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Cargo Takes on Even Greater Value to Airlines With Rising Global Trade

Madhu Unnikrishnan

December 7th, 2020 at 2:56 PM EST


If there’s one leitmotif in the airline industry’s pandemic narrative it’s that cargo is helping airlines keep the lights on. The latest numbers from the International Air Transport Association (IATA) underscore that and show some glimmers for even more hope in 2021.

Cargo volumes fell more than 6% in October, the latest month for which data are available, but that’s better than the almost 8% decline in September. Demand remains high, but belly-hold capacity still remains constrained as airlines operate limited longhaul intercontinental flights. Freighter utilization is high, IATA said, but there simply aren’t enough dedicated freighters to fulfill demand. Air cargo capacity fell more than 22% from last year.

Cargo demand is being driven by increasing e-commerce, as people around the world are shift shopping habits online and limiting trips to retail stores. This is expected to accelerate as the the year-end holidays approach. In addition, global trade is showing signs of life, the World Trade Organization said. The group expects trade to rise by 7% in 2021.

Cargo volumes for this year are expected to be about 12% lower than last year, IATA said. That sounds bad, but the comparison with passenger volumes is stark. IATA expects passenger volumes worldwide to be down 66% year-over-year.

KLM CEO Pieter Elbers underscored this point in an interview with Airline Weekly. ”¬†Cargo has enabled us to keep some of the operation running and pilots and crews active,” he said. “We did not have to shut down the entire shop.” Cargo also has allowed KLM to bring needed medical equipment to cities around its network, and the carrier is gearing up for vaccine transport with investments in its cold chain, he said.

Cargo has been a much-needed lifeline for airlines. Both Korean and Asiana reported small profits, despite an almost total collapse of passenger revenues, from their cargo operations. Virgin Atlantic said it can make money on a flight that’s only 20% full of passengers with a full cargo load. Airlines, like American and United, that don’t usually operate freighters have adapted passenger aircraft to fly all-cargo flights. And Singapore Airlines recently said it would convert some aircraft into “combi” to carry both passengers and freight on the main deck.

Vaccine shipments could be a further benefit to airlines, despite the enormous logistical challenges of maintaining a cold chain and ensuring safety. A question that hasn’t been fully addressed, however, is if vaccines will displace regular freight. Given air freight’s current capacity constraints, it’s not certain what that might do to global freight transport, analysts say.

Cargo’s current importance may fade, however, when the pandemic subsides, warned Air Lease Corp. Executive Chairman Steven Udvar-Hazy at the Skift Aviation Forum. He predicts a return to “equilibrium,” and this “euphoria” for freighters will erode.

Madhu Unnikrishnan

December 7th, 2020 at 2:56 PM EST

Photo credit:  Lufthansa Cargo

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