Demand vs. capacity in the COVID-19 age

March 2020 tonnage is significantly lower year over year compared to March 2019, according to reports by multiple sources, including IATA and WorldACD. Amid the coronavirus pandemic that has axed 80% of the world’s passenger flights, however, capacity is the more salient feature of the demand equation. A quick glance at the static March snapshot could lead to the mistaken conclusion that there was a modest capacity crunch for the month. Industrywide cargo capacity, measured in available cargo tonne kilometers (ACTKs), plummeted by 22.7% YoY for the month of March, according to IATA’s monthly freight analysis. Total industrywide cargo traffic, measured in cargo tonne kilometers (CTKs), meanwhile, decreased by 15.2% year over year. What would seem like a modest differential is actually distorted in a number of ways. Notably, the widespread global passenger flight cancellations accelerated in mid-to-late March, and so available bellyhold capacity was much lower toward the end of the month. In addition, what lower-hold capacity did remain in the market toward the end of the month did not reflect cargo demand. The majority of remaining capacity was on domestic or short-haul flights, while the bulk of cargo is moved on long-haul international flights. Consultancy WorldACD clocked a similar 19% drop in March traffic across the data it collects from seventy airlines, and highlights how the precipitous drop in capacity is reflected in rate increases. City pairs that were more reliant on bellyhold capacity pre-crisis unsurprisingly saw steeper rate increases. Intra-Asian flights saw price-per-kilogram rates jump 48% YoY in March, while North America-to-Europe and Asia-to-Europe flights saw increases of 36% and 33%, respectively. Freighter operators quickly added flights, where possible, to alleviate the crunch. Flights operated by 747Fs increased 34% month to month between February and March, and the tonnage carried on 747Fs grew by 48%. The 777F saw movements up 24% month to month, and tonnage was up 28%, according to WorldACD. In late-March, combination carriers began redeploying passenger aircraft on cargo-only missions. Initially, flights chased the yields. Cathy Pacific and Scoot launched intra-Asian flights. Trans-Atlantic and Trans-Pacific , and Asia-to-Europe soon followed. As the Cargo Facts passenger-freighter database reveals, by April 30, some 100 carriers have used more than 900 passenger aircraft to carry cargo. Already in March, these passenger-operated cargo flights added meaningful capacity back into the market. Even as 777 passenger flight movements dropped by 29%, freight carried on the type fell only 21%. The A330 saw movements down by 39%, and a 36% drop in freight. The role of the cargo-only widebody passenger aircraft will become clearer once April statistics are released in mid-May. "This initiative and additional capacity is welcome and appreciated during this taxing time, but that doesn’t change the fact that this additional capacity is less cost effective," said Keith Nehring, senior product development manager of forwarder C.H. Robinson. For April and into May, air cargo demand continues to outstrip available capacity and yields remain elevated. "As social distancing measures ease globally, demand for all modes of cargo transportation should increase from the current low levels," Nehring added.

Demand vs. capacity in the COVID-19 age

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