Crucial Cargo: Airfreight in the age of COVID-19

The exact proportion of air cargo moving in the bellies of passenger aircraft varies by trade lane, but most industry estimates assume that approximately 45%-55% is a safe bet in a regular operating environment. Shipments of fresh salmon from South America to Miami, pharmaceuticals from Europe to Chicago, automotive parts from Korea into San Francisco — these and other commodities can be found crossing continents and oceans inside aircraft along with passengers. That was until last month, when the well-oiled global network was thrown into disarray. March figures are not yet available as of press time, but the proliferation of COVID-19 across the world has led to significant reductions in flights — as of late March, overall flights stood at about 55% of February levels, Cargo Facts Consulting estimated — as countries institute travel bans and lockdowns in an attempt to curb the rate of infection. The loss of freedom of movement has already dramatically affected the day-to-day lives of many people, and cargo has likewise been impacted. Without passenger travel demand, cargo can languish in a warehouse, particularly air cargo destined for certain lanes like the trans-Atlantic, where most moves in the bellies of passenger aircraft. Depending on origin and destination, ocean freight can take months to arrive. As people around the world prepare to battle the novel coronavirus or shelter in place to slow the spread of infection, rapid transport of medical supplies, food and other items vital to survival has become more necessary than ever. Often, airfreight is the only mode that can ensure cargo arrives where it is most needed. To meet the world’s needs during this global crisis, innovative thinking is required. How are air cargo operators and freight forwarders keeping cargo moving? To learn more, the Air Cargo World staff spoke with industry leaders advocating for novel approaches to airfreight and big changes in policy. This feature originally appeared in the April issue of Air Cargo World . Continue reading by clicking through the pages below, or in the digital issue at https://aircargoworld.com/digital-issue/ Forwarders move amid the fallout When China extended its Lunar New Year earlier this year to quell the initial outbreak of the novel coronavirus in mainland China, the airfreight industry saw its first large coronavirus-driven drop in demand of about 3% for January and February, according to WorldACD estimates. Since then, the virus’ evolution into a pandemic has shocked supply chains worldwide. Although many passenger flights to Asia were cancelled, trans-Pacific capacity wasn’t initially in short supply due to the low demand, Matt Castle, vice president of air product and services at U.S.-based forwarder C.H. Robinson, told Air Cargo World . However, as the pandemic evolved, demand for cargo has shot up even as continued slashing of passenger flights depletes the market of its usual belly-hold capacity. “In the case of current events, at least the cancellations were announced in advance for specific timeframes, and it allowed the industry to adjust,” said Chris Gregg, vice president of airfreight, North America, at Germany-based Hellmann Worldwide Logistics. To deal with these slashes to airfreight capacity, freight forwarders and charter brokers, including Air Charter Services, Bollore Logistics, Hellman Worldwide Logistics and Dachser Air & Sea Logistics are offering capacity through alternative bookings on scheduled or charter services. Along with the jump in overall demand for air, the industry has seen elevated rates on almost all trade lanes. However, it seems there is currently little possibility of managing rates — some of which are up five to eight times normal market prices — due to the volatile nature of the situation. “It’s really a day-by-day situation,” said Henri Le Gouis, CEO of France-based Bollore Logistics Europe. “Our strategy is to try to fix block space with airlines to ensure we get capacity no matter what.” Bollore declined to share details on which carriers it was working with to book capacity. Due to this overwhelming demand, the scramble to book freighter and charter capacity has prompted global freight forwarders, such as Dimerco, DSV-Panalpina, SEKO Logistics and Agility Logistics, to offer alternative modes of transport to customers hard-pressed to complete shipments. Although sea, air-sea combinations, trucking and rail have been some of the alternatives offered, stakeholders told Air Cargo World they expect to see a continued preference for air capacity and charter requests. Most air shipments now are for urgent medical supplies, e-commerce and home goods as shipments for items like garments decline. Several forwarders mentioned in early March they were seeing certain high-tech and automotive products being shipped from Asia into the U.S. However, Hellmann said that a protracted economic impact due to prolonged shelter in place ordinances will alter the disposable income of consumers, resulting in lower demand for purchases like automobiles, appliances and furniture. “While it is certainly challenging to book space on freighters right now, trucking is also very difficult as containers are out of position,” said a U.S.-based forwarder who asked to remain unnamed. “As for sea, there doesn’t seem to be a lot of competition for air against trans-Pacific boat shipments as everyone is still pushing to get things in the air. Once companies begin to see the light of day at the end of the tunnel, ocean may make more sense, but it is difficult to make a projection several months from now.” Despite efforts to provide varied capacity options, multiple trade routes and transport modes are under stress, leaving some 3PLs unable to fulfill their contracts. DHL Global Forwarding (DGF) was the first global forwarder to publicly declare force majeure for its air and ocean operations on March 20. On March 25, CEVA Logistics announced its own force majeure across all transportation modes. A spokesperson from DGF’s parent company, Deutsche Post DHL Group, said it is continuously adapting its operations to mitigate risk. “The Group follows a holistic management process that enables our business units to ensure the best possible operations for our customers with the help of so-called business continuity planning, even in an emergency.” All freight forwarders emphasized that the safety of their employees is paramount. Some said they learned best practices for processing workflows based on the original outbreak in Asia, and have chosen to have office-based and non-critical personnel work remotely. Offices now host skeleton crews of essential personnel and warehouse staff to ensure continuous movement of freight. Extra precautions are taken for employees still required to come into work, such as staggering shifts and even requiring members who work on-site to engage in meetings with Zoom or other software rather than in person. Other forwarders have not said whether their companies might declare force majeure. Bollore did tell Air Cargo World it believes it will have enough capacity to fulfill its contracts, but added