The market for freighters remains sufficiently strong as to allow lease rentals to remain at the very least at current levels, with the potential for a slight rise. There is a growing expectation that the use of “preighters” will reduce in the coming months as international passenger services are restored. Preighters are not necessarily an efficient means of carrying cargo. As more widebody passenger aircraft are returned to service this increases the supply of freight capacity. Eventually, the passenger aircraft will provide much more capacity than the preighters even did, thus potentially causing demand to fall below capacity. But in the interim, IATA reports that for May 2021 compared to May 2019 (IATA is comparing data before the Covid Event) capacity fell by some ten percent for the global market. Asia, Europe and Latin America saw significant falls in capacity – 16 percent, 17 percent and 24 percent respectively. Such a fall in capacity is beneficial for lease rentals as demand further outstrips supply. The demand for airfreight increased by some ten percent in May 2021 compared to May 2019 which continued a pattern of growth although there are indications that such a trend will not be sustained. The result is to see an overall load factor of 57 percent with international load factors reaching 65 percent. Before the Covid Event, the average load factor was 50 percent or less. The airfreight carriers are therefore filling the aircraft in both directions rather than having to search for goods to carry on the return trip. The issue in terms of demand is how long the growth can be sustained. In some cases, the improvement in airfreight is a consequence not necessarily of overall economic growth but due to more temporary and macro issues impacting surface transportation. Some Chinese container ports can close for a week or two due to a Covid outbreak and other container ports around the world are sometimes unable to cope partly due to staff shortages. Airfreight is then used as a last resort. Even though the cost of shipping by air has increased, so too has the cost of surface transportation. Airfreight is more often used when the cost of shipping is less than 20 percent of the value of the goods being shipped. But airfreight can be at least five times that of surface transportation even in the context of the current market. IATA data:
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