Hope in the European skies for flying cargo

While Europe was preparing on how to deal with the Brexit effect, unprecedented Covid-19 stalled the global economy. Meanwhile, key developments like Turkish Cargo preparing for a direct service to Munich from May 7 and Hainan Airways planning to fly twice-weekly pax-cargo flights from Haikou, China to Paris signalled the revival of the air freight industry post-Brexit and pandemic.

After a nightmarish 2020, the International Air Transport Association (IATA) in its February 2021 data on global air cargo markets revealed that the European carriers posted a 4.7 percent increase in demand compared to the same month in 2019. Even with the new lockdowns in place, cargo demand stayed largely unaffected in Europe and the operating conditions remained supportive for air cargo. However, international capacity decreased by 12.5 percent during this month.

While Turkish Cargo is preparing for a direct service to Munich from May 7 and Hainan Airways is planning to fly twice-weekly pax-cargo flights from Haikou, China to Paris – these signals the revival of the air freight industry post-Brexit and pandemic.

During the pandemic, Liege Airport saw a 24 percent increase in the tonnage passing through the airport compared to 2019, going from 902,480 to 1,120,643 tonnes by December 2020. The airport handled large quantities of medical equipment to fight against the pandemic which made the UN choose it as one of the hubs for the World Food Programme. As the crisis affected the consumption patterns, it also carried over 500 million ecommerce packages, compared to just over 320 million in 2019.

We are looking forward to the opening of the Alibaba Cainiao warehouse, which is nearing completion. Steven Verhasselt, Liege Airport

Commenting on its Q1 2021 performance, Steven Verhasselt, vice president commercial at Liege Airport, says, “In Q1, Liege Airport handled 330,000 tonnes of cargo with inbound (53 percent) and outbound (47 percent), which arrived and departed on freighters. The belly cargo has now reduced to zero, and we are not including rail or road in our statistics, although they are a major asset to Liege Airport and the Liege Airport Cargo Community.”

The 2020 cargo capacity of the Air France-KLM Group has been down 30.7 percent, primarily driven by the reduction in belly capacity of passenger aircraft, partly offset by the increase of the full freighters’ capacity and mini cargo flights. The group benefited from a full freighter fleet of six aircraft and a passenger long-haul fleet well suited for the cargo activity i.e. B777, B787 and A350. The airline expects the volumes of Covid-19 vaccines to gradually increase in 2021 and is ready to transport them worldwide.

“In Q1 2021, AFKLMP Cargo transported largely over 200 thousand tonnes worldwide, 10 percent more than in the same quarter last year,” Marloes van Laake, vice president Europe at Air France KLM Martinair Cargo.

In its 26-year history, Lufthansa Cargo achieved the best result last year. Revenue rose by 11 percent to 2.76 billion euros. A total of 6.5 billion freight tonnes kilometres were sold and the average load factor improved by 7.8 percentage points to 69.1 percent, while cargo capacity shrank by 36 percent. However, the airline moved around 103,000 tonnes in Europe in the first quarter of 2021.

Apart from the strong demand for medical supplies, demand for general cargo and perishables is strong like for ecommerce related products. The automotive production is back on pre-Covid levels, especially in China and North America. Other industry related products such as oil & gas, aerospace as well as textiles tend to be stable or in slightly lower demand than traditionally in this period.

Predicting about the upcoming quarters as the second wave of the pandemic is on the rise, van Laake says, “We expect demand for cargo to remain strong in the coming months given the current capacity situation, albeit possibly at slightly lower levels during traditional summer slowdown period. Commercial passenger travel bringing increased (cargo belly) capacity seems to move to the latter part of the year. Pressure will remain on cargo-only flights, also driven by the constrained situation on the side of ocean logistics.”

Currently, Lufthansa Cargo is carrying machinery and special cargo such as aircraft engines and cars back on its planes, after yearlong transportation of medical supplies.

Commercial passenger travel bringing increased belly capacity seems to move to the latter part of the year. Marloes van Laake, Air France KLM Martinair Cargo

Thomas Egenolf, vice president Western Europe at Lufthansa Cargo, notes, “We expect the airfreight demand in Europe to recover and at the same time look forward to a quick restart of the belly capacity. A stronger network of passenger flights operated by the Lufthansa Group also is significant in terms of additional loading capacities.”

