Senior United Airlines cargo executive expects the return of passenger air services to markets such as the transatlantic from this autumn to significantly affect pricing on Europe-US capacity.
United Airlines (UAL) will reduce the number of aircraft it operates in ‘preighter’ configuration to a bare minimum this autumn, having begun the process in July, as more and more of its fleet returns to flying scheduled passenger services, particularly on domestic and transatlantic routes – to a backdrop of Covid-19-related restrictions on foreign air travel being eased – according to a senior cargo executive at the US carrier.
Mirco Renfer, VP of United Cargo for Asia Pacific, told a freight webinar organised by Scan Global Logistics: “UAL does not operate freighters at all and during the Covid-19 pandemic we have deployed basically half of our fleet on the wide-body side – every passenger airplane the size of a B767 and bigger and representing well over 200 aircraft – to fly cargo-only missions. As things stand, in November we are planning to only have four to five of our largest planes available to undertake such missions, because the others will be flying passenger routes again. Some of these preighters will continue to support the distribution of Covid relief-related supplies all around the world while the others will fly Asia Pacific routes.”
Transatlantic rates pressures
Renfer noted: “From early-November, the transatlantic air transport market is set to be completely open again, the US accepting vaccinated travellers from Europe. Right now, these schedules are at around 65% compared to pre-Covid levels and we see the shortfall in bellyhold space reflected in the elevated rates.
“The key question is what is going happen when that capacity is back 100% – probably even more than 100%, because a lot of carriers are trying to enter the transatlantic market as they have available airplanes which under normal circumstances would be flying in Asia? It’ll be interesting to see how quickly air cargo rate levels drop; and there’s no doubting they will drop as more capacity comes in.”
Renfer continued: “On the other hand, the big challenge remains Asia – be it Asia to Europe, Asia to North America or South America – because commercial airlines are not allowed to fly there as the pandemic-related restrictions remain in place.
“And while all of these pure freighters have entered the market, it’s worth highlighting that there are not enough of them around the world to backfill the missing (cargo) capacity from the commercial airlines flying into Asia, either from Europe or from the US. As long as that is the case – and unfortunately we don’t see any real change in the situation in the foreseeable future – rate levels will stay more or less where they are now.”
Asked what advice he would give to shippers and forwarders as the air cargo market enters the peak Q4 season, he replied: “Whenever you have the chance to get your hands on capacity, no matter what price is offered, go and take it because it will be extremely hard to come by at least for short-term capacity. And I’m talking about offers that will allow you to access that capacity from now until the end of the year, or even until the end of the first quarter next year.”
He highlighted that some carriers are reducing the number of air cargo charter flights they operate due to Covid-related restrictions placed on pilots.
“When pilots return to some Asian countries, they are subject to a (Covid-19) quarantine period of 21 days. This effectively means that a single pilot and first officer will only be to fly one trip per month. So, one can imagine that pretty soon this will lead to a serious shortage of pilots.”
China challenges
Meanwhile, another challenge emerged last week with China implementing power outages throughout the country so that it can reach its sustainability mandate with the reduction of greenhouse gas emissions.
“What we are trying to find out is what the effects are likely to be for heavier industry – those shippers who not only need electricity for light and sorting equipment but also to run complete machines and production lines, turning out a range of different products,” Renfer said. “At the moment, we simply don’t know.”
He added: “One consequence might well be that they will have a little less demand for air cargo capacity in October than planned as a result of their reduced output – which might be made up subsequently and probably create another ‘bottleneck’ in the supply chain towards the end of the year or the beginning of next year.
“And let’s not forget, there is also Chinese New Year (in February 2022), which is another period of peak demand. So, if the impact of the power outages comes on top of that, there will be yet more potential disruption to deal with.
“But again, it’s very hard for us to predict what might happen as it’s a brand new problem.”
Source: Lloyd’s
