Randy Sinker thought he had seen just about everything over his more than 30 years in the airfreight and logistics business. That was until 2020. “Unprecedented doesn’t even begin to describe it,” says Sinker, who is president of Winnsboro, Texas-based freight forwarder and third-party service provider Team Worldwide. If anything, the year reinforced for Sinker, and others in the airfreight forwarding industry, that the “f” in forwarding really stands for “flexible.”
“We found we had to have lots of patience and be very creative” in the face of unprecedented challenges, he says, referring to the market gyrations caused by the pandemic, shelter-in-place orders, and the need to ensure safe workspaces and provide adequate personal protective equipment (PPE) for employees. Then there was the drastic reduction in commercial passenger flights (and the resulting loss of critical belly space for cargo), the surge in PPE shipments, skyrocketing rates, and the shift of cargo profiles from supporting B2B (business-to-business) needs to meeting e-commerce–driven B2C (business-to-consumer) demands.
He defined the year as a progression through three phases. In the first phase, February and March, the market still had capacity. “I recall taking a flight to JFK on March 9, and the plane was two-thirds empty,” he notes.
Then the middle phase, from mid-March through the summer and fall, saw commercial passenger lift disappear. “You’d book [cargo on] a flight, and it would be canceled,” Sinker remembers. Airlines began furloughing employees and shuttering some secondary- and tertiary-market offices. Station hours were reduced. Some experienced, long-time employees took early retirement, and with them, valuable forwarder relationships. It was a daily challenge to get reliable information as short-staffed airlines struggled to keep up.
That period coincided with surging demand for shipping personal protective equipment, mostly from Asia. Finding capacity became a huge challenge, and rates shot up “to levels we have never seen—four to five times normal, if not greater,” Sinker says.
Entering the new year, the market has somewhat stabilized into a third phase. While freight volumes are still high, the holiday crush has passed and e-commerce–related freight has come off its 2020 peak. Both all-cargo and passenger airlines have adapted, regrouped, redeployed, and adapted again—as have their freight-forwarding partners.
A STEEP LEARING CURVE
In many cases, those adaptations have involved the way airlines deploy their aircraft. “It’s been an interesting year; we’ve all learned a huge amount,” says Roger Samways, vice president of cargo, commercial for Dallas, Texas-based American Airlines Cargo. By way of background, he notes that some 50% of the world’s air cargo moves in the bellies of passenger aircraft. His company typically generates some $800 million to $1 billion in cargo revenue annually.
At American Airlines, “early on we saw a need to repurpose some of our passenger aircraft to carry cargo. That is what we’ve been doing since early March,” Samways recalls. The first such flight was Dallas to Frankfurt, Germany. Over time, that grew to some 250 flights per week, mostly between Asia, Europe, and the U.S. By late December, American was on the cusp of operating its 5,000th cargo-only flight using passenger aircraft, he said. Samways expects to operate the same number of weekly flights through the first quarter, which could change depending on how much—and how quickly—passenger traffic returns.
While American was flying passenger aircraft for all-cargo duty, the freight was being loaded only into the belly of the aircraft. Other airlines, such as Air Canada, went the extra step and removed seats from the premium and economy areas of passenger cabins so the plane could carry more cargo in addition to freight in the plane’s belly. Last year, Delta Airlines removed seats from a Boeing 777 and converted the aircraft to all-cargo use, prior to retiring its 777 fleet last October.
American decided against that strategy, says Samways, because it foresaw several challenges.
For one thing, cargo that goes in the belly of the aircraft normally is consolidated in unit load devices (ULDs), containers designed specifically to fit in a passenger plane’s lower-deck cargo area. Freight intended for the passenger cabin—whether the cabin has seats or not—would have to be boxed or in cartons that could be walked onto the aircraft. Flight attendants and, in some cases, ground crews also would have to fly with the cargo in the passenger cabin.
Another challenge was limited “slot times” at airports, particularly in Asia. Operators literally had 90 minutes on the ground. “We could not commit to loading in the passenger cabin in that short time frame,” Samways recalls. Lastly was the cost of pulling out seats—and then reinstalling them for when passenger traffic returned.
“The [past] year has not been easy,” Samways says, adding that he expects a shortage of cargo capacity to persist into 2021, with demand outstripping supply in many markets and, thereby, keeping yields near record levels. Yet 2020 “has been an incredible learning experience,” he notes. The key lesson: “We have to be nimble and adaptable.”
FINDING NEW SOLUTIONS
John Hill, president and chief commercial officer of Glen Mills, Pennsylvania-based Pilot Freight Services, recalls being stunned by the whipsawing of the market. “We went from having a brutal March to being in peak season in May,” and then operating at that pace the rest of the year. Rates for aircargo space “went crazy, peaking at about $20 a kilo from Asia to the U.S.,” he recalls.
While the pandemic upended the market in many ways, it also spotlighted companies that were creative in helping customers overcome unique challenges. Early on, “we had one of the largest health-care equipment companies come to us” for help with a pandemic-related problem, Hill notes. Normally, their field technicians would assemble, test, and certify the company’s patient-monitoring equipment on site within a hospital. Pilot traditionally supported this effort by consolidating and shipping components and parts to technicians on site.
