Clogged Chains and Travel Restrictions Affecting Air Capacity
The ongoing pandemic is not only a humanitarian and health crisis but it is also a time of economic turmoil and shock. Figures show that air capacity was down by 7 percent between December 2021 and January 2022 compared to 2018. There have also been capacity fluctuations during the holiday season due to the new Omicron variant. On the positive side, airlines have been using aircraft for vaccine distribution around the globe. Yet, a major supply chain disruption factor is the fact that restrictions have left thousands of employees stuck in quarantine.
Freight, Airlines, and Clogged Chains
Airlines around the globe welcomed the opportunity to ship cargo, helping them offset virtually non-existent passenger traffic. Yet, while the U.S. and China report a positive economic outlook as well as significantly higher retail sale volumes, clogged supply chains are hurting air carriers.
Logistics issues at all points of the supply chain have affected airlines and resulted in lost opportunities. Manufacturers, for example, were unable to deliver vital goods in sufficient amounts, including personal protective equipment because demand for PPE skyrocketed with the arrival of Omicron.
International airline organizations have called on governments to double efforts at addressing supply chain bottlenecks. Restrictions for travelers have affected aircraft operations in many places. In some countries, quarantine restrictions have also been tightened to minimize the risk of importing new cases. In December 2021, for example, the Hong Kong’s Centre for Health Protection reported that imported cases accounted for about 35 percent of all new cases. As a result, all air cargo crew is now subject to a mandatory quarantine for 72 hours upon arrival. Three weeks ago, the Hong Kong airline also suspended cargo operations for 1 week due to quarantine rules. Tough quarantine measures are likely to stick in 2022 due to slower than expected vaccine rollout across Asia as well as country borders under strict controls. What this means for airlines is that capacity is unlikely to improve any time soon.
Overall Impact on the Aviation Industry
The prolonged pandemic has had a devastating effect on the aviation industry, with passenger revenues dropping by 69 percent in 2020. As passenger aircraft carries close to 50 percent of air cargo, air freight has also been hard hit. The passenger market did not show any signs of significant rebound in 2021, with cargo prices also being affected by the coronavirus crisis. Shipping rates were about 12 times higher pre-Covid compared to ocean cargo. Prices rose considerably in the first quarter of 2020 due to demand exceeding supply. Then prices fell again to reach competitive levels compared to container cargo.
All in all, the health and economic crisis has had a profound effect on air carriers, mainly due to travel and border restrictions. Some airlines discontinued operations, with carriers declaring bankruptcy. As we near the end of the pandemic, the focus will, in all likelihood, shift to passenger travel and navigating the transition successfully.