Turning the tide across TransAtlantic

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The start of this decade has been nothing short of a disaster. Just as countries began to open their borders again after the first wave of the Covid-19 crisis, which throttled capacity in belly-holds of passenger aircraft, the second wave of the pandemic began to show across the globe. Like other trade lanes, record demand across the TransAtlantic has led to capacity shortages and peak rates, which has prompted several air freight players to introduce dedicated flights along this route to service their customers.

The airfreight market has been eagerly looking forward to passenger flights returning to the market for belly cargo to add capacity. But the most recent outlook from the International Air Transport Association on passenger travel is far from optimistic.

“This crisis is longer and deeper than anyone could have expected. Losses will be reduced from 2020, but the pain of the crisis increases. There is optimism in domestic markets where aviation’s hallmark resilience is demonstrated by rebounds in markets without internal travel restrictions. Government imposed travel restrictions, however, continue to dampen the strong underlying demand for international travel,” said Willie Walsh, IATA’s director general.

IATA estimates that travel (measured in revenue passenger kilometers or RPKs) will recover to 43 percent of 2019 levels over the year. While that is a 26 percent improvement on 2020, it is far from a recovery. Domestic markets will improve faster than international travel. Overall passenger numbers are expected to reach 2.4 billion in 2021. That is an improvement on the nearly 1.8 billion who traveled in 2020, but well below the 2019 peak of 4.5 billion.

Capacity remains constrained with the removal significant belly capacity, driving up yields 40 percent in 2020, with a further 5 percent growth expected in 2021. In 2021, cargo will account for a third of industry revenues. This is significantly above cargo’s historic contribution, which ranged around 10-15 percent of total revenues. The improvement in cargo, however, is not able to offset the dramatic decline in passenger revenues.

“We have seen gradually increase of capacity on the Atlantic Route with a peak mid-April being 50 percent above some weeks in March with most of the top airlines adding new capacity as well as new capacity from LGG with CMA-CGM,” observed Matthieu Petot, CEO, CargoAi.

As usual, capacity on North Atlantic routes are very much balanced towards widebody which represent 80 percent of the capacity in April (16 percent for freighters) which is an increase of widebody proportion compared to March (77 percent vs 18 percent), notes Petot.

Capacity on North Atlantic routes are very much balanced towards widebody which represent 80 percent of the capacity in April (16 percent for freighters) which is an increase of widebody proportion compared to March (77 percent vs 18 percent)                                                                                         Matthieu Petot, CEO, CargoAi

On the commercial trans-Atlantic route between Europe and North America, in and out, demand is high, boosted by pharma in particular. “We have seen an improvement in weight M vs MY-1 over the first months of 2021 versus 2020, from -51 percent in April 2020 to -25 percent in February 21. This translates to 26 percentage points more – between Europe and North America. On the inverse route, from North America to Europe, we are getting even closer to our pre-pandemic figures, increasing from -37 percent in April 2020 to -8 percent in February 2021,” shared Adrien Thominet, chief executive officer, ECS Group, which services a number of clients on this all-important route.

The same trend is witnessed in the Europe/Central and South America segment, in and out, with an average increase from -55 percent in April 2020 to -18 percent in February 2021 (Europe to Central and South America and the Caribbean). For Central America and the Caribbean to Europe, Weight M vs MY-1 is better in February 2021 than it was before the pandemic (+13 percent). From South America to Europe, there has also been a significant improvement, from -53 percent in April 2020 to -12 percent in February 2021. “However, the current situation is difficult and it appears that the recovery will be slower due to the slowdown in commercial traffic with, for example, the cessation of flights between multiple European countries and Brazil,” Thominet added.

According to many airlines, air cargo volumes on the transatlantic lane have been fairly strong with airlines flooded with requests for additional capacity. “Over the last three months at American we have gradually been increasing the number of transatlantic flights. As an airline, our goal is to welcome more passengers aboard our wide-bodied aircraft across our global network.  But with the pandemic and its effect across all countries we’ve been carrying cargo in their bellies on many routes,” said Tim Isik, director, cargo sales – EMEA & APAC, American Airlines. By operating cargo only flights, American has effectively facilitated the return of full service i.e. including passengers to markets like Paris (CDG) – Dallas, Rome – Dallas, Milan – Philadelphia, Madrid – Philadelphia and Barcelona – New York (JFK) as just a few examples.

