Etihad Airways expects its cargo business growth to stay above pre-Covid levels for several years, despite "normalisation" of the global air freight market from the pandemic-induced boom of the last two years.
The Abu Dhabi airline expects its average cargo yields to remain higher than their 2019 levels but dip from the peaks recorded during the height of the pandemic, as the supply-demand imbalance gets corrected, Martin Drew, Etihad Aviation Group's senior vice president, Global Sales and Cargo, told The National on Tuesday, on the sidelines of the World Cargo Summit in Abu Dhabi.
This is in line with overall industry trends of softening cargo growth due to global macroeconomic challenges and increased capacity entering the market, he said.
The belly-hold of passenger jets returning to service due to recovering travel appetite and airlines' strong demand to convert older passenger aircraft to freighters has meant additional cargo capacity.
"We definitely see the market normalising, we didn't really witness any real peak last year in the traditionally strong period of October, November and first half of December," Mr Drew said.
“Our average yields have fallen as the market has begun to normalise. They were crazy high during the height of the pandemic, but as capacity has re-entered the market, we are seeing yields soften. In fact, in some regions, they have already fallen to pre-pandemic levels. In other regions, they remain higher than 2019 levels and will potentially take longer to normalise."
China's economic slowdown, a decline in maritime freight rates and additional freighter capacity flooding the market means that "those days where we saw yields through the roof are over now", he added.
Global air cargo volumes are forecast to decline 4 per cent year-on-year this year, after an 8 per cent drop in 2022, amid challenging economic headwinds, the International Air Transport Association said in its latest forecast in December.
Cargo volume will decrease to 57.7 million tonnes in 2023, down from 60.3 million tonnes in 2022, as the market cools down after strong periods of growth during the Covid pandemic, according to the industry body.
Etihad cargo unit's contribution to the group's total revenue will reach 25 per cent in 2023, down from 30 per cent in 2022 and 62 per cent in 2021, but still above the pre-pandemic levels of a 15 per cent contribution to group revenue, he said.
"Those crazy contributions we saw from cargo in 2021 was a by-product of very limited passenger activity, so it was never going to continue at that share and we always expected it to come down," Mr Drew said.
"If we can maintain it at around 25 per cent, then that's a healthy share."
The first half of 2023 will be "pretty tough" for cargo business amid a challenging operating environment of high inflation, an energy crisis in Europe and forecasts of an economic recession in major economies, according to Mr Drew.
However, in the second half of the year, "hopefully we will be through the worst of it" and cargo demand will start to pick up and "we will see a fairly strong peak season", he said, and added that the demand for cargo services from the e-commerce and pharmaceuticals sector will continue to grow.
Etihad's cargo unit is considering adding a freighter service to London and increasing freighter capacity into China's historic port city of Guangzhou, Mr Drew said.
The airline will return four of its 10 Airbus A380s into service this summer to London Heathrow, following their grounding during the pandemic, and the double-decker will provide a "fairly decent cargo payload", he added.
"It will be less than what we have on the Boeing 787 and the A350, so we'll be looking at whether we potentially supplement some of that capacity with the deployment of a freighter into the UK ... that's an option we always have available to us," he said.
Mr Drew pointed to India and Vietnam as growth markets for Etihad's cargo business this year, while China is expected to pick up and expansion in Africa is on the cards.
"Africa is going to be a big focus for us this year as well," he said. "South Africa is somewhere that we're pretty active in already but we're looking to see how we can increase capacity there and tap into flows coming out of Asia for electronics, pharmaceuticals and e-commerce."
The airline also wants to tap into the cargo flows out of Kenya for perishable goods such as flowers, fruits and vegetables into Europe, he said.
Announcements will be made later this year on partnerships to grow Etihad's cargo footprint in the continent, Mr Drew added, without providing details.
The panellists at the cargo summit were aligned on a tough global cargo market outlook in the first half of the year before improving in the second half.
This comes amid sluggish trade flows, supply chain disruptions, labour shortages, overcapacity and recession fears, they said.
Industry experts also highlighted the need to focus on greener operations and digitalisation of the industry for more sustainable growth in future.