Fog warning ahead: Forwarders struggle to map industry trajectory in 2022

If there’s one prediction for 2022 that everyone in airfreight seems to share, it’s that the path ahead for the next twelve months is foggy and dotted with question marks. While industrywide capacity recovery isn’t on the horizon, air cargo’s accelerated age of digitalization, surging e-commerce demand and select lanes have forwarders optimistic for the future of freight. And while forwarders expect charters — which helped navigate capacity challenges over the past year — to continue playing a significant role, it is unclear what kind of equilibrium will be struck between charters and passenger flights. Bottlenecks, meanwhile, will continue to pose challenges. With the state of airfreight varying widely from region to region, week to week, and even day to day, industry leaders spoke with Air Cargo World to prognosticate about what lies ahead in 2022. Charting capacity recovery It’s too challenging to predict which regions will see significant capacity recovery and when, Tim Robertson, CEO of DHL global forwarding for the Americas, told Air Cargo World . “There are so many interdependencies today between regions that we will need significant improvements in both the COVID situation and overall capacity situation — across all modes — in every region before any single region returns to full capacity.” Others say there are glimpses into which regions might recover sooner. “I would expect most European origins to be the first to recover capacity at a dramatic rate,” James Constantinidis, director of airfreight at Ohio-based forwarder UWL, told Air Cargo World . “In contrast, we are experiencing the lowest levels of capacity out of China and Southeast Asia since the pandemic first hit early 2020.” Full-capacity recovery could arrive in the Trans-Atlantic lanes due to higher vaccination rates relative to other regions, Mads Ravn, executive vice president and global head of airfreight procurement at DSV, told Air Cargo World . “When exactly that will be remains the magic question, but as of right now, we just don't see this happening anytime soon. The early predictions for 2025 is probably the best-case scenario.” While 2022 might not present a full recovery, there is relief on the horizon, DHL’s Robertson said. “Right now, we don’t expect to see full capacity return in any region in at least the first three quarters of 2022,” he said. “At the same time, we expect a significant improvement in many regions next year, even if we don’t see a complete normalization.” Recent orders placed on passenger conversions and widebody freighters might also lead to recovery in either 2023 or 2024, though the question remains of how fast additional freighter capacity will enter the market, said Jan Kleine-Lasthues, chief operating officer of airfreight at Hellmann Worldwide Logistics. “ Boeing’s order book is full for the next few years, ” he said. Meanwhile, a host of 767s are currently undergoing conversion. “I think we will never come back to the belly capacity which we had pre-COVID,” he said. However, UWL’s Constantinidis questioned how impactful this additional capacity could be in the coming years. “News such as the 270 plane order placed by United Airlines earlier this year was much celebrated, however this order was made up of 200 737 Max jets and seventy A321neos [which are] both narrowbodies typically utilized on domestic routes,” he said. “Therefore, ‘full capacity’ will likely be recovered through the increased utilization of freighter aircraft services.” Bottlenecks block recovery The outlook is even hazier when it comes to spotting bottlenecks. As major airports like Chicago O’Hare (ORD) and Los Angeles International Airport (LAX) remain congested due to staffing shortages and elevated volumes, 3PLs are turning to smaller airports in hopes of minimizing sometimes day-long bottlenecks and predict they will continue to do so through at least 2022. The bottleneck situation, especially in the U.S., is “disastrous,” as the infrastructure needed to keep up with the demand is totally lacking, as are necessary automated processes, Ravn said. “At the end of the day, this is very much a hands-on job when it comes to the capacity flowing through the airports,” Ravn said. “And if people are not coming back to work, this will not improve at all. …There is not only room but also right now an opportunity for small airports to make a name for themselves and in the coming years.” Hellmann is one of the many freight forwarders turning to smaller airports for support and has adopted a strategy that entirely avoids certain key airports – including Dubai (DXB), Liege (LGG), LAX and Atlanta (ATL) – when possible, Kleine-Lasthues said. DSV is also using “alternative” airports of origin and arrival, Ravn confirmed to Air Cargo World . While some forwarders look to smaller regional airports, others have been driven to forge new partnerships and agreements. Hellmann, for example, has increased its air cargo capacity