News / Air cargo market more volatile as hopes fade for return of bellyholds

© Janece Flippo

Hopes for a recovery in bellyhold airfreight capacity to relieve the tight lift situation are fading as passenger traffic suffers setbacks from the Covid-19 pandemic.

Faced with high prices and a shortage of services, forwarders are reinforcing their dedicated lift arrangements.

According to OAG Aviation, global passenger capacity dropped to 48.1m scheduled seats in the first week of February, with the tally for the full month heading for half the numbers recorded a year earlier.

Instead of a steady build-up of capacity since last summer, the passenger business shifted into reverse again, as Covid-19 infection numbers climbed in most major markets. In mid-January, flight numbers were down across all major regions, reported aviation consulting and appraising firm IBA.

Where demand did not rein in passenger capacity, governments stepped in to curtail activities.

At the end of January, the Canadian government announced that from 1 February international passengers could only land at four gateways – Vancouver, Calgary, Toronto and Montreal. That deprived Edmonton, a thriving cargo gateway, of international belly capacity for the second time in 12 months.

In addition, Canadian air carriers suspended flights to Mexico and the Caribbean until 30 April.

In Hong Kong, the authorities have signalled plans to implement new flight crew quarantine requirements that could force Cathay Pacific to reduce passenger capacity by 60% and cargo lift by 25%, the carrier warned.

The air cargo market has responded to these set-backs with volatility.

“Rate negotiations between shippers, forwarders and carriers are much more short-term again (weekly or even per shipment) and, as a result, the number of spot rates has increased drastically,” said Robert Frei, business development director at TAC Index.

Last week, IATA director general and CEO Alexandre de Juniac said: “As countries strengthen travel restrictions in the face of new coronavirus variants, it is difficult to see improvements in passenger demand or the capacity crunch. 2021 will be another tough year.”

At the World Cargo Summit in late January, Niall van de Wouw, MD of Clive, predicted belly capacity would remain below 2019 levels, while Jo Feiks, corporate product manager air cargo at forwarder cargo-partner, anticipates some tailwind from vaccination programmes, but is not betting on a fast return of lift.

“We expect passenger traffic will slowly start growing again with the distribution of vaccines and increasing immunisation rate, although it will still take a few years to recover fully,” he said.

Predictions vary on when pre-Covid capacity levels will return. Some cautiously hope this may happen next year, while the more pessimistic envisage a three-year slog ahead.

A recent poll by the US Airforwarders Association found 20% of respondents expecting capacity to be back at pre-pandemic levels in 2022, while 70% saw this happen in 2023. The remaining 10% reckon capacity will never climb back fully.

Mr Feiks noted that some regions had recovered faster than others, pointing to the intra-Asian and Middle Eastern markets,  and added: “Just as in 2020, we will need flexibility and agility to adapt to the changing market situation.”

The pandemic has hit the global route network hard. According to OAG, there were 47,756 operational routes in January last year; by November that was down to 33,146. Many of the lost sectors are regional, but a lot of second- and third-tier airports have lost international connections.

Mr Feiks said: “We expect that there will be fewer business travellers, particularly on longhaul legs, due to remote working and virtual meetings. These routes are ideal for cargo; these are destinations where trade goes in both directions and they are all served by modern widebody aircraft. If this longhaul capacity does not return to 2019 levels, there will another boost and need for freighter capacity.

“The importance of dedicated freighters or converted ‘preighters’ has become clear over the past year, and this will remain an important factor,” he added.

Forwarders have been shoring up dedicated lift. For example, Geodis recently expanded its AirDirect service with the addition of a weekly flight from Shanghai to Guadalajara.

“We have been running our own, independent charter programme since March 2020, with regular weekly flights from main hubs in Asia to Europe. We will continue this programme in the foreseeable future, as demand is still high,” said Mr Feiks.

Crane Worldwide Logistics has also set up some dedicated flights and remains ready to dial this up or down.

“Our plan has not changed pre- and post- pandemic. We have pre-booked charters, full freighter and passenger freighter, with our partner carriers. We continue to closely monitor changes and when we see any hot spots beginning to develop, we may add the necessary adjustment to capacity. Flexibility is key in such a dynamic market,” said Joe Cipolla, senior director of global airfreight.