Source: S&P Global
During my tenure at ICF Next, I spent a few months working on a particularly interesting project in which our firm was tasked with analyzing the economic impact of one particular airline on a state’s local economy. It was fascinating work and I’m very proud of the final product, but more importantly, I’m surprised at how much I learned about the airline industry as a whole. In the article referenced here, the point that I found particularly interesting is how much impact limited air freight capacity can have on the supply chain as a whole. Specifically, as it is being limited by the pandemic-induced decline in passenger air travel.
In 2019, 59% of all air cargo was what is known as "belly cargo," essentially, cargo that is transported in the belly of passenger aircraft. With global air traffic having been predicted to drop 60-70% in the past year, compounded by a slower than expected vaccine rollout, this has and will continue to place a significant strain on the overall supply chain. The IATA even predicts that belly cargo levels might not return to pre-pandemic levels until 2024, which is especially concerning.
This all leaves me wondering about how much people will be willing and likely to travel once the vaccine rollout reaches a majority of the population. My assumption is that passenger travel would return to normal and even exceed pre-pandemic levels pretty quickly. But I’m not an economist and maybe, based on the aforementioned projections, my assumptions are wrong.
Additional Reading - Air cargo capacity crunch to drive forwarder consolidation: DB Schenker