Even today some flights still have to wait for a place to park at the airport. Yet the backlog is not at the passenger terminal but instead the cargo apron. Cargo aircraft are roaring to life, setting new records for utilization.
China Southern’s freighters are flying 15.5 hours a day, a rate enviable even for passenger aircraft. Freighters at Air China, China Airlines and Korean Air have also surpassed their annual record. Airlines with cargo aircraft have a rare source of revenue and cash flow as passenger flights dwindle and refunds outstrip new bookings. Air cargo sustained some Asian airlines during SARS, and may do so again during this coronavirus downturn.
There is a near halt on intercontinental passenger flights, where in the cabin airlines seek mood lighting and the latest lie-flat seats, but below are scuffed cargo compartments with containers featuring outdated airline logos from decades past.
It is in this unglamorous part of the plane that typically transports at least half of the world’s air cargo. Korean Air carries over 60% of its cargo in the bellies of passenger flights, while for Singapore Airlines it is 75%.
Stopping passenger flights during the coronavirus outbreak has removed this cargo capacity. China alone has lost the equivalent of 50 daily 747 flights.
Mainland China’s Big Three airlines – projected freight aircraft utilization: April 2019 to March 2020
Average aircraft utilization rates for mainland China's Big 3 airlines
The utilization gains airlines are achieving this month add up. The extra 45 minutes of flying for a China Southern freighter theoretically allows the airline another Guangzhou-Frankfurt roundtrip every 2.5 days. With its improvements, Korean Air can fly an extra Seoul-Singapore roundtrip every day. Air China can make 12 Shanghai-Los Angeles returns in a month with its same fleet.
Factory output persists as much of Asia returns to work, and there is new urgent demand to move medical supplies to fight coronavirus. Demand well outstrips this increased freighter utilization, so airlines are even using passenger aircraft as freighters, loading the belly – and sometimes the cabin – with freight but no passengers.
Dedicated freighters have larger capacity and can carry over-sized shipments on their main deck. A Boeing 777 freighter can carry almost four times as much cargo as a passenger variant.
Select Asian airlines – projected freight aircraft utilization: April 2019 to March 2020
Average aircraft utilization rates for select Asian airlines
Of the seven Asian airlines in this study, all but one had a sharp seasonal peak in November, when cargo aircraft are usually at near-maximum output due to new tech products and pre-Christmas consumer demand. Singapore Airlines’ freighters typically average under 10 hours of flying a day, but in November reached over 12.5 hours. The average utilization for a widebody freighter in the last two years was under 11 hours, according to IATA.
Winter and spring are usually quiet for cargo, indicated by the low January utilization rates. February was even weaker than normal as China all but shut down to contain the coronavirus.
Now those November peak utilization rates are being surpassed as four airlines in March push their cargo fleet even more. Air China, China Airlines, China Southern and Korean Air are at record output, and Cathay Pacific almost is.
These projected aircraft utilization figures are based on flight logs over the last year from Flightradar24 and are amended to correct any gaps, but they may show some small under-representation. Data is through March 26 and excludes a handful of aircraft used ad hoc.
Projected peak freight aircraft utilization levels: November 2019 and March 2020
New peak aircraft utilization rates
There can be variation in utilization at airlines with multiple types of freight aircraft. Korean Air’s 777 freighters in March are at about the same output as last November during the peak, but its overall average is pushed by a large increase in 747-400 freighter utilization. The -400Fs are older and less fuel efficient, so they may not have been favoured during the peak. Now demand is high and fuel costs are low.
Korean Air projected utilization by aircraft type: November 2019 and March 2020
Korean Air utilization rate by aircraft type
Not yet reflected in available figures are expected high load factors and yields. Unlike passengers, which typically fly round-trip, freight is highly directional. A 747 can arrive empty into Hong Kong, depart fully loaded and still be profitable. Representative of the sector, Cathay’s cargo load factor was 64% last year versus 82% for the passenger division.
