Passenger Airlines Start Shifting Idled Planes Into Freight Business
Date: Thursday, March 26, 2020
Source: The Wall Street Journal
With travel demand plummeting, the jets can relieve growing shipping congestion and generate revenue
The coronavirus pandemic is reshaping global airfreight operations as passenger airlines ground planes and companies scramble for capacity to keep medical supplies, industrial parts and high-demand consumer goods moving.
Some airlines are putting passenger planes to work as freight-only aircraft, with main cabins empty and cargo holds filled with shipments. The tactic provides some revenue for carriers hit hard by plunging travel demand and may help ease freight bottleneckscaused by cascading cancellations of passenger services, which has dramatically reduced capacity for goods traveling in the bellies of planes.
American Airlines Group Inc. is launching its first scheduled cargo flight since 1984 on Friday, with two round-trip flights over four days between Dallas-Fort Worth International Airport and Frankfurt on a wide-body Boeing Co. 777-300 passenger plane that can carry more than 100,000 pounds of freight. The flights are expected to be booked to capacity and will move cargo including medical supplies, e-commerce packages, and telecommunications equipment and electronics, the airline said.
Global carriers including Delta Air Lines Inc., Korean Air Lines Co., and Qantas AirwaysLtd. also are running passenger aircraft on freight-only flights in certain lanes. “The business strategies of passenger and cargo should be shifted as the transatlantic road in the sky is now blocked,” Korean Air Chairman Walter Cho said in a statement. “We must flexibly respond to market demand.”
Deutsche Lufthansa AG , which has cut 95% of its passenger flights but continues to operate its freighter fleet, said this week it may use some of the passenger planes to move cargo. “The transport demand has clearly increased, and we want to make our contribution wherever possible to maintain the delivery chains,” Chief Executive Carsten Spohr said in a news conference.
The moves come as airlines around the world have been battered by fallout from the coronavirus pandemic. Carriers are furloughing workers and cutting costs to try to stay afloat while they seek government bailouts.
Industry executives say airfreight prices have started to surge on key trade lanes, including routes in Asia where production is starting back up even as industrial operations in Europe and North America shut down in an effort to contain the coronavirus.
“In intra-Asia, there is a great demand for inventory replenishment as manufacturing comes back on line,” said Cathy Roberson, president of supply-chain research firm Logistics Trends & Insights LLC.
The coronavirus-driven suspension of most passenger flights in Asia cut about 60% to 67% of the airfreight capacity in the region and “clogged up the feeder system for intercontinental flights,” said Brian Clancy, managing director of consulting firm Logistics Capital & Strategy LLC.
He said that freight forwarders who typically pay $3 a kilogram to move freight in the belly of Cathay Pacific planes, for instance, may see rates of between $9 and $11 per kilo.
Carriers with idle planes are evaluating cargo revenue on in-demand routes where they can “maximize the payload per departure and take advantage of the very high market rate,” at a time when fuel prices have plummeted, Mr. Clancy said. “That makes this type of scenario economically attractive,” particularly on trade lanes such as the trans-Atlantic, where flights are shorter than on Pacific lanes and plenty of trade moves in both directions.
The rapid shutdown of flights as the pandemic progresses is creating upheaval for shippers and freight forwarders that arrange transport of goods by air. Deutsche Post DHL Group’s global forwarding arm declared force majeure so it can modify its services without penalties of contract violations. The company said in a statement that “almost all elements of the air and ocean supply chain on certain trade lanes” are now “impossible to predict or control.”
Freight rates have increased significantly from Europe to China and Hong Kong, according to logistics provider Agility, and airfreight forwarders have started chartering more aircraft on their own from Belgium, Germany and Italy to China rather than rely on unpredictable and crowded commercial services. France-based forwarder Geodis SA is beginning a charter operation between Amsterdam and Chicago on March 21.