Aside from the Covid-19 vaccines and pharmaceuticals movement, the trans-Atlantic route is witnessing the continuous movement of product verticals that include dense machinery parts and automotive supplies.  Perishables, flowers and fish also continue to be an important part of the market, textiles from southern Europe have also featured prominently.  

“This summer, we will see service return to other transatlantic markets too.  Most notable of these will be our JFK – Tel Aviv service, which is being eagerly awaited by the market.  Cargo’s contribution will help these routes return stronger than ever.  The following month will see another significant milestone when JFK – Athens returns.  Both services will commence operations with a Boeing 777-200 aircraft,” Isik added.

CMA-CGM’s first regular flights between Liège and the United States is a new opportunity for the industry and for trans-Atlantic trade, with significant additional capacity in this segment                                                                                      Adrien Thominet, ECS Group

Delta has also been witnessing solid performance on the Trans-Atlantic trade lane in Q1’21 generating significant revenue during this time period with exceptionally strong performance on its flights exit the Netherlands, France and the UK. The carrier operates scheduled preighters or cargo-only fights to EMEIA where the cargo moves in the belly of our passenger aircraft. “We are steadily increasing capacity in line with demand and market conditions for both pax and cargo. Between March and April, we increased our flight frequencies by 15 percent ex-EMEIA with our daily average frequencies at 19 in April. We expect this to increase as we go further into the year as borders open up and passenger demand increases for trans-Atlantic flying,” informed Robert Walpole, vice president, Delta Cargo.

“Throughout the pandemic, we have seen strong performance in the Europe-US trade lane. Even as different countries within the region went through different waves and several iterations of lockdowns cargo demand has remained strong in several markets,” he added.

In agreement, Guillaume Halleux, chief officer cargo, Qatar Airways Cargo said that business has been really strong for the carrier. Even in the normally softer month of January, there were a lot of requests for additional capacity. “We saw good loads for the Chinese New Year and average yields showed a very positive upward trend. Between January 2021 to March 2021, we transported close to 20,000 tonnes from Europe to US and more than 12,000 tonnes from US to Europe. This is a 6.41 percent increase and 4.43 percent increase respectively, over the same period last year.”

This summer, we will see service return to other transatlantic markets too.  Most notable of these will be our JFK-Tel Aviv service, which is being eagerly awaited by the market.  Cargo’s contribution will help these routes return stronger than ever.  The following month will see another significant milestone when JFK-Athens returns                                                                                                                                                                                                         Tim Isik, American Airlines 

United Cargo also continues to assess the Trans-Atlantic market, as well as global market, from a passenger and cargo perspective to make sure it is utilising the best schedule and aircraft to best serve its customers. 

“The Trans-Atlantic trade lane has been very strong, in both directions, for the past several months and United Cargo will continue to monitor air capacity between the US and Europe. We will continue to support all of our customers shipping needs as we do our part to keep the global supply chain moving,” said a United Airlines spokesperson. 

To overcome capacity shortages and peak demand caused by the pandemic, a number of leading freight forwarders have begun 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.

Dachser USA, when began its dedicated weekly Frankfurt-Chicago-Frankfurt air cargo service in July 2020, in response to an increased demand for air freight transport due to pandemic-related supply chain disruptions announced that it is expanding its air cargo service with the addition of a second flight, scheduled for the weekday to compliment the current weekend schedule. The new route is being operated by American Airlines with B777 / PAX freighters and runs every Wednesday from Frankfurt to Chicago. This additional dedicated air freight option allows for more transit choices as Dachser’s extensive network continues to expand, innovate and deliver for its customers. According to Dachser USA estimates, the number one export from the US to Europe transported via the air freight service is vehicle parts (23 percent). Other high volume exports from US to Europe include data processing devices and electronic optical products (21.5 percent) as well as electrical equipment (18 percent). The leading import to the US from Europe was mechanical engineering products (42 percent) followed by metal products (10.8 percent) and electrical equipment (9.3 percent).

“Many of our customers are shifting some of their shipments to air freight transport because of the uncertainty surrounding ocean transport right now. As volumes increase, our recently launched dedicated Frankfurt-Chicago air freight service continues to attract clients and is now operating at full capacity. In order to serve the growing demand for reliable and predictable service levels, we launched our new weekday service, which is already drawing new customers,” said Andy Frommenwiler, vice president, air freight, Dachser USA.

