Air cargo will more than double its historical share of total industry revenue in 2020, and freight rates through 2020 expected to be 30 percent above those recorded last year, according to the International Air Transport Association (IATA).
In its latest market update released Tuesday, IATA said cargo revenue this year would rise to $110 billion, increasing its portion of total industry revenue from 12 percent in 2019 to 26 percent, as air freight provided a lifeline to countries battling the coronavirus disease 2019 (COVID-19).
With most of the global passenger fleet grounded, removing half the available cargo capacity from the market, freight rates have soared, and IATA is forecasting average rate levels across 2020 will be up 30 percent year over year.
The latest data from TAC Index show air freight rates continue to fall sharply from mid-May records, and although the year-over-year levels remain high, Shanghai-Europe rates this week are $7.03/kg, down almost 19 percent on last week. Shanghai-North America rates are at $5.80/kg, a decrease of 24 percent over last week.
“Air rates out of China continue to drop towards more standard levels as PPE (personal protection equipment) consumers have been able to build inventory,” Freightos said in a market update Wednesday.
Rates are also declining as airlines continue to add cargo-only passenger planes to long-haul routes, with 1,800 of the aircraft now believed to be in service. While not cost effective to operate as freighters, the aircraft are supplementing tight freighter capacity.
Passenger-freighters to remain
Glyn Hughes, head of cargo at IATA, said during a JOC Uncharted interview June 3 that 130 airlines have mobilized passenger planes to operate in a cargo-only configuration.
“That in itself is incredible, but it is also critical because when factories start normal operations and supply chains are back up, the passenger network is not going to be the same size and the global connectivity is not going to be there,” he said. “A significant number of these passenger aircraft carrying cargo will remain.”
IATA is expecting cargo to hold on to its enlarged industry footprint through 2021, with the return of passenger travel likely to be gradual, starting with domestic markets, followed by regional and, lastly, international. The association has forecast that air cargo demand will be strong next year as businesses restock at the start of the economic upturn, while a slow return of the passenger fleet will limit the growth of cargo capacity, and keep cargo yields steady at 2020 levels.
IATA expects cargo revenue in 2021 to grow by 25 percent to $138 billion, giving cargo a 23 percent share of total industry revenue.
Alexandre de Juniac, IATA director general and CEO, said if there was no second wave of coronavirus infections, the worst was now behind the industry, but he painted a bleak picture of what lies ahead.
“Financially, 2020 will go down as the worst year in the history of aviation,” he said in a statement Tuesday. “On average, every day of this year will add $230 million to industry losses. In total that’s a loss of $84.3 billion. It means that — based on an estimate of 2.2 billion passengers this year — airlines will lose $37.54 per passenger. That’s why government financial relief was and remains crucial as airlines burn through cash,” he said.