Putzger perspective: Air cargo navigates stormy skies

Recent months have been relentlessly tough to navigate for air cargo carriers, as imploding demand has yanked rates and yields out of the stratosphere to levels last seen before the pandemic.

The reverberations are taking a toll on capacity expansion, as operators are having second thoughts on their anticipated need for freighter lift.

One example is Cargojet, which postponed delivery of one Boeing 777 freighter on order for the sake of risk mitigation.

The foreseeable future looks bleak. Purchasing managers’ indices across major manufacturing nations point to weak demand ahead.

Inflation appears to have sapped the ability of consumers to keep spending on goods, denting the growth of e-commerce, which had seemed unstoppable a year ago.

Rates have slumped in most markets, but not as much as pricing on ocean carriers as these are chasing dwindling demand themselves.

In conjunction with easing congestion at ports, this has stopped the windfall from mode shifts that boosted airfreight demand in recent years.

Predictably forwarders have scaled back the use of dedicated freighter flights, but they stressed that this would not be a wholesale retreat.

Many shippers have come to expect this lift and appear willing to pay the price for it. The biggest signals of curbs have come from players that were supposed to be soaring on e-commerce.

FedEx is aiming to save more than $2bn in costs, which includes a cull of altogether 16 planes before September. In the future, management intends to rely on commercial lift to fill in the gaps left by these cuts.

Amazon, which had been growing its freighter fleet and network at a frantic pace, is also in reverse gear. Out of 12 leases for Boeing 767 freighters with Air Transport Services Group that expire this year, the e-commerce behemoth has renewed four.

Three of the remaining eight will be scrapped by the lessor, and it is unclear at this point if Amazon will re-sign the other five.

Players in the e-commerce sector remain upbeat on the outlook for online shopping, predicting sustained growth for years to come. A lot of people in the air cargo sector and investors must be hoping that they are right.

E-commerce has figured prominently in a lot of business plans, not least of all in schemes to develop air cargo capabilities at smaller airports that sense a chance of meeting a need that the congested hubs are ill-suited to accommodate. Putzger