There is more demand for cargo leaving Asia, often valuable tech products that fetch a high yield for transport to North America, Europe and Australia. Demand from those regions into Asia is lower in volume and yield quality, but growing as Asia develops an appetite for more foreign shopping – Amazon, eBay – as well as perishables from lobster in Boston to strawberries in Portland.
Charter prices for a 747 or 777 have increased from $300,000 to $600,000-800,000 Bloomberg said. But much of the world’s cargo is pre-booked by freight forwarders at set rates, limiting yield upside.
North America is the most common freight market. For example, at Air China, China Airlines and Korean Air, North America directly accounts for half or more of their freighters’ flying hours. Indirectly the share is higher when considering the intra-Asia flights carrying cargo for onward transport to/from North America.
Cathay Pacific has 20 747 freighters, excluding aircraft at express shipment carrier Air Hong Kong. China Airlines also has an all-747 cargo fleet with 18 while Singapore Airlines has seven 747s. All-cargo operators like Atlas Air and FedEx in North America have even larger freighter fleets.
Direct freight aircraft flying to, from and within North America for select Asian airlines: March 2020
North America flying
The Trans-Pacific route links the world’s two largest economies. In the same way Gulf airlines have become a connecting option for passengers between Asia and Europe, they are also an intermediary carrier for freight between Asia and Europe, adding competitive pressure for Asian airlines’ dedicated Asia-Europe freight flights.
Asia’s airlines have the most freight aircraft of so-called combination passenger and cargo carriers. (FedEx is purely a cargo operator.) North America’s airlines have no dedicated freight aircraft. A notable exception in Europe is Lufthansa, which has a sizeable cargo business, as do airlines in the Middle East. Not all major Asian airlines have a notable freighter presence. Japan Airlines discontinued freight aircraft while All Nippon Airways has only two long-range freighters, fortuitously acquired in just the last year.
Passenger fleets dominate: Korean Air has 146 passenger planes to its 23 freighters. But freighters at Korean Air and other carriers are a rare source of revenue while the passenger business all but shuts.
Estimating revenue inflow is difficult. Cargo generated about a third as much revenue as the passenger division at Cathay and Korean Air last year. Over half of their cargo by weight was in passenger flights that are temporarily cancelled. But freight on cargo planes is typically higher-yielding than the freight in bellies on passenger jets. Now overall yields are higher.
Passenger and cargo revenue at Cathay Pacific (2019), China Southern (1H2019) and Korean Air (2019)
Passenger and cargo revenue at Cathay Pacific, China Southern and Korean Air
Total revenue composition at Cathay Pacific (2019), China Southern (1H2019) and Korean Air (2019)
Revenue composition
With the downturn of passenger flights, it is easier for cargo operators to secure airport slots, allowing for freight aircraft to be better utilized. But there are also constraints. At operators like Cathay and Singapore Airlines, their only cargo aircraft are 747s. They do not have any passenger 747s, so their pilot pool is limited to existing numbers based around average year-round needs and not a sudden out of season spike. There is greater flexibility for airlines like China Airlines that have passenger and freight variants of the same aircraft. Pilots can usually switch between passenger and freight versions.
Loading and unloading cargo takes time, hence those instances when a pilot tells passengers boarding is complete but they are waiting for freight to finish. Freight loading can be even longer if there are sensitive or hazardous goods. The ad hoc nature of cargo schedules means pilots may need to commute to cities using regular passenger flights. That becomes difficult as commercial flights rapidly decrease.
This cargo rush comes after a weak year for cargo, once again characterized by over-supply and low-yields as well as the U.S.-China trade war. Resumption of passenger flights, even to a partial rebound, will once again add pressure to the cargo sector. That will see airlines reluctant to make medium- to long-term cargo additions. The focus now is maximizing available capacity while looking for short-term opportunities.
A Cathay Pacific Airways Ltd. Boeing Co. 747-8 freighter with an open nose door sits on the tarmac ... [+]
