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Unusually high air cargo demand shows signs of weakening

STRONG air cargo demand that saved passenger-starved airlines survive the Covid scare is weakening as the world economy is beset with uncertainty fuelled by runaway inflation, according to the Baltic Air Freight Index, Reuters reports.

Cathay Pacific CEO Augustus Tang said cargo load factors were not as high as they had been because more air freight capacity was being added to the market.

"If there is any moderation it would be really small but the trend is still really positive," he said.

A potential weakening of the air freight market coincides with growing concern in the aviation industry that surging passenger traffic, which has reduced airlines' reliance on cargo revenue, may be fleeting.

The Baltic Air Freight Index , which shows weekly transactional rates for general cargo fell 8.7 per cent last week, while the airlines group IATA said that freight revenue generated by carriers this year would fall by 6.4 per cent.

Qatar Airways CEO Akbar Al Bakar warned that inflation was expected to weaken demand for air freight and subsequently put downward pressure on yields.

"There will be a downturn in business and when there is a downturn in business, people don't buy stuff that we normally carry as cargo," he told reporters at an industry meeting in Doha.

Edward Bell, an economist at Dubai lender Emirates NBD, described consumers and corporates as facing a "kind of vortex of price pressures" that they would increasingly be sensitive to over the rest of the year.

Korean Air CEO Walter Cho said freight rates had softened but were far higher than they were before the pandemic, when there was much more capacity.

"Demand is weak especially since China is basically shut down right now. We expect it to come back soon. I expect the cargo market to be sustainable until next year at least."

Credit Agricole's global head of asset finance Jose Abramovici said the sector was likely to remain profitable for several more years given how high air freights are today.

The freight market - both air and ocean - has seen rates skyrocket since the Covid crisis amid huge capacity cuts that have left limited available space compared to cargo being shipped.

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Unusually high air cargo demand shows signs of weakening
Unusually high air cargo demand shows signs of weakening

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