Air Cargo Boom in Supply Chain Crunch Has Car Tires Flying First Class

Date: Tuesday, August 31, 2021
Source: Wall Street Journal

The global air cargo sector is flying planes at almost 90% of capacity as record amounts of goods crisscross the globe, bound for free-spending consumers and parts-hungry manufacturers.

Packed planes pose a challenge for shippers, airlines and airports entering the traditional peak U.S. season for moving goods, when demand increases for consumer electronics, household items and clothing ahead of the holiday-shopping spree.

Pinch points include overflowing airport cargo warehouses, spilling goods into off-site facilities and exacerbating the shortage of staff to sort, load and unload jets. Airlines have responded by expanding cargo flights beyond the biggest gateways to such cities as Columbus, Ohio, and Tampa, Fla., to avoid congestion. Sometimes the cabins of repurposed passenger planes are used for cargo.

“We are at the limit,” said Bernhard Kindelbacher, who heads cargo operations in the U.S. and Canada for Deutsche Lufthansa AG DLAKY -1.80% , one of the world’s largest airfreight carriers.

Charles Goodwin, operations director at the Columbus Regional Airport Authority, said car tires packed between the seats of repurposed passenger jets are among the cargo now being flown that once traveled by sea.

“The entire supply chain seems to be full,” Mr. Goodwin said.

Flying goods by air is the last—and priciest—option for many manufacturers and retailers to move products through a global supply chain already snarled by pandemic-driven closures of Chinese seaports and widespread labor shortages.

Airfreight accounts for less than 1% of global trade by weight but more than 30% by value, according to the International Air Transport Association, a trade group.

The share of global airline industry revenue for freight traffic has doubled to around 30% from pre-pandemic levels, according to IATA. Soaring shipping prices have made freight a profit center for many airlines, offsetting some of the airline industry losses, which the trade group estimates will top $48 billion this year.

“It is cargo demand that is determining where we fly,” Pieter Bootsma, chief revenue officer at Air France-KLM SA, AFLYY -0.84% said at an industry conference in April.

The near shutdown of many airlines in spring 2020 removed most of the 50% of global air cargo capacity that is usually in the bellies of passenger jets. Cargo carriers pulled idled jets from desert storage, and passenger planes were repurposed to carry goods in cabins to help meet demand for personal protective equipment. More than half of the orders for wide-body jets secured by Boeing Co. this year are for cargo aircraft, and both Boeing and rival Airbus SE are exploring new freighter planes.

International passenger flight capacity is still down more than 50% from pre-pandemic levels, according to IATA, leaving dedicated cargo aircraft and repurposed passenger planes to pick up the slack, just as many industrial economies roar back from pandemic-induced slowdowns. Lufthansa’s Mr. Kindelbacher said a recent freighter flight to Chicago carried as many as 30 boxes of human organs and tissue that would have normally been flown in the bellies of passenger planes.

The summer is traditionally a relative lull for air cargo as factories close for staff vacations and maintenance. IATA, however, said cargo jets are flying fuller this summer than at any time since it started keeping records in 1990. The combination of inventory restocking and ocean-cargo logjams boosted the appeal of airfreight, according to the group, even though pricing is 80% above pre-pandemic levels. Limited operations at some Chinese seaports are causing more disruption than the temporary closing of the Suez Canal in March, IATA said.

Auto and machine parts for just-in-time supply chains, consumer electronics, fresh food and flowers and high-end apparel have traditionally filled planes. Now companies seeking to find alternatives to choked ocean shipping lanes are sending cheaper items with increasing scarcity value. Airfreight prices in recent years have run around five times that of ocean shipping; the multiple is currently around 12, according to industry executives.

Korean Air, one of the pioneers of outfitting passenger jets to carry freight, began flying cargo to Rickenbacker last fall partly in response to challenges at other airports, said Eum Jae-dong, head of the airline’s cargo business division.

“We have also experienced some ground-handling delays in the U.S. due to a shortage in ground-handling staff, increased cargo volumes to the U.S., and congestion at local transportation connections,” Mr. Eum said.


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