Author: Admin

 Geneva – The International Air Transport Association (IATA) released May 2022 data for global air cargo markets showing that the easing of Omicron restrictions in China helped to alleviate supply chain constraints and contributed a performance improvement in May.

Note: We returned to year-on-year traffic comparisons, instead of comparisons with the 2019 period, unless otherwise noted.

•             Global demand, measured in cargo tonne-kilometers (CTKs*), was 8.3% below May 2021 levels (-8.1% for international operations). This was an improvement on the year-on-year decline of 9.1% seen in April.

•             Capacity was 2.7% above May 2021 (+5.7% for international operations). This more than offset the 0.7% year-on-year drop in April. Capacity expanded in all regions with Asia-Pacific experiencing the largest growth.

•             Air cargo performance is being impacted by several factors.  

o             Trade activity ramped-up slightly in May as lockdowns in China due to Omicron were eased. Emerging regions also contributed to growth with stronger volumes. 

o             New export orders, a leading indicator of cargo demand and world trade, decreased in all markets, except China. 

o             The war in Ukraine continues to impair cargo capacity used to serve Europe as several airlines based in Russia and Ukraine were key cargo players.

“May offered positive news for air cargo, most notably because of the easing of some Omicron restrictions in China. On a seasonally adjusted basis, we saw growth (0.3%) after two months of decline. The return of Asian production as COVID-19 measures eased, particularly in China, will support demand for air cargo. And the strong rebound in passenger traffic has increased belly capacity, although not always in the markets where the capacity crunch is most critical. But uncertainty in the overall economic situation will need to be carefully watched,” said Willie Walsh, IATA’s Director General. 

May 2022

(% year-on-year)             World share1     CTK        ACTK     CLF (%-pt)2         CLF (level)3

Total Market      100.0%  -8.3%     2.7%      -6.1%     50.5%

Africa    1.9%      -1.5%     3.0%      -2.3%     49.5%

Asia Pacific          32.6%    -6.6%     -7.4%     0.5%      62.7%

Europe 22.8%    -14.6%  3.3%      -11.5%  54.8%

Latin America     2.2%      13.8%    33.3%    -6.6%     38.7%

Middle East        13.4%    -11.6%  7.6%      -10.5%  48.7%

North America  27.2%    -5.7%     6.8%      -5.4%     41.1%

1 % of industry CTKs in 2021  2 Change in load factor   3 Load factor level

May Regional Performance

•             Asia-Pacific airlines saw their air cargo volumes decrease by 6.6% in May 2022 compared to the same month in 2021. This was a significant improvement over the 15.8% decline in April. Airlines in the region have been heavily impacted by lower trade and manufacturing activity due to Omicron-related lockdowns in China however this started to ease in May as restrictions were lifted. Available capacity in the region fell 7.4% compared to May 2021.

•             North American carriers posted a 5.7% decrease in cargo volumes in May 2022 compared to May 2021. Demand in the Asia-North America market remained subdued, however, other key routes such as Europe – North America remain strong. Capacity was up 6.8% compared to May 2021. Several carriers in the region are set to receive delivery of freighters this year, which should help address pent-up demand on routes where it is needed if economic headwinds don’t persist.

•             European carriers saw a 14.6% decrease in cargo volumes in May 2022 compared to the same month in 2021. This was the worst performance of all regions. This is attributable to the war in Ukraine. Labor shortages and lower manufacturing activity in Asia due to Omicron also affected volumes. Capacity increased 3.3% in May 2022 compared to May 2021. 

•             Middle Eastern carriers experienced a 11.6% year-on-year decrease in cargo volumes in May. Significant benefits from traffic being redirected to avoid flying over Russia failed to materialize. This is likely due to persisting supply chain issues in Asia. Capacity was up 7.6% compared to May 2021.

•             Latin American carriers reported an increase of 13.8% in cargo volumes in May 2022 compared to May 2021. This was the strongest performance of all regions. Airlines in this region have shown optimism by introducing new services and capacity, and in some cases investing in additional aircraft for air cargo in the coming months.  Capacity in May was up 33.3% compared to the same month in 2021. 

•             African airlines saw cargo volumes decrease by 1.5% in May 2022 compared to May 2021. This was significantly slower than the growth recorded the previous month (6.3%). Capacity was 3.0% above May 2021 levels.

View the May 2022 Air Cargo Market Analysis (pdf)

By Damian Brett

Both passenger and freighter airlines are cancelling flights to and from Frankfurt Airport (FRA) as staff shortages affect operations at the hub.

In a statement, airport operator Fraport said demand for travel was returning and at the same time it is experiencing staff shortages for some services along the travel chain.

“To remedy this situation, some airlines are pro-actively cancelling individual passenger and cargo flights to and from FRA, or rescheduling flights in advance to periods when traffic volumes are lower,” Fraport said.

