Air cargo gaining momentum in the aftermath of the pandemic

Indian airports saw a 29% growth in cargo shipments to 264,510 tonnes in August 2021, in comparison to August 2020, according to the latest available data from the Airports Authority of India (AAI). In this story, we explore the industry initiatives to ensure air cargo recovery and initiatives to propel this growth further.

The pandemic has brought the whole world to a standstill, leading to lockdowns and border closures that restricted the movement of goods. Social distancing at warehouses and further halt in business contributed to bottlenecks for freight movement through the air.

Air cargo volumes fell by 19% in March 2020 due to a sharp reduction in passenger flights (which carry freight as belly cargo). However, as shippers and governments turn to air cargo for essential goods, air freight rates have increased—some carriers are seeing delays with increased congestion at airports. In mid-April 2020, the industry saw an increase in capacity, as well as a recovery in volumes transported. Further, the overall reduction in capacity is greater than the net reduction in demand, which supports higher air freight rates. Besides, cargo on seats has been on-demand as passenger flights were cancelled due to which airlines resorted to carrying cargo on the seat to transport essential covid relief material, pharma, testing kits, and sanitisers.

Sandeep Chatterjee, Director, Deloitte says, “It is always profitable because the passenger segment is not much profitable business specifically for the airlines. Also, due to infrastructure issues like lack of dedicated material handling at the airport and logistics parks outside the airport, all these infrastructural bottlenecks have never supported air cargo to improve.” However, the pandemic has significantly depicted the industry that air cargo could be a profitable business. This has urged the industry to re-look at multimodal infrastructure to optimise the growth of air cargo. “Further, with the GST being rolled out, companies are not getting any tax advantage. So now the supply chain is being optimised. Today’s customers are more demanding as people are preferring air rather than rail or road. Some investments are happening by airports and logistics parks providers to ensure multimodal becomes more feasible.”

Besides, airlines like AirAsia, Lufthansa, and several others are ensuring the growth in air cargo further. Several airlines tweaked their aircraft, introduced new cargo aircraft to keep their air cargo business running despite the declining passengers’ travel. Though air cargo is moving slowly towards pre-Covid level numbers with the fact that Indian airlines have carried over 738 metric tonnes of freight between April and June 2021, according to the Airports Authority of India (AAI) data. However, it is still 12 per cent lower than pre-Covid levels.

Initiatives to propel growth

Logistics companies involved in the movement, storage, and flow of goods, have been directly affected by the COVID-19 pandemic. As an integral part of value chains, both within and across international borders, logistics firms facilitate trade and commerce and help businesses get their products to customers.

To further enhance its air cargo business, airlines like AirAsia India in the past few years have increased their market share in the domestic cargo market. Shekhar Mohanty, Head – Cargo, AirAsia India says, “We have introduced new cargo categories for transportation including dangerous goods, wet cargo, valuable cargo, e-commerce cargo, postal mail to ensure that we diversify our cargo business and offer a larger portfolio to our customers while we achieve consistent pre-covid growth.”

Adding on, India’s decision to ply ‘Cargo-on-Seat’ flights changed the dynamics of the aviation industry by providing transportation solutions for various industries especially pharma and e-commerce by utilising the passenger aircraft to carry cargo and generating revenue for the airlines which otherwise were financially constrained, states Mohanty.

As global passenger traffic reduced in 2020, airlines utilised the Cargo on Seat feature and have operated various flights transporting essential medical supplies, Covid19 vaccination, and perishables. Though most airlines utilised 40-50 per cent of the current fleet however due to cargo demand and cargo on seat initiative, airlines have seen an increase in their cargo revenue by almost 20 per cent which is significant in supporting otherwise financially ailing airlines.

Ashish Asaf, Managing Director, S.A. Consultants & Forwarders Pvt. Ltd. finds that choices of the epidemic control policies and their impacts on the industry, and possibly on the total economy, are found to be dependent on certain features of the local market, and hence the best way to find a balance varies from country to country, from market to market. “The COVID-19 and consequent lockdowns have seen some major changes and after-effects in the working model of the logistics sector. Since we have always been into cloud-based ERP systems, the only new practise we have carried out during the crisis was ensuring employees were sincerely engaged in their duties and holding the communication with the team while working remotely,” says Mr Asaf.

Lufthansa on the other hand coined the term “preighters” at Lufthansa when it quickly provided urgently needed cargo capacity by utilising passenger aircraft exclusively for cargo transport during the peak of the Corona crisis last year. Harald Gloy, Chief Operations Officer Lufthansa Cargo says, “Here, fast and decisive action was important to sustain global supply chains.”

This is an abridged version of the article that was published in the November edition of the Logistics Insider magazine. To access the complete article, click here.

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