that the future weeks remain a “mystery.” Booking cargo in the main cabin The fallout in belly-hold capacity that has resulted from passenger flight schedule reductions on an unprecedented scale required swift action from the air cargo supply chain to supplement lost capacity. While utilizing freighter aircraft is the obvious option, facing a shortage of freighters, many carriers have repurposed passenger aircraft and have started flying them solely for cargo as a way to gain some revenue from charters. Sensing the looming capacity crunch, Air Charter Service in March began collecting prices and payload capabilities for any aircraft that could carry cargo — including passenger aircraft. “I see it as a good way to offer solutions to our customers,” said Dan Morgan-Evans, global director cargo at ACS, referring to the use of passenger aircraft as freighters. Whether prompted by a forwarder or charter broker, or in an attempt to preserve market share and continue serving customers, a number of carriers are now operating passenger aircraft as freighters. Frankfurt Airport (FRA), which saw passenger volumes drop by 70% year over year and total aircraft movements fall by 60% during the third week of March, has seen a surge in freighter movements and passenger aircraft used as freighters, said Max Conrady, senior vice president of cargo and logistics infrastructure development at FRA. “We have cargo airlines we haven't seen in quite a while doing charter flights to Frankfurt. In March, we also saw the first trans-Atlantic passenger flights coming to Frankfurt using passenger aircraft as cargo aircraft,” Conrady said. No fewer than three North American airlines are now serving FRA with passenger freighters. American Airlines Cargo is offering charters on empty 777-300ERs from Dallas (DFW), and United Cargo started cargo-only 777-300ER flights from Chicago (ORD) to FRA. Air Canada operated its first freight-only 777-300ER on March 22 from Toronto (YYZ) to FRA, and plans to extend its cargo charter to other European and South American destinations with 787s. Delta Cargo is also offering charter flights operated by passenger aircraft. Lufthansa’s first cargo-only passenger flight was an A330-300 from Shanghai (PVG) to FRA, while Swiss began operating charter flights between Zurich (ZRH) and Hong Kong (HKG) with an A340-300. According to German newspaper Bild, Lufthansa is also looking at flying its passenger 747s as freighters to maintain supply chains into and out of Germany. Although Lufthansa currently has thirteen 747- 400s and nineteen 747-8s, the carrier is specifically quoted as saying the 747-8 can carry sixty tonnes of cargo. Danish forwarder Scan Global Logistics partnered with SAS Cargo to launch airfreight charter flights from the Nordics to the U.S. from March 26. “Despite the current situation we have a continued high demand on transports to and from the U.S., and it was natural for us to look towards SAS Cargo as a long-term partner when we needed to find a new solution to service the U.S. market,” said Steen Sogard, Nordic airfreight director at Scan Global Logistics. “We see it as our obligation to keep the wheels turning in a very challenging situation as the current one, and we are extremely pleased that SAS Cargo acted swiftly converting a passenger aircraft into a full freighter and showed that two Nordic companies together can make a real difference.” Scan Global Logistics is working on offering similar solutions from main gateways in Europe. Several other carriers, including Cathay Pacific, Emirates, Etihad Airways, Korean Air, KLM, Qantas, Singapore Airlines and Virgin Atlantic, are also now utilizing some passenger aircraft as freighters. Governments respond While airfreight by nature can quickly adapt to emerging demand, governments are notoriously slow in adopting necessary changes. However, with the situation changing daily and logistics needs likewise moving to adapt, industry leaders and associations have called on governments to adjust regulations and accommodate vastly different cargo operations. The International Air Transport Association (IATA) has been particularly vocal in advocating for airlines working to meet surging airfreight demand in the wake of widespread passenger flight cancellations. Airlines are pursuing innovative approaches to increasing capacity, including operating passenger aircraft in all-cargo service, but “more needs to be done by governments,” Glyn Hughes, IATA’s global head of cargo, said during a media briefing call on March 25. In the near-term, governments should also focus on expediting the approval process for charter flights, Hughes said. Under typical circumstances, charter needs are usually known weeks in advance, allowing operators and brokers time to secure capacity and apply for relevant licenses. On the other hand, during humanitarian disasters, charter permits are often issued immediately for flights into the impacted areas. “This is a hybrid situation, where it’s global humanitarian relief needed,” Hughes said. In this unusual situation, governments are receiving many charter requests with less advance notice than is typical. The large number of charters organized during the pandemic can also clash with current caps on charters earlier agreed to by governments, as noted recently in a U.S. Department of Transportation notice approving a charter request from Kalitta Air. “With the reduction of passenger flights, governments need to recognize the greater number of requests for permits for charter operations,” Hughes said. So far, several governments are making strides to relieve regulatory and financial pressures. As one example, the European Commission last month issued guidance in support of air cargo to keep transportation flows moving. Some of the measures the Commission suggests EU member states should follow include: Temporarily removing night curfews and slot restrictions at airports for essential air cargo operations; For flights from outside the EU, granting any necessary authorizations or permits for extra cargo operations, including those conducted with passenger aircraft; Exempting aircraft crews who are asymptomatic from travel restrictions; Facilitating passenger aircraft use for allcargo operations, flight crew repositioning and transportation of medical staff as well as anyone involved in the supply chain, regardless of mode; and Allowing fast-track exemptions on an as-needed basis to address unforeseen and emergency situations as they arise. Other countries, including the U.S. and New Zealand, are pursuing various routes regarding financial support or subsidies of cargo airlines and routes. The U.S. Senate passed a relief package allocating about $58 billion for struggling airlines, with up to $4 billion earmarked for cargo carriers and another $3 billion for airline contractors. Meanwhile, to attract carriers into committing to normal cargo operations to and from New Zealand, the government is inviting operators to submit proposals for service and in turn receive government financial support. “We support all such measures like this,” IATA’s Hughes said.

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