It added: “We deeply regret any inconvenience caused by this situation for our passengers here in Frankfurt. Moreover, cargo traffic can also be affected by disruptions, longer wait times and flight cancellations.”

Meanwhile, the airport is also experiencing “extreme traffic peaks” with arriving and departing flights spread unevenly throughout the working day.

At times, Fraport said that airport traffic is almost back to the pre-pandemic levels of 2019, particularly during the early morning hours and at noon time and flights were often re-scheduled at short notice meaning additional staff are required outside of the planned duty rosters.

As well as airlines moving or cancelling flights, Fraport has intensified its recruitment programme, especially for hiring ground service specialists.

For example, its FraGround subsidiary is currently recruiting ground and baggage handling staff with the aim of hiring up to 1,000 new recruits for the current year.

“We have already added some 870 new staff members since last summer, thanks to our extensive recruitment measures.

“Nevertheless, it takes time until the new employees can provide noticeable relief. Our new recruits need to undergo extensive background security checks, as well as the necessary specialized training before being deployed at the airport.”

“The goal of these measures – in cooperation with our airline partners – is to stabilise FRA’s operations during peak times for the benefit of all stakeholders.

“However, this does not imply that ground handling services at FRA have been suspended at any time – neither for freighter nor for passenger aircraft.”

Frankfurt is not the only airport to be experiencing flight cancellations this summer.

Both Schiphol and Heathrow also face disruption due to staff shortages.

By Rebecca Jeffrey

The air cargo industry will not suffer any “lasting negative impact” from the pandemic, an industry expert has said.

Speaking at the Scan Global Logistics Air & Ocean Freight Outlook June 2022, Ashwin Bhat, chief commercial officer at Lufthansa Cargo, said that the company believes: “There won’t be any lasting negative impact from the pandemic for air cargo.”

He said there are five reasons why. 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 the industry remains relevant.

Bhat said the future focus of air cargo should be on ensuring the supply chain is a “value chain”, alongside more fluid collaboration, and more smart solutions, including those that cut CO2.

In the present, he said that peaks of uncertainty are increasing.

“One crisis after another on top of each other is coming and that is the world we are living in. As air cargo we have lived through it in the last few years.”

At Lufthansa Cargo, belly capacity at the end of last year was  down 27%. Capacity is currently still down  down 8-10%.

The Ukraine-Russia war affected competition and capacity because of the closure of airspace, meaning Lufthansa, alongside other airlines, was forced to fly a longer Europe-Asia route than normal.

The Shanghai and Beijing Covid lockdowns also further affected capacity due to the lack of ground facilities in China.

Bhat said passenger demand is steeper than expected but the capacity gap remains: “The air cargo capacity projection is that we will come to the pre-Covid situation only by 2025.”

But the demand for commodities and products is climbing. The supply chain disruption has been exacerbated by a lack of spare parts and materials following factory shutdowns in China during the lockdowns, putting more demand pressure on airfreight to deliver when these become available.

Port congestion continues to be an advantage for the air cargo industry. Fewer ships are waiting at ports, but huge delays remain, said Bhat.

The rise of e-commerce also continues to push up demand for airfreight capacity.

On the subject of whether there has been a softening of rates, Bhat said: “We see some softness in the market party because of the Shanghai lockdown, Ukraine war and inflation.” However, he added there is also “seasonal” softening.

Anticipated changes to the market include Asia to Europe trade because of the end of the Shanghai Covid lockdown, and the North Atlantic trade due to more belly capacity creating overall excess capacity.

Lars Jensen, chief executive and partner of Vespucci Maritime summarised that within the maritime sector “demand is ok, but capacity is lacking”.

He said: “The market is normal in most trades. Up until now there hasn’t been signs of weakness in the market.”

Jensen stressed that demand is not weak but imbalances are worsening, meaning more empty containers need to moved. When imbalances increase, empty containers increase and so demand increases.

However he said: “When vessels are delayed outside a port this is effectively taking remaining capacity out of the market.”

Improvements in capacity absorption have been marginally improved, he added.

Forwarders must prepare for airfreight volume crunch, says Airforwarders Association

By Rebecca Jeffrey

Better communication is key to managing an oncoming air cargo capacity crunch in the US caused by worsening oceanfreight capacity issues.

The forecasted surge in demand for US air cargo capacity will be largely driven by a lack of sailings with ocean suppliers, but air cargo forwarders must “learn to be adaptable” in the current climate of already constrained airfreight capacity, said Brandon Fried, executive director, Airforwarders Association (AfA).

Although global air cargo capacity is increasing, Fried, told members of the Los Angeles Air Cargo Association (LAACA) that the US capacity crunch will be driven by a perfect storm of cancelled China to US sailings, congestion at US airports, limited warehouse space, the labour shortage and rising inflation

“The challenges for ocean carriers are well documented and we understand that they are looking after profit margins, but air capacity is already constrained by multiple factors,” said Fried.

