Air Cargo Demonstrates Resilience Amid Mixed Market Signals

shipping by air is a fast and efficient means of transport for goods. airlines transport in excess of 52mn metric tonnes of goods a year, representing more than 35% of global trade by value but less than 1% of world trade by volume, according to IATA, the global body of airlines.
That is equivalent to $6.8tn worth of goods annually, or $18.6bn worth of goods every day. However, the effects of Covid-19 on the industry dramatically affected the air industry including air cargo.
Available cargo tonne-kilometres fell industry-wide by 21.4% year-on-year in 2020. However, by the end of the year, industry-wide cargo tonne-kilometres had returned to near pre-Covid values.
In 2021, air cargo generated $155bn, up from $129bn in 2020 and $101bn in 2019. Air cargo therefore contributed more than a third of airline revenues in 2021, over double its contribution in 2020.
Recent data for global air cargo markets demonstrated the industry's resilience amid economic uncertainties, IATA noted.
Global demand, measured in cargo tonne-kilometres (CTKs), fell 8.3% compared to August 2021 (-9.3% for international operations). This was a slight improvement on the year-on-year decline of 9.7% seen in July.
Capacity was 6.3% above August 2021 (+6.1% for international operations). This is a significant expansion over the 3.6% year-on-year increase in July.
Global goods trade expanded slightly in August this year and the additional easing of Covid-19 restrictions in China will positively impact cargo markets.
While maritime will be the main beneficiary, air cargo will receive a boost from these developments. Also, inflation levels in G7 countries slowed for the first time since November 2020.
Oil prices stabilised in August and the jet fuel crack spread fell from a peak in June. New export orders, a leading indicator of cargo demand and world trade, decreased in leading economies in all regions except the US.
That said, global supply chain congestion is contributing to an inflationary environment and causing challenges for air cargo. Air cargo crews still face hardships navigating Covid-19 restrictions in many countries, and operations are being adversely affected by shortages of human resources and facilities.
Air cargo is the backbone of global supply chains. The efficiencies and advantages of transporting goods by air were highlighted during the Covid-19 pandemic, with the delivery of life-saving personal protective equipment, medical supplies, and vaccines.
The passenger side of the air transport business, conversely, dimmed as countries closed their borders and added to their travel restrictions.
Air cargo revenues have nevertheless been the bright story for airlines during the pandemic. They rose nearly 75% in 2021 compared with 2019 on the back of strong demand and record cargo yields.
That, however, was far from enough to offset the fall in passenger revenues, which in 2021 were still more than 60% under their 2019 level. This left overall airlines revenues in 2021 fully 57% below revenues for 2019.
Amid greatly diminished international passenger traffic, particularly as the pandemic took full effect, passenger aircraft belly capacity declined substantially.
To compensate, airlines temporarily converted some of their passenger aircraft to freighters, which are dubbed“preighters”. The result was record air cargo load factors and yields.
The air cargo load factor hit a peak in mid-2021 before falling as a result of lower demand and increased capacity.
Air cargo yields also fell in the second half of 2021 until Omicron, labour shortages, and other disruptions sent them to new heights at the outset of 2022.
IATA's director general Willie Walsh said:“Air cargo continues to demonstrate resilience. Cargo volumes, while tracking below the exceptional performance of 2021, have been relatively stable in the face of economic uncertainties and geopolitical conflicts. Market signals remain mixed.
“August presented several indicators with upside potential: oil prices stabilised, inflation slowed and there was a slight expansion in goods traded globally. But the decrease in new export orders in all markets except the US tells us that developments in the months ahead will need to be watched carefully.”

Pratap John is Business Editor at Gulf Times. Twitter handle: @PratapJohn

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