Huge opportunities – along with some challenges – as the air cargo sector deals with the ongoing Covid-19 crisis were the key theme of Cargo Connect, a conference within the Dubai Air Show.
The biggest challenge, says Nabil Sultan, divisional senior vice president at Emirates SkyCargo, is also a nice one to face: “huge pressure” for air cargo. “This is something that’s not going to go away any time soon.”
On top of huge demand from Asian countries, congested and disrupted marine services are also forcing things that normally go by ship onto airplanes.
This revelation is hardly surprising when, for every seven containers quayside at the Port of Long Beach, there is only one driver, said Erik Goedhart, senior vice president and global head of aerospace and industrials at Kuehne+Nagel in Zurich.
Labour shortages like this are a significant hurdle which the industry did not expect coming out of the pandemic, Goedhart said.
It’s also a problem likely to linger. “I don’t believe the ocean problem will be solved in two years’ time,” Cor de Man, senior vice president for cargo sales at Turkish Airlines in Antwerp told one session of the conference.
These factors ensure demand is strong worldwide and is likely to remain so for some time, with the debate being about how long the boom will last. Goedhart was bold in his claim and forecast belly hold cargo will be back to normal in 2024 “earliest.” However, he added that “perhaps” there will be “some relaxation in the second half of next year.”
“Grab the opportunity. Make it happen,” was Sultan’s advice, although he stressed the need for cooperation to make this period a good one for the cargo sector.
An immediate problem is one unheard of at some recent points in the industry’s history: the lack of airplanes rather than the more usual lack of cargo. Passenger planes responsible for moving half the world’s air cargo pre-Covid world are coming back into service, but not quickly enough or in high enough numbers to shift the freight building up in Asia.
Emirates, like many others, is moving to gain as much extra capacity as it can with new freighters and conversion of 16 of its Boeing 777-300ERs to freighters. Another Middle Eastern carrier, Etihad, also has plans to repurpose its 777s.
It’s a sign of the times that these two airlines have done the same thing, even if it’s not a silver bullet for the shortage of space.
There is 2.5-times more capacity on a purpose-built freighter, Martin Drew, senior vice president for sales and cargo at Etihad in Abu Dhabi told the conference. Then, there are the limitations of what the conversions can carry and where. They are largely limited, he said, to garments in boxes out of places like India, Vietnam and Bangladesh into Abu Dhabi and then onto consuming destinations. “It’s an expensive way to operate,” Drew said.
One other reason for long-term optimism (tempered by an awareness of the challenges) is a feeling that ecommerce, the backbone of the boom so far, still has some way to run. This is especially true of markets such as Africa, the Middle East and the Indian sub-continent, which are served largely by Gulf-based carriers backed by the right infrastructure and intermodality.
“It’s a humungous market,” said Olivier Houri, executive vice president and chief revenue officer at SmartKargo in Boston, amidst talk of 6 trillion packages in two years. In an industry where millions and billions are routine, the next step up is already happening.
It is, though, going to be a challenge, as the market is fragmented, with lots of cash-on-delivery and consumers wanting “faster and faster,” said Teddy Zebitz, CEO of Saudi Cargo, who believes there will be a capacity crunch.
Here, he says, there are two ways forward: tech and cooperation. “I see the opportunity for partnerships,” said Zebitz, adding that initially these would be between the airlines and the ecommerce companies.
“There has never been a better time to revisit how we do business. We need to go and revisit how we do things,” Sulaiman Alsaleh, vice president for aviation and standards at Saudi Arabia’s General Authority of Civil Aviation (GACA), told the conference.
The task is a big one, everyone knows and acknowledges, but now firmly on the collective agenda.
Michael Mackey
