Airfreight capacity falls 42%, 'damaging' global supply chains
Date: Friday, June 5, 2020
Source: Supply Chain Brain
- Airfreight volume fell more than 27.7% year over year (YoY) in April, according to the latest numbers from the International Air Transport Association (IATA).
- Freight capacity fell nearly 42% YoY in April. International belly capacity fell by about 75% YoY as a result of flight cancellations due to the pandemic, according to IATA.
- "The result is damaging global supply chains with longer shipping times and higher cost," IATA’s Director General and CEO Alexandre de Juniac said in a statement. Airlines are deploying as much capacity as possible, including special charter operations and the temporary use of passenger cabins for cargo.
Demand for freighters "improved significantly" beginning in March, as airlines pulled capacity and other transport modes were disrupted, Atlas Air CEO John Dietrich said on the company's earnings call last month. Atlas has added capacity in response, he said.
Airfreight rates have started to fall from their peak in mid-May but are still well above the rates seen in early March when prices began to climb. Rates between China and the U.S. rose throughout April to reach $10.21 per kilogram on May 11. Prices have fallen to $7.12 per kilogram, but this is still a 160% increase compared to the $2.73 per kilogram rate the market saw at the end of February, according to the TAC index.
The passenger airline industry has responded to the capacity crunch by beginning to fly some cargo-only flights and the federal government has stepped in to provide guidance to make this possible.
"We expect the positive trends that we’re currently experiencing to continue throughout the remainder of the year," Dietrich said, adding that the pandemic makes the market hard to predict.
Demand is also falling, but capacity is falling at a faster rate. "Lockdowns, falling consumer income and the loss of manufacturing output undoubtedly mean that demand for air cargo was subdued that month," IATA said in its April report. "Belly capacity was however not sufficient to reach demand, forcing airlines to turn to dedicated freighters."