Yet with hospital ICUs swamped with Covid patients, the company was concerned about putting its technicians at risk in an environment where the virus was so prevalent.
Hill and his team got together and came up with a solution. Instead of shipping piecemeal to hospitals, Pilot took its main New Jersey station, cordoned off an area of the facility as a “cleanroom,” and set up workstations for the technicians so they could assemble and test the patient-monitoring equipment there. As technicians finished assembling and testing the machines, Pilot then blanket-wrapped the units and expedited their delivery by dedicated truck to hospitals in Manhattan.
“We had them up and running in 24 hours to accommodate the hospital and its patients,” Hill reports. The result was a solution that significantly limited the time technicians had to spend inside the hospital—and, by extension, their risk of exposure to the virus.
TAKING ON THE VACCINE CHALLENGE
While similar stories abound, the one that captured the public’s eye last year was the logistics sector’s role in the vaccination effort. While FedEx and UPS have received, deservedly so, the lion’s share of attention for marshaling their integrated networks to provide linehaul airlift and local delivery of vaccine shipments from manufacturing plants, the freight-forwarding and all-cargo community also stepped up, providing transportation of raw materials, equipment, and other supplies for vaccine manufacture as well as medical equipment to facilitate vaccine administration.
Miami, Florida-based all-cargo carrier Amerijet International Airlines supported two areas. It moved ingredients, reagents, and other substances used in vaccine manufacturing from San Juan, Puerto Rico, into the U.S. Amerijet, which has sophisticated cold chain capabilities at its Miami station, also shipped some 250 million syringes and needles from Asia to the U.S., reports Tim Strauss, the company’s chief executive officer.
Amerijet provides scheduled and charter services with a fleet of eight wide-body Boeing 767 aircraft. The company primarily services Latin and Central America, the Caribbean, and Europe and operates dedicated charters to other worldwide points as well.
The scope and scale of vaccine distribution is a huge challenge for the airfreight industry, Strauss notes, but it’s one that he believes the industry’s collective resources, experience, and expertise are up to.
Part of that challenge lies in the amount of product that has to get to market to support global vaccination efforts. Strauss estimates that “roughly speaking, you can put about 1 million doses on a Boeing 777 freighter.” While that might sound like a lot, thousands of such flights would be needed for the current campaign. “To do half the population of the world, that would take roughly 3,500 777 loads, or 7,000 for both doses,” he explains. “That’s like 20 years of flying compressed into a very short period of time.”
For the foreseeable future, Strauss does not expect long-haul international passenger flights—the primary source of cargo capacity—to increase significantly because “passengers are not there” to support it. “Almost all the profit for passenger airlines comes from the front cabin. The back cabin is break even,” he explains. “That’s the group that has learned to work [remotely] by Zoom (video meetings). Where executives before might have traveled internationally five to six times a year, now they go [online to attend Microsoft] Teams meetings and maybe travel once a year.”
He recalls that when the SARS (severe acute respiratory syndrome) virus hit, it took nearly seven years for the industry to recover to previous levels of flights and cargo capacity. He thinks the recovery from Covid-19 will be faster than with SARS, yet he does not foresee a meaningful recovery of commercial lift from international passenger flights until 2022 or 2023.
STEPPING UP TO THE PLATE
In the meantime, airfreight players continue to keep supply lines open despite significant operating constraints. “What I’ve been most impressed with is the [airfreight forwarding] industry’s ability to step up to the plate … especially in the face of one of the biggest challenges we’ve ever had,” with the grounding of some 50% of passenger flights, notes Brandon Fried, executive director of the Washington, D.C.-based Airforwarders Association, which represents 275 member companies, including airlines, forwarders, and all-cargo carriers.
“It has been a team effort … this big symphony of stakeholders working together” to make possible the rapid and efficient movement of millions of shipments of essential health-care, medical, and pharmaceutical supplies; protective equipment; and other critical consumer goods, he notes.
As for what lies ahead, more than anything else, progress administering the vaccine—and how quickly that restores consumer confidence—will drive the pace of recovery, Fried believes. “We are never going to see [a return to] the traditional normal of the past,” he says, because “people will be wondering if the next pandemic is around the corner and whether we’re ready for it.”
He expects mask wearing and social distancing to continue for some time to come, and pandemic-driven alterations to many workplace and business practices to become permanent. “We might not go into the office as much—maybe only two, three times a week.”
Fried also cites the pandemic-induced shift in consumer buying behavior. “People [have come to] like buying things online, getting boxes delivered directly to their doorsteps,” he notes, all of which has fundamentally changed shopping habits, supply chain flows, and distribution demands in ways that will likely endure after the pandemic subsides.
Yet some old habits die hard, he says. Fried predicts that as the pandemic begins to ease, consumer confidence returns, and the economy responds, “then we’ll see more people willing to get on airplanes and fly.”
Gartner, Inc.