Preighters unlikely to offset rising air cargo demand

By Damian Brett

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The use of passenger aircraft in an all-cargo configuration is unlikely to offset rising air cargo demand for the peak season.

Writing in the Baltic Exchange monthly market summary, Bruce Chan, vice president of global logistics at investment bank Stifel said that issues in ocean shipping, high ocean prices and ongoing air cargo demand were putting capacity under pressure.

Chan said that preighter operations were unlikely to alleviate the situation.

“Some have pointed to the inflow of passenger-to-freight conversions — which have been dubbed preighters — to provide incremental capacity.

“But these are insufficient to meet the demand, in our view, and they address the symptoms of the problem, not the root cause.

“Ultimately, these conversions are temporary, and will only be deployed in the tightest of markets when rates are beyond a certain threshold, only to be pulled back when those rates decline.

“Widebody belly capacity is still in the high-teens to low twenty percent range below where it was in 2019, depending on the lane, in our view — and demand is for the most part much higher now than it was in 2019.”

Widebody passenger capacity is currently estimated to make up around 30% of the total market.

Meanwhile, Accenture’s Seabury Consulting estimates that in June passenger-freighters accounted for around 6 to 7% of total widebody passenger flights.

“An end to passenger freighter flights would have a limited overall impact on current air cargo capacity,” Seabury said.

On peak season expectations, Chan said: “With the seasonal ramp toward the fourth quarter holiday peak in full swing and apparent momentum in spending on consumer goods, retail inventory to sales ratios are still near record lows.

“Anecdotally, one large retailer said that even if it shut down all of its stores and just focused on replenishing inventory backlogs, it would still take months before things were back to normal. So shippers are fighting to play catch up in addition to meeting robust new demand, in our view.”

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