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A gray Cathay Pacific 747 cargo plane takes off with white United Airlines place parked in the background.

Airlines continued to rehabilitate cargo business in September, but the air travel recovery from the coronavirus pandemic is stalling, the industry’s leading trade group said Wednesday. The backslide in passenger growth due to the disease’s resurgence will reduce aircraft capacity for companies with goods to ship.

The air cargo sector has retained 92% of its business while almost 90% of passenger demand has evaporated because of travel fears and government restrictions. Further improvement in cargo volumes could be capped by the shortage in passenger airlift, despite carriers deploying more dedicated cargo aircraft. A number of airlines have recently announced capacity reductions for the end of the year.

“We have hit a wall in the industry’s recovery,” Alexandre de Juniac, the International Air Transport Association’s director general, said Wednesday.

IATA reported that international passenger traffic in September was only 11% of its 2019 amount and that capacity fell 79%, with only 38% of each flight filled. Demand was flat after improving during July and August when the pandemic subsided and more people resumed travel, albeit mostly short-distance trips. Overall, passenger demand fell 72.8% on a yearly basis, a marginal improvement from August. 

International flights are particularly important for air cargo customers because airlines usually deploy large, widebody planes that can carry large amounts of people, baggage and containers on long-haul routes.

Domestic traffic improved in September, shrinking 43.3% on a yearly basis compared to a 50.7% decline in August. But domestic traffic represents slightly more than a third of total traffic, and the gains were heavily influenced by improvements in China and Russia. 

Last week IATA provided data showing airlines can’t cut fixed costs fast enough to overcome the loss in passenger demand and urged governments to use testing instead of blunt instruments such as quarantines to contain the virus. It estimates airlines will deplete cash reserves by almost $130 billion this year. 

Global air cargo demand was 8% below the September 2019 level, but that was an improvement from the 12% yearly contraction in August, according to IATA. Volume has steadily improved each month since contracting 28% year-over-year in April following factory lockdowns in China and other countries. Cargo ton kilometers — the benchmark that combines distance transported and weight — grew 3.7% month-over-month, the fastest increase since May.

North American airlines enjoyed a robust September, with international volumes up 1.5% — the first growth in 10 months. Overall, North American carriers carried 8.6% more cargo thanks to a spike in e-commerce shipments and exports from Asia. Most other regions, except Africa, continued to be in negative volume territory versus last year.

Meanwhile, cargo capacity was a quarter less than a year ago, despite a 20% increase in freighter volume, leaving a gap in available space on board aircraft that is three times more than the amount of goods being shipped by air. However, the situation is better than the 42% shortage of cargo space at the height of the crisis.

The capacity situation is likely to worsen in the coming weeks as airlines idle more aircraft to minimize the cost of flying with low passenger load factors as nations ramp up travel restrictions again to contain new waves of COVID-19.

Some all-cargo carriers have reintroduced planes that were in storage, but the bulk of new capacity has come from passenger airlines designating aircraft for dedicated cargo operations. IATA estimates there are 2,500 passenger aircraft adapted to carry in-cabin cargo. The number of cargo-only aircraft in service could be even higher because some airlines don’t want to deal with the extra time and manpower requirements associated with in-cabin hand transfers.  

Strong freight bookings and technology companies chartering full freighters for new product releases during the peak holiday shipping season are expected to support further air cargo recovery in the fourth quarter.

Leading economic indicators also point to favorable conditions for airfreight, with trade and exports of industrial products, along with business confidence, on the rise.

There is uncertainty, however, about how the coronavirus comeback will affect air cargo. A renewed need for medical supplies could lead to more air shipments. But, renewed lockdowns and restaurant closures across Europe to stop the spread of coronavirus could slow economic activity, increase unemployment and dampen confidence, economists say.

Click here for more American Shipper/FreightWaves stories by Eric Kulisch.

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