Liege has witnessed an increase in the total number of cargo flights by 10.7 percent, i.e. 34,264 flights in 2020 compared to 30,934 in 2019. However, the increase in tonnage entailed an increase in the number of jumbo jets. The segment witnessing strong growth apart from pharma is ecommerce at Liege. Since the China cargo trains have been restored, the airfreight and rail freight have both been very strong.

Verhasselt states, “Perishables suffered from lack of capacity in 2020 but have come back strongly since the airfreight capacity has been normalised. We also see an uptake in automotive and electronics. Project cargo and live animal transport are not back at pre-Covid levels yet, but we do see a comeback in this segment as well. The outlook for 2021 is positive. We are very happy to announce long-term hub contract extensions with two of our long term partners very soon. The demand remains strong and the capacity has been restored. We are adding capacity in the first-line (additional warehouse and cargo bypass systems) and second-line on the airport. And we are looking forward to the opening of the Alibaba Cainiao warehouse. Construction is nearing completion. The target of being operational in Q3 will be met and add to the outlook of the second half of the year for LGG.”

The surge in online purchases has led Lenton Group, a subsidiary of France-based DPD, to ink a pact with Hainan Airways. The one year-agreement will cover round-trip flights between Haikou, China to Paris, utilising 72 tonnes on a B787 Dreamliner. Before the pandemic, Lenton’s cargo was flown on passenger aircraft but with the reduction in air travel, orders for Chinese products to Europe have to be shipped on dedicated cargo flights.

On the other hand, CMA CGM AIR CARGO which began commercial operations from Liege to Chicago, New York and Atlanta using its A330-200F adds more privilege for the Belgian airport.

Verhasselt observes, “We are very happy with the startup operations of CMA CGM, operated by Air Belgium. The development of this operation is still in the early stage. From the start (March 8), 2 A330 freighters are adding capacity between LGG and Chicago, 4x per week. In the next phase, more freighters will be added, and more transatlantic capacity will be provided adding JFK and ATL to the network. ECS Group is commercialising the operation, and they will be happy to discuss any commodity that needs airfreight capacity between LGG and the US.”

While Europe was preparing on how to deal with the Brexit effect, unprecedented Covid-19 stalled the global economy. Speaking on the Brexit consequences, Verhasselt, explains, “The impact of the Brexit is still difficult to assess. From a pure airfreight point of view, Brexit has increased the number of flights between the UK and Liege. The sustainability and longevity of these additional flights are not certain. They have been put in place to solve the logistics issues with trucking and at the ports. The LGG Cargo Community would much prefer to see the problems solved, the rules set straight, and develop a long term strategy to keep serving the UK.”

The airfreight market has recovered in March in Europe after a long period of capacity shortage. For the single countries, the picture looks heterogeneous with Belgium being a quite stable market throughout the crisis, and bigger markets like Italy being below the previous year for a longer time. While the Brexit effect on customs and security procedures are coinciding with the Covid-19 restrictions, it is difficult to differentiate the effects.

Due to Covid-19 restrictions, only one driver is allowed on a truck and testing is required which further complicates our feeding from and to the UK via truck. Thomas Egenolf, Lufthansa Cargo

Egenolf mentions, “On the customs side, we need to issue additional documents and populate additional databases with entries and the customs checks at the borders take longer as they are more detailed than before. Above all, cargo from the UK requires additional security screening in mainland Europe with further prolongs the total transportation time. Due to Covid-19 restrictions, only one driver is allowed on a truck and testing is required which further complicates our feeding from and to the UK via truck. Therefore, our belly network is reduced to and from the UK like it is all across Europe which results in lower capacities.”

Agreeing to Egenolf ‘s statements, van Laake says, “Our teams have been working on this topic already for a long time and made sure that the right processes have been put in place promptly to deal with the changes in customs situation. At this stage, business is more or less business as usual, even though some specific situations still need to be further worked out by authorities.”

On April 9, Bolloré Logistics chartered its 100th weekly freight cargo flight between Liege and West Africa; one year after the air bridge was put in place to compensate for the restrictions on transport resulting from the Covid-19 health crisis.

Verhasselt concludes, “We are very proud of this operation, which has now operated more than 100 charters out of Liege into the markets where it is most needed. 100 flights over about one year are 2 flights per week, bringing more than 3,500 tonnes of much-needed cargo capacity to West Africa.”

For the air cargo industry, 2021 has taken off strongly. The cargo volumes are not only a lot stronger than in 2020, but they are also back to pre-Covid levels in Europe. The belly-hold capacity is nowhere near where it used to be. The capacity has been replaced by increased use of freighters, re-introduction of parked freighters and the introduction of preighters.