Cargo revenue share predicted to remain high into 2023

Revenue from cargo operations remains critical to airlines, with markets predicting cargo to hold a greater share of total revenue in 2022 and 2023 than pre-pandemic levels. In 2019, cargo revenue made up 12% of the sample 137 airlines’ revenue, or around $100.8 billion, according to data from the International Air Transport Association (IATA). In 2020 and 2021, cargo revenue grew to 36.2% and 40.3% of total revenue, respectively. IATA estimates cargo will make up about 27.7% of airline revenue for 2022, or around $201.4 billion. “Cargo continues to outperform domestic and international passenger markets,” according to the IATA report. “While [cargo tonne kilometers] have moderated, the related revenue will likely exceed 2019 results going forward, in spite of pressure on yields as belly capacity returns.” [caption id="attachment_57133171" align="aligncenter" width="562"] Photo / IATA[/caption] Part of this increase is tied to the overall depression of passenger activity in 2020 and 2021, but this summer, the price of air cargo remained more competitive than the price of maritime cargo, particularly between June and September. “Although the relative price advantage of air cargo over maritime is narrowing, the current level of cargo yields will still make cargo a critical source of revenue to the air transport industry,” according to IATA. [caption id="attachment_57133173" align="aligncenter" width="1102"] Photo / IATA[/caption] A downgrade of GDP growth expectations this summer and lingering COVID-19 restrictions in key markets like China deflated IATA’s expectations for cargo in 2022. In June, the organization predicted cargo would exceed 2019 levels by 11.7% but now anticipates volumes to be closer to 98.4% of 2019 levels. More air cargo is expected to be transported by freighters in 2022 than in 2019, IATA reported. The share of international CTKs flown in dedicated freighters grew 12 percentage points between July 2019 and July 2022, from 49.6% to 61.7%. [caption id="attachment_57133172" align="aligncenter" width="553"] Photo / IATA[/caption] The share of converted passenger aircraft, or preighters, declined from 2020 to 2022, accounting for 29% of international CTKs among airlines in Asia Pacific in May 2020, but only 11% in August 2022, according to IATA. Economic outlook 2023 The global airline industry is expected to return to profitability in 2023, with a net profit of $4.7 billion and net profit margin of 0.6% of a projected $779 billion revenue. Regulations, inflation, inconsistent government policies relating to COVID-19 and travel, inefficient infrastructure and an inequitably distributed value chain impact airlines’ overall growth, IATA Director General Willie Walsh said in a Dec. 6 release. “Despite the economic uncertainties, there are plenty of reasons to be optimistic about 2023,” Walsh added. “Lower oil price inflation and continuing pent-up demand should help to keep costs in check as the strong growth trend continues . At the same time, with such thin margins, even an insignificant shift in any one of these variables has the potential to shift the balance into negative territory.” IATA predicts cargo revenue will reach $149.4 billion in 2023, $52 billion less than 2020’s expectations, but still $48.6 billion more than pre-pandemic levels. Volumes, similarly, will fall from their height of 65.6 million tonnes in 2021 to 57.7 million tonnes next year, IATA reported. “IATA expects a fall of 22.6% in cargo yields, mostly in the latter part of the year when the impact of inflation-cooling measures are expected to bite,” according to the release. “Even the sizable and expected decline leaves cargo yields well-above pre-COVID levels.”

Cargo revenue share predicted to remain high into 2023

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