Despite COVID-19 Spread, 'Air Cargo Boom'

Supply Shortage Occurs as Cargo Volume Concentrates on Freighters

On the 4th, disinfection workers from a quarantine company are disinfecting a Korean Air passenger plane bound for New York at the Korean Air aircraft maintenance hangar at Incheon International Airport. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Geum Bo-ryeong] Despite the spread of the novel coronavirus infection (COVID-19), an analysis has emerged that air cargo has experienced a boom.

According to KTB Investment & Securities on the 7th, it was expected that both air passenger and cargo traffic would decline due to the impact of COVID-19, but air cargo freight rates have instead surged sharply. This is because the supply of passenger flights to China decreased, leading to a reduction in cargo supply as well, while demand for air cargo increased.

Lee Han-jun, a researcher at KTB Investment & Securities, explained, "Air cargo freight rates have more than doubled compared to the previous month since the beginning of this month. The routes with the steepest increases are inbound routes from the US to China and Europe to China, and outbound routes from China also turned to an upward trend compared to the previous year in March. Intra-Asia freight rates also rose to about three times the level of the previous month."

First, passenger flights on China routes operated by North American and European airlines have been suspended. Due to the suspension of passenger flights, nearly half of the cargo supply on China routes has disappeared. As cargo volume concentrated on freighters, a supply shortage occurred. It is estimated that passenger flights will be impossible until the end of next month, so freight rates are expected to continue rising for at least two months or more.

Urgent cargo volume has also increased. Manufacturers in Asian regions, who urgently need to import materials from China where factories had stopped, are increasing their use of air transport to meet delivery deadlines as much as possible. A representative example is Southeast Asian countries that import fabric from China to manufacture clothing.

The researcher analyzed, "Airline stocks have all fallen due to concerns over earnings caused by COVID-19. However, the unexpected air cargo boom has created a performance buffer for Korean Air, Asiana Airlines, and others. Shippers and forwarders are unable to secure cargo space, so freight rates are expected to continue rising through the first half of this year," adding, "Due to the strong performance of the cargo sector, the downward revision of consensus for Korean Air may not be as large as expected."

This content was produced with the assistance of AI translation services.