The pandemic saw many changes take place around the world as we all adjusted to a ‘new normal’. With people either trapped inside because of lockdowns or scared to go outside for fear of contracting Covid, some drastic and rapid adaptations had to take place in order for us all to collectively pull through. As you might expect from a population trapped inside during the digital age, people began spending a huge amount of time online. As a result, the digitization of various aspects of society (including my uni course) quickly became our reality. I would like to say that everyone took this opportunity to re-evaluate their consumerist lifestyles, started appreciating their surroundings more, and began to live more in the present – and to be honest, many did. However, the majority just turned to online shopping to fill that ever-present need to consume, and cope with the boredom of essentially being under house arrest for the better part of two years. Businesses also increasingly moved online to try and mitigate the massive losses incurred due to the sudden reduction in custom the pandemic brought. As a result, the E-commerce industry suddenly found itself pumped full of the digital equivalent of elephant growth hormones – that is to say, it experienced a rapid increase on a massive scale.
The industry’s share of global commerce shot up from 14% in 2019 to 17% in 2020, and continues to grow at that same speed well into 2021 and 2022, according to a report by the United Nations Conference on Trade and Development. The group’s acting Secretary-General, Isabelle Durant, stated that “Businesses and consumers that were able to ‘go digital’ have helped mitigate the economic downturn caused by the pandemic.” Essentially, consumer capitalism stopped us from all experiencing levels of economic depression worse than in 2008. Small businesses and developing countries have been able to ride this growth train too, utilising the sudden increase in general E-commerce demand to grow their own corporations and economies. Indonesia, for example, has launched a capacity-building programme to expedite digitization among micro, small, and medium enterprises. According to Big Commerce, 67% of consumers shop differently now to how they did pre-Covid, and 20-30% of global business has moved online. This in turn meant that the global cargo industry was suddenly inundated with an influx of demand for products and goods to be shipped around the world. The growth of omnichannel supply (shipping that utilises multiple transportation methods) also meant that supply lines found themselves having to become fluid and adaptable almost overnight. This, of course, led to problems.
Cargo ports became congested, there was (and still is) a major global shipping container shortage, and the international cargo industry struggled to cope. On top of all that, perishable or urgent equipment like vaccines and PPE needed to get from point A to point B ASAP, or lives could be at stake. Supply could no longer keep up with demand, leading to huge delays at the start of the pandemic on your Amazon deliveries. Demand is the driver of growth, however, and international cargo suddenly found itself sitting on a rare opportunity for expansion. One of the players in the industry arguably adapted to the sudden huge demand the best, though, and that was air cargo.
Shipping things by air is usually very expensive, but also very quick – meaning air freight is often reserved for perishables or some of the most expensive items. To give you an idea of this, cargo shipped by air represents 1% of the total freight market volume, but accounts for 35% of its value. That all changed with the pandemic, as corporations increasingly turned to air transport to get around the massive shipping congestion the world found itself suffering from. Keeping customers is worth shelling out a few extra quid, and in a world dictated by ‘have it now’ culture, having to wait another two weeks for a product would most likely result in a loss of repeat customers. “We have used a lot of air freight, which we’re not excited about, but it’s a necessary thing with the challenges we’re all being faced with,” explained David Bergman, Chief Financial Officer for Under Armour. To put things in perspective, USA Trade Online, which tracks cargo flows in and out of the USA, found that in the first 10 months of 2021, 78.9 million kilograms of car parts were sent by air from Asia to the US – a massive increase from the pre-pandemic 3 million.
Adding to this is another major factor drastically impacting the way air freight works. You see, more than half the world’s air cargo is usually shipped in the ‘belly holds’ of commercial jets (essentially, airlines can ship passengers and parts on the same flight to improve efficiency). However, the pandemic put a stop to that, leaving only dedicated freighter aircraft to take over. This, alongside the increase in demand, caused the cost of air freight to skyrocket. As a result, airlines suffering heavy losses from the dramatic decrease in passenger numbers (global demand fell by over 70% between November 2019 and November 2020) looked to the cargo market to try and recuperate some of their losses. This caused manufacturers to start pumping out (and converting) dedicated freighters faster than you can blink. But, while tapping into this demand did ‘soften the blow’ so to speak, it didn’t reverse the heavy losses suffered by the industry during the pandemic. “In no way has freight cargo reversed the damage that has been done to airports and their operations,” states Stephen Harvey, Head of Cargo at EMA. And what’s more, the cargo industry did still suffer as well. European air cargo demand fell by over 13% from 2019 to 2020, with the hub-focused dedicated freighters finding themselves severely restricted in the routes they could actually take to ship items by air. The main takeaway here is that, while cargo did soften the financial losses for many aviation companies, it didn’t prevent a net loss, and aviation in general still took a massive hit. What Covid did do is provide a monumental injection, through increased demand, into the growth of the air freight market.