“Congestion at major airports is exacerbating the strain on supply chains across the US.

“To rise to these challenges, the air forwarding community must better communicate with each other and learn to be adaptable.”

AfA recently launched its Airport Congestion Committee (ACC).

Set up to find realistic solutions to relieve airport congestion, the ACC will present findings to private, public, and government entities as workable policies for urgent new legislation.

Doha – The International Air Transport Association (IATA) called on governments to further support the safe carriage of lithium batteries by developing and implementing global standards for screening, fire-testing, and incident information sharing.

As with many products shipped by air, effective standards, globally implemented, are needed to ensure safety. The challenge is the rapid increase in global demand of lithium batteries (the market is growing 30% annually) bringing many new shippers into air cargo supply chains. A critical risk that is evolving, for example, concerns incidents of undeclared or mis-declared shipments.

IATA has long called for governments to step-up enforcement of safety regulation for the transport of lithium batteries. This should include stiffer penalties for rogue shippers and the criminalization of egregious or willful offenses. IATA asked governments to shore up those activities with additional measures:

•             Development of safety-related screening standards and processes for lithium batteries 

Development of specific standards and processes by governments to support the safe transport of lithium batteries, like those that exist for air cargo security, will help provide an efficient process for compliant shippers of lithium batteries. It is critical that these standards and processes be outcome based and globally harmonized.

•             Development and implementation of a fire-testing standard that addresses lithium battery fire containment

Governments should develop a testing standard for fires involving lithium batteries to evaluate supplementary protection measures over and above the existing cargo compartment fire suppression systems.

•             Enhance safety data collection and sharing information between governments

Safety data is critical to understanding and managing lithium battery risks effectively. Without sufficient relevant data there is little ability to understand the effectiveness of any measures. Better information sharing and coordination on lithium battery incidents among governments and with the industry is essential to help managing lithium battery risks effectively.

These measures would support significant initiatives by airlines, shippers, and manufacturers to ensure lithium batteries can be carried safely. Actions have included:

•             Updates to the Dangerous Goods Regulations and the development of supplementary guidance material, 

•             The launch of a Dangerous Goods Occurrence Reporting Alert System that provides a mechanism for airlines to share information on events involving undeclared or misdeclared dangerous goods,

•             The development of a Safety Risk Management Framework specifically for the carriage of lithium batteries.

•             The launch of CEIV Lithium Batteries to improve the safe handling and transport of lithium batteries across the supply chain.

“Airlines, shippers, manufacturers, and governments all want to ensure the safe transport of lithium batteries by air. It’s a joint responsibility. The industry is raising the bar to consistently apply existing standards and share critical information on rogue shippers. But there are some areas where the leadership of governments is critical. Stronger enforcement of existing regulations and the criminalization of abuses will send a strong signal to rogue shippers. And the accelerated development of standards for screening, information exchange, and fire containment will give the industry even more effective tools to work with,” said Willie Walsh, IATA’s Director General.  

Ensuring Safe Rollout of 5G Networks

Doha – The International Air Transport Association (IATA) urged governments to work closely with the aviation industry to ensure that aviation and incumbent aviation safety systems can safely co-exist with new 5G services(1). While IATA recognizes the economic importance of making spectrum available to support next generation commercial wireless telecommunications, maintaining current levels of safety of passengers, flight crews, and aircraft must continue to be one of governments’ highest priorities. The call came as the industry was meeting in Doha, Qatar at the 78th IATA Annual General Meeting.

“We must not repeat the recent experience in the United States, where the rollout of C-band spectrum 5G services created enormous disruption to aviation, owing to the potential risk of interference with radio altimeters that are critical to aircraft landing and safety systems. In fact, many countries have successfully managed to facilitate the requirements of 5G service providers, while including necessary mitigations to preserve aviation safety and uninterrupted services. These include, for example, Brazil, Canada, France and Thailand,” said Willie Walsh, IATA’s Director General.

Before deciding on any spectrum allocations or conducting spectrum auctions, IATA called for governments to ensure close coordination and mutual understandings between national spectrum and aviation safety regulators so that each frequency allocation/assignment is comprehensively studied and is proven not to adversely impact aviation safety and efficiency. Robust testing in coordination with aviation subject matter experts is critically important in providing necessary information.

