Air freight industry continues to battle capacity

Despite the capacity challenges facing air cargo, the industry will not suffer any “lasting negative impact” from the pandemic, because global economies will recover, high value goods require expedited transport and customer demand for speed continues to increase.

The pandemic, Ukraine war and global macroeconomics illustrate how uncertainty is increasing, with one crisis after another, but over the last few years the air cargo industry has demonstrated how resilient the sector is.

Belly capacity from passenger flights, continues to be massively constrained, particularly on long-haul East/West routes and the Ukraine-Russia war has further affected capacity because of the closure of airspace, meaning airlines that are operating scheduled flights are forced to fly a longer Europe-Asia route than normal.

When passenger flights were grounded and belly-hold capacity vanished, at the onset of COVID, high demand for air cargo – to move PPE and medical products – led aviation safety authorities to amend the rules to allow the carriage of cargo in passenger cabins – on seats, or with seats removed.

In many cases, these exemptions provided the sole income for passenger airlines, but gradually the ‘preighters’ are disappearing from the market and from the end of July, Europe’s safety agency (EASA) ends the exemptions.

The FAA, meanwhile, ended the exemptions for US carriers at the end of last year and in China no cabin loading, Including PPE is allowed from July, and that’s all airlines, Chinese and foreign.

In Hong Kong, there seems to be a continuing flexible approach to the carriage of cargo by passenger aircraft, with the Civil Aviation Department adopting a facilitating approach to meet industry demand for loading in the passenger cabin.

Local operators in Hong Kong that opt to remove passenger seats for carrying cargo, will require a Supplemental Type Certificate (STC) by the CAD, while non-local operators will need to submit relevant safety procedures to CAD and obtain approval from their own civil aviation authority.

The Shanghai and Beijing COVID lockdowns also further affected capacity due to the lack of ground facilities in China and while passenger demand is greater than expected, the capacity gap remains, with projections suggesting we may not return to pre-COVID conditions before 2025.

Supply chain disruption and PO delay has been exacerbated by a lack of spare parts and materials following lockdown factory shutdowns, which is likely to put more demand pressure on airfreight when these orders become available.

With such capacity constraints there are hopes that this year’s peak season will be more shallow than initially expected, with orders getting pulled forward, as retailers try to avoid disruption leading into the back-to-school season and Christmas trading period.

For many shippers it means balancing business needs with timeline uncertainties, to meet demand, which comes with a necessary investment in air freight, particularly if inventory is likely to be held up in sea freight supply chains. 

Port congestion continues to be an advantage for the air cargo industry and while fewer ships are waiting at ports, huge delays remain and eCommerce continues to increase demand for airfreight capacity.

Anticipated changes to the market include Asia to Europe trade because of the end of the Shanghai COVID lockdown, and the North Atlantic trade due to more belly capacity creating overall excess capacity.

In summary the air cargo market is still very volatile and there are many challenges ahead, with different trade lanes effected by varying events and market conditions. This is without consideration of the macro-economic situation and the dampening of demand for goods, which would usually have a rapid impact on air cargo sentiment. 

Also, the traditional peak season for the time-critical mode usually begins to build from late August and this will create more stress and strain on some routes. In particular, as China production increases, it is expected that space will be hard to find, with passenger flights still very much restricted.

Despite ongoing challenges, we continue to find solutions for urgent and time-sensitive shipments, using a blend of scheduled, dedicated and chartered air cargo services. 

We work closely with our global network to continuously monitor market capacity and service opportunities that might benefit our customers.

Evaluating and blocking space on viable services early, including our sea/air platforms and hub services, is a critical factor in achieving the most demanding deadlines. 

Please call Elliot Carlie for insights and advice on how to move your express time-sensitive products globally.