CFA 2020: COVID-19 rewrites air cargo playbook

[caption id="attachment_413710" align="alignright" width="343"] Moderator Caryn Livingston, deputy editor of Cargo Facts, with panelists Ravishankar Mirle, Vice President Cargo Commercial – Far East & Australasia of Emirates (right), and Lars Winkelbauer, Executive Vice President and Chief Operating Officer of Polar Air Cargo.[/caption] With cargo charters booked through May, and increasingly into June and beyond, the slow start to 2020 is already a distant blur to most involved in the current boom times of airfreight. But just as dwelling on the initial slow-start of the year is now irrelevant, so too are most of the seasonal patterns typically found in air cargo, according to speakers on the opening roundtable session of Cargo Facts Asia 2020. The COVID-19 pandemic is rewriting the air cargo playbook as part of a global narrative that unfolds differently, depending on the geography and business model of the air cargo stakeholder involved. Symbolic of the industry’s ability to adapt to operational constraints presented by the COVID-19 crisis, Cargo Facts Asia panelists practiced social distancing and addressed their sizable audience through a completely virtual platform. The initial flare-up of COVID-19 cases in China prolonged the country’s Lunar New Year break and idled factories for an extended period. Rather than ramping up flying to a fuller schedule in February, as would have been expected after the break, many air cargo carriers continued to operate lighter schedules into March. “The situation started out very fluid, and remains very fluid,” said Lars Winkelbauer, executive vice president and COO of Polar Air Cargo. Around March 9, however, “we saw the demand re-energizing and really starting to pick up,” prompting the return to a full schedule. Fellow panelist, Ravishankar Mirle, vice president cargo commercial of Far East and Australasia at Emirates, agreed that March was pivotal. As a combination carrier with a massive passenger fleet, the Dubai-based carrier really began to cull its passenger flights as demand plummeted, leading to a suspension at the end of the month. “We've seen SARS, the Gulf War, 9/11 and the Global Financial Crisis, but nothing as severe as this," Mirle said, referring to the drop in passenger travel. To make up for some of the lost bellyhold capacity, Emirates launched an extensive passenger freighter network with its 777-300ER fleet. Between its 777F freighter fleet and the passenger freighters, Emirates now serves fifty-two of the 159 destinations it had previously served. “We have tried to ensure that we stay connected to at least one city in every country where we operated in the past, just to ensure that the supply lines are maintained and we are able to allow free movement of trade and essential items,” Mirle said. While it’s tough to justify the use of passenger aircraft for cargo-only missions, the trend is likely to continue through at least the first half of the year. Although currently an attractive proposition, once passenger flights begin to resume, the yield pressure will eventually dissipate. “At that point in time, these opportunistic carriers which are now in the market running charters would also start to disappear,” said Winkelbauer. In today’s environment, low fuel prices enable the injection of extra capacity, but panelists warn that low fuel prices can also be a double-edged sword. They agreed that some opportunistic players utilizing older freighters or passenger aircraft to carry cargo will exit the market as demand wanes. When precisely yields will ease and, in turn, how long air cargo demand will outstrip available capacity, depends on the trajectory of the COVID-19 pandemic. Much of what is moving by air today is linked to personal protective equipment (PPE), which is used by first responders to combat the virus. “If you look at China, for example, the bulk of everything that's moving right now anywhere is somehow related to PPE, whether it's ventilators, masks, sanitizers and everything in between,” said Winkelbauer. Noting the current importance of PPE for airfreight, he pointed out the need to strike a balance between traditional air cargo verticals and PP, saying, “Once PPE demand dissipates along with COVID-19, we need to be very mindful that we don't cut off the traditional verticals.” Mirle agreed that PPE currently plays an important role, and added that other verticals are also performing well. With large sectors of the globe on lockdown, consumer electronics are in high demand. With work-from-home and homeschooling on the rise, there seems to be good demand for laptops and tablets, he said. Meanwhile, countries and regions that depend on imports for food security continue to rely — or increase their reliance — on airfreight.

CFA 2020: COVID-19 rewrites air cargo playbook

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