Measures that have already been used by some governments include:

•             Ensure thorough testing, sufficient spectrum separation between 5G C-band deployments and 4.2-4.4 GHz frequency band used by existing radio altimeters

•             Clearly codify and enforce the maximum power limit for 5G C-band transmission and downward tilting of 5G antennae particularly in the vicinity of flightpaths

•             Establishment of sufficient 5G C-band prohibition and precautionary zones around airports

IATA noted that airlines operating to/from and within the US continue to contend with the effects of the rollout of 5G, including a pending airworthiness directive from the Federal Aviation Administration requiring them to retrofit/upgrade radio altimeters at their own expense to enable the respective aircraft to continue to utilize CAT II and CAT III low-visibility approaches at many US airports where 5G C-Band service is currently or will be deployed in future. The timely availability of upgraded altimeters is a concern, as are the cost of these investments and the lack of certainty regarding the future spectrum environment. Furthermore, 19 additional telecommunications companies are scheduled to deploy 5G networks by December 2023.

“FAA’s unilateral decision to require airlines to replace or upgrade their existing radio altimeters – which are approved by both the FAA and the US Federal Communications Commission – by July 2023 is deeply disappointing and unrealistic. The FAA has not even approved or certified all the safety solutions that it will require, nor have systems providers been able to say with certainty when the equipment will be available for much of the fleet. So how can there be any confidence in the timeline? Furthermore, FAA can provide no guarantee that airlines will not have to carry out further upgrades to radio altimeters as even more powerful 5G networks are deployed in the near future. Safety is our highest priority, but it cannot be achieved with this rushed approach. The FAA needs to continue working with all stakeholders collaboratively and transparently, including the FCC and the telecom sector, to define solutions and deadlines that reflect reality,” said Walsh.

The International Civil Aviation Organization (ICAO) and the International Telecommunications Union (ITU) both have recognized and reminded their Member States and Administrations of the importance of ensuring that existing aviation systems and services are free from harmful interference(2). This will become even more critical as more and more spectrum is being allocated to new generation telecommunications services.

Doha – The International Air Transport Association (IATA) announced an upgrade to its outlook for the airline industry’s 2022 financial performance as the pace of recovery from the COVID-19 crisis quickens. Forecast highlights include:

•             Industry losses are expected to reduce to -$9.7 billion (improved from the October 2021 forecast for an $11.6 billion loss) for a net loss margin of -1.2%. That is a huge improvement from losses of $137.7 billion (-36.0% net margin) in 2020 and $42.1 billion (-8.3% net margin) in 2021.

 •            Industry-wide profitability in 2023 appears within reach with North America already expected to deliver an $8.8 billion profit in 2022.

•             Efficiency gains and improving yields are helping airlines to reduce losses even with rising labor and fuel costs (the latter driven by a +40% increase in the world oil price and a widening crack spread this year).

 •            Industry optimism and commitment to emissions reductions are evident in the expected net delivery of over 1,200 aircraft in 2022.

•             Strong pent-up demand, the lifting of travel restrictions in most markets, low unemployment in most countries, and expanded personal savings are fueling a resurgence in demand that will see passenger numbers reach 83% of pre-pandemic levels in 2022.

 •            Despite economic challenges, cargo volumes are expected to set a record high of 68.4 million tonnes in 2022.

“Airlines are resilient. People are flying in ever greater numbers. And cargo is performing well against a backdrop of growing economic uncertainty. Losses will be cut to $9.7 billion this year and profitability is on the horizon for 2023. It is a time for optimism, even if there are still challenges on costs, particularly fuel, and some lingering restrictions in a few key markets,” said Willie Walsh, IATA’s Director General.

1. Outlook Drivers

Revenues are rising as COVID-19 restrictions ease and people return to travel. The challenge for 2022 is to keep costs under control.

“The reduction in losses is the result of hard work to keep costs under control as the industry ramps up. The improvement in the financial outlook comes from holding costs to a 44% increase while revenues increased 55%. As the industry returns to more normal levels of production and with high fuel costs likely to stay for a while, profitability will depend on continued cost control. And that encompasses the value chain. Our suppliers, including airports and air navigation service providers, need to be as focused on controlling costs as their customers to support the industry’s recovery,” said Walsh.

Revenues

Industry revenues are expected to reach $782 billion (+54.5% on 2021), 93.3% of 2019 levels. Flights operated in 2022 are expected to total 33.8 million, which is 86.9% of 2019 levels (38.9 million flights).

•             Passenger revenues are expected to account for $498 billion of industry revenues, more than double the $239 billion generated in 2021. Scheduled passenger numbers are expected to reach 3.8 billion, with revenue passenger kilometers (RPKs) growing 97.6% compared with 2021, reaching 82.4% of 2019 traffic. As pent-up demand is released with the easing of travel restrictions, yields are expected to rise 5.6%. That follows a yield evolution of -9.1% in 2020 and +3.8% in 2021.

