Demand for freighters is currently “extraordinarily high”, primarily due to the resurgence in production in China as the spread of the coronavirus there stabilises coupled with a dearth of bellycargo capacity following the suspension of airline passenger services on Chinese routes.

The US’ travel ban on European countries is also contributing to the rush to secure maindeck solutions as up to 80% of freight on the transatlantic lane is transported aboard pax aircraft.

However, a leading air charter broker has warned that there is the prospect of the market for all-cargo planes tailing off markedly in the coming weeks as economic activity slows in Europe and US plants shut down amid government measures to contain Covid-19 by confining workers at home.

“At the moment we’re in a peak, with demand for freighter charters on Far East routes going through the roof and keeping us very, very busy,” Air Charter Services’ head of cargo, Dan Morgan-Evans, told Lloyd’s Loading List in an interview.

“While outbound flights from China are the most popular, there’s also a considerable number of flights going the other way as well, from Europe and the US – as well as transatlantic flights because of the US travel ban.”

The charters are mainly carrying supplies such as face masks as well as a broad range ‘need to move’ general cargo.

Freighter availability

“Freighter availability is tight, depending on the routings. There are freighters out there – be they from scheduled airlines, charter specialists or lessors. But prices have gone up dramatically to a point where suppliers can more or less name their price,” Morgan-Evans revealed.

“We’ve seen quotes of over a US$1 million (per flight) for anything that’s trans-Pac, such as China to the US, when the normal rate is around half of that. You can find cheaper options, but a lot of carriers will demand $1 million+ and leave it to customers to decide whether the cargo justifies such a price.

“However, charter transactions are not always plain sailing. Things can change very quickly in what has become a very volatile market. Last week, we had a charter fixed to operate from the Far East to Los Angeles and, moments before it was all signed and sealed, there was a message from the warehouse in LA where the cargo was bound for, saying: ‘Don’t send it. We’ve gone into lockdown’.

“Meanwhile, a very recent, separate development, which could cause us problems with some of our charters is that there is a shortage of pallets to build up cargo, especially in China.”

Morgan-Evans added that availability of freighters was perhaps being skewed as a result of a fair amount of speculative behaviour on the part of customers.

“I've seen a lot of freighters go off the market and then soon after they’re back for hire again,” he noted. “The only explanation is that companies have taken a punt on an aircraft in the hope of being able to sell it in these exceptional circumstances, only to cancel the booking when the freight doesn’t materialise in the end.”

He also highlighted the uncertainty over what constraints are placed on air crews.

“Sometimes they’re not allowed to stay in the country they’re flying to, which means a replacement crew has to be on board for the next flight. And if they are able to rest up, there is the risk of quarantine conditions of up to two weeks being applied. So, airlines need to know their crews are OK flying all of these flights.”

Pax aircraft used for cargo-only flights

Some of the pressure on the availability of freighters could be eased by airlines deciding to use passenger aircraft in cargo-only mode, Morgan-Evans noted.

“A good many carriers are very receptive to the idea, the crew issues already referred to notwithstanding. It is a viable option for brokers too and is something that we’re already offering out. Some carriers have B777s which are cargo-friendly aircraft and can carry 30-40 tonnes even with passengers.

“Certainly for those carriers with no freighter activity and who are burdened with the high costs of having a pax fleet grounded, it’s an opportunity of generating revenue – very likely at premium prices – providing, of course, that the demand is there. But the scale of this –  how many passenger aircraft will be used for cargo-only purposes – is difficult to judge at the moment. Among the potential hurdles is obtaining flight permits, as some states simply don’t want passenger aircraft flying,” he added.

Outlook

As for the outlook for the freighter charter market, Morgan-Evans is braced for a ‘peak to trough’ transition in the next week or so – a pattern likely to be repeated in the short term.

“I would expect demand for flights out of China to be reduced significantly and soon as Europe and the US close up shop (because of the coronavirus) – although those carrying medical supplies such as face masks will probably continue for a time,” he suggested. “Then there’ll probably be another peak as Europe and the US get over the virus and their economies ramp up, as we are now seeing in China.”

In the meantime, and while accepting that the worst-case scenario of no air freight moving at all cannot be ruled out altogether, the fact that passenger aircraft are simply not flying and cargo capacity has been squeezed provides scope for ‘maindeck’ demand to be maintained at buoyant levels, he said.

“With all of this bellycargo space going out of the market – and little prospect of it returning in the foreseeable future – even if demand were to decline dramatically in the coming weeks, there’ll still be enough of it to sustain the market.”

Source:lloydsloadinglist

The opinions expressed herein are the author's and not necessarily those of The OLO News.