Capacity cuts and digitalisation: That was the air cargo year that was

Thelma Etim reflects on a year of havoc, change and heroics

WHAT can the air cargo industry expect in 2022? … without doubt, more logjams and bottlenecks at sea and airports, further cargo capacity crises, unprecedentedly high prices and personnel shortages. Will there also be more poor planning in an industry already suffused with a paranoid fear of change — and no-one with any influence prepared to admit their arrogance?

One does not need a crystal ball to know these trends will continue.

The real new question though is which businesses will survive the next 12 months before the revival of passenger aircraft belly-hold cargo.

Geoff Van Klaveren, head of advisory, and Stuart Hatcher, chief revenue officer at independent aviation analyst IBA are both sanguine about the prospect of a recovery of the global aviation industry. “The speed at which many governments re-imposed travel restrictions following the discovery of the new Omicron variant has been a blow to the aviation industry, which had a recovery firmly set in its sights,” they jointly observe.

“Nevertheless, we are optimistic that aviation is unlikely to return to the position of 2020, when global passenger traffic was some 70 per cent down on normal levels,” they predict. “Provided Omicron does not cause a material rise in hospitalisations, the rational response would be to keep borders open.”

Karen Reddington, president of FedEx Express Europe, is more doubtful about any major recovery: “The pandemic has undoubtedly brought supply chain resilience to the fore. With a new, highly contagious COVID-19 variant, reduced port and air cargo capacity and heightened consumer demand, it will continue to impact global trade well into 2022,” she says.

As passenger travel remains depleted, air cargo capacity will be constrained throughout 2022 while demand for goods is likely to grow, with 2021 trading volumes overtaking pre-pandemic levels and achieving their fastest year of growth in over a decade, she stresses. “In the long-term, supply chain challenges are likely to trigger a change in the trading landscape, as global trading networks shift and we see continued regionalisation of supply chains.”

Soaring e-commerce sales

England reported a record number of COVID cases on Christmas Day, BBC News Online reveals. The public broadcaster says there were 113,628 new infections reported in England on 25 December, 103,558 on 26 December and 98,515 on 27 December.

Elsewhere, France announced a surprise ban on travellers from the United Kingdom who had planned a Christmas break and, predictably, one by one, like a set of cascading dominoes, nations have since been imposing a swathe of protective measures against the more transmissible variant of Coronavirus by putting a further dent in the already stretched availability of belly-hold cargo.

Some 7,500 flights were cancelled during Christmas and over the Christmas weekend, according to the FlightAware data tracking website, so the airfreight industry will enter the New Year with many of the same problems it suffered 12 months ago, such as soaring prices on key trade lanes and the kind of unreliability which any business depending on the e-commerce boom simply cannot afford.

The latest International Air Transport Association (IATA) white paper entitled A new era for air cargo — How e-commerce is accelerating the logistics transformation points out that in 2017, the annual value of global e-commerce sales reached two trillion dollars and was forecast to exceed 4.4 trillion by 2025, a total which was achieved in 2021. “The new estimated forecast for 2025 grew well over past predictions, at US$7.4trilliom,” the report says.

It is therefore no big surprise that air cargo industry giants such as Maersk and CMA have acquired their own freighters. Indeed, such is the dire need for any sort of cargo capacity that Boeing and Airbus have both enjoyed record-breaking orders for freighters. Global express carrier UPS has ordered 19 B767Fs, whilst the new widebody cargo jet, the long-haul A350 freighter, attracted much attention at the Dubai Air Show, with America’s aircraft Air Lease Corporation (ALC) becoming the launch customer of the new freighter type purchasing seven units, and with Singapore Airlines also purchasing seven.

CMA CGM Air Cargo — whose CEVA Logistics subsidiary has traditionally been a major air cargo customer of many of the world’s airlines — has ordered four of the Airbuses, along with Air France/KLM, which has purchase rights for four more units.

More freighters and p2fs

In other moves, the passenger-to-freighter (p2f) market is suddenly buoyant as businesses attempt to plug the gaping hole left by the paucity of belly capacity. For example, Canada’s Cargojet emerged as the launch customer of aircraft engineering specialist Mammoth Freighters’ new B777–200LR p2f freighter conversions project. It signed a sales agreement for two initial B777–200LRMFs with additional options for two -300ERMFs and two -200LRMF extended range variants.

