Airlines Still Banking on Freight
Airlines are maintaining the focus on air cargo that they gained during the Covid-19 pandemic, according to IATA director general Willie Walsh.
Mr Walsh, speaking in an interview at the IATA World Cargo Symposium, said that it was natural that airline management would focus on passenger operations as carriers continued to roll out networks following the pandemic. However, he added that the focus on cargo that had developed over the last couple of years would continue.
“Airline management teams have a much greater appreciation for cargo, how the cargo industry operates, the value of it, what it meant to the industry and what it meant to airlines in terms of cash generation through that very difficult period in 2020 and 2021.”
He added: “It is not that people aren’t interested in cargo anymore. It is just natural that there is a focus on rebuilding the passenger network, which has a direct relationship as well with the importance of bellyhold as well.”
Mr Walsh pointed out that there had been a spate of combination carrier investment in freighters as airlines realized the importance of all-cargo aircraft for some of the contracts they compete for.
He also pointed out that from a business perspective, it made sense for carriers to diversify revenue streams to offer protection against market disruption – cargo, like a wide geographic spread, has a role to play in this approach.
“You want to have a basket of potential revenue streams, you don’t want to have all your eggs in one basket,” he said.
On IATA’s future focus on cargo, Mr Walsh said that sustainability was top of the agenda with digital transformation and safety and security also of importance.
“In terms of threat to our industry, it is sustainability,” he said.
Mr Walsh said that he had been surprised that there was a greater emphasis on sustainability from cargo customers than on the passenger side of the market.
He said the pick up on offsetting and paying for sustainable fuel was just 1 percent in the passenger market.
“The awareness and the willingness are much higher on the cargo side,” he said. “The industry is very much aligned in terms of all of the players when it comes to the environmental challenge that we face.”
Another challenge facing cargo, as well as the wider aviation industry, is recruitment. He said that airline management was noticing an improvement in numbers applying for roles of late.
Another trend in cargo this year has been declining rates as capacity increased and demand subsided.
Mr Walsh said that this drop-off in pricing is partly related to cargo increasingly being able to share the cost of operating with the passenger side of the business.
He explained that during the pandemic, cargo had to bear the brunt of the fuel, airport and landing fee costs rather than an incremental part of the cost as they were shared with passenger operations.
“The cost associated with transporting a kilo of cargo went up significantly during the pandemic and it looked like the yields showed massive profits, but what it didn’t show was the significant increase in costs,” he said.