CNN: Airlines are trading passengers for packages. That hasn't made shipping any cheaper
Airlines are trading passengers for packages. That hasn't made shipping any cheaper
By Jackie Wattles
Jun. 18th, 2020
New York -- Slightly less than half of the world's passenger aircraft are grounded and sitting in storage, and that's a big problem for businesses that need to ship goods. Even as some areas of the world loosen Covid-19 related travel restrictions, and airlines slowly ramp up passenger services, airlines such as United and Delta are still flying dozens of planes each week with goods stuffed into overhead bins, while all of the seats sit empty.
While much of the world's air cargo is hauled around by freighter jets operated by companies like UPS and Amazon, about half of air shipments are typically transported by passenger planes that tuck shipments into aircraft bellies alongside suitcases. So the sharp reduction in passenger plane flights has made the process of moving goods from A to B amid the pandemic expensive and extremely complex. And the problem isn't likely to go away anytime soon.
No new normal
During lockdown, passenger airlines started operating cargo-only routes to help ease supply chain bottlenecks. And, with lingering uncertainty around when passenger travel will resume in any meaningful way, some airlines are still growing that area of their business.
United has operated more than 2,700 cargo-only flights using its passenger jets since mid-March, a spokesperson said Wednesday, and in June the company added routes in Europe and South America.
Delta is operating daily cargo-only flights between the United States and Asia. And the airline recently began flying new passenger routes from the United States to Germany and the United Kingdom — not because there was sufficient demand from travelers — but primarily because of demand for shuttling packages between those countries.
The US Federal Aviation Administration began working with airlines in April to provide guidance on all-cargo flights of passenger aircraft, something the agency called an "extraordinary situation." Major US carriers are permitted to stow goods in overhead bins and supply closets, as well as in the cargo hold. And the FAA suggests that at least one crew member ride in the cabin to monitor for fires because passenger jets don't have the same fire detection systems as freighter jets.
Some US carriers may even begin flying passenger jets with cargo strapped into passenger seats or, possibly, on planes that have the seats stripped out to make room for more cargo. The FAA has not yet approved such a plan, but a few foreign carriers, like Lufthansa and Air Canada, have already taken that step.
Though some air travel is picking back up, it's not clear when — or if — passenger flights will return to pre-Covid levels. And health experts are predicting that a second wave of Covid-19, which could be worse than the first, is on the horizon.
What's a freight forwarder?
Airlines aren't grappling with the cargo problem on their own. The little-known industry of freight forwarding has been on the frontlines of this issue.
Forwarders broker deals among suppliers, manufacturers and the companies, such as airlines, that move products around. They negotiate prices and handle all the logistics — from trucking an order to the airport to finding a plane with enough spare room to accommodate the package. Forwarders are also responsible for vetting their clients, and they work closely with governments to ensure packages are screened and don't get hung up at customs checkpoints, said Gordon Branov, the CEO of Pilot Freight Services.
In normal times, keeping the air cargo system running smoothly revolved in large part around the relationships that air forwarders built with their clients, air carriers, and regulators. But in March, as the United States and other countries moved into lockdown, that system changed instantly and dramatically.
Forwarders no longer had as many clients booking shipments of manufacturing equipment and other business supplies. The focus shifted almost entirely to shuttling medical gear, especially masks and other personal protective equipment (PPE), around the world.
Pilot Freight Services had to plan out new shipping routes and forge relationships with major PPE manufacturers, which are primarily located in Southeast Asia, Branov said.
"We had to pull all that together in real time," Branov added.
Meanwhile, Pilot and other forwarders also had to keep up with normal shipments of fresh foods, medications and a surge in e-commerce orders. As consumers became newly confined to their homes, online orders spiked for certain bulky items such as gym equipment, trampolines, and backyard grills, Branov said. All of that came at the same time that thousands of passenger jets were taken out of the skies and dedicated cargo jets began flying at maximum capacity. Branov said Pilot and other freight forwarders are taking things on a day-to-day basis, unsure if a new normal will arrive. As of mid-June, the process of shuttling PPE was becoming more routine, he said, as dire shortages were met. And demand for shipments of auto parts and other goods to serve newly reopened businesses have picked back up, he said.
The one financial brightspot
Despite the logistical headaches, the business of flying packages from place to place is expected to be the sole bright spot for the financially devastated airline industry. Though the industry's cargo-carrying capacity is down, the price of shipping goods by air has shot up, according to the International Air Transport Association. So, even though about 10 million fewer tonnes of cargo will move through the skies this year, the cargo sector is still expected to generate more revenue than last year, the IATA reported. That means freight-only carriers and air forwarders could make it through the pandemic without much damage to their bottom lines.
Branov, the Pilot Freight Services CEO, said that rings true for his business: "We're going to exceed last year's numbers, and I'm pretty excited about that."
The outlook for passenger airlines, however, remains bleak. Operating cargo-only flights may bring in some badly needed revenue — but it's not expected to make up more than a tiny fraction of the money airlines are losing from the nosedive in passenger travel. The overall airline industry, according to the IATA, is expected to post losses topping $84 billion for 2020.