Air cargo still assesses impact of coronavirus

- A Monitor Report16 Feb, 2020 | 966 Views|-+
Singapore : The impact of the coronavirus on the air cargo industry is still uncertain, with demand under pressure but some expectations of an eventual surge in volumes.

As of February 13, China had reported 14,800 cases and more than 1300 deaths.

Many of China's provinces have extended the New Year Holiday, which sees factories and transport operations grind to a halt as workers are on leave to help contain the virus. This extended break is affecting supply chains, with Airbus, Toyota, General Motors, Volkswagen all closing some production in China.

South Korean firm Hyundai has halted production as many of its parts come from China. Nintendo is also warning of disruption to the supply of some consoles and controllers.

Meanwhile, a number of airlines have cut capacity to China, which reduces belly space for cargo, as passenger demand plummets. Some airlines are adjusting their schedules until April.

Some freighter operators have also cut scheduled services as the factory closures take their toll on demand. However, some have suggested that shippers will rely on airfreight to cater for the surge in demand that comes when factories do re-start production.

Also, China's government on February 6 announced that it would halve tariffs on more than 1,7000 goods that it imports from the US as part of the phase one trade deal recently reached with the US.

Tariffs will be reduced from 10 per cent to 5 per cent, or from 5 per cent to 2.5 per cent and cover around USD 35bn worth of goods.

In a research note, Helane Becker of investment bank Cowen also expected freighter operators to benefit from a spike in demand.

"The opportunity for FedEx, UPS and DHL is twofold. As we noted last week, with the passenger airlines leaving the market until sometime between the end of February and the end of March, there will be no belly capacity available to ship low-value goods."

"As a result, the three integrated carriers (FDX, UPS and DHL) are likely to benefit. In addition, Atlas Air is likely to see some benefit from its clients trying to catch up on shipments later this month and next month."

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