Luis Ramos
Expert Contributor

Cargo Industry during COVID-19: Are There New Opportunities?

By Luis Ramos | Thu, 06/18/2020 - 09:30

In January, our cargo industry was in the process of recovering from the economic tensions between the US and China. With the disruptions caused by COVID-19, cargo markets linked to Asia-North America and Asia-Europe saw a further negative impact. These markets together account for more than 40 percent of international segment-based traffic.

In Mexico, 21 percent of the total transported cargo is moved in the bellies of Mexican commercial airlines. Today, commercial operations have been reduced by at least 90 percent because carriers grounded most of their fleets as per government recommendations surrounding the pandemic. The remaining capacity has been taken over by the Mexican and international cargo airlines, and this huge reduction in cargo capacity has affected the distribution of important products such as food, medicines, medical equipment and personal protective equipment (PPE). The recovery forecast is unknown, but some airlines are planning to gradually increase flights during the following months.

Figure 1. Market Share all Operators (AFAC)
Figure 1. Market Sahe all Operators (AFAC)

Almost all the aviation currently overflying Mexican airspace are cargo airlines, which reflects the importance of the air cargo industry. Furthermore, international cargo has decreased about 40 percent: before the pandemic hit, it is estimated that approximately 2,121 tons were moved every day. Today, over 61 percent of the world’s aviation fleet is grounded. IATA has said that the income reduction versus 2019 will be over 55 percent. As far as the Mexican aviation industry is concerned, it has been estimated that the economic losses will be around MX$5.29 billion with the risk of losing over 117,000 jobs.

The COVID-19 pandemic has impacted significantly the main domestic cargo routes. The aviation industry continues to plead for government help in the form of concessions, subsidies and tax deferral programs. The government’s answer is expected this month.

Figure 2. Top 10 Routes O-D transported Nationally on Scheduled Services
Figure 2. Top 10 Routes O-D transported Nationally on Scheduled Services

In Mexico, 47 percent of total cargo is operated by Mexican cargo airlines and commercial airlines, with the other 53 percent managed by Asian, US, European and Central and South American airlines.

Figure 3. Market Share National Operators (AFAC)
Figure 3. Market Share National Operators (AFAC)

If our cargo figures are compared with other countries, we notice room for improvement. Mexico is part of the 10 big emerging market economies with high potential for continuous air cargo growth. Aviation analysts expect an air cargo recovery to 2019 levels for national flights within a year and for international markets, at least 18 months. However, we hope the recovery will happen faster.

With the main objective of supporting our society, Aerocharter, in partnership with Vivaerobus, has offered the government up to 10 A-320pax aircraft with a max payload capacity up to 17 tons. Both companies designed a process for the A-320 whereby cargo can be loaded in the passenger cabin and in the lower deck compartments, thus increasing the loading capacity. At the moment, we’re performing charters to transport medical equipment and all sorts of cargo. We hope to provide enough assistance to reach the required amount of medical cargo need for distribution within the country.

Aerocharter is positioned as a Mexican premium provider of aviation services that offers a one-stop shop service in support of cargo and commercial airlines. Our low-cost business model has allowed us to cope with the pandemic since we have a wide diversification of business lines, which are ground handling, ramp handling, online preventive maintenance, warehousing, fulfilment, and domestic/international cargo sales (GSA). We provide a wide array of services to important cargo airlines such as Atlas, DHL, Estafeta, UPS, China Southern, Polar Air, Volga Deneper, Aerounion, LATAM, and Masair amongst others.

Our business structure has allowed our company to continue operations amid the global pandemic. We launched a dedicated business line focused on moving PPE nationwide in Mexico. The world is changing, and we must adapt quickly and change traditional ways of doing business. It is clear that no one was prepared for a situation such as the one we are living in. Therefore, our cargo industry needs to evolve as well. Customers are requiring more visibility on the location of their cargo by way of technological platforms, which will provide more transparency and accuracy to shipments.

The opportunity today is that we all now recognize the value of the logistics sector and we have incited a revaluation of how much the Mexican economy relies on air cargo to keep the country moving. The Mexican cargo industry has been underdeveloped for many years but after COVID-19, many new markets may open. We can also say that the need for cargo infrastructure at the airports is evident, which will open up areas of opportunities for companies and entrepreneurs willing to invest.

Meanwhile, we must support and keep cargo flowing and our airports operating. For the future stability of the aviation sector, it is clear that the way of doing business has changed. For example, e-commerce growth during these months of pandemic has been impressive. The economic impact from the crisis will require companies to review markets, processes, IT infrastructure and even home office efficiencies to prepare for a slow recovery of the world economy.

Photo by:   Luis Ramos