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the final years of mash row out of the
myriad problems that emerged in the
world in spring 2020 there is one that
is quietly being solved one that has to
do with behind the scenes of a
globalized modern-day economy
understanding it is easy at its core
it's a simple supply and demand mismatch
you see back in March 2020 when Cova 19
reached pandemic status almost every
airline in the world drastically scaled
back its flying it varied from region to
region and airline to airline but the
one common trend everywhere was that if
any route got cut it was almost
certainly a long haul one in the era of
quarantine periods border closings and
other travel restrictions there is near
zero demand for long-haul international
travel so intercontinental flights were
quickly removed from airline schedules
for example in April 20 19
500 round-trip flights per day would fly
between Europe and the US however in
April 2020 that number was reduced to
about 80 per day that represents between
an 80 and 90 percent reduction ignoring
airline revenue you'd think that that
would be a loss free situation though it
reduces carbon emissions many
governments are covering the salaries of
furloughed workers it reduces airline
expenditure and nobody's writing in the
cabins anyways but that doesn't consider
what rise below the cabin on nearly
every intercontinental flight in the
belly hold among the hundreds of
passenger bags there is cargo in fact
45% of the world air cargo is carried in
this method now the math to explain the
supply and demand mismatch is simple
the proportion of cargo carried on
passenger aircraft varies from route to
route so 60% of Western Europe to u.s.
air cargo for example flies on passenger
planes 80 to 90 percent of transatlantic
passenger flights are not flying which
means that about 50% of air cargo
capacity
in this market has disappeared in a
matter of weeks the situation is less
severe in other markets but
industry-wide the overall air cargo
capacity reduction was about 23 percent
in March 2020 so that's the supply
figure but what about demand as a huge
proportion of the world entered various
lockdown scenarios economic forecasts
plummeted the extent of the financial
toll will not be clear for a while but
it is clear that it is deeply negative
this all has an effect on air cargo
demand on a macro level consumers are
buying less which means less is shipped
which means companies are buying lasts
which means less is shipped which means
suppliers are making less which means
less is shipped on a micro-level
different jurisdictions worldwide differ
on the exact details of their
coronavirus response but in many places
factories are shut down which means
supply chains are cut so from an
economic perspective one would predict
the demand would almost certainly be
down but like all things in the age of
coronavirus there is another dominant
perspective that of Public Health from
almost the moment kovat 19 emerged it
became clear that it was a highly
infectious virus which means that a
crucial component of the safe treatment
of an infected individual is the use of
personal protective equipment or PPE in
this context that means masks shields
gowns and more which healthcare
facilities always talk but never in the
quantity needed to cover nearly
universal staff usage for a long period
that means that in order to reduce the
risk of staff exposure nearly every
hospital in the world needed more PPE
purely by chance it turns out that the
number one medical PPE producing country
in the world was also the first country
to experience kovin 19 China before the
pandemic the country produced 20 million
medical masks per day or about half of
the world's supply by the beginning of
march though this had already been
scaled up to more than 100 million per
day it was at exactly this time when
simultaneously China's manufacturing
industry started to inch fact
and the virus truly took hold of the
rest of the world with how fast Cova 19
ram top many hospitals in hot spots like
italy spain and the US were reusing
masks and even with that technique we're
down to only days of supply so they
needed supply from China and other
manufacturing hubs as fast as possible
in the logistics world as fast as
possible
means air cargo thanks to this
unprecedented and urgent demand for PPE
and other medical supplies demand for
air cargo only dropped by 15 percent in
March 2020 considering air cargo
capacity dropped by 23 percent that
means that there was an eight percent
gap between supply and demand in the
context of this enormous industry eight
percent is huge and so the laws of
supply and demand followed their course
the cost to transport goods by air
spikes especially in the crucial Asia to
US and Europe markets in the last two
weeks of March air cargo rates from Hong
Kong to North America jumped 27% above
normal while rates from Shanghai to
Europe increased by 50% of course after
a supplying and demand mismatch economic
forces pushed companies to increase
supply which is exactly what happened
cargo airlines that could massively
ramped up their flights Kalitta air for
example an American cargo airline
brought some aircraft out of storage and
increased its long haul flying by nearly
50 percent however there is only so much
that these cargo airlines can do they
only have so many aircraft so many
pilots and so many mechanics so they
can't massively ramp up their operations
in a short time who did have extra
capacity though were passenger airlines
and that's where a small solution
emerged a plane with no passengers is
not necessarily an empty plane an
average airline earns fifteen to twenty
percent of its revenue through cargo but
