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A bright future awaits the air cargo industry post-pandemic, although there is at least one twist in store, the IATA World Cargo Symposium was told in Dublin in October.
Demand looks set to be up 8% this year, and will go up even more at 13% next year, on pre-crisis levels. Revenues this year will reach US$175 billion and US$169 billion next. More strikingly, still, yields will grow 15% this year but decline 8% next, reflecting more capacity entering the market.
More detail was provided by Ezgi Gulbas, senior economist at IATA, who has two significant qualifications to her generally positive outlook. “We are optimistic about 2022,” she told the WCS.
Gulbas called economic growth “positive but uneven,” pointing out that China is “clearly the star,” while risk-averse Japan will lag, the EU will recover at a slower pace and South and Southeast Asian growth rates are likely to be “very slow.”
What she did not dispute is that there is real potential for growth to keep rolling as households supported by monetary policy but restricted by health rules were not able to consume” during the past two years.
Balancing this generally optimistic view are risks such as the emergence of new variants and supply chain congestion, Gulbas said, which, she added, is “getting worse and worse” as China’s build-up of goods and lack of containers continues. Lower rates of vaccination elsewhere in Asia risk-averse governments such as those in Indonesia and Vietnam shutting down manufacturing in order to stop the spread of the virus have also added to supply chain congestion.
This leads, she said, to “clear divergence in trade lanes,” with the North Pacific lanes having been strong for past three months, while routes such as Middle East-Asia and Middle East-Europe have suffered.
However, because air capacity is less congested than ocean shipping and inventory needs to moved, Gulbas a modal shift is continuing, producing very high load factors and yields. “Load factors are close to historical highs,” she said.
High load factors are expected to continue long-term, as world trade will grow faster than the world economy; Gulbas said she expects air cargo to continue to rise as a portion of the total. Airlines, however, shouldn’t take high load factors to mean permanently high yields, as the view is that load factors will revert to normal in 2022 as more capacity enters the market.
Another challenge looming is a surprising one. To move, cargo needs bellyhold space in planes which are flying because of passengers, and while there is a debate opening up in many airlines about where the balance between travellers and freight capacity will lie, in the short term, there are many rules trying to stop, or at least limit, people moving around the globe, which has big implications for cargo.
“Recovery is significantly challenged,” said Nick Careen, IATA’s senior vice president for operations, safety and security, who pointed out that domestic travel will rebound, but is still at only 73% of 2019 levels. Internationally it’s an even more acute problem, with only 22% of 2019’s capacity available.
This restricted market, which underpins cargo, also affects what type of planes are moving.
Widebodies are parked in larger numbers, according to Marco Bloemen, managing director at Seabury Consulting in Utrecht – maybe as many as 1,600, he said – and airlines are pushing orders for planes in this category back. A significant part of this market might not return in the future, he said, a hint that the issue of limited capacity for some with higher yields for others might be more enduring than previously thought.
The key part of the problem is the number of unharmonized measures which are stopping passengers from boarding.
“It’s a mess,” IATA’s Careen said, pointing out that 38 of the Top 50 markets have restrictions, but not one of these is compatible with others. “It’s a real stumbling block.”
One case in point is vaccines and the lack of consistency in how they are recognized. The other he flagged is airport processing times for cargo, which averaged 1.5 hours pre-Covid but now can stretch to as much as six hours.
“Cost is an issue, complexity an issue. It is a real, real challenge,” he said.
The answer, he said, lies governments aligning the measures and using digital technology not just for cargo but for faster passenger movement.
Michael Mackey
