Pax-freighter charters relieve automotive industry chip shortage

With microchips in short supply around the world, automakers are turning to charters of cargo-only flights using passenger aircraft in addition to freighter aircraft as manufacturers struggle to avoid costly manufacturing stoppages. Until recently, the auto industry in China had been performing better than before COVID-19, while Europe and North America were on a good recovery path, Achim Glass, SVP and global head of the automotive and new mobility vertical at Kuehne + Nagel, told Air Cargo World. That changed when the sudden shortage of microchips last month “forced almost every Western carmaker to slam on the brakes and reduce, or even suspend, production.” Ford and General Motors are just two examples of manufacturers that have recently announced production cuts or suspensions due to the shortage. [caption id="attachment_94540" align="alignright" width="560"] TUI has been flying an increasing number of cargo-only flights carrying auto parts, including microchips. (Photo/Stuttgart Airport)[/caption] “At the same time, increasing consumer orders for new electric vehicles — driven by government incentives — need to be fulfilled and carmakers have a stronger interest than ever before to reduce their CO2 emissions now, in light of heavy penalty payments when violating the Paris Agreement’s targets,” said Glass. “Therefore, production must continue at any price. All this has disrupted production cycles, and resulted in imbalances of material and shortage of supply.” The result has been an acceleration of demand for urgent supplemental airfreight capacity to transport production material and aftermarket service parts. “Carmakers are willing to pay premium rates to fly product around the world, following the principle that a car that is not built cannot be sold,” Glass said. To that end, Glass confirmed that Kuehne + Nagel, ranked third in Air Cargo World ’s ranking of 2019’s largest forwarders by airfreight metric tonnage , currently has “several operations” ongoing that deploy idled passenger aircraft and fill them with up to 40 tonnes of urgent automotive shipments, “predominantly production material for new model launches.” Fewer passengers, more auto parts for carriers The use of passenger aircraft has benefited even carriers like TUI, which serves passenger leisure markets and did not previously have much — if any — exposure to automotive cargo. With various airlines based in Europe, TUI now finds itself flying a significant cargo-only operation serving the automotive industry. In fact, auto represents at least 80% of TUI’s current contracts, Roel Martens, head of aviation leases and adhoc sales, told Air Cargo World . From around the end of 2020, TUI began operating cargo charters from Stuttgart (STR), Germany, and now uses a contingent of around ten 787s to fly to Atlanta (ATL), Detroit (DTW), Greenville-Spartanburg (GSP) and Guadalajara (GDL) — sometimes more than once a day — shuttling between major clusters of automotive manufacturing. “Our volumes have increased month to month from around October 2020 up to the end of January 2021, and continue to rise,” said Martens. Other carriers are also helping to provide capacity for the auto industry between Europe and North America. In January, United Airlines began a cargo-only flight between Frankfurt (FRA) and ATL , and confirmed to Air Cargo World that the flight carries “a variety of commodities, especially automotive,” while IAG Cargo has also been running a cargo-only operation between STR and ATL on 787s flown by British Airways. According to Martens, he and his team now manage four times as many flights compared with when they worked on selling passenger charters and wet leases, and they will continue to operate cargo-only flights for the foreseeable future until the market recovers. “If there are any opportunities to use our widebody aircraft — or even narrowbodies in the winter — to carry cargo, and if the market still thinks that belly-only cargo flights are interesting and competitive, there is no reason not to keep on doing it,” he said. TUI did not make a strategic decision to target the lucrative automotive sector, Martens said. The carrier has always carried belly cargo on its passenger flights and works with general sales agent ECS Group; after operating cargo-only flights last spring and fall, TUI gained the necessary experience to meet the needs of the auto market, where requests are often last-minute and urgent — sometimes with lead times of a day or less, he said. There continues to be a systemic lack of belly capacity, especially on international widebody routes, since more than half of all air cargo is normally transported in the bellies of passenger aircraft. But despite turning to chartered passenger freighters and full freighters in the short term, Kuehne + Nagel’s Glass said he does not expect much volume to switch permanently to dedicated main-deck capacity. “That global ratio between bellies and freighters is probably also pretty accurate for the automotive industry,” he said. “And we do not see any reason why this ratio should change once the pandemic is over.” In the meantime, airlines like TUI will continue to be a source of supplemental capacity. “When the market recovers, we’ll all be happy because it will mean that the core business of our company is in a better place,” said Martens. “But on a personal level, for those of us involved in the cargo operation, it’s been special to see our aircraft covering the world and flying to new destinations, parked next to large 747 freighters.”

Pax-freighter charters relieve automotive industry chip shortage

Cargo-only flights continue to plug gaps in the automotive supply chain, benefitting passenger-heavy carriers like TUI.

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