Baltic Exchange airfreight rate newsletter recently wrote a quoted Bruce Chan at investment bank, Stifel saying that over the next few months capacity could become tighter as demand continues to recover.
Chan said: “Assuming that consumer and especially e-commerce driven activity persists, that the industrial recovery continues, more brick and mortar activity and more produce and seafood demand could further tighten capacity as vaccination effort march forward and life gets back to normal.”
“And with no proximate signs of capacity loosening in other modes of transport, we believe that airfreight will remain a critical goods pressure relief valve in shipper supply chains for months to come.”
The most recent IATA statistics show that air cargo volumes have now recovered from decline due to COVID-19 and are back to 2019 levels.
Capacity levels in February 2021 were -8% and -5% of 2019 and 2020 respectively. Volume and weight perspectives of cargo flown and capacity available was up 5% pts on February 2019 and 9& pts on February 2020. The overall dynamic load factor was the same as last months while the monthly volumes climbed 7% despite the short month of February as capacity rose 5% over January.
Van de Wouw, from CLIVE Data Services added: “These are tricky months to compare due to the Chinese New Year and Leap Year variances, so we have to be careful in how we read the market. To give a meaningful view, it makes sense to keep an eye out to 2019 before the pandemic took hold and, on that basis, air cargo demand is now nearly at par with pre-COVID volumes despite much less capacity in the market. If we normalise for last year’s Leap Year, we can see a 2% growth in global volumes compared to February 2020 but that does not tell the tale by any measure – the apparently modest global growth number is masking what lies underneath. Volumes from China to Europe, for example, were nearly 5 times higher in the four weeks of February 2021 than in the similar weeks of 2020. This was caused by the dramatic drop in volumes because of the of the factory closures a year ago in response to the COVID outbreak. Volumes from Europe were down by -11% for the same period.”
“Demand is increasing and there are a lot of passenger planes sitting around that could start flying cargo, but I don’t think that will happen proactively. Given the high financial risks, when it comes to adding capacity, airlines are more likely to follow the market as opposed to trying to stimulate it. But if it makes sense, they will surely fly those aircraft. Air cargo has been resilient and, bit-by-bit, has clawed back the losses we saw only a few months ago. In April 2020, volumes were down -39% but are now back to the pre-COVID level. Who would have that possible inside 10 months? It’s a recovery airline passenger departments will be dreaming of.”
Chan added: “We don’t see many signs of immediate rate relief on the horizon, so strap in and try not to get gored.”
He added that freight companies would need to find alternative ways to offset the costs.
Alternative ways could include surgical analysis of modal planning and selection, more use of buffer stock, tactical procurement and sourcing, relying on different logistics providers to supply capacity and improved use of technology for supply chain planning and execution.
He reiterated his warning that it could be up to a year or more until “meaningful international belly capacity returns.”
He explained that the addition of freighters is unlikely to solve the issue. He explained that demand for freighters is on the rise, but widebody slots are at a bottleneck.