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Coronavirus Chipped Away at February’s Declining Air Cargo Demand

As the negative impacts of the COVID-19 crisis on air cargo demand were becoming visible in February, global air freight demand decreased 1.4 percent compared to the same time last year, according to new data from the International Air Transport Association (IATA).

Adjusting for the impact of the Lunar New Year, which occurred in February in 2019 but mostly in January this year, and the extra day of activity for Leap Year in 2020, seasonally adjusted demand was down 9.1 percent month-on-month in February.

During February, manufacturing production in China, one of the world’s largest air cargo markets, plunged precipitously in response to widespread factory closures and travel restrictions. Global export orders fell to historically low levels, as evidenced by the global Purchasing Managers Index falling into negative territory, with all major trading nations reporting falling orders.

Significant cargo capacity was also lost as a result of airlines reducing passenger operations in response to government travel restrictions due to COVID-19, severely impacting global supply chains.

“The spread of COVID-19 intensified over the month of February and with it, the impact on air cargo,” Alexandre de Juniac, IATA’s director general and CEO, said. “What has unfolded since is a story of two halves. The disruption of global supply chains led to a fall in demand, but the dramatic disruption in passenger traffic resulted in even deeper cuts to cargo capacity, and the industry is struggling to serve remaining demand with the limited capacity available.”

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February offered a first glimpse of this, De Juniac said, noting that among all the uncertainty in this crisis it has become clear that “air cargo is vital.”

“It is delivering lifesaving drugs and medical equipment, and it is supporting global supply chains,” he said. “That’s why it is critical for governments to remove any blockers as the industry does all it can to keep the global air cargo network functioning in the crisis and ready for the recovery.”

Airlines in Europe suffered a sizeable decline in year-on-year growth in air cargo volumes in February, while North American and Asia-Pacific carriers experienced more moderate falls. Middle East, Latin America and Africa were the only regions to record growth in air freight demand compared to February 2019.

Asia-Pacific airlines saw demand for air cargo contract 2.2 percent in February compared to the year-earlier period, while seasonally adjusted cargo demand fell 15.5 percent from January to levels last seen in early 2014. The drop in demand was largely due to the coronavirus impact.

North American airlines saw demand decrease 1.8 percent in February compared to the same time a year earlier. Cargo traffic on the Asia-North America trade lanes fell 2.4 percent year-on-year as a result of factory closures in Asia due to COVID-19.

European airlines posted a 4.1 percent decrease in cargo demand in February from a year earlier. European carriers were among the first to cancel flights to and from Asia, contributing to February’s drop in demand.

Middle Eastern airlines’ cargo demand increased 4.3 percent in the month from the year-ago period.

“However, given the Middle East’s position connecting trade between China and the rest of the world, the region’s carriers have significant exposure to the impact of COVID-19 in the period ahead,” IATA said.

Latin American airlines saw an increase of 1.8 percent in freight demand in February, with the region relatively unaffected by the coronavirus outbreak in February. However, disrupted global supply chains and a fragile economic backdrop in some countries in the region continue to create headwinds for air cargo, IATA noted.

African carriers posted the fastest growth of any region for the 12th consecutive month in February, with a gain in demand of 6.2 percent compared to a year earlier.

IATA also published a new analysis showing that airlines could burn through $61 billion of their cash reserves during the second quarter ending June 30, while posting a quarterly net loss of $39 billion.

The analysis is based on the scenario that severe travel restrictions last for three months. In this case, full-year demand falls 38 percent and full-year passenger revenues drop $252 billion compared to 2019. The fall in demand would be the deepest in the second quarter, with a 71 percent drop.

Revenues are expected to fall by 68 percent, which is less than the expected 71 percent fall in demand due to the continuation of cargo operations, although at reduced levels of activity.

“Travel and tourism is essentially shut down in an extraordinary and unprecedented situation,” de Juniac said. “Airlines need working capital to sustain their businesses through the extreme volatility. Canada, Colombia and the Netherlands are giving a major boost to the sector’s stability by enabling airlines to offer vouchers in place of cash refunds. This is a vital time buffer so that the sector can continue to function. In turn, that will help preserve the sector’s ability to deliver the cargo shipments that are vital today and the long-term connectivity that travelers and economies will depend on in the recovery phase.”