With lockdowns returning, low-interest rates, and air passenger travel down more than 60%, Covid’s new realities will continue until a vaccine is widely available, accepted by the flying public, and travel restrictions and quarantines are lifted. With the lack of international passenger travel, air cargo shippers are facing a shortage of long-haul ‘belly cargo’ space. Belly space in the lower deck of passenger aircraft usually provides 50% or more of global cargo capacity. That belly cargo capacity is not expected to return to pre-pandemic levels before 2024.  

Even though cargo volumes are down, the International Air Transport Association (“IATA”) forecast air cargo revenue will exceed last year’s $102 Billion and reach a near-record $110.8 Billion in 2020. The lack of cargo capacity is forcing pricing up.  IATA’s director general and CEO Alexandre de Juniac has said that cargo is “the one bright spot” in air transport’s outlook. “As a portion of industry revenue, cargo will contribute approximately 26%, up from 12% in 2019.” Cargo revenues are expected to reach a record $138 Billion in 2021 (a 25% increase over 2020), roughly double its historical share of total industry revenues.  

Air carriers in Asia carry nearly 40% of global air cargo tonnage. Current belly cargo space coming back to market is in the short and medium-haul markets which will not alleviate rate pressures on long-haul routes. And long-haul passenger operations are expected to be the last passenger operations to return to normal. The challenge of distributing a Covid vaccine (when it is ready for public use) to a worldwide population of 8 billion in such a capacity-constrained air cargo market will only force additional price hikes. IATA is urging governments to plan now for vaccine distribution. It has been reported that even a single vaccine dose per person will require a global air freight capacity of 8,000 Boeing 747s.   

Major U.S. air carriers are flying without passengers using belly space in passenger aircraft as ‘cargo only’ flights[1].  American[2] and Delta began flying such ‘cargo only’ flights to Europe and Asia in March. United is operating 40 ‘cargo only’ flights per week between Chicago and Frankfurt. Southwest is flying its first ‘cargo only’ services in company history. Since spring freighter traffic has increased by 20%. As mainline carrier fleets are renewed, the reconfiguration of older passenger aircraft to dedicated freight service can add years to an aircraft’s life. Conversion requires gutting the interior cabin. Floors are fitted with a carpet of rollerballs for pallets. The cockpit is modified and systems for ventilation, fire detection, and temperature control are installed. New hatches and reinforced frames and flooring are required in order to handle the extra load. Air Canada has removed 422 Premium Economy and Economy Class seats from three of its high-density Boeing 777-300ER aircraft. Even with 28 Business Class seats remaining, Air Canada says the modification brings the aircraft’s total cargo capacity to nearly 90 tons, not far off from the typical 110-ton capacity of a Boeing 747-400 Freighter. 

If long-haul passenger traffic is not returning until 2024 the global shortage of cargo capacity will continue. Interested in exploring freighter conversions? Call RESIDCO.

[1] No scheduled passenger airlines in the U.S. except Alaska Airlines have dedicated freighters.

[2] American’s first regular “cargo only” operation since 1984, when it last operated a dedicated cargo fleet.

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