COVID outbreaks cut capacity — and bring more airfreight price chaos
ON 30 August a new strain of Coronavirus called the Mu variant was placed on the World Health Organisation’s (WHO) Variants of Interest (VOI), a watchlist for COVID viruses that may “pose an increased risk” to global public health. Cases of the Mu variant were first detected in Colombia earlier this year.
These new variants and other outbreaks are further threatening an already overburdened global airfreight marketplace, which has somehow managed the pandemic-induced dearth of passenger belly-hold cargo by introducing cargo-only passenger aircraft services, buying in charter flights and converting redundant passenger aircraft into freighters.
As it gears up for the coming peak season and the much-anticipated surge in volumetric e-commerce traffic, how much more agony can airfreight industry customers bear?
Big questions remain about the fate of air cargo prices during all of this and especially in the lead-up to Christmas. Pricing analyst CLIVE Data Services reveals ‘resilient’ international demand for air cargo capacity in August versus a shortfall in supply pushed average global airfreight rates up by 112 per cent on pre-pandemic levels. “A local lockdown in Vietnam and the closure of cargo handling terminals at Shanghai Pudong International Airport (PVG) after a handful of new COVID cases demonstrated the fragility of supply chains,” says a statement.
The Shanghai Pudong issue came about after Chinese authorities in the city quarantined hundreds of personnel in an attempt to halt a new outbreak of the COVID-19 Delta variant in the region after infections were detected in five cargo workers at PVG. As a result, Cathay Pacific Airways’ freighter handling operations into mainland China were severely affected. Pudong is among a number of major Chinese cargo airports affected by the variant.
CLIVE’s analysis for last month also shows the effect on reduced ground operations in Shanghai, a hiatus which contributed to a 10 per cent drop in China-to-Europe volumes in the last two weeks of August, whilst overall westbound capacity dropped by 18 per cent. As a result, spot-rates from the region increased by almost 20 per cent in the last week of the month in comparison with the last week of July, it notes.
The latest analysis also reveals that cargo volumes were up by one per cent compared with the same month in pre-pandemic 2019 and more than 19 per cent versus August 2020. “The biggest challenge for businesses importing and exporting goods by air was the low level of available cargo capacity at 16 per cent below the level seen in August 2019,” the company points out.
CLIVE’s load factor — which takes into consideration both the volume and weight ‘cube’ perspectives of cargo flown and capacity available to produce a reliable indicator of airline performance — was 66 per cent for August 2021, more than six percentage points above the same period in 2019, and minus one point over the same month of last year.
CLIVE’s managing director Niall van de Wouw observes: “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 there. When something like this happens at what is 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 of airline passenger operations, but some signals suggest this may get pushed back yet again on intercontinental routes following the recent EU recommendation to pause all non-essential travel from the US to Europe,” he adds.
“For passenger airlines operating cargo-only aircraft 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 per cent, it’s not a sustainability situation for passenger airlines,” he warns.
This story first appeared in aircargoeye.com on 3 September 2021