keep in mind what an average airline
looks like most of the average North
American Airlines is flying is domestic
and short haul where little cargo is
carried so the proportion of revenue
coming from cargo on a long-haul flight
is far higher consider to that on a
normal long-haul passenger flight a
considerable portion of the car
hold is filled with baggage so that 15
to 20 percent is derived from only some
of the capacity on only some flights
airlines soon realized that there was a
possibility of turning a profit
flying a passenger plane with no
passengers now normally a passenger a330
for example has capacity for 38,000
pounds or 17,000 kilograms of cargo in
its belly hold that's compared to the
freighter version of the a330 which can
carry 132 thousand pounds or 60,000
kilograms of Freight thanks to its
completely empty cabin that means that
the passenger a330 can only carry 29
percent as much cargo as its freighter
counterpart however considering that
freight rates have risen by as much as
50 percent that means that flying these
aircraft can earn about 44 percent as
much per flight as their freighter
counterparts normally do making less
than half as much as cargo airlines
clearly would not make flying passenger
aircraft for cargo purposes worth it
where there is more to consider first
jet fuel prices are at an all-time low
largely in response to all-time low
demand the same gallon that would have
cost airlines 2 dollars and 20 cents in
January 2020 costs about 40 cents in
late April 2020 and those prices are
continuing to drop in normal conditions
fuel as Airlines is number one cost so
having that drop by a factor of five
reduces the cost to operate a flight
dramatically that means that they need
to earn far less than what a cargo
airline does in normal conditions to
break-even in addition most airlines are
paying their pilots and staff anyways in
the US for example airlines are required
as a condition of their government
relief funding to not lay off or
furlough and staff so the marginal
staffing cost operates an additional
flight is minimal thirdly with no
passengers airlines have quickly
innovated new ways to carry cargo many
airlines have loaded their passenger
cabins with cargo placed directly on top
of and fastened to seeds this
dramatically increases complexity and
loading time but it also dramatically
increases capacity all of these
conditions and circumstances combined to
the point that for this brief moment in
time economics dictate the airline can
profit flying a passenger plane without
passengers big airlines like American
Airlines Air Canada Lufthansa and Air
New Zealand began cargo only flights so
many in fact the United Airlines for
example had up to dozens of passenger
list passenger planes airborne at the
same time all around the world this also
created flights that have never happened
before like a 16 hour non-stop cargo
only trip from sydney to toronto by air
canada but it wasn't all just big
airlines on long flights smaller
airlines to got an on the king air
greenland started a link on a tiny
propeller - aid to transport coronavirus
tests for processing in a Danish lab
Titan Airways flew medical supplies to
the remote island of st. Helena on a
passenger a318 and whizzed air flew
their passenger a321s to Shanghai by a
Kazakhstan to transport medical supplies
to Hungary these circumstances have also
led to a dramatic reshuffling of a rank
and order in the aviation world the list
of the world's busiest airports in terms
of annual aircraft movements is normally
headed by Atlanta followed by Chicago
Los Angeles Dallas Beijing and a number
of other major hub airports normally you
wouldn't expect an airport from
America's third least populous state
anywhere on the first pages of that list
however for a brief moment in April 2020
that was the case Anchorage Airport in
Alaska became the world's busiest
airport thanks to its strategic location
it has long been a busy cargo airport as
it acts as a stopover point for cargo
flights from Asia to North America they
stopped here because it is more
efficient for aircraft on long-haul
flights to take less fuel and more cargo
and refuel halfway through than fly
non-stop to their destination also in
some cases Freight is sorted and
exchanged between aircraft and Anchorage
in April 20 2008 number one in the world
for new and total coronavirus cases so
it had a tremendous need for medical
supplies which are overwhelmingly
produced in Asia so hundreds of cargo
aircraft per day passed through
Anchorage on their way between Asia and
the US so while every other major
airport in the u.s. fell into relative
silence Anchorage was busier than
there is however one final issue that
the air cargo world is facing beyond the
short-term issue of too much demand the
long-term issue is that this demand will
not last global air cargo demand closely
tracks with global economic health every
indicator suggests that the economy will
not emerge from the co19 pandemic even
close to as strong as when it's entered
so there will undoubtedly be some slow
months and years for air cargo when it's
urgent demand for medical supplies eases
and buyers have the time to switch to
slower forms of shipping the air cargo
world will almost certainly follow the
fate of its passenger carrying
colleagues on the exact same day as if
this video goes out we released a brand
new hour-long documentary called the
final years of Metro it's about the
isolated nation of the Marshall Islands
and specifically what life is like when
you know your nation is coming to an end
when where you live as an expiration
date this project is available
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