 •            Cargo revenues are expected to account for $191 billion of industry revenues. That is down slightly from the $204 billion recorded in 2021, but nearly double the $100 billion achieved in 2019. Overall, the industry is expected to carry over 68 million tonnes of cargo in 2022, which is a record high. As the trading environment softens slightly, cargo yields are expected to fall 10.4% compared with 2021. That only partially reverses the yield increases of 52.5% in 2020 and 24.2% in 2021.

Expenses

Overall expenses are expected to rise to $796 billion. That is a 44% increase on 2021, which reflects both the costs of supporting larger operations and the cost of inflation in some key items.

•             Fuel: At $192 billion, fuel is the industry’s largest cost item in 2022 (24% of overall costs, up from 19% in 2021). This is based on an expected average price for Brent crude of $101.2/barrel and $125.5 for jet kerosene. Airlines are expected to consume 321billion liters of fuel in 2022 compared with the 359 billion liters consumed in 2019.

War in Ukraine is keeping prices for Brent crude oil high. Nonetheless, fuel will account for about a quarter of costs in 2022. A particular feature of this year’s fuel market is the high spread between crude and jet fuel prices. This jet crack spread remains well above historical norms, mostly owing to capacity constraints at refineries. Under-investments in this area could mean that the spread remains elevated into 2023. At the same time, high oil and fuel prices are likely to see airlines improve their fuel efficiency—both through the use of more efficient aircraft and through operational decisions.

•             Labor: Labor is the second highest operational cost item for airlines. Direct employment in the sector is expected to reach 2.7 million, up 4.3% on 2021 as the industry rebuilds from the significant decline in activity in 2020. Employment is still, however, somewhat below the 2.93 million jobs in 2019 and is expected to remain below this level for some time. Unit labor costs are expected to be 12.2 cents/available tonne kilometer (ATK) in 2022, which is essentially back to 2019 levels when it was 12.3 cents/ATK.

The time required to recruit, train, complete security / background checks, and perform other necessary processes before staff are “job-ready” is presenting a challenge for the industry in 2022. In some cases, employment delays may act as a constraint on an airline’s ability to meet passenger demand.

In countries where the economic recovery from the pandemic has been swift and the unemployment rate is low, tight labor markets and skill shortages are likely to contribute to upward pressure on wages. The industry’s wage bill is expected to reach $173 billion in 2022, up 7.9% on 2021, and disproportionate to the 4.3% increase in total jobs.

Macro-Economic Factors

The global macroeconomic backdrop is critical for the industry outlook. The forecast incorporates an assumption for solid global GDP growth of 3.4% in 2022, down from the strong 5.8% rebound last year. Inflation has risen and is expected to remain elevated throughout 2022, waning over the course of 2023. And, while nominal interest rates are rising, real interest rates are expected to remain low or negative for a sustained period.

2. Risk Factors

There are a number of risk factors associated with this outlook.

War in Ukraine

The impact of the war in Ukraine on aviation pales compared with the unfolding humanitarian tragedy. The outlook assumes that the war in Ukraine will not escalate beyond its borders. Among the many negative impacts of an escalation for aviation, rising fuel costs and a dampening demand due to lowered consumer sentiment would be paramount.

•             Passenger: Combined, the Russian international market, Ukraine, Belarus, and Moldova accounted for 2.3% of global traffic in 2021. In addition, about 7% of international passenger traffic (RPK) would normally transit Russian airspace (2021 data), which is now closed to many operators, mostly on long-haul routes between Asia and Europe or North America. There are significantly higher costs for re-routing for those carriers affected.

•             Cargo: Just under 1% of global freight traffic originated in or is transited through Russia and Ukraine. The greater impact is in the specialized area of heavy-weight cargo where Russia and Ukraine are the market leaders, and the corresponding capacity loss will be difficult to replace. And about 19% of international cargo shipments (CTKs) transits through Russian airspace (2021 data). Carriers impacted by sanctions face higher costs for re-routing.

Inflation, Interest Rates, and Exchange Rate

Interest rates are rising as central banks combat inflation. Aside from those carrying debt (who will see inflation devaluing their debts), inflation is harmful and has the economic dampening effect of a tax by reducing purchasing power. There is downside risk to this outlook should inflation continue to rise, and central banks continue to hike interest rates.

Moreover, the record strength of the US dollar, if it continues, will have a negative impact as a strong US dollar is growth dampening in general. It increases the local-currency price of all USD-denominated debt, and adds to the burden of paying for USD-denominated fuel imports as well.

COVID-19

The underlying demand for travel is strong. But government responses to COVID-19 ignored World Health Organization advice that border closures are not an effective means of controlling the spread of a virus. The outlook assumes that strong and growing population immunity to COVID-19 means there will not be a repeat of these policy mistakes. There is, however, downside risk should governments return to knee-jerk border-closing responses to future outbreaks.

