Air freight capacity tightening as peak season looms
Forwarders are increasingly taking ‘pre-emptive action’ to guarantee space for customers during the looming peak season and beyond, with the already-diminished capacity expected to tighten further in the coming months.
Air charter broker Chapman Freeborn’s head of cargo, Pierre Van der Stichele, told Lloyd’s Loading List that customers have been signing higher-than normal levels of mid- and long-term leases on freighter aircraft, amid concerns that space shortfalls may worsen with any vaccine launch.
For example, recent estimates by DHL and IATA that the global delivery of billions of doses of a COVID-19 vaccine will require thousands of flights to support its worldwide distribution has brought into sharp relief the risk of a worsening of the current serious capacity shortage in the air cargo sector over the coming months.
Van der Stichele told Lloyd’s Loading List that ‘pure’ freighter utilisation remains at very high levels as the market continues to be severely impacted by capacity constraints from the loss of available bellyhold space as passenger aircraft remain parked in the wake of the pandemic.
He noted: “While PPE shipments have dropped off in the last 4-5 weeks and volumes are well down on those we were experiencing at the peak of the pandemic in March and April, demand for pure freighter aircraft has not decreased.”
Combination of factors
Van der Stichele said this was due to a combination of factors: some re-supply of PPE, the run-up to the Black Friday online shopping bonanza at the end of November, and last quarter of the year peak season traffic – especially with new product launches coming onto the retail market in time for Christmas.
“Certainly, what we are seeing are forwarders taking pre-emptive action and signing medium-term leases on our managed aircraft – thus providing their shipper clients with a secured or regular service, by nailing down capacity now should there be a sudden influx of ‘vaccine logistics’.
“Some of these agreements with the forwarders make provision to secure capacity well into 2021, with an option to extend and ‘lock-in’ the capacity if demand persists,” Van der Stichele revealed.
Long-term contracts triple
“The demand for ‘long-term’ wet-lease contracts for freighters has increased by 200%. The requests have all been for fully dedicated aircraft (and utilisation) for a minimum of 12 months, ranging from mid-size planes such as the A330F to the long-range B777F and B747F,” he added.
Van der Stichele concluded: “There are a number of imponderables as the air cargo market enters what is usually its busiest time of the year. If a significant second wave of COVID-19 does materialise, driving a fresh surge in PPE shipments, and this, say, coincides with a strong peak season and also the launch of a vaccine, then clearly the capacity squeeze would tighten further and make for an extremely challenging situation.
“It’s all about the timing of such events which will determine what the market will look like in Q4 2020 and in 2021. With maindeck capacity stretched, what we’re likely to see is continued buoyant activity by passenger aircraft converted to freighters (P2F) which could even increase with the launch of a vaccine.”
Mike Hill, director for freight at fellow charter broker Air Partner, said the firm was yet to see any evidence of ‘vaccine logistics’ preparations. “It would be unwise for anyone to secure so much capacity for a product that does not yet exist,” he told Lloyd’s Loading List.
Resurgence in PPE demand
“We are, however, seeing some resurgence in PPE demand, with a new charter series beginning, when before (in July) shipments would have gone on scheduled flights. A lot of the previous ‘passenger freighter’ capacity has been converted back to pax ops, so maybe this is why we are seeing an increase in PPE demand on the charter side.
“Also, possibly, the recent COVID spikes and the stepping up of restrictions in Europe are creating renewed demand for PPE.”
Hill explained that after the lockdowns in Europe eased in July, there had been an increase of non-PPE charter activity during the remaining weeks before the usual August ‘lull’.
“August is traditionally one of our quieter months, but this year, the ‘lull’ was rather shorter than we've been accustomed to seeing. From the end of August onwards, normal business has picked up again – to more or less pre-COVID levels.”
© 2019 Worldfreightrates News