Cargo Chat: Agility Logistics on post-COVID cargo capacity

[caption id="attachment_83753" align="alignright" width="218"] Andy Vargoczky, SVP, Sales & Marketing, Asia-Pacific at Agility Logistics.[/caption] The first half of 2020 has held significant challenges for air cargo logistics providers, as the widespread grounding of passenger flights, and lockdowns around the world severely impacted cargo demand and capacity during the COVID-19 pandemic. However, after the initial shock, airlines began to adapt by introducing creative solutions, the most notable being the thousands of cargo-only flights operated with passenger aircraft. This is good news for freight forwarders, as many had to declare force majeure on shipments for which they could no longer guarantee capacity. Andy Vargoczky, who heads Kuwait-based Agility Logistics’ commercial business unit for the Asia-Pacific region, discussed the impact on the Asia-Pacific market at the April Cargo Facts Asia virtual event. Agility has fared better than most amid the crisis and was not among the forwarders declaring force majeure across its entire network although it felt the industry’s capacity crunch. Vargoczky also shared his thoughts on how airlines, many of which normally prioritize their passenger operations, should think about their cargo business in the post-COVID world. ACW: A lot of talk right now is focused on the air cargo industry moving medical shipments around, but that misses the bigger picture of what’s going on. Which markets are doing well, which markets are not doing so well, and what is different to the normal situation we’d be seeing? AV: I don’t believe there’s a single market that is doing well at the moment, quite frankly. I think we’ve come to an age of complete unpredictability. Our air routes have shut down completely. In some cases, they’re opening up and some stations — Shanghai for example — had a record number of flights transporting cargo only on any given day, breaking the previous records. But that doesn’t necessarily mean the market is working well. What it means is that we’re responding to an emergency situation. There are two sides of the coin here. Airlines are struggling, obviously, with the cutback of passenger travel. Freighter operators are overstretched at the moment. They are flying as much as they can, and the shipping lines on the other side that still moves the majority of the freight around the world are operating as normal. The biggest challenge we have is, the consumer demand is not only drying up, but the companies that are producing goods to meet that demand are unable to produce. So we’ve come to a situation where it’s not about which market is doing well, it’s more the question of, which market is doing better than others? If I want to pick one particular market, that would be Asia-Pacific, intra-Asia-Pacific. We’re probably seeing more pickup in demand within Asia than we see on the long-haul sectors. If you look at the news, moving medical equipment is dominating the sector, but that’s changing rapidly as well. Looking at food security, we see more air charters being booked for simple dietary items today as well. It’s rough and the market is challenging, but we’re trying to adapt and adjust to what we can do. ACW: In a normal year, medical equipment and pharma together count for about maximum 10% worldwide airfreight, but in the current situation it’s all over the place. PPE is shifting to some of the minor lanes now, and other traffic is filling the gap. You said you’ve seen a shift in terms of the type of commodities as well? AV: I think we shouldn’t be grabbing just the headlines. It’s true that we hear about medical equipment and PPE, but there’s a large shift on other commodities as well. Technology products and e-commerce, that still continues. If you look at telecommunication companies, they are ramping up production. Look at what we’re doing today—we're using Zoom and digital technology, right? It’s going to schools, it’s going to governments, and they need to broaden the network. Producers of telecommunication equipment are having an increased demand. We’ve seen commodities fly that I’ve never seen in my career, like hazelnuts from Istanbul to Australia. ACW: How quickly is passenger capacity going to come back, and what's the overall demand level? Have you considered following in the footsteps of some freight forwarders and signing up for dedicated freighter capacity in order to support your own capacity requirements going forward? AV: Passenger airlines that will remain in business — and we’re already seeing some going into liquidation — will have to treat cargo differently. It can’t be treated as a byproduct anymore. As you see today, cargo is flying on airlines that treated their freight division as a potential headache. Now the only reason they’re flying is because they have cargo to put in the aircraft. I believe within the airline business there’ll be a shift in mindset: that cargo is profitable, that cargo is important and that cargo is almost needed, balanced with the passenger traffic to secure the long-term viability of any airline. Because I don't believe this crisis is the first or last we will see. Even before the passengers resume full operations, there will be a shift in my opinion for airlines, and the reliance on freighters needs to be understood. Look, this is about national security in many cases. As an industry, over the last 20 years, we’ve managed to continually drive down the prices so much that freighter operations viability is almost at stake, and that's in no one’s interest. I'm not advocating for freighter operators to triple their prices, but I'm advocating for a level playing field. What I’m advocating is a sustainable and ethical approach toward our business. We need to be in a position that our approach as a shipping community and price points allows airlines to continue investing in freighter operations.

Cargo Chat: Agility Logistics on post-COVID cargo capacity

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