The head of one of the world’s largest air cargo handlers has brushed off the deteriorating outlook for global trade, arguing that the rise of ecommerce and growing demand for faster deliveries are driving a long-term shift towards moving goods by plane.
Worldwide Flight Services chief executive Craig Smyth said that air cargo, historically a relatively small part of the global supply chain, was playing an increasingly significant role as more shipping groups invested in aircraft fleets. “We’re pretty excited about [that] growth,” he said.
“Because of ecommerce . . . there’s definitely a shift that is structural, that is permanent,” he said. Online shopping deliveries now account for a fifth of the cargo that WFS is moving in some parts of the world.
Paris-based WFS, which provides ramps, cargo handling and other on-the-ground services to airlines, is one of several companies involved in a dealmaking spree in the air cargo sector.
In September, Singapore ground handling business Sats completed a €1.2bn takeover of WFS, a move that the companies said would create the industry’s largest group in terms of cargo volume handled.
Meanwhile, the world’s biggest shipping container group, Geneva-based Mediterranean Shipping Company (MSC), is preparing to launch its first air cargo service in the coming months following a bid earlier this year to acquire a majority stake in ITA Airways, successor to bankrupt Alitalia.
Ecommerce giant Amazon, which Smyth said was a WFS client, has also been expanding its own air fleet, running an average of 164 flights a day towards the end of last year.
These investments follow a boom in demand during the Covid-19 pandemic for deliveries by air, a faster but more costly option than sea transport that in the past was generally reserved for high-value goods. With the increase in online shopping during lockdowns, many retailers turned to airlines to circumvent logjams at seaports.
In 2021, the volume of goods moved by air jumped 18.7 per cent compared with the previous year, according to the International Air Transport Association. Volumes reached the highest level since 2010, measured in terms of cargo tonne-kilometres, a unit for freight traffic calculated by multiplying freight weight by the distance travelled.
However, demand has since plunged, with cargo volumes falling below pre-pandemic levels in recent months. Continuing lockdowns in China have hit demand for goods, while Russia’s invasion of Ukraine had also grounded airlines in the region, IATA said.
Smyth dismissed these hits to global trade as “temporary effects”. He conceded that WFS was starting to see some impact from consumers reining in spending and that profits in the second half of 2022 are expected to be flat compared with the previous year. But he added that the long-term view for the company was up.
“There’s some structural changes through Covid,” he said. “Whether it’s 10 per cent, 15 per cent or 5 per cent, there’s still going to be [permanent] growth in ecommerce.”
