News / The case of the missing passenger belly capacity

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Recent air transport statistics are heartening: not only are passengers back, but cargo is in recovery too, according to the figures just released by IATA for December 2023 and the full year. Passengers (in RPKs) were up 25% in the month – and just 5.9% lower than in 2019.

Cargo, which has been in decline for most of 2022 and 2023, was up more than 10% in December, year on year, and even up 2.3% over December 2019 levels.  In short, normalcy has returned. Passenger capacity is just 2.5% lower than pre-pandemic, and top-level global air cargo capacity is about the same.

Or is it?

For passenger transport, most national domestic markets have recovered beyond pre-Covid levels. Of the six major domestic markets tracked by IATA, only Australia and Japan have yet to fully recover, and that should fully happen over the course of 2024. However, international markets are altogether different, primarily to due a rise in nationalist brinksmanship on the part of the Russian Federation, China (PRC) and the United States.

Passenger seat-km capacity can be used as a proxy for passenger belly capacity. The chart below shows the available seat capacity as measured in “available seat km (ASK)” on the three major “east-west” airtrade lanes connecting Asia to North America and Europe. Europe-North America capacity is more than fully restored, but Europe-Far East capacity is 31% smaller than year 2019 levels, and Far East-North America capacity is 37% less than the pre-Covid norm.

Russia’s invasion of Ukraine in early 2022 polarised the global landscape unlike any event since the Cold War of 1945-1991.

Factor number one: Russian and Ukrainian air space was closed to most countries not aligned with either Russia or the PRC, severely impeding air transport capacity between East Asia and Western Europe.

Factor number two: the US and China have restricted resumption of air passenger service between their countries to less than one-third of 2019 levels due to US opposition to China’s alignment with Russia during Russia’s ongoing invasion of Ukraine, curbing transpacific air cargo capacity.

Case-in-point: United Airlines, a US-based legacy passenger airline with no freighter capacity, is currently only operating 24% of its allotted US-PRC route authority, as of February 2024.

In a nutshell, these factors have severely curtailed passenger airplane belly capacity available to the world’s two biggest international region-to-region air cargo markets: East Asia to/from North America (transpacific); and East Asia-to/from Europe.

Not surprisingly, these two trading blocs remain dependent on freighter capacity well beyond pre-Covid norms. The capacity split on the trans-Pacific was roughly 60:40 in favour of freighters in 2019; in later 2023, the split was closer to 80:20 in favour of freighters. By way of comparison, the capacity split on the East Asia to/from Europe market was 40:60 in favour of belly capacity in 2019; as of late 2023, the split was about 40:60 in favour of freighters.

Due to the fact that the air cargo market remains highly reliant on freighters, their utilisation also remains higher than pre-Covid norms. Large widebody freighters, like the 747, 777 and MD-11, are used to serve these two biggest international tradelanes. Trade and Transport Group found that overall large widebody freighter utilisation remained, on average, 34% higher than 2019 levels in 2023. These numbers help explain the continuing interest in new large widebody freighters despite traffic declines in 2022 and 2023 relative to the Covid-19 inflated traffic peak of 2021.

The conundrum outlined in this article prompts several questions. What implications does this new-found reliance on freighter capacity have on global air cargo markets? What is the outlook for future capacity deployments in the transpacific and East Asia-to/from Europe market?

Air cargo pricing is 30%+ higher than pre-Covid levels. Will it remain elevated and, if so, for how long?  What factors might alleviate pricing for air cargo service in long-haul freighter markets?

All of these questions will be addressed in detail in subsequent articles in this series.

Tom Crabtree is managing director of Trade and Transport Group.