Turbulence in the air cargo industry will continue until 2025
Demand and supply in the air cargo market will return to pre-crisis balance no earlier than 2025.
Major players in the aviation industry and shippers recently gathered in Copenhagen to discuss the prospects for the development of air cargo transportation at the Nordic Air Cargo 2022 symposium. All of them came to one common conclusion - the return of the balance of supply and demand to the pre-crisis level in the next three years will not happen. Many airlines, including ZetAvia, were waiting for the results of this event in order to correctly assess the situation on the market and make the most of the available opportunities.
The panellists at the symposium said cargo capacity could reach 2019 levels as early as 2023, but rebalancing will be hampered by continued growth in air travel demand amid congested container ports, supply chain disruptions and growing e-commerce. At the same time, a number of speakers noted that in the coming months, there may be a drop in demand for air cargo transportation due to lower consumer spending due to high inflation. However, everyone agreed that disruptions and high shipping costs will continue to drive the use of air travel to support a regular supply chain.
Let's look at the numbers. Air freight demand in March 2022 was down 4.5% from March 2021 and 6.5% from 2019, according to CLIVE Data Services, part of Xeneta, a leading sea to air rate benchmarking platform. year, which according to Xeneta indicates "...a sudden halt in the trend of recovery in recent months after the peak disruption due to the pandemic over the past two years." Throughput in March was down 3% from 2021 and 14% from 2019 levels. As a result, weight and volume dynamic load factors were 66%, in line with 2019 levels and six percentage points lower than in 2021 after hitting record levels in the same year. Despite the fact that in March this year the aircraft were less loaded than a year ago, the rates actually increased by 27% year on year and by 141% compared to rates two years earlier. Xeneta analysts say the air and sea shipping markets are in general turmoil right now, with shippers and consumers paying the price. And if the first two months of 2022 were all about the growing resilience of the air travel market and recovery to pre-pandemic levels, the data for March showed how quickly things can change. Analysts at Xeneta called the results of March a step back from the trend observed at the end of last year and the beginning of this year, as well as a clear demonstration of the dependence of the global air transportation market on passenger traffic, disruptions in maritime supplies and geopolitical events.
As an aviation expert with more than twenty years of experience, I agree that the volatility in the industry will continue. Exactly how long it will take to restore the balance of supply and demand is difficult to predict, especially given the current uncertainty in the market. However, high interest rates, together with the rising cost of two to four months of cargo on ships, could benefit the air cargo market and fuel demand. I emphasize that during the pandemic, the profitability of container transportation increased by more than 300%, and the typical price difference with air delivery decreased to an average of 5.5 times, although problems with the reliability of maritime transportation remained. In the long term, the consolidation of the shipping market that has taken place should also have a positive impact on the air cargo market, since the current price difference between air and ocean is now the smallest I have ever seen in my twenty-plus years in the aviation business.
Oleg Sergeev