Emirates Airline Group is investing US$1billion in augmenting its cargo capacity by bringing in two new B777Fs to its fleet in 2022, and converting four of its B777–300ER passenger aircraft into freighters between 2023 and 2024. The aircraft conversions programme will be performed in partnership with Israel’s aircraft engineering specialist Aerospace Industries (IAI) Aviation Group.

International aircraft leasing company Avolon has committed to take as many as 30 A330–300 p2f conversion slots between 2025 and 2028 as the launch customer of IAI’s A330–300 p2f conversions programme.

Meanwhile, USA’s Eastern Airlines has acquired 35 B777 passenger aircraft as feedstock for an eventual fleet of p2f conversions, and Ethiopian Airlines Group has entered into a deal with IAI to construct its own dedicated conversions centre specifically for B767–300 ERs at its MRO facility at Addis Ababa Airport.

Switching on to digitalisation

In another dramatic change in 2021, with flexibility, efficiency, wastage reduction, transparency, and the ability to promulgate additional capacity to as many freight forwarders as possible, carriers have been finally admitting the importance of digitalisation. This year saw higher numbers of cargo businesses enter into partnerships with a myriad of emergent digital disruptors including Cargo.One, IBS Software, Nexshore, a facilitator of IATA’s ONE Record airfreight data-sharing solution, PayCargo, an encrypted online payments settlements platform, Unisys, ESC Group, the Freightos Group, data-sharing specialist Nallian and WiseTech’s CargoWise e-bookings platform.

This development is another trend that will continue to flourish as the air cargo industry jettisons its legacy paper-based processes. As IATA’s white paper once again warned carriers that they must digitise to increase speed. “Airlines must support transparency by digitally integrating with their business partners,” says the airline association. “This includes the integration of data flows between airlines and other parties involved in shipment processes. They need to assess and develop multimodal forwarding platforms and provide transparency for consumers,” the body insists.

Global multimodal information technology specialist Kale Logistics Solutions insists that the way forward lies in ‘digital airfreight corridors’ — which create a transparent supply chain through the exchange of real-time status of shipments between two airports — and thereby eliminates duplicaton of processes. This would mean that shipment arrival information can be shared in advance to the rightful stakeholders at the destination airport so that Customs, ground handlers and others are well-informed and prepared to handle the incoming freight on time.

Throughout all of this, the air cargo industry as whole has excelled itself in the uplift of life-saving COVID-19 vaccines and related medical supplies. Earlier in the year, 16 airlines signed the UNICEF Humanitarian Airfreight Initiative in the distribution of COVAX vaccines — a global effort co-led by the World Health Organisation (WHO) aimed at providing equitable access to COVID-19 vaccines.

Under that initiative, Saudia Cargo, Astral Aviation, AirBridgeCargo (ABC), Air France/KLM Martinair Cargo, Brussels Airlines, Cathay Pacific, Cargolux, Emirates SkyCargo, Ethiopian Airlines, Etihad Airways, IAG Cargo, Korean Air, Lufthansa Cargo, Qatar Airways, Singapore Airlines and United Airlines all agreed to add freight capacity to routes where needed, whilst continuing to safeguard the efficacy of the life-saving medicines in time- and temperature-sensitive secure environments.

Humanitarian lift

Etihad Cargo has also been distributing vaccines via Hope Consortium, a COVID-19 vaccines ‘nerve centre’ established and spearheaded by the UAE’s Abu Dhabi Department of Health.

And it has been impressive to see how the airfreight industry galvanised itself for India struggling in the grip of the Delta variant. Among them were German ground operator CHI Aviation Handling which, in co-operation with flag carrier Air India and forwarding giant DSV Panalpina, processed five specially-chartered flights from Frankfurt to COVID-stricken India, carrying urgent medical supplies including 31.5 tonnes of oxygen tanks. Ukraine’s Antonov Airlines transported 2,500 life-preserving oxygen concentrators from Israel; Volga-Dnepr Group’s airlines shipped more than 200 tonnes of life-preserving oxygen storage devices, oxygen concentrators and cryogenic containers from China, Ireland and Germany into India; Lufthansa Cargo flew 10 tonnes of time- and temperature-sensitive life-preserving medical equipment to India, including 280 oxygen concentrators.

