Glimpse of hope for cargo operators: second-hand aircraft market?
The cargo side of aviation has had a very wild ride throughout the past few years, as demand crumbled down then shot back up. Yet with uncertainty going forward regarding the demand for cargo, as belly capacity goes up due to the resumption of passenger services, one bright light in a dark night might be the secondary aircraft market.
One such example could be the recent announcement by Boeing. The United States-based manufacturer broke the news that DHL Express, a Germany-based logistics company that also operates its own cargo airline, bolstered its fleet with four extra Boeing 767-300 Converted Freighter (BCF) aircraft.
“We have operated the 767-300F model across our global fleet for many years and look forward to continue investing in the platform by adding more 767-300BCFs,” seemingly an exciting statement by Geoff Kehr, the Global Air fleet manager at DHL Express, read.
The 167 aircraft-strong fleet of DHL includes 34 Boeing 767 aircraft, a few of which were converted from the passenger version.
At a weird place
Aviation’s cargo sector is at a weird place right now. 2019 was a disastrous year for freight companies, as it recorded the worst year since 2009, the year of the financial crisis, International Air Transport Association (IATA) report showcased. Despite no major global events taking place, apart from the elephant, or rather a panda, in the room in the form of a trade war between China and the United States.
“Trade tensions are at the root of the worst year for air cargo since the end of the Global Financial Crisis in 2009. While these are easing, there is little relief in that good news as we are in unknown territory with respect to the eventual impact of the coronavirus on the global economy,” remarked IATA’s Director General and CEO Alexandre de Juniac.
For DHL Express, weirdly enough, it was a good year. It finished 2019 with an extra revenue of $1.1 billion (€954 million) compared to 2018, while it managed to stay profitable with an Earnings before interest and taxes (EBIT) increase of $94 million (€82 million).
“2020 will be another challenging year for the air cargo business,” added de Juniac, concluding IATA’s cargo sector report for the year.
And so far, 2020 is a difficult year for everyone involved in aviation due to the COVID-19 outbreak. However, for the cargo industry, the falling demand is offset by the plunging capacity. Latest numbers by IATA showcase that there is a gap between capacity and demand, as the former dropped by 34.7%, while the latter by 20% in the month of May 2020.
“But predicting the length and depth of the recession remains difficult,” noted the monthly report.
Preparing for the future and new opportunities
Nevertheless, cargo airlines have to prepare for the future and increase their capabilities. After all, e-commerce is a sector that is only on the rise. Oddly enough, the pandemic helped to spur the growth of the sector, according to the 2020 Digital Economy Index report published by Adobe.
“The key finding in the May analysis is that e-commerce shopping levels during COVID-19 (April to May) were higher than what retailers saw during the 2019 holiday season (November to December),” highlighted Adobe. Shoppers in the United States spent $10.5 billion more than compared to their Christmas shopping sprees.
Shopping online also broadens the geographical scope of one’s purchases, thus requiring the package to cover additional kilometers on its journey. With shifting consumer behavior, opportunities open up. And even in the short-term period, with cargo demand and capacity discrepancies, the chance to earn additional revenue is there.
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