Whilst the COVID-19 pandemic has had a devastating impact on much of the aviation industry, the cargo business has been somewhat of a lifeline. According to a recent McKinsey article, before the pandemic cargo typically represented around 12% of the sector's total revenue, but that percentage tripled in 2020.
During the pandemic e-commerce sales have soared, consolidating on an already growing shift towards online shopping and away from the high street. Since customers want their packages quickly, retailers need to ship by the fastest mode possible and customers are increasingly willing to pay a premium for quick delivery.
Airlines are now seeing the revenue potential of e-commerce shipping. With their daily scheduled services, airlines are uniquely positioned to meet demand for fast delivery and e-commerce packages, which typically weigh 1-10 kilos, are a good fit for an airline's domestic fleet.
Of course, one current obstacle to capitalising of the e-commerce opportunity is that many passenger flights (and therefore much belly capacity) are still grounded. As the world returns to normal, more and more commercial flights will start operating again and belly supply will increase. However, it is thought that the return to pre-pandemic levels of commercial flights will take several years. Consequently, there is an opportunity for airlines to capitalise on the short- to medium-term requirements for air cargo services. One way for airlines to boost their flexibility would be the use of "phreighters" i.e. passenger aircraft that are used to transport cargo. Airlines could also look at freighter conversions. However, the key will be for airlines to grow cargo in an agile way that allows for quick adjustments to meet changing market conditions and demands.
Many operators are already taking steps to ensure they can take advantage of the increasing demand for air cargo. DHL has launched a brand campaign highlighting its expertise in the segment, whilst Lufthansa Cargo has stated that it plans to operate two Airbus A321 aircraft permanently converted into freighters. Boeing also expects a 60% increase in the world freighter fleet over the net 20 years and has announced a firm order for twelve 737-800 Boeing Converted Freighters from BBAM Aircraft Leasing & Management.