The COVID-19 pandemic has precipitated a divergence between air cargo and passenger services. It has not only challenged the Air Cargo sector, that accounts for approximately 35% of global trade by value, but has shown how the community has remained resilient, value-generating and quickly adapting to a fast-evolving situation.
- The sharp global drop in passenger demand has precipitated a 19 percent year-over-year decrease in global air cargo throughput, due largely to an 80 percent decrease in passenger aircraft belly cargo capacity, which normally transports half of all air cargo;
- Humanitarian cargo has highest priority among the remaining air cargo capacity, over consumer goods;
- Shipping rates for freight forwarders have tripled, in some cases;
- Governmental restriction on movement of people between countries (including aircraft crews) has challenged air carriers’ ability to deliver certain countries;
- Similar restrictions on landside access to airports and cargo terminals for shippers.
- The reliance of air cargo operations on capacity provided by belly space on passenger aircraft has led to a significant bottleneck and raising shipping rates—by some estimates, threefold.
- According to a certified aircraft appraiser, the shortage of freighter aircraft has caused their lease rates to double. Some of these costs will be passed on to the consumer.
- Compounding is the trend toward economic protectionism that was evident before the current pandemic. There is growing concern that some leading economies might soon move to develop trade policies with the goal to secure certain supply chains (e.g., pharmaceuticals, medical supplies, lithium-ion batteries) to meet their needs with domestic production. This potential supply chain evolution warrants further study and engagement by relevant stakeholders.
Immediate Needs and Long-Term Actions
The International Civil Aviation Organization (ICAO), the United Nations’ (UN) specialized agency for civil aviation, is collaborating with other UN organizations, including the World Health Organization (WHO), for a coordinated global response to the pandemic and to help to restore global air traffic operations.
Where state-level intervention is required, air cargo stakeholders, which include air carriers and freight forwarders, have asked ICAO to work with regulators and encourage:
- Extension of expiring licenses, certifications or approvals e.g. pilot licenses, and dangerous goods recurrent training;
- Facilitation of charter flights operating essential services, providing them greater operational and financial flexibility, as well as hoping that airlines will allocate some cargo capacity for scheduled services;
- Flexibility on rules regulating transport of crews, curfews, slot amendments, etc.; and
- Temporary granting of additional traffic rights (e.g., seventh freedom for cargo flights).
To learn how ICAO is addressing these challenges visit ICAO website: https://www.icao.int/Security/COVID-19/Pages/default.aspx
The ICAO Long-term Vision for International Air Transport Liberalization offers a solution to Member States by highlighting the unique characteristics of the air cargo (which is very different from the passenger service) in order to develop suitable policies.
Governments must act to implement more liberal economic regulatory frameworks, which may be the surest way to ensure air cargo carriers can develop robust operations and fleets, as well as have the flexibility to respond to crisis situations, like the current one.
Some states have already responded to these needs. For example, the Chinese government will support air cargo operators needing to lease or to purchase freighters. Further, it will direct support toward express delivery firms to help them support expanded air services and overseas operations.
The major freight integrators, having significant capacity, are seen by some as being largely capable of filling the void left by belly capacity both across the Pacific (as China continues its post-COVID-19 recovery), as well as the transatlantic routes.
What about eCommerce?
E-commerce has been a fast-growing component of air shipments and global trade, but the lack of e-commerce data specific to air cargo on a global scale makes it impossible to measure the immediate impact that COVID-19 has had. However, there is a strong basis for research on the long-term impact on the global supply chains that feed e-commerce.
Yes, uncertainty is the only thing that is for certain in the months ahead. However, the implementation of prolonged social distancing and “stay-at-home” measures worldwide will quite likely have a lasting—and beneficial—effect on e-commerce, since they have exposed many who otherwise would not have experimented with online purchasing to its benefits.