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Air cargo prospects amid multiple adversities

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IATA released a report last week marking the global air cargo demand at pre-COVID levels, achieving a 32 year high, despite the operating challenges. But just as the air cargo sector somewhat took off in the air, it looks like it’s going to be a turbulent flight – the deterrents include rising air freight costs, reduced capacity as well as the Russia-Ukraine war. Not to forget the by-products of the war i.e. soaring oil prices, geopolitical uncertainty and the sluggish manufacturing & economic activity due to the various Western sanctions.

IATA report also said that suspension of trade from the most of the world along with the closure of air space above Russia and Ukraine will have long term negative impact on the air cargo recovery. According to the Logistics UK magazine, the cancellation of flights to Russia from the UK, EU and US, and the closure of airspace above Russia and Ukraine is leading to lengthy detours for air freight, particularly to Asian markets, such as Japan, South Korea and China. The closure of the direct route via Russia’s Siberian air corridor is adding hours to flight times between the UK and Asia, and flight bans are estimated to affect over a fifth of air freight.

The flying ban has canceled many of these flights and removed 10 million miles of airspace from international freight routes. With airlines responsible for flying around 20% of cargo, this will dramatically decrease capacity provided by carriers.”

~ Dylan Alperin, Head of Professional Services, Keelvar

The manufacturing surge during the Lunar New Year was a major contributor to the intensified air cargo demand in February. Other factors included the general and progressive relaxation of COVID-19 travel curbs, increased flight operations after Omicron-related restrictions were relaxed (especially outside of Asia), and fewer winter weather operational disruptions. Though the industry is currently joyous about the report, it should also be noted that to counter the exemplary performance in February 2022, there is also a dip anticipated for March 2022 in light of the ongoing Russia Ukraine war.

Demand for air cargo continued to expand despite growing challenges in the trading environment. That is not likely to be the case in March as the economic consequences of the war in Ukraine take hold. Sanction-related shifts in manufacturing and economic activity, rising oil prices and geopolitical uncertainty will take their toll on air cargo’s performance.”

~ Willie Walsh, Director General, IATA

IATA said that in 2020, one-third of the overall revenue of airlines was attributed to the air cargo industry, and in 2021, revenues may have risen to a record USD 175 billion (and yields are expected to have grown by 15%). For the year 2022, IATA predicts the air cargo demand to exceed pre-pandemic levels by 13% and revenue to touch USD 169 billion, with an 8% decline in yields. Air cargo transports more than USD 6 trillion worth of goods, accounting for approximately 35% of world trade by value.

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