The cargo capacities of passenger aircraft have been almost completely eliminated. However, the prices for air freight have now largely returned to normal. Sufficient capacity is available for critical goods. Announced border openings give hope.
A sigh of relief for the aviation industry: The border openings in Central Europe announced for the end of May and mid-June will bring some relief for airlines. They are aimed at a resumption of passenger traffic in early summer. Initially with only a few, but reliable connections. As a result, the available freight capacity in the market will also increase again.
At the beginning of the corona crisis, aviation experts had assumed a development in the shape of a "V": a sharp fall, but also a strong recovery. According to them, demand and supply would have reached old levels again by the end of 2020. In the meantime, it is clear that the most probable development is probably a hesitant recovery within 12 to 18 months. The consultants at Boston Consulting assume that the lockdown in many countries will probably continue for a few more months and that travel restrictions will only be relaxed slowly.
Slump in Air Traffic
In fact, air traffic in Europe in April was down 85 percent year-on-year, reports Deutsche Flugsicherung. For the year as a whole, it expects only 50 per cent of air traffic compared to 2019, and by February at the earliest, air traffic will reach 80 per cent of the pre-Corona level again.
The consequences for the industry are dramatic: numerous airlines have applied for short-time work or announced mass layoffs; airfreight companies have also done so. The first small airlines are already insolvent, the big players in the market are demanding billions in aid from the governments of their home countries.
The Lufthansa Group, too, is currently talking to the German government about state support and is also considering insolvency under its own administration. The Scandinavian SAS has announced that it will part with half of its employees. The internationally best-known corona victim is the state-owned South African Airways, which ceased operations in April. Overall, airfreight traffic is organized on a small scale. For this reason, the failure of individual providers has not been critical so far.
Cargo gives Hope
At present, there are only rays of hope in cargo traffic. According to IATA, the number of tonne-kilometres flown worldwide in March fell by more than 15 percent due to the collapse of industrial production. However, demand currently exceeds supply. This is one of the reasons why airlines continue to convert their aircraft temporarily into cargo machines or fly passenger aircraft exclusively for cargo. For the year as a whole, the IATA is right with a decline of between 14 and 31 percent - depending on how severe the recession is and how quickly the countries recover from it.
The initial price explosions on the spot market were a short-term phenomenon. Current data from airlines and forwarders show only slight rate increases - partly because capacities are being constantly increased. This is clearly illustrated by the example of traffic from China: the market here is tight due to the numerous exports of medical products. A comparison with the previous year, however, shows that airfreight volumes have increased by 6 percent overall - despite the passenger fleet still on the ground.
But it is also true that the resumption of production in China means that capacity is currently in short supply in certain areas. However, this is being counteracted by the sharp drop in demand in the West. Air freight capacities to other Asian countries are rather scarce. Mass transports, for example of medical equipment to Europe or North America, are causing temporary bottlenecks. Even special flights do little to change this. In India, the nationwide lockdown also causes considerable bottlenecks in road transport to and from air cargo centres. Traffic with South Korea is currently suffering from shortages of capacity at rather high prices, but is functioning reliably.
Decoupling of demand and prices
Traffic between Europe and North America is also restricted. This applies equally to passenger and cargo. The transit times are extended accordingly. This also applies to Latin America. Here, the number of cases has been rising sharply for days - and with it the need for medical protective equipment. On the other hand, the demand for standard articles or preliminary products is falling. However, this development is likely to be only temporary: Numerous international groups have their production facilities in Latin America and determine their transport needs according to global requirements.
As early as the end of May, there could be lasting changes in supply, demand and prices as soon as the majority of industrialised countries at least relax their existing restrictions. In this situation, it is to be feared that the airlines will increase freight rates across the board - regardless of capacity and demand.
Latest update: 15th May, 2020