Lack of passenger flights holds down airfreight

The limited passenger service worldwide is keeping a lid on airfreight volumes, which should be growing faster based on strong global manufacturing activity and retail sales as the world adjusts to the coronavirus. The International Air Transport Association reported this week that air cargo demand in August improved nearly two points from July, but was still 12.6% below 2019 levels. And volumes shrank 14% year-over-year in the all-important international sector. 

At the same time, the Purchasing Managers' Index showed new export orders increased 5.1% on an annual basis, its best performance in three years. Manufacturing output continues to grow. Leading indicators tracked by the Organization for Economic Cooperation and Development are trending upward and Manpower Group's employment survey for this quarter shows improvement. 

But a shortage of available air transport is delaying some shipments or pushing them to ocean or Eurasian rail service. The main culprit is the large number of passenger planes still parked because of coronavirus-caused reductions in travel. Many passenger airlines carry cargo in the lower hold along with baggage, but belly capacity is more than two-thirds below levels in August 2019, IATA said.

And capacity is likely to get tighter. The airline association downgraded its full-year passenger forecast, now estimating that traffic will be 66% less than a year ago compared to its previous estimate for a 63% decline due to a weaker-than-expected recovery as governments reinstate travel restrictions. August passenger demand was down 75.3% from a year ago, a disappointing improvement from the 79.5% year-over-year contraction in July.

And available seat kilometers, a measure of capacity, was down 64%, with load factors plunging 27.2 points to an all-time low for August of 58.5%. Domestic markets continue to outperform international, although most are still well below last year's level, IATA said. Passenger traffic began to stall in mid-August with more restrictions amid a resurgence of COVID-19 outbreaks in key markets, and forward bookings for the fourth quarter have slowed, according to the industry data.

Previous projections called for passenger traffic to improve to 55% of the 2019 level by December, but the new trends indicate December traffic will be 68% less than a year ago.  Domestic markets in Australia and Japan actually regressed in the face of new outbreaks and travel restrictions. Swiss International Air Lines' new winter schedule underscores the recalculation underway in the industry.

It is restoring more destinations to its flight schedule, with 85% of its previous route network covered through March, but said Tuesday the new schedules only represent 30% to 40% of capacity for the same period last year after new travel restrictions and quarantine provisions forced it to pull back on capacity expansion. Capacity levels originally anticipated for October will not be achieved until the end of the winter season, it said. Meanwhile, a big increase in freighter activity, including more than 2,300 temporary passenger freighters, is barely making a dent in the capacity situation for shippers.

Freighter capacity in August grew 28%. All-cargo operators are maxed out with daily widebody freighter utilization at nearly 11 hours per day -- a record since the metric started to be tracked in 2012, according to IATA. 

More dedicated cargo aircraft and a higher operating tempo incrementally improved August air cargo capacity a couple points from July, but it was still almost 30% less than normal. As previously reported, Europe is highly dependent on passenger aircraft to move freight and has not had the same access to freighters as the Asian market.

Total capacity in the North Atlantic market was down 56% in August, with dedicated freighter space only up 8.8%, IATA reported.  Regional differences Capacity is especially tight in the Asia-Pacific and Europe, shrinking by a third or more from last year.

Cargo demand was down 18.3% in August for the Asia-Pacific region, the second consecutive month that seasonally adjusted demand has declined. Export volumes to the U.S. and Europe are increasing with the peak shipping season in full swing, and strong orders for medical supplies, electronic devices and online purchases, which should pull up the region's numbers during the next couple of months. North America fared the best with demand only down 4% compared to 2019.

In the eastbound trans-Pacific lane, cargo volumes are even above last year's level. 

  • Lack of passenger flights holds down airfreight
Cargo-ton kilometers, available cargo-ton kilometers, cargo load factor. (Source: IATA)

European carriers reported a decrease in demand of 19.3%. Improvements have been slight but consistent since April's negative growth of 33%, IATA said. The large Europe-Asia market was down 18.6% in August. 

IATA Director General Alexandre de Juniac said hundreds of thousands of jobs are on the line unless more governments provide financial aid to airlines, reopen borders by relying on pre-departure COVID testing, and end quarantines. Click here for more American Shipper/FreightWaves stories by Eric Kulisch. RELATED NEWS:

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