“Governments must have learned their lessons from the COVID-19 crisis. Border closures create economic pain but deliver little in terms of controlling the spread of the virus. With high levels of population immunity, advanced treatment methods, and surveillance procedures, the risks of COVID-19 can be managed. At present, there are no circumstances where the human and economic costs of further COVID-19 border closures could be justified,” said Walsh.

China

China’s domestic market alone accounted for about 10% of global traffic in 2019. This outlook assumes a gradual easing of COVID-19 restrictions in the second half of 2022. An earlier move away from China’s zero COVID policy would, of course, improve the outlook for the industry. A prolonged implementation of the COVID-19 policy will continue to depress the world’s second largest domestic market and wreak havoc with global supply chains.

3. Regional Round Up

Financial performance in all regions is expected to improve in 2022 compared with 2021 (all regions improved in 2021 compared with 2020 as well).

North America is expected to continue to be the strongest performing region and the only region to return to profitability in 2022. Supported by the large US domestic market and the re-opening of international markets, including the North Atlantic, net profit is forecast to be $8.8 billion in 2022. Demand (RPKs) is expected to reach 95.0% of pre-crisis (2019) levels, and capacity 99.5%.

Europe: In Europe, the Russia-Ukraine war will continue to disrupt travel patterns within Europe and between Europe and Asia-Pacific. However, the war is not expected to derail the travel recovery, with the region edging closer to profitability in 2022, with a net loss of $3.9 billion forecast. Demand (RPKs) is expected to reach 82.7% of pre-crisis (2019) levels, and capacity 90.0%.

For Asia-Pacific airlines, strict and enduring travel restrictions (notably in China), along with an uneven vaccine rollout, have seen the region lag in the recovery to date. As the restrictions diminish, travel demand is expected to increase quickly. Net losses in 2022 are forecast to decline to $8.9 billion. Demand (RPKs) is expected to reach 73.7% of pre-crisis (2019) levels, and capacity 81.5%.

Traffic volumes in Latin America recovered robustly in 2021, supported by domestic markets and relatively fewer travel restrictions in many countries. The financial outlook for some airlines, nevertheless, remains fragile and the region is expected to record a net loss of $3.2 billion this year. Demand (RPKs) is expected to reach 94.2% of pre-crisis (2019) levels, and capacity 93.2%.

In the Middle East, this year’s re-opening of international routes and long-haul flights in particular will provide a welcome boost for many. Region-wide, net losses are expected to narrow to $1.9 billion in 2022, from a $4.7 billion loss last year. Demand (RPKs) is expected to reach 79.1% of pre-crisis (2019) levels, and capacity 80.5%.

In Africa, lower vaccination rates have dampened the region’s air travel recovery to date. However, some catching up is likely this year, which will contribute to an improved financial performance. Net losses are forecast to be $0.7 billion in 2022. Demand (RPKs) is expected to reach 72.0% of pre-crisis (2019) levels, and capacity 75.2%.

By Rebecca Jeffrey

Shanghai is back in business following a Covid lockdown but additional quarantine measures have resulted in trucking restrictions and staff shortages that are further battering airfreight supply chains.

Infections recorded following the formal end to lockdown in the city on June 1 has seen some areas return to Covid restrictions, temporarily restricting traffic and road access to trucks carrying airfreight in and out and around Shanghai. Covid testing requirements have also led to staff shortages. Beijing has also started mass testing again after an outbreak in the city.

Dimerco’s June 13-26 Air-Ocean Freight Market Forecast for shows that a “manpower shortage” in Beijing due to the pandemic has “caused at least 1 day delay”.

The logistics company added: “The amount of exported goods from other provinces to Beijing decreased significantly due to traffic restriction.”

Asia to Intra Asia space is “soft” at Shanghai Pudong (PVG) while the rate is falling. Meanwhile, there has been an “upturn” in Asia to US/CA space at PVG and the rate is stable.

Asia to Europe PVG space is “tight” and the rate is stable.

CNBC reported that highway closures due to quarantine have stopped trucks loaded with export goods from entering the Port of Shanghai, according to logistics company Orient Star Group. Cargo has been redirected to Ningbo, which is now becoming congested, or other small ports along the Yangtze River.

Air Cargo News reported on a backlog of shipping containers at the Port of Shanghai last month. Congestion had begun easing at the port, but additional pressure could see issues mounting again.

DHL Global Forwarding told CNBC there is still a shortage of truckers in and out of the Shanghai area, while Seko Logistics said testing rules remain a challenge with capacity yet to return to its pre-lockdown level.

Elsewhere in Asia, logistics is looking rocky in South Korea, where according to Dimerco, thousands of truckers are striking to protest against rising fuel costs. The strike is “disrupting production, hitting port activity, and posing new risks to a strained global supply chain”.

Port congestion with truck shortages is continuing in North America. Dimerco noted: “Expect the congestion to worsen once Shanghai returns from lockdown. Feeder capacity from Asia Base Ports to other Asian Out Ports remains limited.”

