The Airline Strategy Awards held in London yesterday, on September 27, provided me with the good fortune to spend quality time with colleagues in the industry as we recognized outstanding leaders in air cargo leadership. Nominees were reviewed against key criteria, including network strategy, business performance, and innovative thinking during the pandemic crisis. We were so excited to sponsor the first-ever cargo award and even happier to present it to Ethiopian Airlines Cargo.
As I reflected on the past couple of years since we last met in the fall of 2019, it occurred to me that so much has changed in the industry—particularly in our air cargo space. The pandemic truly changed the world we live in, both from a societal to a business industry standpoint. We have been impressed with how adaptive airlines have been during this crisis while facing their biggest headwinds, possibly ever.
In 2020 alone, the global airline industry had to stave off a loss of $391 billion in revenue. To recapture some of that revenue loss, passenger airlines across the world had to come up with alternative strategies to make up for very low passenger volume. Many turned to implement an incremental air cargo strategy on passenger flights (both on wide-body and narrow-body planes) as a source of supplemental revenue.
Inspirational Vaccine Distribution through Air Cargo
Once there were approved vaccines beginning December 2020 for COVID-19, many in our industry stepped up quickly to aid those worldwide by distributing critical vaccines. Air cargo space was available due to lower passenger levels on passenger planes, and airlines used that vital space to get vaccines to needed locations. However, because of the nature of the vaccines (temperature-sensitive, etc.), it was a logistical feat to get these vaccines where they needed to be.
According to a study from DHL and McKinsey, at least 10 billion doses are needed worldwide (conservatively)—which would require 15,000 flights. The winner of today’s award for air cargo, Ethiopian Airlines, played an instrumental role in the distribution of vaccines in Africa. In addition, SPICEJET of India, Azul Brazilian Airlines, and many, many others are playing critical roles in transporting vaccine consignments in their regions. We attribute much success of increased vaccination distribution to the innovative solutions in logistics provided by the airline and air cargo industries.
Global Demand for Air Cargo is Approaching Double-Digit Growth
Overall, the growth trends for air cargo are improving rapidly. According to IATA, global demand increased 9.4% between May 2019 and May 2021 as measured in cargo tonne kilometers (CTKs). This incredible growth is approaching double-digits this year relative to pre-pandemic levels, and we are excited about the prospects for airlines around the world as they explore new ways to capture revenue through air cargo.
Air Cargo Solutions for E-Commerce
While the pandemic has wrought seemingly endless havoc to society in the past two years, there is one very bright spot as it pertains to the air cargo space. In addition to vaccine distribution, we are also seeing passenger and cargo airlines enhance their revenue through e-commerce parcel delivery.
E-Commerce sales are expected to grow globally at a CAGR of 6.4%, from an estimated $5 trillion in 2021 to a projected $6.4 trillion in 2024. The explosive expansion of global e-commerce presents a markedly optimistic opportunity for the air cargo industry. Airlines can now optimize unused belly space in their existing wide-body or narrow-body planes to ship these smaller e-commerce parcels—typically between 2-4 kilograms in weight.
The CAGR forecast from 2021-2025 globally is a 6.29% growth rate, promising news for airlines looking to embrace the e-commerce cargo shipping phenomena. As more and more global nations adopt e-commerce shopping habits, we expect these international e-commerce growth rates to be a substantial upcoming opportunity in cargo air transport in the coming years.
Using our estimates based on existing client outcomes, we anticipate that, should flight resume to their pre-pandemic levels by 2022, and, assuming fifty percent of their fleet is comprised of narrow-body planes, there is a global opportunity of up to $649.3 billion in potential e-commerce revenue on an annualized basis.
Again, we wish to congratulate Ethiopian Airlines on their outstanding achievement of earning the Air-Cargo Leadership Award 2021. Their immense and meaningful contributions to their region through providing critical vaccines to identified areas in Africa were critically significant in the global fight against COVID-19. As with all of our current airline partners, all of which operate in the air cargo space, we have much to be grateful for as we begin to look forward to 2022 and beyond.