Key business amid COVID-19: is cargo an ultimate choice?
The recent growth of the cargo market has seen airlines converting their passenger aircraft to transport more freight, reactivating retired jets to cope with the demand and for some performing their first cargo-only flights in more than 30 years. With that comes the question: is cargo the ultimate and only source of revenue for the aviation industry now?
The recent fall in passenger demand has left passenger airlines in a situation where refunds for canceled flights overtake new bookings and, as a result, airlines have to innovate and shift their business model immensely to sustain operations at least for the near future.
As seen from the practice, most airlines chose to go down a popular path of offering cargo services on passenger planes, but is this the ultimate choice airlines should consider?
Firstly, it is important to understand why cargo-only flights currently are in record-high demand. Before the global coronavirus pandemic, about 45% of global air cargo was transported by passenger aircraft in cargo holds below the passenger deck. Industry analysts have calculated that two-thirds of air freight between Western Europe and the United States were carried in belly holds of passenger aircraft like Boeing 767, 777, 787, Airbus A330, 340, A350 and A380.
However, as the situation regarding COVID-19 worsened, more than 80% of flights between Europe and mainland US have been canceled. This translated into a 50% reduction in air freight capacity in the market. While other markets are also experiencing a similar problem, the EU – US sector has felt the hardest hit. Overall, the capacity of March 2020 has been calculated to be 23% lesser when compared to normal circumstances.
To cope with growing losses airlines deployed their passenger aircraft to operate cargo-only flights around the globe. In recent months Swiss, Air Canada (ADH2) , Lufthansa (LHAB) (LHA) , and other airlines have been removing economy class seats from some of their aircraft to accommodate more bulky cargo i.e. PPE. While airlines invest money to remove seats from their aircraft, a significant rise of air cargo transport and its fares have made it a viable decision. Just in several weeks of March cargo rates rose over 10% and have been steadily increasing by growing demand for PPE.
Even though the cargo-only flight numbers are increasing, this may not continue for much longer. Currently, heavily growing cargo dedicated airlines may see requests for cargo charter dry up as the demand for PPE falls and passenger airlines restart their passenger operations, carrying freight in cargo holds.
While cargo transport may look like a promising and profitable way to support business in the current situation, the market may not see the same demand in the long-term and only the strongest players of the industry will survive the explosion of the oversaturated air freight market.
AIR Convention Digital Week organizes a free online discussion to review the current situation and future prospects of the global air freight market. Join the conference, going live every day from Monday to Friday, June 14-19th, 2020. Registration is required: https://digital.airconvention.com/#register
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