Both these issues have the potential to further exacerbate pressure on airfreight.

By Damian Brett

IATA has expressed optimism that the air cargo market will begin to improve in the months ahead, despite the current market challenges.

In its latest market update, IATA said that air cargo demand dropped by 11.2% year on year in April, while cargo load factors slipped by 5.2 percentage points on a year ago to 51.6%, and capacity was down by 2%.

The fall in demand is the largest since August 2020 and load factors are at their lowest level since February 2020, although still above pre-Covid levels.

The airline association said that the drop in demand was fuelled by the war in Ukraine leading to a fall in cargo capacity used to serve Europe as several airlines based in Russia and Ukraine were key cargo players.

Meanwhile, China’s zero-Covid policy and associated lockdowns led to capacity challenges due to flight cancellations because of labour shortages.

“Global goods trade has continued to decline in 2022, with China’s economy growing more slowly because of Covid-19 related lockdowns (among other factors),” IATA said.

“The lockdowns have brought much of the world’s largest port, Shanghai, to a standstill. Supply chain disruptions due to the Ukraine-Russia conflict are also adding to the downward pressure on trade.”

New export orders, a leading indicator of cargo demand and world trade are now shrinking in all markets except the US, the association added.

Despite the challenging conditions, IATA director general Willie Walsh sounded a note of optimism.

“The combination of the war in Ukraine and Covid-19 lockdowns in China have pushed up energy costs, intensified supply chain disruptions, and fed inflation,” Walsh said.

“The operating environment is challenging for all businesses, including air cargo. But with China easing lockdown restrictions, there is cause for some optimism and the supply/demand imbalance is keeping yields high.”

Looking at regional performance, Asia Pacific airlines saw their air cargo volumes decrease by 15.8% in April 2022 compared with the same month in 2021.

IATA pointed out that was the weakest performance of all regions and significantly slower than the previous month.

“Airlines in the region have been heavily impacted by lower trade and manufacturing activity due to Omicron-related lockdowns in China,” IATA said.

North American carriers posted a 6.6% decrease in cargo volumes in April compared with a year earlier.

“Demand in the Asia-North America market declined significantly, however, other key routes such as Europe – North America remain strong,” the association said.

European carriers registered a 14.4% drop in demand April as the Ukraine war and lower manufacturing activity in Asia affected volumes.

Middle Eastern carriers experienced a 11.9% year-on-year decrease in cargo volumes in April.

“Significant benefits from traffic being redirected to avoid flying over Russia failed to materialise,” IATA said “This is likely due to persisting supply chain issues in Asia.”

Latin American carriers noted the strongest performance with demand up 40.9% year on year. In response, airlines in this region have shown optimism by introducing new services and capacity, and in some cases investing in additional aircraft for air cargo in the coming months.

African airlines saw cargo volumes decrease by 6.3% in April 2022 compared to April 2021 – significantly slower than the increase registered in the pre month.

09 June 2022     

Geneva – The International Air Transport Association (IATA) announced that air travel resumed its strong recovery trend in April, despite the war in Ukraine and travel restrictions in China. This was driven primarily by international demand.

Note: We have returned to year-on-year traffic comparisons, instead of comparisons with the 2019 period, unless otherwise noted. Owing to the low traffic base in 2021, some markets will show very high year-on-year growth rates, even if the size of these markets is still significantly smaller than they were in 2019.

•             Total demand for air travel in April 2022 (measured in revenue passenger kilometers or RPKs) was up 78.7% compared to April 2021 and slightly ahead of March 2022’s 76.0% year-over-year increase.

 •            April domestic air travel was down 1.0% compared to the year-ago period, a reversal from the 10.6% demand rise in March. This was driven entirely by continuing strict travel restrictions in China, where domestic traffic was down 80.8% year-to-year. Overall, April domestic traffic was down 25.8% versus April 2019.

•             International RPKs rose 331.9% versus April 2021, an acceleration over the 289.9% rise in March 2022 compared to a year ago. Several route areas are actually above pre-pandemic levels, including Europe – Central America, Middle East – North America and North America – Central America. April 2022 international RPKs were down 43.4% compared to the same month in 2019.

“With the lifting of many border restrictions, we are seeing the long-expected surge in bookings as people seek to make up for two years of lost travel opportunities. April data is cause for optimism in almost all markets, except China, which continues to severely restrict travel. The experience of the rest of the world is demonstrating that increased travel is manageable with high levels of population immunity and the normal systems for disease surveillance. We hope that China can recognize this success soon and take its own steps towards normality,” said Willie Walsh, IATA’s Director General.

