Russia-Ukraine conflict set to hit air cargo markets amid airspace closures, Iata says

Capacity is expected to come under more pressure and air freight rates are likely to rise globally

Workers load relief supplies of Swiss Humanitarian Aid for Ukraine population on to an aircraft at Zurich Airport. EPA

The Russia-Ukraine conflict is expected to negatively affect global air cargo markets as airspace closures sever many countries' direct connections to Russia, although it is too soon to assess the magnitude of the impact, the International Air Transport Association (Iata) said.

Cargo carried to, from and within Russia accounted for just 0.6 per cent of global air cargo in 2021, so the overall impact on markets is expected to be low, Iata said in its monthly cargo update on Thursday.

“We can expect cargo markets to be affected by the Russia-Ukraine conflict,” Willie Walsh, Iata's Director General, said. “Sanction-related shifts in manufacturing and economic activity, rising oil prices and geopolitical uncertainty are converging. Capacity is expected to come under greater pressure and rates are likely to rise. To what extent, however, it is still too early to predict.”

Strong air cargo demand was one of the few bright spots for the global aviation industry battered for two years by the Covid-19 pandemic. Russia's military offensive in Ukraine — which has triggered sanctions on the country — and skyrocketing oil prices are likely to throw a spanner in the works.

International airlines are suffering from a sharp rise in oil prices and the additional cost of rerouting flights to avoid Russian airspace, which is expected to drive up ticket prices and air cargo rates.

Oil prices surged past $130 a barrel on Tuesday, their highest level since 2008, after US President Joe Biden announced that the US would ban crude, gas and coal imports from Russia.

Prices eased as the UAE envoy to the US said the country supports increasing oil output in tight market conditions.

Global air cargo markets recorded slower growth in January as supply chain disruptions, capacity constraints and deterioration in economic conditions for the sector dampened demand, Iata said.

Global freight demand, measured in cargo tonne-kilometres, was up 2.7 per cent year-on-year in January, the latest report showed. That was down from the 9.3 per cent growth recorded in December 2021.

Capacity was 11.4 per cent above January 2021 levels. Although in positive territory, capacity remains constrained, 8.9 per cent below January 2019 levels, Iata said.

“Demand growth of 2.7 per cent in January was below expectation, following the 9.3 per cent recorded in December. This likely reflects a shift towards the more normal growth rate of 4.9 per cent expected for this year,” Mr Walsh said.

Middle East airlines recorded a 4.6 per cent annual decrease in cargo volumes in January and a drop of 2.2 per cent in performance compared with the previous month.

This was due to a deterioration in traffic on several key routes such as Middle East-Asia and Middle East-North America, Iata said.

Capacity was up 6.2 per cent compared with January 2021 but remained constrained compared with pre-Covid-19 levels, down 11.8 per cent from the same month in 2019.

Cargo volumes for African airlines, meanwhile, increased 12.4 per cent in January 2022, compared with January 2021. The region was the strongest performer, according to Iata, with capacity at 13 per cent above January 2021 levels.

Updated: March 10, 2022, 2:00 PM