Cargo revenue this year predicted to soar past 2019 levels

Avatar for Brian DunnBy Brian Dunn | July 23, 2021

Estimated reading time 8 minutes, 51 seconds.

Recent forecasts predict cargo revenue globally will reach $150 billion in 2021, up 50 per cent from 2019. Given the decline of passenger revenue due to the pandemic, cargo revenue will account for a third of airline revenue this year, over twice its historic normal levels. 

“With the global rise of e-commerce stock and product distribution, continued growth of technology industries and their global supply chains and, of course, the importance of the pharmaceutical industry, it is no surprise that many across aviation are turning their attention to the opportunities presented by the air cargo sector,” said David Stroud, director of U.K.-based ASM. He made the remarks during an online presentation called TakeOff Cargo.

One of the most significant challenges of the industry is the issue of capacity, according to Glyn Hughes, director general of TIACA (The International Air Cargo Association). With 80 percent of aircraft grounded during the pandemic, it reduced cargo capacity by about 50 percent, which is normally carried in the cargo holds of passenger aircraft — particularly on international routes. 

With 80 percent of aircraft grounded during the pandemic, it reduced cargo capacity by about 50 percent, which is normally carried in the cargo holds of passenger aircraft. Galen Burrows Photo

And since the International Air Transport Association (IATA) has predicted passenger travel will not return to normal levels until 2024, this will continue to present challenges to the cargo industry in terms of capacity. During the height of the pandemic, cargo — particularly personal protective equipment — was often transported on seats of passenger aircraft or where seats were removed. And earlier this year, vaccines were often transported in a similar fashion.

Cargo capacity was further challenged with the growth of online shopping, which increased 27.6 percent globally between 2020-21, representing $4.28 trillion. At the same time, global capacity is down 12 percent from 2019, while demand is up eight percent. In North America, capacity is only down 1.3 percent, but demand is up 31.9 percent, according to IATA.

In short, the cargo industry faces a bumpy road ahead with the growth of e-commerce, slow return of passenger aircraft, slowing global connectivity, and rising cost of oil.

“The industry is moving many more special cargos which fall into the category of sensitive handling requirements. And therefore, the industry needs to work much closer together to make sure cargo is moved in 100 percent safe supply chains as much as possible,” said Hughes.

In a session entitled “Becoming a Sustainable Cargo Partner Through Innovation,” Edmonton International Airport (YEG), the online event’s major sponsor, laid out its commitment to sustainability. 

For example, it was the world’s first and only airport partner to The Climate Pledge (founded by Amazon), noted Mammen Tharakan, director of e-commerce, cargo, and real estate at YEG. It is committing to be carbon neutral by 2040, 10 years ahead of the Paris Accord. 

Another initiative was to leverage YEG’s land holdings of over 7,000 acres to bring online the world’s largest solar farm at an airport of about 627 acres, a partnership with German developer Alpin Sun. The project involves 340,000 panels which will generate 120 watts of clean electricity. 

“From an air cargo perspective, we are already in discussion with some of our cargo facilities to be powered from this solar farm to reduce their overall cargo footprint,” noted Tharakan.

The airport also signed an agreement with Air Canada to reduce the carbon impact of air travel and cargo movements, working together to test emerging green technologies on YEG’s sustainability campus that can be scaled at other airports around the world.

Biofuel production from plants such as hemp is being considered at YEG, since it sequesters six times more carbon from the atmosphere than any other crop. “These crops can be potential biojet fuel stock, and we know that sustainable aviation fuels are being actively explored by airlines.”

Edmonton is currently embarking on its largest cargo infrastructure upgrade, a $100 million expansion that includes new aprons, new warehouses, cold storage, and fueling upgrades; its leadership in sustainability has been incorporated in the project design, such as carbon capture cement and using energy renewable resources to power the facility and other carbon reduction strategies.

“Aviation has always been about ultimately connecting the global community for good. . . . Some of the collaboration to date has been between shippers and forwarders and the carriers, but the opportunity exists for airports to be that innovative partner in the responsible movement of freight,” Tharakan concluded.

In terms of how Covid-19 has impacted the domestic cargo sector, Vancouver International Airport (YVR) claims cargo-only departures now currently represent 20 percent of all departures, up from four percent pre-Covid. 

“So the focus is how can we grow that business in the future, how can we improve infrastructure, and how can we work with local economic development partners to increase the volume of eligible air cargo commodities?” said Jason Tse, manager of commercial leasing-cargo, Vancouver Airport Authority. 

The quality of data on the cargo side is not as good as on the passenger side, so YVR uses a lot of Stats Canada data because it’s good for international trade. But the data is highly imperfect, so Tse talks to stakeholders and shippers, particularly on the perishables side, since 70 percent of what YVR exports outside the integrators is perishables. 

How does YVR stay competitive in terms of facilities infrastructure? “It’s more challenging on the cargo side than on the passenger side to justify infrastructure expenditures, because the return on investment will be inferior. But we look at it not just as a financial return to the airport, but also at the financial benefit to our stakeholders like the airlines, as well as providing jobs to the local community.”

Because YVR expansion is limited by mountains, ocean, and U.S. border, it is looking for improved efficiencies from its existing assets and is planning to present a land use proposal to the federal government this fall.

Because of Covid, air cargo has become more top of mind, and airports are likely going to spend more money to attract new business.

“It’s an exciting time to be in cargo with the jump in e-commerce, aerial drones, and potentially driverless trucks. We’re also looking at an opportunity where manufacturing could potentially be repatriated to North America. And from a Canadian perspective, we also look at the opportunity from the 51 free trade agreements that Canada has, either individually or through regional trade agreements.”

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