CARM: What all importers need to know about CARM

Universal Logistics - Take The Right Route Logo with 70 Years Badge

Route Article

Demand for international airfreight continues

     Airplane and Globe

The demand for international air transport has been steadily increasing since last summer and is showing no signs of slowing down.  February air shipment volumes increased 9% compared to the same month in 2019, according to the International Air Transport Association (IATA).  

Demand for air transport is so strong that it has returned to elevated levels last seen before the U.S.-China trade war broke out in 2018.  Cargo demand is being pulled up by the V-shaped recovery of the global economy and industrial production, roaring e-commerce sales as people spend on goods rather than services, conversion from ocean shipping where transport delays of several weeks are common, and low inventory-to-sales ratios that can mean stock-outs if companies don’t use air for replenishment.

The only thing dampening growth is a lack of capacity related to the severe pullback in international passenger flights.  That’s a problem for air cargo shippers because more than half of available transport comes in the lower deck of passenger planes, especially large jets that crisscross oceans.  Many cargo owners are experiencing wait times of seven to ten days from the time of booking to acceptance by a carrier because of the shortage of aircraft.  The 15% shortfall in cargo capacity from two years ago is directly related to the stunted condition of passenger airlines, resulting in airlines removing half the global fleet from service at the height of the pandemic.

As the fleets return to service, airlines are opting for narrowbody aircraft versus widebody aircraft because of travel constraints.  With fewer widebody aircraft available in the near future, cargo capacity for international trade will be compromised.  Widebodies have maintained a consistent fleet share of close to 20% over the past decade, but that level is expected to drop in the coming years, which is a concern in terms of moving airfreight.  The supply imbalance is also happening despite a 30% increase in freighter capacity.  There simply aren’t enough all-cargo aircraft to make up for thousands of lost passenger flights.

Airlines are placing great hope in the busy summer travel season to help restore cash flow, but the level of bookings will depend on the progress of vaccinations and border re-openings.  Bookings are robust in the U.S., but very weak in Europe.  Industry officials say global standards are needed for digital COVID test and vaccination certificates, as well as governments agreeing to accept certificates digitally.

There are indications some U.S. airlines might be getting more aggressive about adding back international capacity, anticipating a return to foreign travel with the proliferation of vaccines.  However, if precedents hold, the advance schedules will likely be reduced the closer they get to departure dates, given how airlines have been managing close-in capacity for the past 12 months. Matching capacity to uncertain demand during COVID is very challenging, but U.S. airlines are getting better at anticipating COVID-19 conditions.

The U.S. domestic airline industry is also moving toward recovery from the pandemic faster than previously estimated according to analysts and executives.  Consumer eagerness to travel has some carriers predicting they will soon break even from an operating standpoint and some market analysts saying consensus growth projections are too conservative.  It is expected robust leisure travel will pull U.S. operations of domestic airlines back to pre-COVID levels by early 2022, months ahead of predictions made last fall.

While there are positive signs on the horizon, the concern is that corporate and international travel levels are still more than 80% below normal, airlines report, and are not expected to bounce back until at least 2023. 

Globally, the airline industry lost $118.5 billion in 2020, with revenues down 40% to $328 billion.  IATA projects that core operations won’t become cash-positive for the sector until next year because of new waves of infection in some parts of the world and government travel restrictions. 

For more information, contact David Lychek, Manager – Ocean & Air Services.

Quick Tip #58
Be prepared for customs penalties and fines under AMPS

Never assume that the absence of an audit means you will never be audited.  Penalties under AMPS (Administrative Monetary Penalty System) can be applied at the border at time of import (or export) and also post audit.

Switch to a Logistics
Partner Who Cares

Click the button below to find out why we’ve been Canada’s most trusted freight forwarder and customs broker for over 75 years.

Professional business people team meeting and working in corporate office concept

Register now to learn more about our

101 Logistics Quick Tips

Available exclusively from Universal Logistics