The air cargo industry will suffer no “lasting negative impact” from the pandemic
The air cargo industry will suffer no “lasting negative impact” from the pandemic, an industry expert has said.
Speaking at the June 2022 Global Logistics Air & Ocean Freight Outlook Scan, Ashwin Bhat, Commercial Director of Lufthansa Cargo, said the company is confident: “There will be no lasting negative impact of the pandemic on air freight.
He said there were five reasons for this. The first is that global economies will recover, the second is that air cargo continues to transport high-value goods, the third is that the air cargo industry continues to solve problems, the fourth is that global trade will continue and the fifth is that there are increasing customer demands for speed. These will ensure that the industry remains relevant.
Bhat said the future focus for air cargo should be to ensure the supply chain is a “value chain”, alongside smoother collaboration and smarter solutions, including those that reduce CO2.
In the present, he said the peaks of uncertainty were increasing.
“Crises come and go and that’s the world we live in. As air cargo, we’ve been through it for the past few years.”
At Lufthansa Cargo, cargo hold capacity at the end of last year was down 27%. Capacity is currently still down 8-10%.
The war between Ukraine and Russia has affected competition and capacity due to the closure of airspace, which means that Lufthansa, alongside other airlines, has been forced to operate a European route – Asia longer than normal.
The Shanghai and Beijing Covid shutdowns also further affected capacity due to lack of ground facilities in China.
Bhat said passenger demand is stronger than expected, but the capacity gap remains: “The air cargo capacity projection is that we will only get to the pre-Covid situation by 2025.”
But the demand for raw materials and products is rising. The supply chain disruption has been exacerbated by a lack of spare parts and materials following factory closures in China during the lockdowns, which has increased demand pressure on air freight to ensure that he delivers as soon as they are available.
Port congestion continues to be a boon to the air cargo industry. Fewer ships are waiting in ports, but huge delays remain, Bhat said.
The rise of e-commerce also continues to drive demand for air cargo capacity.
On whether there has been any easing in rates, Bhat said, “We are seeing some softness in the market party due to the Shanghai lockdown, war in Ukraine and inflation.” However, he added that there is also a “seasonal” softening.
Anticipated changes in the market include Asia-Europe trade due to the end of the Shanghai Covid lockdown, and North Atlantic trade due to more belly capacity creating overall excess capacity.
Lars Jensen, managing director and partner of Vespucci Maritime, summed up that in the maritime sector “the demand is good, but the capacity is lacking”.
He said: “The market is normal in most trades. So far, there have been no signs of weakness in the market.
Jensen pointed out that demand is not weak but that imbalances are worsening, which means more empty containers need to be moved. When imbalances increase, empty containers increase and therefore demand increases.
However, he said: ‘When ships are delayed outside of a port, it effectively takes remaining capacity out of the market.
Ability absorption buffs have been improved slightly, he added.