Air travel boom creates crosswinds for air cargo
By Tim Hepher, Lisa Baertlein, Allison Lampert and Valerie Insinna
(Reuters) -Air cargo enjoyed record demand when COVID-19 closed borders and snarled supply chains. Now, it is reeling from overcapacity and tumbling freight rates as the freight boom makes a hard landing.
Consumers who had the means to spend the lockdown shopping online for goods needing to be delivered, diverting budgets from restaurants and leisure, are travelling in ever-rising numbers.
The result? Passenger jets grounded during the health crisis are flying again and bringing their lower-deck cargo space, which competes with dedicated air freighters, back into play.
The switch in demand from goods back to services and the abrupt expansion in belly capacity on passenger planes have sliced about a third off cargo rates in the last year.
Some pilots are leaving to fill passenger airline vacancies.
And shipping is flowing again after congestion sent goods as mundane as jeans and bathtubs into the air during the pandemic.
It's a perfect storm for the roughly $200 billion air cargo industry, which handles a third of global trade by value, industry executives and analysts say.
Looking forward, shippers whose freight bills climbed in 2021, will have more bargaining power in upcoming winter price negotiations, Norwegian cargo analytics firm Xeneta said.
That should ease inflationary pressure on high-value lightweight items from electronics to luxury goods that traditionally go by air. But it is bad news for cargo operators.
"(They) are in for a rough ride. Shippers are spoiled with capacity, but they're not really utilising it because demand is not really there," Xeneta Chief Analyst Peter Sand told Reuters.
The scale of the industry's problems is laid out in
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