Also, aviation organisation Sky One collaborated with a host of leading air cargo, air transport and logistics businesses to deploy a US$2.5m B747–400 freighter operation loaded with 50 tonnes of urgently-needed medical and other aid shipments to India. The charitable humanitarian endeavour was supported by a collaboration of USA aircraft manufacturer Boeing, global integrator FedEx, commercial aircraft marketer Regional One, aircraft ferrying specialist JetTest, UNICAL Aviation, Ascent Aviation Services and California’s San Bernardino Airport.

Also helping India was European aircraft manufacturer Airbus which delivered more than 36 tonnes of additional medical equipment, including 250 oxygen concentrators and four mobile intensive care units (ICUs) to the Indian Red Cross Society. Hong Kong carrier Cathay Pacific utilised its B747 freighter fleet as well as cargo-only passenger aircraft flights to deliver more than 100 tonnes of medical supplies, including oxygen generators, oxygen concentrators and ventilators to Delhi, Mumbai and Hyderabad.

Virgin Atlantic, in partnership with Khalsa Aid International — a UK-based humanitarian relief charity providing support around the world to victims of natural and man-made disasters — delivered more than 200 boxes of oxygen concentrator machines to Delhi from London’s Heathrow Airport; and Qatar Airways Cargo transported 300 tonnes of aid collected across its global network into its Doha home hub from where it was transported “in a three-flight cargo aircraft convoy” directly to destinations in India.

It goes on. This month, Envirotainer has revealed it has carried its one-billionth Coronavirus vaccine in its fleet of temperature-controlled containers and predicts growing demand for such COVID treatment shipments next year; whilst SkyCell has been witnessing a growth in demand for frozen consignments between -20 and -70 degrees centigrade. The company predicts data will propel improvements in the efficiency of pharmaceutical goods.

Overall, Emirates SkyCargo has confirmed that it has now delivered more than 400 million of the life-preserving phials and outsize specialist Volga-Dnepr Group’s carriers ATRAN Airlines, AirBridgeCargo Airlines, along with Volga-Dnepr Airlines have delivered a myriad of COVID brands including Sputnik V and China’s Sinovac.

IAG Cargo focused on remote regionsm shipping 2.5 million doses of COVID-19 vaccines to the Latin American and Caribbean regions, including to El Salvador, Mexico, Chile and the Dominican Republic over a three month-period. By August, it had transported more than 10 million COVID-19 vaccines worldwide. Air France/KLM Martinair (AFKLMP) Cargo launched a dedicated COVID Service Centre supermarket to manage and process rapidly increasing numbers of shipments of vital live-saving vaccines.

Despite the COVID rescue missions, natural disasters were also well served in 2021 by the air cargo industry, including United States’ Hurricane Ida and Californian wildfires; devastating flooding which disrupted British Columbia’s supply chains; the Philippines’ deadly typhoon; and the eruption in the Caribbean of the La Soufriere Volcano, which stands 3,864ft above sea level on the island, amd which sent a plume of fine rock particle ash into the air reaching parts of neighbouring Barbados and Saint Lucia. All of these have emphasised the crucial role the airfreight industry plays in shipping emergency supplies.

It can be seen that the global urgency for humanitarian aid in the aftermath of these climatic and pandemic events have also contributed to a marked growth in charter flights and exorbitant shipment prices on key trade lanes. Chris Leach, founder and chairman of global broker Air Charter Service (ACS), revealed in October for the first time “We paid two million dollars for a trans-Pacific flight on a B777, a flight that would normally cost less than US$750,000.”

Charter broker Chapman Freeborn also managed to arrange hundreds of humanitarian rescue flights and urgent cargo deliveries — despite extremely volatile airfreight prices and widespread capacity shortages. Reto Hunziker, group cargo director revealed this was down to “long-standing co-operations with most of the airlines that still allow us to get capacity on [their] aircraft. Also, earlier, we made the decision to commit to our own controlled capacity which now helps to fulfil the demands of our key customers.”