April 2022 (% year-on-year)         World share1     RPK        ASK        PLF (%-pt)2         PLF (level)3

Total Market      100.0%  78.7%    45.5%    14.5%    77.8%

Africa    1.9%      108.4%  66.4%    13.7%    68.0%

Asia Pacific          27.5%    -25.4%  -25.3%  -0.1%     67.0%

Europe 25.0%    301.6%  172.5%  25.6%    79.5%

Latin America     6.5%      139.2%  114.4%  8.4%      80.9%

Middle East        6.5%      238.1%  91.3%    30.9%    71.3%

North America  32.6%    78.5%    43.8%    16.7%    85.8%

1% of industry RPKs in 2021   2year-on-year change in load factor   3Load Factor Level

 International Passenger Markets

•             European carriers’ April international traffic rose 480.0% versus April 2021, substantially up over the 434.3% increase in March 2022 versus the same month in 2021. Capacity rose 233.5% and load factor climbed 33.7 percentage points to 79.4%.

•             Asia-Pacific airlines saw their April international traffic climb 290.8% compared to April 2021, significantly improved on the 197.2% gain registered in March 2022 versus March 2021. Capacity rose 88.6% and the load factor was up 34.6 percentage points to 66.8%, still the lowest among regions.

•             Middle Eastern airlines had a 265.0% demand rise in April compared to April 2021, bettering the 252.7% increase in March 2022, versus the same month in 2021. April capacity rose 101.0% versus the year-ago period, and load factor climbed 32.2 percentage points to 71.7%.

 •            North American carriers’ April traffic rose 230.2% versus the 2021 period, slightly above the 227.9% rise in March 2022 compared to March 2021. Capacity rose 98.5%, and load factor climbed 31.6 percentage points to 79.3%.

•             Latin American airlines experienced a 263.2% rise in April traffic, compared to the same month in 2021, exceeding the 241.2% rise in March 2022 over March 2021. April capacity rose 189.1% and load factor increased 16.8 percentage points to 82.3%, which easily was the highest load factor among the regions for the 19th consecutive month.

•             African airlines’ traffic rose 116.2% in April 2022 versus a year ago, an acceleration over the 93.3% year-over-year increase recorded in March 2022. April 2022 capacity was up 65.7% and load factor climbed 15.7 percentage points to 67.3%.

Domestic Passenger Markets

April 2022 (% year-on-year)         World share1  

RPK        ASK        PLF (%-pt)2         PLF (level)3

Domestic             62.3%    -1.0%     -8.6%     6.2%      80.1%

Australia              0.8%      47.5%    45.5%    1.0%      73.3%

Brazil     1.9%      133.3%  131.7%  0.6%      78.1%

China P.R.            17.8%    -80.8%  -73.6%  -20.9%  55.8%

India      2.2%      78.6%    33.8%    20.0%    79.8%

Japan    1.1%      57.0%    31.1%    9.1%      55.4%

US          25.6%    48.2%    26.0%    13.2%    88.4%

1% of industry RPKs in 2021   2year-on-year change in load factor 3Load Factor Level

•             Australia’s domestic demand rose 47.5% compared to April 2021, an improvement over the 36.5% rise in March traffic, owing to the lifting of travel restrictions and rising consumer confidence.

 •            Japan likewise saw monthly gains, with domestic RPKs up 57.0% year-over-year, up from a 46.5% rise in March 2022 compared to March 2021. 

2022 vs 2019

Total April passenger demand was down 37.2% compared to the same month in 2019, which is an improvement compared to the 41.3% decline for March 2022 versus March 2019.   

April 2022 (% ch vs the same month in 2019)        World share in1                RPK        ASK        PLF (%-pt)2         PLF (level)3

Total Market      100.0%  -37.2%  -32.9%  -5.3%     77.8%

International      37.7%    -43.4%  -38.6%  -6.5%     76.2%

Domestic             62.3%    -25.8%  -22.4%  -3.7%     80.1%

The Bottom Line

“With the northern summer travel season now upon us, two things are clear: two-years of border restrictions have not weakened the desire for the freedom to travel. Where it is permitted, demand rapidly is returning to pre-COVID levels. However, it is also evident that the failings in how governments managed the pandemic have continued into the recovery. With governments making U-turns and policy changes there was uncertainty until the last minute, leaving little time to restart an industry that was largely dormant for two years. It is no wonder that we are seeing operational delays in some locations. In those few locations where these problems are recurring, solutions need to be found so passengers can travel with confidence.

“In less than two weeks, leaders of the global aviation community will gather in Doha at the 78th IATA Annual General Meeting (AGM) and World Air Transport Summit. This year’s AGM will take place as a wholly in-person event for the first time since 2019. It should send a strong signal that it is time for governments to lift any remaining restrictions and requirements and prepare for an enthusiastic response by consumers who are voting with their feet for a full restoration of their right to travel,” said Walsh.