Following the Covid-19 outbreak, we have seen air cargo enjoy a substantial uptick in activity. Despite the collapse in passenger travel globally, many airlines had to shift their operation strategies to remain functional. This involved increasing their ability to offer air cargo services to support global supply chains. However, despite the uptick, air cargo has remained a volatile industry as we move through the first few months of 2022. With so much going on in the world in addition to the pandemic, we can expect to see some interesting trends this year. 

Ukraine and Russia Airspace Closures Expected to Boost Air Cargo Capacity Restrictions

Due to the war between Ukraine and Russia, we have seen airspace closures that are affecting over 30 countries and causing flight times between Europe-Asia and Asia-North America to be increased and air cargo flights are rerouted. Other operators have had to cancel their Asia flights altogether. This is likely to worsen the air cargo capacity restrictions as capacity is taken out of the market. 

Air Freight Rates are Expected to Remain Elevated

Due to aircraft belly-cargo capacity remaining restricted, and the slow introduction of new aircraft into the market, air freight rates continue to be inflated. It is expected that rates will continue to increase in the near term, but surcharges from carriers are likely due to surging fuel prices, network disruptions, and the war in Ukraine. 

Extended Waiting Times for P2F Conversions Could Hamper New Capacity in the Market

Since older passenger-configured widebodies have fallen out of favour recently, now is an attractive time to get passenger to freighter (P2F) conversions at competitive prices. However, despite the demand, extended waiting periods facing P2F conversion programmes have slowed down the entry of new capacity to the market. It is no coincidence that the strongest growth within the freighter industry for over 20 years coincides with the global pandemic. 

Jet Fuel and Crude Oil Prices Continue to Climb

The price of kerosene-type jet fuel and WTI crude oil has peaked at levels last seen back in 2012, reaching highs of USD $3.7 per gallon and USD $119 per barrel as of March 2022. Prices are expected to be pushed even higher by the conflict in Ukraine, especially if more sanctions are applied to the Russian energy sector. We can expect to see these higher oil prices resulting in extra costs of transporting via air cargo, which will be felt by consumers. 

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