With ocean shipping in turmoil, the COVID-19 economy has allowed cargo to become a significantly larger part of airline revenues.
Last year was disastrous for the world’s airlines—revenues dropped by half a trillion dollars, according to the International Air Transport Association (IATA). But those numbers came as a result of the falloff of passenger traffic. Cargo performance actually advanced remarkably during the pandemic.
The COVID-19 economy has allowed cargo to become a significantly larger part of airline revenues, as passenger travel largely shut down while cargo revenues increased thanks to capacity shortfalls and rate increases. With the pandemic also wreaking havoc on ocean container shipping, leading to constrained capacity and spiking rates, airfreight has also benefitted from a modal shift from ocean to air, as the rate differential between the two compressed. Companies racing to replenish depleted pandemic inventories are reporting increased reliance on airfreight.
Cargo “has become a financial bright spot for airlines and the backbone of global supply chains,” said Willie Walsh, IATA’s Director General and CEO.
Boom in Air Freight
Global air cargo demand was up 9.9% during the first half of the year compared to 2019, according to IATA, with North American carriers contributing 60% of that growth. But capacity remained 10.8% below June 2019 levels, and belly capacity was down 38.9% compared to June 2019 due to the ongoing grounding of passenger aircraft. With capacity constrained, the industry-wide cargo load factor was up 7.0%, reaching an all-time high of 53.8%.
UPS has responded to the latest conditions by adding capacity, especially out of Asia. In the first quarter of 2021, the carrier “added 25% more flights and even more in terms of capacity to support outbound Asia demand,” which was up 43% year-over-year, said Brian Newman, UPS’s chief financial officer. In the second quarter, UPS’s international volumes were up 14% year-over-year and international revenues were up 30%, with all major regions showing double-digit growth. The carrier plans on adding six new aircraft to its fleet by the end of this year.
Air Canada has benefitted from enhanced cargo operations, even as passenger aircraft sat idle. Since March 2020, Air Canada has operated over 10,000 scheduled and on-demand all-cargo flights using its Boeing 777 and Airbus A330 passenger aircraft.
“The pandemic changed our business at unprecedented speed,” said Jason Berry, vice president for cargo at Air Canada. The airline…
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