With widespread gloom in the industry about the pace of passenger traffic’s return this year, the cargo market will remain a bright spot for airlines well into 2021, as growth in e-commerce displaces shipments of personal protective equipment as a major opportunity.
That is the message from expert panelists in a FlightGlobal webinar last week on the future of the air cargo market, sponsored by SmartKargo.
Tim Strauss, vice president cargo for Air Canada, and soon to join specialist freighter operator Amerijet as chief executive, says the next six months will “continue to be strong for freight” with passenger volumes “not returning as fast as we hoped”.
During the crisis, mass groundings of passenger flights created a critical shortfall in belly hold capacity for the air cargo sector, prompting many airlines to operate all-freight services in passenger airliners, often with seats removed under temporary exemptions from regulators to allow urgent consignments of PPE to be transported.
Airlines operating passenger aircraft as improvised freighters “will do quite well” over the next six to 12 months, while those in the “all-cargo world will be in the driver’s seat for a bit longer”, Strauss believes.
Abhi Shah, chief revenue officer for Azul, describes on the webinar how the domestic Brazilian airline has for two years been successfully tapping the online retail market in a country “the size of the continental USA”, with large population centres, poorly connected by roads, by “partnering with e-commerce providers to create a network that goes from first mile to last mile”.
The e-commerce market in South America’s largest country remains undeveloped compared with North America, Europe and even India, says Shah. Until Azul began its service, “unless you were in Sao Paulo, there was no two-day delivery [for items ordered online]. It was seven or even 14 days.”
According to SmartKargo’s executive vice president Olivier Houri, the “acceleration to the digitisation of the economy”, given fresh impetus by the coronavirus pandemic, “is something that will not go away in the long term”.
Cargo, he says, has transformed from a way of “maximising the utilisation of an asset” to revenue that “can save an airline” in the crisis. Compared with standard consolidated pallets of cargo, an e-commerce shipment, at typically 1-5kg, is a “perfect commodity for an airline”, he says.
“It is from a known source, it is easy to load, you can track it, and you don’t even need to take the seats out of a plane,” he adds, noting that the yield can be “two or three times higher” than for traditional air freight.