Name: Air Cargo's Coronavirus Problem
Uploaded: 2021-06-10T07:18:06.000Z
Duration: 12 min 53 s
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Out of the myriad problems that emerged in the world in Spring 2020, there is one that

is quietly being solved—one that has to do with the behind-the-scenes of a globalized,

At its core, it's a simple supply and demand mismatch.

You see, back in March 2020, when COVID-19 reached pandemic status, almost every airline

in the world drastically scaled back its flying.

It varied from region to region and airline to airline, but the common trend everywhere

was that, if any route got cut, it was almost certainly a long-haul one.

In the era of quarantine periods, border closings, and other travel restrictions, there is near-zero

demand for long-haul, international travel, so intercontinental flights were quickly removed

For example, in April 2019, about 500 roundtrip flights per day would fly between Europe and

the US, however, in April 2020, that number was reduced to about 80 per day.

That represents between an 80% and 90% reduction.

Ignoring airline revenue, you'd think that that would be a loss-free situation, though:

it reduces carbon emissions, many governments are covering the salaries of furloughed workers,

it reduces airline expenditure, and nobody's riding in the cabins anyways, but that doesn't

On nearly every intercontinental flight, in the belly hold, among the hundreds of passenger

In fact, 45% of the world's air cargo is carried in this method.

Now, the math to explain the supply and demand mismatch is simple.

The proportion of cargo carried on passenger aircraft varies from route to route, so 60%

of Western Europe to US air cargo, for example, flies on passenger planes.

80% to 90% of transatlantic passenger flights are not flying, which means that about 50%

of air cargo capacity in this market has disappeared in a matter of weeks.

The situation is less severe in other markets, but, industry-wide, the overall air cargo

capacity reduction was about 23% in March, 2020.

So that's the supply figure, but what about demand?

As a huge proportion of the world entered various lockdown scenarios, economic forecasts

The extent of the financial toll will not be clear for a while, but it is clear that

This all has an effect on air cargo demand.

On a macro level, consumers are buying less, which means less is shipped, which means companies

are buying less, which means less is shipped, which means suppliers are making less, which

On a micro level, different jurisdictions worldwide differ on the exact details of their

Coronavirus response, but in many places, factories are shut down which means supply

So, from an economic perspective, one would predict that demand would almost certainly

be down, but like all things in the age of Coronavirus, there is another dominant perspective—that

From almost the moment COVID-19 emerged, it became clear that it was a highly infectious

virus, which means that a crucial component of the safe treatment of an infected individual

is the use of personal protective equipment, or PPE.

In this context, that means, masks, shields, gowns, and more, which healthcare facilities

always stock, but never in the quantity needed to cover nearly universal staff usage for

That means that, in order to reduce the risk of staff exposure, nearly every hospital in

Purely by chance, it turns out that the number one medical PPE producing country in the world

was also the first country to experience COVID-19—China.

Before the pandemic, the country produced 20 million medical masks per day, or about

By the beginning of March, though, this had already been scaled up to more than 100 million

It was at exactly this time when, simultaneously, China's manufacturing industry started to

inch back to life and the virus truly took hold of the rest of the world.

With how fast COVID-19 ramped up, many hospitals in hotspots like Italy, Spain, and the US

were reusing masks and, even with that technique, were down to only days of supply, so they

needed supply from China, and other manufacturing hubs, as fast as possible.

In the logistics world, “as fast as possible,” means air cargo.

Thanks to this unprecedented and urgent demand for PPE and other medical supplies, demand

for air cargo only dropped by 15% in March, 2020.

Considering air cargo capacity dropped by 23%, that means that there was an 8% gap between

In the context of this enormous industry, 8% is huge, and so the laws of supply and

The cost to transport goods by air spiked, especially in the crucial Asia to US and Europe

In the last two weeks of March, air cargo rates from Hong Kong to North America jumped

27% above normal, while rates from Shanghai to Europe increased by 50%.

Of course, after a supply and demand mismatch economic forces push companies to increase

Cargo airlines that could massively ramped up their flights.

Kalitta Air, for example, an American cargo airline, brought some aircraft out of storage

and increased its long-haul flying by nearly 50%.

However, there is only so much that these cargo airlines can do.

They only have so many aircraft, so many pilots, and so many mechanics so they can't massively

ramp up their operations in a short time.

Who did have extra capacity, though, were passenger airlines, and that's where a small

A plane with no passengers is not necessarily an empty plane.

An average airline earns 15% to 20% of its revenue through cargo, but keep in mind what

Most of the average North American airlines' flying is domestic and short-haul, where little

cargo is carried, so the proportion of revenue coming from cargo on a long-haul flight is

Consider too that, on a normal long-haul passenger flight, a considerable portion of the cargo

hold is filled with baggage so that 15 to 20% is derived from only some of the capacity

Airlines soon realized that there was a possibility of turning a profit flying a passenger plane

Now, normally, a passenger a330, for example, has capacity for 38 thousand pounds or 17

thousand kilograms of cargo in its belly hold.