Putzger perspective: Freighters lose altitude

Since late spring last year, truckers and ocean carriers have been wondering where the bottom of the market is as demand and rates continued to spiral downward.

Now a growing number of players in the freighter market are concluding that it’s time to cut back.

Management of shipping line NYK no longer sees a future in all-cargo aircraft. The Japanese firm is handing over its shares in Nippon Cargo Airlines to All Nippon Airways, having concluded that “in the highly volatile business environment of airfreight transportation, NCA has been facing challenges in expanding its business scale at a level that is commensurate with such costs”.

NYK has a long history with NCA. It has been a shareholder from the early days of the airline and bought out ANA’s stake in the carrier in 2010 to take it over completely.

At the time, management was talking of building an integrated logistics operation – long before Maersk, CMA CGM and MSC established cargo airline arms and bought forwarders.

Are these ocean carriers going to come to the same conclusion as NYK?

Even pure air cargo firms are scaling back. Cargojet has halved the number of B777s it intends to take on from eight to four aircraft, citing the slowing global economy.

At the same time, the supply of freighters joining the global fleet is slowing. Already some aircraft conversion outfits have idled a few conversion lines, and more are expected to follow, especially in the B737-800 segment, which was on a tear until now.

As aircraft valuation and consulting firm IBA recently observed, the days when “everybody and his dog was converting 737-800s” are coming to an end.

Aircraft lessors, who were scrambling to convert their idled passenger planes into freighters after the pandemic stifled travel, are set to rein in their conversion activity.

Lease rates for narrowbody passenger and freighter planes are converging, with the former on the rise, so lessors will look to place their planes with passenger carriers.

Forwarders have dialled back their dedicated freighter lift, but most of them have signalled that this remains a key plank of their business.

As one executive put it, in a cyclical and volatile business like air cargo, there are bound to be times when the associated costs are above rate levels, so it is important to take the long-term view and balance out pricing over time.

Putzger perspective: e-freighters anyone?

Putzger perspective: Full steam ahead for air cargo headwinds