A boom year for charters?

Total air cargo traffic grew 5.4% y-o-y through March 2018, according to IATA. The cargo charters business meanwhile, which represents a much smaller sub-segment of the overall air cargo market, appears to be growing even faster.

UK-headquartered Air Charter Service (ACS) reported the number of cargo charters it handled during the first three months of the year rose 33% over 2017, to 1,048 contracts. Revenue for the cargo division rose 12% to $56.4 million. According to ACS’ Group Cargo Director Dan Morgan-Evans, the growth is actually stronger than the numbers might indicate: “When you bear in mind that 2017 was our record year across all divisions and exceeded even our wildest expectations, the growth shown so far this year is even more remarkable. The other thing to note is that February to April is the quietest quarter for much of the industry, with cargo charters often half their autumn and winter peaks.”

Some of the world’s largest charter operators are also reporting robust demand for charters. Cargloux President and CEO, Richard Forson recently told Cargo Facts his airline saw a 200% y-o-y spike in demand for charters in 2017. “This year in the first 4 months, we’re up close to over 100%,” he said, and added that the three 747-400Fs Cargolux will acquire over the next year will allow Cargolux to ground a few aircraft currently utilized in power-by-the-hour service, and repurpose them for charters.

Another carrier seeing strong charter demand is Ukraine-based Antonov Airlines. At the Air Cargo China event earlier this month, Antonov Airlines’ Commercial Manager, Paul Bingley told Cargo Facts that the strong demand seen last year is continuing into 2018, and that he expected it to increase even further with the resurgence of the oil and gas sector. Towards the end of 2017, some AN-124s were even hired for general cargo charters, Bingley added. 

Apart from the oil and gas industry’s rising demand for outsized cargo transport, e-commerce and changing long-term capacity management strategies of freight forwarders are two other influences connecting shippers to charter capacity.

Cargolux’s Forson said that because of the volumes that move through e-tailer fulfillment centers, chartering an aircraft to rapidly replenish inventories was not uncommon. “You’re not going to bring in 20 tonnes at a time. You’ll bring in 50 tonnes, or charter an entire aircraft.”

Likewise, although the recent strength of the air cargo market has been welcomed by carriers, many forwarders have had a “rougher experience” securing capacity at favorable rates. As current and forecasted capacity remains tight across certain trade lanes, “Forwarders have been more willing to take out long contracts to guarantee capacity, especially out of Asia,” Forson said. In some cases, this includes additional scheduled or ad-hoc charters. Earlier this month, Switzerland-based Panalpina increased the size of its own-operated charter network, operated on an ACMI-basis by Atlas Air.

In an environment without sufficient maindeck capacity, the charter business may continue to outperform the broader air cargo market in terms of demand growth – as long as there are freighters available for hire, that is.