Icelandair Group and global logistics provider DB Schenker signed an agreement to use Icelandair aircraft for 45 cargo flights between Shanghai and Munich to transport medical equipment for health care providers across Europe. Additional flights from Shanghai to Chicago through Iceland were also part of the agreement.

The agreement resulted in passenger seats being removed from three B-767 aircraft to accommodate nearly 7,063 square feet of capacity on each converted airplane and the DB Schenker logo being slapped on the side of the Icelandair aircraft.

“We had mutual interests,” says Daphne Robboy, a spokesperson for DB Schenker Americas. “We needed capacity to serve our customers’ demand, particularly for transport of urgently needed medical equipment. Icelandair needed use for its grounded passenger aircraft. With such a strong partnership, we were able to initiate the first flight within only a few days from our first talks.”

Steve Alterman, president of Cargo Airline Association, observes that for the first time in years, traditional passenger carriers are now flying cargo-only “ghost” flights. “These efforts serve the dual purposes of partially alleviating the gap between demand and capacity that has been caused by the grounding of a large percentage of the passenger fleet and allowing the passenger carriers to use their aircraft to create at least some revenue,” Alterman says.

This is the case at Korean Air. Penny Pfaelzer, spokesperson for the airline, explains that with the cargo market expected to continue experiencing a supply shortage throughout the second quarter due to the reduction and suspension of passenger flights worldwide, Korean Air has maximized its cargo operations by adding charters and using passenger jets as freighters.

“We’re responding to the market situation by exploring new markets and will continue our effort to reduce operating costs and maximize profitability of the cargo business,” says Pfaelzer.

Virgin Atlantic has also been active in seeking air cargo opportunities due to worldwide demand for medical supplies. “The cargo business is keeping aircraft, which would otherwise be parked, in the air and given us all more hope than otherwise that we will come out of this,” says Dominic Kennedy, Virgin’s head of cargo operations.

In June, Virgin Atlantic increased its cargo-only flights by 35% to nearly 600 with the launch of new routes that include Beijing and Brussels. In May, the carrier operated 446 cargo-only flights, including 66 charters for customers.

HAECO Cabin Solutions offers an initiative that converts main passenger aircraft cabins into a hybrid passenger-freight space.

Besides Virgin Atlantic and Korean Air, some 150 airlines worldwide have been operating “ghost” flights. In the meantime, Lufthansa, KLM, SWISS, Ethiopian, Qantas, Air Canada, Emirates, Austrian Airlines and Cathay Pacific have modified some passenger aircraft to transport cargo.

Jazz Aviation and Air Canada Cargo now operate routes with Dash8-400 simplified package freight aircraft developed by De Havilland Canada, notes Johanne Carorette, Air Canada spokesperson. And in the Middle East, Emirates SkyCargo began loading cargo in the overhead bins and seats of its B777-300ER passenger aircraft in early May in response to growing customer demand out of key markets.

“We’ve operated flights from stations such as Tokyo and New Delhi with cargo in the overhead bins and seats and are now in a position to be able to safely and optimally respond to customer demands for additional cargo capacity from main global production markets,” says Nabil Sultan, divisional senior vice president at Emirates Cargo.

Emirates plans to operate additional flights with cargo both in the belly as well as in the main cabin. “We’re also looking at other measures, including the removal of seats from select aircraft to deploy on high-demand trade lanes,” Sultan adds.

To obtain more space for cargo, Lufthansa employed Lufthansa Technik to remove seats from four of its A330 aircraft. “In addition to our entire cargo fleet, we’ve operated 70 cargo flights using A330 passenger aircraft,” said Lufthansa CEO Carsten Spohr in May. Lufthansa calls these ‘preighters,’ a combination of passenger aircraft and freighter.

With much of its fleet grounded, Lufthansa also has converted one of its Airbus A330-300s into a cargo plane. Lufthansa Cargo has grounded its 14 Airbus A380 passenger planes, six of which are grounded permanently, and is working with Lufthansa Technik on the first Airbus A380 passenger-cargo conversion for an undisclosed customer.

Beginning May 18, Lufthansa began offering up to fourteen additional cargo flights a week from Shenzhen, China, to its hub in Frankfurt. Its first flight carried around three million respiratory masks and other PPE.

In April, the FAA had approved the use of overhead bins, storage closets and under-seat areas in the passenger portion of aircraft for lightweight pieces on flights carrying cargo only—no passengers. On May 21, however, an FAA exemption went into effect that expands the ruling to allow airlines to place cargo—with restrictions—in passenger seats when no passengers are being transported.

The exemption is valid for those carriers that submitted a letter of intent and received specific FAA authorization and expires on Dec. 31, 2020. United Airlines, Delta Air Lines, American Airlines and Alaska Airlines immediately indicated interest.

Meanwhile, HAECO Cabin Solutions, a business unit of HAECO Americas headquartered in North Carolina, has launched an initiative that will convert main passenger aircraft cabins into a hybrid passenger-freight space. With airlines shifting to meet the demand for social distancing, HAECO’s interior stowage devices will use packages to distance passengers—optimizing passenger and cargo yield, while simultaneously maintaining proper weight and
balance requirements.

“Major airlines are already expressing interest in the new passenger-freight hybrid solutions, and HAECO expects announcements to be made soon,” says Doug Rasmussen, president and group director of HAECO Cabin Solutions.

Meanwhile, carriers are increasing their cargo schedules. Airlines are also showing signs of improved passenger demand, which is leading to slight increases in passenger capacity and additional flights.

Passenger seats are removed from an Icelandair B-767 aircraft to accommodate medical equipment flown from Shanghai to Munich per an agreement with DB Schenker. Photo courtesy of DB Schenker.

Do signs point to recovery?

While signs might point to a recovering air cargo industry, IATA warns that the collapsing economy worldwide, coupled with the immediate capacity shortage, is expected to further depress overall cargo volumes.

And while airlines may be deploying as much capacity as possible, including special charter operations and the temporary use of passenger cabins for cargo, IATA’s Juniac maintains that the air cargo industry is in a severe capacity crunch. “The result is damaging global supply chains with longer shipping times and higher costs,” he says.

In the meantime, trade organizations stress that governments need to continue to ensure that vital supply lines remain open and efficient—and this means alleviating red tape.

“There are still too many examples of delays in getting charter permits issued, a lack of exemptions on COVID-19 testing for air cargo crew, and inadequate ground infrastructure around and within airport environments,” adds Juniac. “Air cargo needs to move efficiently throughout the entire supply chain to be effective.”