under block space (BSAs) and long-term charter agreements, Kleine-Lasthues said. “We’re using carriers that we’d never even heard of two years ago and basically entertaining every capacity opportunity out there,” Kleine-Lasthues said. DSV is in a similar position. “We are using small planes [like] 757s [and] 737s, [and] in some cases going as far out on the trans-Pacific route on [a] 757 — something that we would never even have thought of a couple years ago,” Ravn said. However, these partnerships won’t last forever, as DSV will exit some of its newer agreements as more strategic partners return to the market, Ravn said. As for the bottleneck situation — especially in the U.S., it isn’t likely to resolve anytime soon, he said. “We need automations on pallet building and unloading. Also, to a certain degree racking and segregation by automation,” Ravn said. “You see pallets by the thousands in some cases, and then some of the major airports sitting out on the tarmac, just waiting to be manually broken down and segregated for pickup, and that is a situation that we simply can't cope with.” Charter check-in If bottlenecks will remain, then so, too, will the booming charter market . The industry consensus seems to be that charters are to continue to play an irreplaceable role for the foreseeable future. “If charter providers choose to operate their aircraft as a conventional freighter at times, they could capture more of the market,” UWL’s Constantinidis said. “Like what we saw in the ocean market, air charter services could hold the key to an outside-the-box solution to the current capacity crunch.” “As long as passenger travel remains subdued and structural capacity problems persist in ocean freight … there will continue to be demand for charters,” DHL’s Robertson agreed. Some of the oldest charters have been pulled back into the market to compensate for missing bellyhold capacity, Ravn said. Even as bellyhold capacity eventually recovers, charters will remain because the air freight market is expected to continue to grow 3% to 4% per year, and the capacity they offer will be necessary, he added. The exact extent of the role passenger freighters will continue to play is somewhat more controversial. They’ll have less impact on trans-Atlantic lanes in 2022, Ravn said, though they may continue to see action if new restrictions are placed on travel between Europe and the Americas. “But in terms of true passenger freighters, we don’t think that they will stay in the market for very long,” he said. Conversely, passenger freighters will continue to play a significant role in 2022, or as long as proper charters continue to be booked up, Kleine-Lasthues said. Hellmann, for its part, has been making frequent use of passenger freighters on ex-Asia routes to Europe and North America. Digitization and e-commerce Predictions regarding digitization and e-commerce, like others, are troubled by the industry’s turbid state. Despite predictions that accelerated digitization will increase into next year and beyond, digitalization remains “fragmented” across the industry, said Andreas Schaefer, senior vice president at Toll Forwarding Group. While some airlines have 100% accurate tracking information, others provide their customers with little to no visibility, Kleine-Lasthues said. A meta-platform that could unify data from all carriers would be an immense step forward. Failing that, physical tracking devices placed on each shipment could provide an alternative. DHL, meanwhile, is keeping an eye on artificial intelligence and machine learning technology that could help improve forecasting on routes, streamline global transport management systems, automate facilities and more, Robertson said. “At DHL Global Forwarding, we are seeing shipper behavior change and become more digital, most likely as a result of demographic changes with younger, more tech-savvy users entering the workforce and the intense pressure on supply chain managers to deliver more efficiency and agility,” he said. Hazy skies ahead Predicting the year’s upcoming trends is always a guessing game, but 2022 should present more than its share of mystery, Ravn said. “We can already see now that Q1 will be almost as busy as Q4, and while rates will stay high, there will be no capacity,” he said. “We also anticipate that will roll into Q2. We do think there will be a bit of a drop in yields come Q2, [but] at what point it’s too early to say.” With public awareness of the importance of air cargo on the rise, it's possible the industry may see some benefits in the coming year. “You can expect more government involvement,” UWL’s Constantinidis said. “We hope that the attention will generate new ideas for solutions, and possibly garner funding for infrastructure upgrades that will improve cargo flow and operational efficiency in the future.” This story has been updated to with UWL's headquarters.

Fog warning ahead: Forwarders struggle to map industry trajectory in 2022

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