Air Cargo Trends in a Pandemic World

Dominic Hyde, Vice President Crēdo On Demand at Peli BioThermal, discusses the developing trends in freight that have come about as a result of the COVID-19 pandemic.

Previous predications in pharmaceutical transportation trends, highlighting declining air passenger numbers and increasing air freight demand, have all been propelled by the pandemic. Coronavirus continues to cause worldwide disruption and is anticipated to impact industry throughout 2021 and beyond.

Pandemic response - preighters take off

Pre-pandemic passenger numbers were already on the downturn. However, the crisis has significantly accelerated that trend and the crisis capacity crunch came as the number of passenger flights plummeted. The ensuing scramble to transport pandemic payloads saw the deployment of hundreds of passenger planes as freighters, known as ‘preighters’.

Pioneering Portuguese charter operator Hi Fly led this trend, being the first to convert an A380 for freight by removing the majority of seats to provide more cargo capacity. Despite the sector seeing the grounding of hundreds of passenger planes, earlier than had been initially forecast, which led to a reduction in the availability of cargo space, we’ve seen more planes undergo such conversions.

However, the ongoing drastic downturn in travel means the loss of a lot of capacity in passenger aircraft, and while freighter aircraft are still present and working hard, fleet growth takes time, so there will be a slower response to replacing some of the capacity lost from the passenger side of the industry.

Large widebody aircraft – grounded or retired

Before COVID-19, it was predicted that airlines would cut flights from schedules, mothball larger aircraft, decline production options, and look to utilise smaller, more efficient aircraft – whether for environmental or economic reasons. All those decisions have now been massively accelerated. The forecast to park some of the larger, widebody aircraft has been brought forward significantly due to the COVID-19 crisis, and its ongoing impact has meant the majority of all 747 freighter aircraft have or are being retired. The A380, which Airbus had previously announced it would stop deliveries of in 2021, has also been retired across the board by numerous airlines.

Increasingly, airlines are grounding their A380s in favour of more modern, smaller jets that can fly more efficiently than their four-engine aviation counterparts.

What we will continue to see is a lot more interest in leaner aircraft, such as the A220, the Canadian Bombardier aircraft produced by Airbus in North America.

Sea change in modes of transport

There will be ongoing developments in the sea freight sector too, which has an estimated 17 million TEUs (Twenty-foot Equivalent Unit) serviceable globally, of which six million containers are routinely turning and carrying freight.

Uncertainty in sea and air freight availability saw pharma companies initially ship everything they could, by any mode of transport available, to get it out to the markets. Following months of disruption, passenger airlines began loading aircraft with cargo in the lower decks and loose load cargo on the upper decks.

Whereas I was hoping things might be back to some kind of normality in March, I am now inclined to add another quarter to that. I now think there will be exacerbated sea freight and sea container availability issues throughout the first half of 2021.  

Given the sea freight situation, we will continue to see the utilisation of air freight to transport pandemic payloads. When it comes to economics, without the passengers on the main deck is a much more expensive operational option. However, pharma customers are prepared to pay those premiums.

The volumetric efficiency on aircraft is critical at the moment because it is such a scarce resource. We need to ensure the best use is made of it. With air freight capacity a dwindling resource, it is even more important to have the efficient packing density of temperature-controlled products on such limited air freight resources.

Vaccines vs. virus - rapid response

As the development of successful COVID-19 vaccines continues, approved vaccines are already being administered as part of ongoing mass vaccination programmes worldwide. Temperature-controlled packaging manufacturers continue to play a pivotal part in the global deployment of these, but as COVID-19 vaccines fall into different families of technology, some have frozen and deep-frozen temperature requirements, leading to a scramble to qualify existing solutions for shipping at those specific lower temperatures.

In a rapid response to the logistical cold chain challenges involved, we have adapted our shippers to meet those requirements, as have other providers. There has been an impetus for innovation to support these temperatures in volume. Suppliers stepped up to meet the vaccine temperature challenges by adapting existing shipping solutions. The capacity is there, so I don’t anticipate it will be an issue going forward.

The focus is reverted back to the capacities in the transport modes and – given the nature of these drugs – people are paying whatever it costs to ship them, with rates rising sharply from $2.5 a kilo to $23 – although, that is starting to calm down.

Beyond the current vaccines being approved there will be the need to provide boosters. It is going to create a recurring step up in the volume of vaccines being shipped, alongside the flu vaccines being transported and other pharmaceutical payloads every year.

There will not be a continuous crisis. There will rather be a continuing trend for smaller aircraft with reduced air freight capacities moving pharmaceutical products at temperatures that sea freight cannot do. It really can only fly.

However, there’s not going to be a modal shift from air to sea because sea cannot meet the temperature requirements. You get a displacement, whereby COVID-19 shipments, whether vaccines, test kits and reagents, or some of the therapies which help with recuperation, are flying at almost any cost on a dwindling resource.

The pharmaceuticals, which have more normal temperature shipping requirements, get displaced. In that situation, when the air freight rates get so high, sea freight would normally be seen as a shipping solution.

However, with all of the sea freight challenges, coupled with the fact that their transportation rates have also doubled, there has been some displacement – although not as much as pharma companies would have liked, which is what has kept pushing the prices up in the region of the $23 a kilo figure for air freight we had seen previously in the market.

Sea freight will improve in the first six months of 2021, so some of that displacement can take place more efficiently. Aircraft, however, will still be loaded with COVID-19 related products.

2021 will see the industry learning to operate in ‘the new norm’. Next year, we might start to see some improvements and efficiencies, but I think this year is about adjusting our planning, our capacities and our operations around this spike in demand and the gradually improving capacity picture. Almost like wearing in a new pair of shoes.