Between March and April, we increased our flight frequencies by 15 percent ex-EMEIA with our daily average frequencies at 19 in April. We expect this to increase as we go further into the year as borders open up and passenger demand increases for trans-Atlantic flying                                                                           Robert Walpole, Delta Cargo

Similarly, in February this year, CEVA Logistics’ parent company CMA CGM secured freighters and launched its own transAtlantic air cargo service with flights from Liege to Chicago, New York and Atlanta. “There are also other solutions available, including with CMA CGM, which we have represented since March 2021 as the airline’s exclusive worldwide GSA. Its first regular flights between Liège and the United States (Chicago, New York and Atlanta, in and out) began in March. This is a new opportunity for the industry and for trans-Atlantic trade, with significant additional capacity in this segment. By launching its air freight activity on this route, in and out, CMA CGM benefits from the demand and can take advantage of the dynamic nature of the market,” shared ECS Group’s Thominet. 

Meanwhile, DB Schenker had announced a whole slew of freighter connections with two weekly freighters to Chicago and one to Atlanta. Also, GEODIS contracted freighters to operate within its own controlled network (OCN) as part of its global AirDirect service offering.  The 2021 schedule offers routes between Amsterdam Schiphol (AMS) and Chicago O’Hare (ORD) with three full rotations each week.

Eric Martin-Neuville, executive vice president, freight forwarding of GEODIS said in a media statement, “Our customers on both sides of the Atlantic have been suffering from a severe shortage of regular, guaranteed air freight options.  We foresee this situation remaining for some time and so have committed resources to provide stability and assure the continuity of our service through the full year of 2021.”

Furthermore, in addition to its scheduled freighter operations, Qatar Airways Cargo (QR Cargo) added mini freighters or preighters on the Transatlantic route. Eastbound, on a weekly basis, QR Cargo offers more than 2,800 tonnes of cargo capacity (31 flights) from Americas to Europe. While Westbound, more than 2700 tonnes of cargo capacity (30 flights) is available from Europe to Americas. This includes both, Boeing 777 freighters and Boeing 777-300ER mini freighters. “The mini freighters were especially introduced to cater to the need of our customers. We are in constant dialogue with our customers to understand their requirements and where we have to support with extra capacity. Even during the pandemic, we have never lost contact with them. This pre-dominantly would mean deploying passenger freighters from different origins in Europe,” said Halleux.

There are plans to deploy more freighter capacity; we envisage this to happen still towards the end of the second quarter. We are following the market trends closely to assist our customers based in Asia Pacific, Indian subcontinent and Europe to transport their cargo into and out of the USA                                                                                                                                                                  Guillaume Halleux, Qatar Airways Cargo

In April, QR Cargo already introduced additional passenger freighter capacity for individual customers to various destinations in United States and will do so for the month of May as well. “There are also plans to deploy more freighter capacity; we envisage this to happen still towards the end of the second quarter. We are following the market trends closely to assist our customers based in Asia Pacific, Indian subcontinent and Europe to transport their cargo into and out of the USA. In fact our geographic footprint is now larger than pre- Covid,” he shared.

Going forward, capacity will continue to remain very tight. This route is usually a belly-hold dominated market but passenger capacity may not return to the market quickly due to the pandemic. So this trade lane will be dominated by freighter and pax-freighter capacity.  However, all players are confident that demand will continue to remain strong along this trade lane.

“We foresee demand to remain strong in all markets through the summer, with the expectation of gradual reintroduction of belly-hold capacity in the second half of the year,” forecast Halleux.

American’s Isik echoed a similar sentiment. “I am certainly feeling positive about the demand for transatlantic cargo moving forward but we are very much in the hands of the pandemic and the actions of governments opening up their borders.  If there is a delay in opening any borders and if it makes commercial sense then of course we will continue to operate cargo-only flights. We are certainly geared up and ready to go and the transatlantic has a bright future for cargo.”

Delta’s Wadpole also remains optimistic that cargo demand will stay strong on this trade lane as the US opens up from Covid-19 restrictions and strong manufacturing and consumer product flows. 

The unknown, however, is the ever-evolving Covid-19 landscape including the emergence of new variants of the virus, which could lead to regulatory changes that the industry is cautiously monitoring and adjusting to.

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