Sustainability — not just a website mission statement

Such disasters have also resulted in governments focusing more deliberately on climate change measures which has urged the air transport industry to examine more acutely its sizeable cargo footprint. As a result, Deutsch Post DHL Group is investing €7billion over the next 10 years to systematically reduce its CO2 emissions by 2030 — and turn the company into a sustainability beacon amongst global logistics suppliers.

Unarguably, AFKLMP Cargo has led the charge among airfreight industry carriers in the utilisation of Sustainable Aviation Fuel (SAF) whilst encouraging other business operating in the air cargo supply chain to follow suit.

Russia’s oil giant Gazprom Neft, in collaboration with some of that nation’s most successful air transport operators such as Volga-Dnepr Airlines and Airbus, has launched the first Eurasian Sustainable Aviation Fuel Alliance initiative, which plans to conduct its first bio-fuel flight no later than during 2024.

Whilst the importance of sustainability in fuel usage is being amplified, less so is the diversity of people, genders and employees which, in turn, leads to a diverse perspectives in decision-making, so that the same voices — coteries/cliques — do not always have a platform promulgating the same repeated year-after-year views.

Meanwhile, the International Air Cargo Association (TIACA) has published the industry’s first Air Cargo Sustainability Roadmap, emphasising the role employees play in the cultural and climatic shift the world is striving for.

Recruiting talented people continues to be a thorn in the side for most air cargo sectors. Robert Fordree, executive vice-president cargo at ground company Menzies Aviation, complained earlier this year: “The resource pool that we had to fish in is much smaller than it ever was before, so we are seeing a number of people move away from working in the handling side. There is lots of competition out there for resources and being able to attract the right people is challenging. We have over-stretched and very busy teams, whilst having to support and coach new entrants into the business as well.”

Thomas Mack, executive vice-president global airfreight at DHL Global Forwarding, admitted the company was also experiencing staff shortages. “Other industries have increased their wages, so we have more competition if we are hiring blue collar and white-collar staff,” he said.

In this environment, it is not surprising that this month IAG Cargo launched the largest recruitment campaign in the company’s history. Over the next 12 months more than 500 new posts will be created across the UK-based business including in operations, revenue and inventory management, data and analytics, along with personnel needed for new projects.

A bumpy ride for some airlines

Meanwhile, more carriers will emerge from Chapter 11 proceedings next year, according to independent aviation analyst IBA. “The COVID crisis has seen more than its fair share of distressed operators, though ultimately the body-count remained lower than it should have been — largely thanks to government bailouts. Some of those who sought protection have already exited, whilst others such as LATAM and Aeromexico are expected to follow Avianca’s footsteps in early 2022. Overall, airlines will find themselves operating much leaner business models with fewer staff, fewer aircraft and a lot more debt to worry about,” it observes.

A case in point is Cathay Pacific Airways whose struggles look set to continue into the New Year. Stricter COVID-related local quarantine rules have now forced the Hong Kong airline to shut down all of its long-haul freighter services for at least a week.

The introduction of more stringent quarantine requirements for cargo flight-deck staff has rendered the freighter division impossible to operate the airline says in a statement.

“Further to our [prior] announcement on 28 December, due to additional, more stringent quarantine requirements for Hong Kong-based cargo crews, we regret to announce that all long-haul freighter rotations to transpacific, Europe, south-west Pacific, Riyadh and Dubai destinations will be suspended,” it says.

The news follows The South China Morning Post reporting that airlines in Hong Kong have been told that crews working on non-mainland China passenger flights will lose all quarantine-related exemptions effective midnight (local time ) on 29 December.

Cathay Pacific is already at risk of widespread flight cancellations in the coming days, as it is unable to secure enough hotel rooms to accommodate the new COVID rules, the online news group notes.

Some of the airline group’s pilots have told the Financial Times that a sigificant number have resigned since November. The newspaper claims three pilots were sacked after leaving their hotel rooms and allegedly breaching quarantine restrictions.

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Originally published at https://aircargoeye.com on 30 December 2021