Retailer demand and airport shut-downs keep airfreight under pressure

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Resilient international demand for air cargo capacity in August versus a shortfall in supply pushed global rates up 112% of their pre-Covid level as a local lockdown in Vietnam and the closure of cargo terminals at Shanghai, said analyst Clive Data services.

Volumes were up 1% compared to the same month of 2019, before the pandemic took hold, and 19% versus August 2020. But the biggest challenge remained available cargo capacity at 16% below the level seen in August 2019.

Clive managing director, Niall van de Wouw, said even before the latest disruptions in Pudong and Vietnam, air cargo capacity was already tight due to fewer international passenger flights and demand is also being driven by retailers switching from shipping to air cargo to replenish stock levels in time for their peak season.

He explained: “The problem for the air cargo industry is not demand, it’s clearly capacity. The market is solid from a demand viewpoint, but it is currently based on a scarce and fragile infrastructure. As we saw in August, a small handful of Covid cases at Pudong airport led to the closure of air cargo terminal operations. When something like this happens at the world’s third largest cargo airport, it only reflects how fragile things are for global supply chains and the immediate impact on rates which were already high.

“Shippers want to see more cargo capacity from the return on airline passenger operations, but some signals suggest this may get pushed back again on intercontinental routes following the recent EU recommendation to pause on all non-essential travel from the US to Europe. For passenger airlines operating cargo-only flights, it’s all about the margin per flight and not about adding capacity to grab market share. Airlines want and need passengers back and I suspect airline cargo departments are anxious to see this too because of the pressure they are under to generate revenue – but even when cargo revenues double, if passenger revenues are down 80%, it’s not a sustainable situation for passenger airlines.”

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