Air freight capacity continues to struggle with headwinds. Disruptions have hampered the recovery of bellyhold capacity and the war in Ukraine has decimated freighter lift and curbed payload on Asia-Europe routes.
As e-commerce operators claim freighter aircraft, lift for shippers and forwarders remains tight, keeping rates high.
Two years after Covid-19 brought about an implosion of international flying global air freight capacity still remains below its level in 2019. IATA statistics for February show a 5.6% shortfall in available ton-kilometres vis-a-vis February 2019.
Owing to numerous passenger flight cancellations in North America and Asia, triggered by a combination of weather problems, labour shortages, and Covid-19-related restrictions, capacity had contracted 3.6% in January from December. It slumped 13.5% in North America and dropped 7.9% in the Asia-Pacific region. Passenger flying improved in February, but the outbreak of war in Ukraine resulted in a massive loss of freighter lifts.
The recovery in bellyhold lift has been most hobbled in international long-haul sectors. Many of the older aircraft previously deployed on those routes are not going to return, as their owners decided to drop them from their fleets and bring in more advanced and fuel-efficient planes.
In some sectors, this changes the equation for available cargo lift. The proliferation of Airbus A321neo and Boeing 737MAX aircraft is seeing these planes increasingly flying on routes where traditionally widebodies like the 767 have been used.
This is having an impact on the North Atlantic sectors between the North American East Coast and Western Europe. Elsewhere, Hawaiian Air has replaced its 767s with A321neos to fly to the continental US.
Ajay Virmani, CEO of Canadian freighter airline Cargojet in Toronto, described the push of A321 and 737 planes into longer sectors as a structural shift in the market that takes out widebody planes and opens doors for freighter operators.
He made these comments at the end of March, when his company announced a five-year agreement with DHL, which calls for Cargojet to provide another five 767 freighters to the integrator, on top of 12 planes that the freighter airline is already flying for DHL. In addition, DHL will be using the first two of four 777 freighters that Cargojet has ordered, which will begin to enter its fleet in 2024.
“DHL wouldn’t sign a five-year contract if they thought everything is going back to bellies,” he said.
Other operators share this view. While current capacity bottlenecks have prompted a considerable number of forwarders to sign up for dedicated freighter flights, there is broad consensus that the need for main deck capacity will extend beyond the near future.
In February Flexport signed a multi-year agreement with Eastern Airlines for a 777 ‘E-class freighter’ (a passenger 777 that had its passenger infrastructure removed to accommodate cargo) to fly twice a week across the Pacific, linking Chicago with Hong Kong and Ho Chi Minh City.
Airlines are also betting on lasting strength in air cargo. Air France-KLM signed an order for four A350 freighters in April, plus options on another four. Top executives of Lufthansa Cargo and Air Canada Cargo have expressed an appetite to add more freighters to their fleets.
E-commerce continues to be an outsize driver of the need for freighter aircraft.
Last October JD Logistics CEO Yui Yu said that the company was planning to establish its own freighter fleet that would swell to at least 100 aircraft by 2030.
Amazon’s freighter operations keep growing. Between last August and March, its lift increased 14% as the fleet grew from 73 aircraft to 88, according to the Chaddick Institute for Metropolitan Development at DePaul University in Chicago, which has kept track of the progress of Amazon Air.
Joseph Schwieterman, professor of public service management and director at the institute, noted that much of the recent expansion has been in Europe. He expects Amazon to set up a trans-Pacific operation before long, most likely with 777 cargo planes.
DHL’s agreement with Cargojet shows that the integrators have an ongoing appetite for freighters to move their growing e-commerce volumes.
UPS placed an order for 19 767 freighters in December. FedEx is expected to sign for a large number of new widebody jets – either A350s or 777Xs – in the near future.
At this point, it is unclear how the longer-term repercussions of the conflict in Ukraine will impact capacity.
The embargoes placed by the European Union and the U.S. and Canadian governments on Russian airlines led to the grounding of the fleets of the Volga-Dnepr group. This not only removed the Antonov 124 and IL-76s of Volga-Dnepr from the international arena but also the 747 fleets of AirBridgeCargo Airlines.
According to Lufthansa Cargo CEO Dorothea von Boxberg, this reduced capacity between the Asia-Pacific region and Europe by about 10%.
The retaliatory embargo on EU-based airlines from the Russian authorities forces these airlines to take a longer route to the Asia-Pacific region, which cuts their payload on the sector by about 10%.
Another capacity reduction is on the horizon. The European Union Aviation Safety Agency decreed in April that approvals for the use of the passenger cabin for cargo would end on July 31.
The agency sanctioned cargo-in-the-cabin flights in 2020 and extended this last summer, but declared on April 11 that it had concluded: “that the logistical challenges that arose in 2020 as a result of the Covid-19 crisis no longer exist to the same extent.”
It added that “cargo capacity in the holds of passenger aircraft is expected to increase by summer 2022, thus reducing the pressure on the logistic chain.”
By Ian Putzger
Air Freight Correspondent | Toronto
