Cargo – the last hope?

Freight offers hope

In a world reeling from the catastrophic drop in passenger traffic induced by the COVID-19 pandemic, cargo is offering some consolation to airlines.

Prior to the crisis, about half the world’s airfreight was carried on passenger jets as underbelly cargo. Even on a flight full of passengers with baggage, the cargo hold of a typical jet aircraft would not be full. In the case of a wide-body jet such as an Airbus A330 or Boeing 777, passenger baggage filled a lot less than half of the cavernous cargo holds underneath the passenger cabin, allowing plenty of space that airlines could sell to freight forwarders.

Reliance on passenger flights

Utilizing this space to carry airfreight, especially perishable items, was a lucrative business for passenger airlines. Airfreight companies found this was a cheap and convenient way to ship their cargo without the cost of operating their own aircraft. Other than a handful of companies such as FedEx, UPS, DHL, Amazon and other small-package distributors, all-cargo airlines were a rarity.

Many passenger airlines operate small fleets of dedicated freighter aircraft. The Far Eastern airlines are major players, with Air China having 15 dedicated Boeing freighters of both the Boeing 747 and 777 types, China Southern with 12 Boeing 777Fs and China Airlines (based in Taiwan) with 18 all-cargo 747s. Neighboring industrial power Korean Airlines has 12 Boeing 777F and 11 Boeing 747 freighters – one of the largest fleets in that category. In the Gulf, Qatar Airways with 16 B777Fs and Emirates Skycargo with 11 of the same type are also major players, along with Etihad and its five B777Fs.

Dedicated freight aircraft

For many years the venerable Boeing 747 was the backbone of the freighter industry, with the McDonnell Douglas MD-11 (and its predecessor the DC-10) also quite popular. Interestingly, the 747 was originally designed as a military transport in the 1960s, with the nose flipping up to access the cavernous interior. Lockheed won that  competition with the C-5, which is still in use. Boeing redesigned the 747 as a passenger aircraft but kept the high “upper deck” which went on to be the aircraft’s most distinctive feature.

To replace the 747 freighter, Boeing introduced the 777F (freighter) variant in 2008, with the first delivery going to Air France a year later. Since then the twin-engine Boeing has been the darling of the cargo world.

Capable of carrying an astonishing 102,000 kg of freight, and with unrivaled fuel economy, the 777F is a very capable aircraft and a major seller for Boeing, with over 170 having been delivered. By contrast the rival Airbus A330F, with only a 65,000kg capacity, has sold less than 40 aircraft. Airbus has been developing a freighter version of the A350 to break Boeing’s monopoly, but given the current crisis this will probably die in stillbirth.

At the smaller end of the cargo space, Boeing introduced a program to convert ‘single-aisle’ 737s to freighters by strengthening the floor and adding a large cargo door to the main deck. Known as the Boeing 737BCF, or ‘Boeing Converted Freighter’, this is a popular program for older aircraft. Airbus has introduced a similar conversion program for the Airbus A321 (known as ‘passenger-to-freight’, or ‘P2F’ in industry jargon).

SpiceJet of India is a large operator of the 737F with four already in service and 17 more on order. The airline has been flying these aircraft extensively during the current slowdown, and they have undoubtedly proved to be very profitable.

The empty skies

The COVID-19 pandemic has practically obliterated passenger traffic. On January 22, 2020 there were over 114,000 flights a day worldwide. By April 20 that figure had dropped to below 27,000 per day.

While this has been ruinous for the passenger airlines, it has meant a surge in traffic, and revenues, for the freight operators. Ishka, an aviation finance site, estimates that cargo aircraft are being chartered at rates hitherto unheard of, up to USD 100,000 per hour due to demand.

The cargo market does remain disproportionately buoyant through crises, such as SARS in 2003, but now, the sheer depth of the fall in worldwide passenger flights has been a windfall for cargo operators. There are, however, downsides, such as the fall in demand for luxury perishables such as fresh flowers, premium foods and high fashion; but the rise in transport of medical supplies, in particular, has more than offset this loss.

New opportunities

The number of unused passenger jets and the dearth of cargo capacity has led to some innovation in the field. China Eastern Airlines, which does not have any dedicated freighter aircraft, was one of the first to fly a passenger aircraft without any human customers to transport urgently needed medical supplies to Italy at the height of the pandemic in that country.

Since then this has been a temporary relief valve for many airlines. Flying aircraft with empty seats but bulging cargo holds, normally a recipe for losses, has proven to be reasonably profitable for many carriers. The significant drop in the fuel price has also helped offset costs. Some airlines are placing cargo on passenger seats (see feature image), though this depends on the relevant regulatory authority permitting it.

More cynically, transport of vital medical supplies has been a PR boon for airlines that are crying out for government help to avoid bankruptcy.

At best though, this is a merely a short-term reprieve. In the longer term a worldwide recession which will cut customer spending and demand for goods seems inevitable, a fact that the freight operators are acutely aware of.

6 comments

  1. Rafiq Jan

    Spot on analysis Suren. Some Airlines including Qatar are doing exactly what you said….using passenger 777s as a Freighter. Since many airlines in other continents don’t push their pilots to fly against their will, the GUlf carriers are using coercion tactics (typical for the region) to timely grab this chunk of opportunities that otherwise seemed to be a far cry.

    1. Suren Ratwatte

      Yes – doubt many western airlines are going to layover in China voluntarily these days. Air NZ had some some issues with the testing regimes, which I’m sure you read about.
      But it’s a temporary reprieve. Eventually we have to figure out where this is going to go and who will survive. LH Group is losing one million USD a hour – that’s unsustainable.

  2. Rafiq Jan

    Spot on analysis Suren. Some Airlines including Qatar are doing exactly what you said….using passenger 777s as a Freighter. Since many airlines in other continents don’t push their pilots to fly against their will, the GUlf carriers are using coercion tactics (typical for the region) to timely grab this chunk of opportunities that otherwise seemed to be a far cry.

  3. Peter Bashford

    Good stuff. But the Middle Eastern airlines are also not laying over in China, or indeed in most other places. Very heavy crews are used to fly the longer trips as turnarounds. And even with that, only a fraction of their pilots are working at any one time.

    1. Suren Ratwatte

      Absolutely. it’s just a blip – not enough to do much othee than keep a few aircraft flying and the pilots current. Every airline is still bleeding red ink, but this helps a little bit.

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