Although air cargo is currently doing well, thank to the Covid-19 pandemic, the industry will face a number of challenges in the coming years, the International Air Transport Association (IATA) heard at its virtual Annual General Meeting in late November.
The warning comes as cargo, boosted by a good 2020 after global trade held up, was alerted to the idea of further profits from distributing vaccines to counter the Covid-19 virus. A mass, global return to the shops after various lockdowns ended was also likely to see a bigger spike in consumer demand driving business.
Demand, though, has not been equally spread. North Pacific routes were barely hit by the virus, Brian Pearce, IATA’s chief economist, told a briefing. The Middle East has also been very successful in maintaining business on their Asian routes, but within Asia “we have not been able to see a significant recovery as yet,” Pearce said.
Two big issues are immediately on the industry’s doorstep: capacity and connectivity.
“The problem facing the cargo business at the moment is the shortage of capacity,” Pearce said.
Not only has the collapse of the passenger trade pulled lots of bellyhold capacity out of the market, but freighter utilization rates are 20% higher than usual, Pearce said. This produced for the industry “exceptional yields,” something likely to last well into the coming year and beyond.
“We still expect the return to pre-crisis levels of air travel to be quite slow and to take several years rather than a matter of months,” he added.
On top of this, connectivity has been severely disrupted by the pandemic.
Back in April 2019, there were 6,270 city pairs being flown, a sum which excludes domestic services in China, which account for a further 4,070 city pairs. Earlier this year, at the April height of the pandemic, there were 4,020 city pairs being flown, with a further 1,880 city pairs in China, Vinoop Goel, IATA’s regional director, airports and external relations, told a briefing.
Again, there is a strong regional variation, with the five most-connected countries in the Asia Pacific region “very uneven,” Goel said.
China leads the way in this regard, and is within one percent of the number of flights its airlines ran in April 2019. Nowhere else in Asia is even close to that number: Japan is down 54%, year-over-year, India is down 45%, Thailand is down 62% and Indonesia is down 59%.
Getting back all that bellyhold space and those passenger destinations is not going happen overnight; full flight numbers are not expected to get back to their pre-crisis level until 2024. And even then, the recovery will again be uneven, Goel told Asia Cargo News.
“Domestic markets have been more resilient to disruptions in air connectivity and are expected to recover faster than international air travel. Other regions, such as Africa, Europe, Latin America and the Middle East experienced drops in connectivity levels close to 90% at the lowest point,” he said.
There is another variation to factor in, he noted. Short- and medium-haul markets – those less than 5,500 kilometres – are expected to come back faster than long-haul markets. All, however, are vulnerable to a third wave of the virus and further lockdowns, depending upon how quickly the world’s population is vaccinated.
Within this, the two great issues of the day, the distribution of the Covid-19 vaccine and an e-commerce boom boosted even further by the pandemic, need to be reconsidered, webinar attendees heard.
Distributing the vaccine will be a huge event, with the issue of capacity just one of five key challenges outlined by Glyn Hughes, IATA’s then-global head of cargo. This is especially true as vaccines usually fly as bellyhold cargo.
Hughes left IATA after its AGM; he is now director general of The International Air Cargo Association (TIACA).
The other four challenges outlined by Hughes were facilities, border processes, supply chain integrity and security. For example, on border processes, in order for the vaccine to flow and flow quickly: “We need international and bilateral recognition of approvals and fast track approvals,” said Hughes, who advocates working together to ensure the vaccine gets delivered promptly and safely.
Facilities, though, are shaping up to be a much bigger task. “The critical aspect is for each country to determine what its in-country logistics capabilities are and what its in-country storage capabilities are, because that will determine its ability to process and utilize the various vaccines,” he said.
Complicating this is the very nature of the Pfizer vaccine which needs to be moved at -70°C. This requires lots of dry ice, itself a dangerous good – and one in limited supply.
IATA kickstarted the process to eventually transport the vaccine several months ago and has led by example, working with partners such as the World Health Organization, suppliers, ground handlers and airports.
“We have put together a guidance document,” said Hughes, adding, “We have launched an industry platform – one source.” The document establishes guidelines and checklists to help distribution and identifying capabilities within the industry and partners, Hughes explained.
One of the strengths the industry has its experience with e-commerce. However, the sheer volume of growth this year made Hughes underline the need for yet more reforms in order to make growth – and transport of so many small boxes – sustainable.
“We saw a 74% increase in transaction volumes on March year on year,” Hughes said, which is not surprising in world where there are now 2.05 billion online shoppers, or a quarter of the global population.
In order to keep that business flying, IATA is urging the industry to take a number of measures, including digitalizing and simplifying customer interactions, optimizing handling systems and facilities and enhancing transparency and consistency. “The industry has to focus on predictability,” Hughes said.
It must also improve border management, enhance safety and security and needs to embrace robotics and automation. “There needs to be a shift in how these products are moved through cargo facilities,” he said.
Michael Mackey
