Sign up here for GlobalData’s free bi-weekly Covid-19 report on the latest information your industry needs to know.
The Covid-19 pandemic, macroeconomics and environmentalism were at the front of the first webinar set up by Amsterdam Schiphol’s airport cargo hub and Air Cargo Netherlands.
The webinar attracted some of the main stakeholders, both from within the air cargo industry and the broader economic world, Dutch and international. The topics discussed in the hour-long seminar were many but here are our four takeaways.
The current Covid-19 pandemic has shaken the global economy, having an impact on both a macro and a microeconomic scale and affecting some industries, including aviation, more than others.
Due to the lockdown measures implemented in China in the early months of this year, the economic crisis started with a supply shock and a disruption to the supply chain.
As the epidemic turned into a pandemic, forcing European countries to go into lockdown, the supply shock turned into a demand shock. Speaking on the webinar ING senior economist Rico Luman said the global economy registered a contraction of -4.3% while the Eurozone and US were the most affected, with a contraction between -7% and -8%.
The travel industry, where turnover contracted by 55%, has received a massive blow which in turn hit the commercial aviation sector hard while the situation for the air freight sector was mixed.
According to Luman, the pandemic’s impact on first-necessity products, including medical and tech products, has been weak but other industries, such as flowers or fashion, were more affected.
Luman also noted a correlation between world trade, which has endured a -9% contraction due to the pandemic, and air freight. “Airfreight goods flow in a more cyclical way so when we’re looking at the future, we can expect a quite early recovery,” Luman added.
300 members from the Holland International Distribution Council (HIDC), whose aim is to attract cargo flows and logistics operation to the Netherlands, have painted a mixed picture on the future of air cargo.
According to HIDC managing director Remco Buurman, members – which include basic infrastructures like airports, logistic service suppliers and professional service suppliers – have had very different experiences, depending on the sector.
Some industries such as life science, agro-food or e-commerce have done really well during the pandemic, while others including flowers and fashion have done very poorly.
“Some of them mentioned they had the best months ever,” Buurman said.
Members also noticed a shift from the traditional carrier to full freight carriers, due to the cancellation of passengers flight caused by the worldwide lockdown measures, and believe that full freight carriers will take some of the market shares from belly freight.
Overall there was an increased positive attitude towards air cargo, with HIDC members hoping to get more air freight slots at Schiphol in the future.
According to Bucks Consultant international senior consultant Arjen Donkersloot, the Dutch Government’s Civil Aviation Policy memorandum, to be implemented in 2021, will have a significant impact on air cargo.
The document, still in the draft phase, sets out a real doctrinal shift in the way the Dutch Government looks at the aviation industry, including the air freight sector.
Donkersloot, explained the shift stems from public interest in sustainable transformation and environmental change in the whole aviation industry.
The document states that unchecked growth is no longer possible and introduces conditions for aviation to grow in harmony with the public interest, which, in the case of air freight, means changes in the licences to operate for air freight.
According to Donkersloot, out of the four factors that will determine the air freight sector’s licences to operate – safety, economic relevance, environment and sustainability – the economy and sustainability will have the biggest impact.
On the economic side, the government is working to introduce a priority-based policy to distribute air freight slots depending on the value for the Dutch economy. The air freight sector, said the consultant, will then need to lobby for exemptions, in order to make sure that there are enough slots for everyone.
On the sustainability side, air freight will need to be proactive in order to meet the conditions for sustainable growth. Actions include joining sustainable operations across Europe and give an assessment of sustainability targets from an air freight perspective.
“If the sector starts these initiatives by itself, it could tell the government that it wants to take the lead and foster initiatives towards a more sustainable air freight sector, without the need for specific taxes,” added Donkersloot.
Despite the sector’s resilience, the coronavirus pandemic has and will affect the industry in unique ways. Aviation researcher at Rotterdam’s Erasmus University Floris de Haan has studied the four phases of the pandemic, trying to predict how they have and will impact air cargo.
The Covid-19 pandemic has led to a global economic crisis, with the economy reaching a standstill in Europe around March. As travel restrictions were implemented by countries to stop the virus from spreading, the demand for air cargo was significantly reduced.
Immediately after, given the necessity to send pharmaceutical products and PPE, the demand for air cargo exceeded capacity.
Then despite ample capacity at airports, the rates for sending cargo quintupled. “Sending cargo from the US’s East Coast cost $10 per kilogramme, as compared to $2,” de Haan said.
During the phase, in which the world was in a temporary lockdown, the sector still observed an exceeding of capacity over demand, given the restrictions imposed on workers and social distancing measures.
The third phase, which some countries are entering this month, shows how there is a direct connection between passenger demand and air cargo, as passenger demand will affect belly capacity available for cargo.
In the last phase, where we will see the end of restriction and a new market equilibrium, de Haan prospects two opposite situations, which will result in different futures for air cargo.
If passenger demand goes up, there will be less need for full freighter aircrafts, as the sector’s demand will be satisfied by belly capacity. If passenger demand remains on lockdown level, the industry will favour full freighters.
“There is a lot of unknowns and this is maybe not what you wanted to hear from me but no one has a crystal ball,” de Haan concluded.