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(Bloomberg) – Cargo, one of the least glamorous aspects of flying, is proving to be a rare ray of light for airlines amid the twilight of the coronavirus.
Grounding passenger jets at a time of increased demand for everything from medical supplies to iPhones has driven up transportation rates. With much of the world’s population confined to their homes and shopping online rather than going to malls, analysts don’t see demand diminishing, particularly as the year-end peak season approaches.
“Air freight will be a bright spot for airlines at least for this year because as long as the borders are closed, that doesn’t mean people aren’t buying,” said Um Kyung-a, airline analyst at Shinyoung Securities Co. in Seoul. . “That trend is likely to continue as cargo capacity remains limited.”
The type of goods moving along this global conveyor belt 30,000 feet in the sky also tracks the spread of the pandemic. Masks and gloves have given way to semiconductor chips and PC parts as consumers arrange to work from home. Fresh produce is also important because people venture less. Ultimately, once a vaccine is found, the airlines will be used to disperse billions of vials quickly and in a temperature-controlled environment.
Under normal circumstances, around 60% of air cargo globally is carried in the hold of passenger flights. With hundreds of those planes parked in the deserts waiting for the pandemic to pass, air freight costs have skyrocketed: Fares to North America from Hong Kong have risen nearly 60% this year.
For Qantas Airways Ltd., medical freight from China reached a peak in May and June.
“What we saw were large amounts of light but very bulky cargo: masks, gowns, gloves, and the like. That’s when we started to see airlines placing fluffy, lightweight boxes in passenger cabins, ”said Nick McGlynn, who oversees Qantas network and cargo sales as the unit’s director of customer service.
That has now decreased and Qantas has been transporting fresh produce from Australia to Asia, including “significant amounts” of tuna to Japan and coral trout to Hong Kong, he said. On the return routes to Australia, it is dominated by medical supplies, auto parts and electronics, as well as components for mining equipment Caterpillar Inc. from the USA.
Fiji Airways is earning a little more for carrying seafood and kava, CEO Andre Viljoen said during a presentation last week.
Bloomberg Intelligence predicts that the cargo capacity of passenger air fleets will not return to pre-pandemic levels before 2022. Not all airlines can rotate to address changing circumstances. But those who can have wasted no time.
In the US, United Airlines Holdings Inc. recently operated its 5000th cargo-only flight (the busiest air cargo routes are between Asia and North America). The airline’s freight revenue rose more than 36% in the second quarter to $ 402 million. .
Meanwhile, American Airlines Group Inc. has relaunched cargo-only services after a 35-year hiatus. In September, it expects to operate more than 1,000 cargo-only wide-body flights, mainly Boeing Co. 777 and 787, to 32 destinations in Latin America, Europe and Asia.
Take a look inside one of our EVA Air Cargo aircraft. These planes ship high-value products such as pharmaceuticals, vaccines, healthcare products, high-end foods, and high-tech semiconductor devices. #iFlyEVA #TravelwithEVA #Star Alliance #EVAAir pic.twitter.com/yI0bH5lkU3
– EVA Air (@EVAAirUS) August 31, 2020
In Asia, Scoot, the economic long-haul arm of Singapore Airlines Ltd., removed passenger seats from one of its Airbus SE A320s last month to free up more space, while Korean Air Lines Co., which also is converting planes, and Asiana Airlines Inc. made quarterly profit after flying planes loaded with tech components to meet consumer demand for home devices.
With the exception of cargo, global airline share prices have barely risen from the low reached in March, while equity markets generally have recently rebounded. # COVID-19 levels.
https://t.co/fWB9EerNa3#WeeklyChart #economic Sciences pic.twitter.com/Qll7G0Ay47
– IATA (@IATA) August 29, 2020
Emirates, the world’s fourth-largest cargo carrier after Federal Express Corp., Qatar Airways and United Parcel Service Inc., said it “reacted very quickly,” expanding its cargo network to about 50 destinations in early April, 75 to middle of May. and 100 in early July.
“We have been able to connect more than 115 cargo-capable destinations on a scheduled basis,” said Emirates Senior Vice President of Cargo Nabil Sultan. “We work around the clock to use not only our fleet of freighters, but also our passenger planes for cargo flights.”
That’s not to say there isn’t a great deal of pain in global aviation. Airlines are spilling cash and laying off tens of thousands of employees.
While Deutsche Lufthansa AG’s cargo operations contributed a record 299 million euros ($ 354 million) to the group’s operating profit in the second quarter, and the operating margin of the airline’s cargo arm was A robust 39%, the Lufthansa group overall suffered a massive € 1.7 billion operating loss over the three-month period.
Still, in such a difficult environment, every detail counts. Indonesia’s PT Lion Mentari Airlines is even transporting basic necessities like non-perishable food by plane across its vast archipelago.
“Canned foods, things that you would normally buy on your grocery trip, are transported by air because it is a more efficient way to deliver them across the country,” said managing director Daniel Putut. “With the drop in passengers drastically, we have to find other means of income.”
Qatar Airways, one of the world’s heavy hitters in freight transport, does not expect freight rates to drop for at least 12 months.
“The world is a town and air cargo is the main street,” said Guillaume Halleux, Qatar’s cargo director. “Airlines in general have become the lifesaver of the world and airlines with solid strategies
© 2020 Bloomberg LP
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