The current capacity shortage in the air cargo market is likely to be resolved – but not in the industry’s favour – as the global economic crisis depresses demand for such services, according to IATA.
“The capacity crunch will, unfortunately, be a temporary problem,” states the airline association’s director general Alexandre de Juniac during a briefing today. “The recession will likely hit air cargo at least as severely as it does the rest of the economy.”
A mismatch between air cargo supply and demand has caused freight rates to rise in recent weeks. Crucially, however, this has been driven by falls in capacity outpacing drops in demand, largely because passenger aircraft with significant bellyhold capacity have been grounded amid swingeing restrictions on air travel.
With a tentative recovery in passenger services forecast to begin in the third quarter, more belly capacity will return to the market as the world grapples with a deep economic shock.
IATA cites a World Trade Organization forecast that offers “little indication of a quick recovery” and sets out a range of scenarios that suggest global trade could contract by 13-32% in 2020.
“This will deeply impact air cargo’s prospects,” IATA suggests, despite some relief being provided by an increase in pharmaceutical shipments during the coronavirus pandemic.
Therefore, while IATA suggests there is evidence that demand for air cargo is holding up relatively well versus other forms of freight transport, the outlook for the rest of the year is extremely challenging.
”To keep the supply chain moving to meet what demand might exist, airlines must be financially viable,” de Juniac says. “The need for financial relief for airlines by whatever means possible remains urgent.”
In its latest data for the freight sector, IATA states that global cargo demand measured in freight tonne kilometres was down 15% in March year on year, while capacity saw a steeper drop of 23%.
In international markets – which account for 87% of air cargo – belly capacity shrank by 44% in March as carriers around the world grounded passenger aircraft. This was partially offset by a 6.2% increase in capacity through expanded use of freighter aircraft, including the deployment of idle passenger aircraft for all-cargo operations.