North American and international airlines are offering their planes for cargo-only service in the midst of a coronavirus pandemic that has wiped out the vast majority of international traffic, leaving companies with limited options for moving high-value and critical goods.
Only using the lower cargo hold wouldn't make financial sense in normal times, but favorable cost parameters and airfreight rates that are skyrocketing because of freighter scarcity means the product could be an attractive option on certain mid-range routes, experts say.
"Something's got to give if this is going to go on for a period of time," said Brandon Fried, executive director of the Airforwarders Association. "There simply are not going to be enough freighters to take on that 50 or 60% of the trans-Atlantic [trade] volume" that normally flies below passengers' feet.
Following last week's U.S. restrictions on travel from 26 European countries plus the United Kingdom and Ireland, airlines pulled down most trans-Atlantic flight operations rather than fly nearly empty aircraft.
Delta Air Lines (NYSE: DAL), for example, is only flying five flights per day to European cities compared to 91 on a normal day and American Airlines (NASDAQ: AAL) only has one daily flight from Dallas, and one from Miami, to London.
Domestic carriers are shifting some widebody planes to major domestic routes where narrow-body flights can be consolidated and fewer passengers booked on a larger plane. Otherwise, airlines are parking large sections of their fleets.
One way to utilize those idle aircraft is to turn them into freighters.
Delta Cargo said Monday it launched a cargo-charter product at the request of logistics companies that manage freight transportation on behalf of producers and retailers. Companies are looking to alleviate the capacity crunch at all-cargo airlines, which are booked up moving pent-up exports from China as factories there finally reach full production levels after several weeks of strict quarantines.
Delta, which doesn't operate any freighters (it got rid of 14 large 747s in 2009 that came along with the Northwest Airlines' merger), said it will offer cargo charters to and from 13 major hubs and international gateways and more than 70 international destinations.
Delta spokeswoman Debbie Eggerton said that all fleet types, including the small Boeing 717 regional jet, are available for the program, although whether any company would seek a partial aircraft for domestic moves is an open question when a truck can deliver a load within one to three days.
"Our international widebody aircraft are proving most popular for charter opportunities since we launched the program because of their payload and range capability," she said by email. "We are seeing strong interest especially in our B777-200/300 variants and our [Airbus] A350-900 aircraft. The A350-900 plane is a state-of-the-art carbon fiber-bodied aircraft and owing to its light weight and huge cargo belly is able to uplift more than 50 tons."
The 777-300s have 14 available pallet positions and the 777-200 extended range jets have 10 positions. Industry experts say the Airbus A330-300, with 10 pallet positions in a passenger configuration, is also a good aircraft for the all-cargo mission.
Neel Jones Shah, the former chief cargo officer at Delta who now heads the airfreight operation for digital-savvy forwarder Flexport, said circumstances have rapidly changed to the point that smart passenger airlines can successfully operate cargo charters on trans-Atlantic and intra-Asia lanes.
The airlines have leased, or owned, aircraft that are sitting without earning money and they must pay pilots a minimum number of hours, whether they fly or not. With U.S. (and global) jet fuel prices at an incredible low – down 56% since Jan. 3 to $.89 cents per gallon, according to energy information provider Argus Media – and airfreight commanding top dollar, switching to cargo charters becomes a viable option.
"You have close to a perfect opportunity for airlines to justify flying some of their more capable widebody planes as mini-freighters," Jones Shah told FreightWaves.
Trans-Atlantic rates have soared to $7 to $10 per kilo, depending on the origin and destination – five times their level two weeks ago. And the elevated rates are similar going both eastbound and westbound, indicating traffic is heavy in both directions.
The justification for passenger-to-cargo charters in the trans-Pacific market is weaker, Jones Shah added, because the length of haul (at least 13 hours in the air) is nearly double that in the Atlantic. "Those additional block hours are very expensive, not to mention that for the trip back to Asia the rates have dropped considerably from where they were three or four weeks ago."
Rates have to be high enough for passenger airlines because they're only using about a third of the airplane's nominal capacity to generate cargo revenue, independent cargo analyst Jesse Cohen said.
Some airlines may even be satisfied with breaking even on cargo flights just to keep their equipment from being idle too long and to cover overhead and other fixed costs, he said.
Delta is the only passenger carrier to publicly announce a cargo transformation, but several others are focusing on the cargo market too.
"We will begin operating cargo-only charters this weekend and are working with a variety of capacity options for our customers," American Airlines said in a statement provided to FreightWaves.
Air Canada is selling passenger planes as full cargo charters, Tim Strauss, vice president of cargo, confirmed.
El Al has begun offering its Boeing 787-800/900 passenger jets to cargo customers to and from Tel Aviv, Gal Amit, the cargo division's commercial and customer service manager, confirmed by email. The 787-900 can carry 11 air containers and the 787-800 has room for nine containerized units.
Norwegian Air is also approaching forwarders with cargo charter opportunities, according to Shawn Richard, vice president of global airfreight at SEKO Logistics. "We are looking at all opportunities at the moment, including cargo, but we don't have any full details yet," Norwegian spokesman Anders Lindström said.
In a statement about how it is grounding most of its fleet, Australian carrier Qantas said it is using some domestic passenger aircraft for freight-only flights to replace lost capacity from regular scheduled services.
Cathay Pacific is also repurposing its passenger aircraft for cargo, Fred Ruggerio, vice president of cargo for North America, confirmed.
Scoot, the low-cost subsidiary of Singapore Airlines, will be operating freight charters for Singapore Airlines Cargo on the Singapore-Guangzhou and Singapore-Nanjing routes using 787-900 aircraft, a media representative at the company said in an email.
Pilots will have access to masks and gloves. Ground crew handling the aircraft and pilots performing external aircraft checks will be in full protective gear, and the aircraft will be fogged with disinfectant upon arrival in Singapore, the note said.
Jones Shah said Hong Kong Airlines and United Airlines (NASDAQ: UAL) are also making passenger aircraft available to freight forwarders. United Airlines did not respond to multiple requests for confirmation. HKA officials could not be reached.
The Asian passenger carriers that are offering freight charters are only doing so within Asia, where the average distance flow is only three to six hours, Jones Shah explained. Intra-Asia rates have also skyrocketed and are now well north of $3 per kilo, "which makes some of this flying very, very attractive, even using passenger airplanes," he said.
"I don't think it's a huge deal for these airlines to operate these planes as cargo charters," the Flexport executive vice president said. "They're all in the cargo business. Operating this as a cargo-only charter isn't going too far out of the norm of what they do."
Airlines can easily draft some new terms and conditions, possibly to take pre-payment for flights, and get the flights off the ground quickly, he added.
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