Cloudy skies - anticipated structural changes in global air freight dynamics

As countless companies have shown, if you are quicker than your competitor then you can outrun them. International trade may bring images of colossal cargo ships to mind, but for premium products air freight has been the transport method of choice. Around 35% of the value of intercontinental traded goods is transported by air. For almost a decade the industry has seen growth rates well ahead of world GDP, but all has changed in light of the Covid-19 pandemic.

Turbulent times

Air freight is closely intertwined with passenger air travel. Airliners function as cargo vehicles and compete with dedicated freight aircrafts for heavily competed slots at major airports. Capacity constraints have formed the current landscape of the European air freight industry.

There are three non exclusive outcomes that may come to fruition after the COVID-19 pandemic. First, there will likely be a decrease of freight capacity combined with an erosion of the rich connectivity networks that  airports currently enable. Secondly, there will be a profound effect on the shippers of goods: increased air freight prices are likely to have an impact on lower-value product supply chains, like perishables. And finally, the rebalancing of Tier-1 and Tier-2 airports might be of a more structural nature. 

The attached article discusses these potential outcomes in more detail and evaluates a selection of industry shaping business drivers as it was before the COVID-19 pandemic. The current situation may be temporary, but important structural shifts in the commercial aviation market are bound to occur.

EY-Parthenon has a broad and global experience in the transport and logistics sector. Want to know more? We welcome opportunities to discuss potential impact of the above in more detail, please reach out.