Covid-19 is here to stay, for a longer time than originally anticipated by the industry. Therefore, the focus is shifting from short-term to longer-term action. Given this rather gloomy
“L-scenario,” progress in digitalizing processes is a matter of do or die, says CEO Arnaud Lambert of IT solutions provider CHAMP Cargosystems S.A.
In CHAMP’s presentation “Covid-19 in Air Cargo,” shared with CargoForwarder Global, the Luxembourg-based developer of cargo management modules concludes that the industry is in a valley
of tears forecast to last for another 3 years (positive estimate) to 5 years (pessimistic outlook). This forecast is based on available data and current market developments showing a sharp
contraction of industrial production, consequently negatively influencing world trade and driving transport volumes down. In parallel, with the economic slump caused by lockdowns and industrial
upheavals in many parts of the world, commercial aviation was scaled back to nearly zero between April and July. This led to the disappearance of 23% of available belly hold cargo capacity
provided by passenger aircraft on a worldwide level and even 50% on roundtrips between Europe and the U.S. Particularly hit were transatlantic flights, where 60% of all shipments are flown in the
lower decks of passenger planes, which caused a dramatic mismatch between demand and supply. This ongoing but slowly fading lack of belly hold capacity as passenger traffic recovers step by step,
is still a major obstacle torpedoing supply chains from getting back to old strengths, says CHAMP.
Ongoing mismatch between demand and supply
“As long as long-haul aircraft remain grounded, economic recovery will be hampered since there will not be enough capacity to transport the goods once factories restart, and/or the price will
not be affordable anymore due to imbalance between demand and offer, therefore also limiting trade,” CHAMP predicts.
This estimate is in line with international surveys forecasting that all indicators suggest that the global economy will not emerge from the Covid-19 pandemic even anywhere close to as strong as
when it entered. So there will be undoubtedly be some slow months and years ahead for air cargo, market experts similarly conclude. All the more so given that different quarantine regulations,
travel bans, and testing practices are non-transparent and are scaring passengers off.
Industrial production picks up again
Within Europe, air travel is once again permitted, but passenger flights between Europe and the U.S. are still operating on a small scale.
CHAMP CEO, Arnaud Lambert mentions a small glimmer of hope by pointing at production statistics evidencing a slow but steady rise of Air Waybill numbers from April until today. However, despite
the tentative recovery, AWBs are still 29% down versus July 2019. A figure pretty much in line with Cargo Hub traffic which trails July 2019 results by 24%.
So where is cargo heading at in the months and years ahead? In this respect, Mr. Lambert has more questions than answers despite CHAMP’s huge database. In the short term, demand will be fueled by
restocking, in the longer term, by increasing purchasing power. e-Commerce will accelerate its triumphal march, driven by the changed purchasing behavior of people who tend to increasingly buy
online rather than shopping at retail stores, as triggered by the pandemic.
More ‘preighters’ needed
According to CHAMP, more passenger airlines need to play an active role in economic recovery by removing seats and flying as preighters i.e. flying without passengers as many already do. This
adds capacity to the market which gradually reduces the mismatch between supply and demand. “Airlines can potentially not only breakeven with cargo in the belly but, more importantly,
at a time of government cash injections (funded by the tax payers – all of us), airlines should have also an active role in supporting the economic recovery and ensuring air cargo capacity
availability,” the executive states.
Eye-opener Covid-19
Asked about the near future, he points out that much will depend on the opening of borders, enabling air travel to pick up, coupled with the access to effective vaccines and state-supported
airline bailout packages. Given these and some other preconditions, passenger traffic will recover step by step, adding lower deck transport capacity to the market. This will lead to rate
adjustments spurring volumes as air freight transportation becomes financially more attractive for shippers and forwarders.
“Covid-19 has opened the eyes of airlines on the importance of cargo in their revenue/margin mix,” the executive says.
However, it is a long way to go for the industry, requiring perseverance because the 2019 level will not be reached before 2023, he predicts. Hence, it is the L scenario that civil aviation is
facing, the worst of all the feasible options.
Heiner Siegmund
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Source: Cargoforwarder
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