Aircraft Transport Worldwide - The easing of COVID conditions in much of the world has positively impacted the reopening of commerce, but the recovery has not always been smooth for airlines, airports and aircraft manufacturers. China continued to impose a series of lockdowns restricting air traffic. The biggest shock to the regime was the Russian invasion of Ukraine, which drove up fuel prices and helped push the air freight market into a steady decline through the rest of the year.

Air freight traffic declined in 2022, but that was to be expected after a historic 2021 that was hit hard by unprecedented supply chain disruptions. Experts are optimistic about the long-term outlook for air freight, with a cumulative annual growth of 4% expected. Express service operators can expect more demand, buoyed by the ongoing shift in online shopping.

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An investment group led by Apollo Global Management agreed last summer to buy Atlas Air (NASDAQ: AAWW), a major provider of air transportation and cargo plane leases, for $5.2 billion, including debt. Atlas Airlines operates nearly 100 freighters, including the largest fleet of Boeing 747 freighters in the world.

Boeing To Expand Converted Freight Production In China

This was the largest acquisition in the air cargo sector this year and underscored the confidence of major investors in the sector as shippers showed increasing interest in dedicated freight shipments over passenger services.

Meanwhile, the airport services sector has seen enhanced ground handling. Alliance Ground International, backed by private equity partners, has acquired Airport Terminal Services, adding 49 locations in North America, and Total Airport Services, which handles cargo at Chicago O'Hare International Airport and Rickenbacker International Airport near Columbus, Ohio, among others. The contracts follow the late 2021 handover by MIC Cargo, the terminal's local operator in O'Hare.

SATS, a regional airport services provider with limited experience in freight, has bought cargo-handling giant Worldwide Flight Services from subsidiary Cerberus Capital Management for $2.2 billion.

The Russian invasion of Ukraine was a major setback for the air cargo sector as the world began to recover from the pandemic. Western countries blocked access to Russian airlines and banned the exchange of aviation technology, and Russia responded by closing its airspace to many airlines.

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Geopolitical measures have restricted the Russian freight carrier Volga-Dnepr's flights to several countries in Asia and the Middle East and have forced affiliated airlines AirBridgeCargo, CargoLogicAir and CargoLogic Germany to cease operations.

Ukraine's Antonov company lost several cargo ships in the fighting but managed to escape with five Antonov An-124 very large cargo planes currently in operation from a temporary base at Leipzig/Halle airport in Germany. Cargo aircraft fly missions for NATO, the Government of Ukraine, humanitarian organizations and commercial customers. In recent months, it has flown satellites from Europe to Florida for launches by SpaceX at NASA's Kennedy Space Center at Cape Canaveral. Antonov Airlines officials say they plan to rebuild the An-225, the largest commercial cargo ship destroyed by Russian forces during the initial attack on Gostomel airport near Kyiv.

Aviation data provider Cirium estimates that the war has deprived the market of 1% of global cargo capacity. But the effect has been more widespread, with airlines flying between Europe and Asia forced to detour around Russia, adding hours to their flight time and driving up fuel costs. The extra time in the air and the need to carry extra fuel or stop to refuel reduced aircraft utilization and effectively reduced cargo capacity.

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About 400 planes worth $10 billion remain trapped in Russia after Russian airlines refused to return them to Western leasing companies, according to Reuters. Lessors are now suing insurance companies to recover losses.

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The number of airlines and non-traditional companies starting cargo fleets rose for the second year after demand for air freight surged during the pandemic. Airlines realized that freight was more profitable than previously thought and diversifying revenue was a good goal. At the same time, shipping companies with growing logistics ambitions and e-commerce companies have launched shipping lines to control capacity and provide more reliable delivery services.

Mediterranean Cargo started providing air freight services in December with one freighter aircraft operated by Atlas Airlines. Boeing is expected to deliver three more 777 Freighters for the project in 2023. The cargo carrier founded in 2021 by container shipping line CMA CGM has expanded its service from Paris to Hong Kong, but has also paused services in the United States. United. Meanwhile, shipping giant Maersk is investing heavily in its freight line with new aircraft and new Asian-American airlines. ways.

The list of airlines that have added all-cargo operations in 2022 or have expressed a desire to do so is impressive:

A positive start to the year for air cargo began to sour after the invasion of Ukraine, with prices falling steadily since April as war, higher energy prices, inflation, high retail inventories and renewed consumer focus on services dented demand for goods. Widespread shutdowns in China's major manufacturing centers have reduced factory output and reduced exports carried by air and sea carriers.

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In March, capacity fell 20%, load factors reached 84%, and short-term rates increased 10% in a week.

The semiconductor industry is a microcosm of the environment with declining demand for air transportation. Chipmakers report that demand will decline 10% to 15% year over year in the fourth quarter of 2022. Similarly, cargo tonnage at Los Angeles International Airport fell 15.5% in November, down 6.6% compared to 2021.

Shipping volume at the end of December was, by some accounts, nearly 20% lower than a year ago. Tonnage from Asia and North America is down 25% year-over-year over the past two weeks. Global freight rates are 30% to 40% lower than they were a year ago.

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Cargo capacity is still about 8% lower than it was in 2019, according to the International Air Transport Association, as airlines have not fully resumed all the flights they had before the pandemic. And the IATA figures don't take into account all courier traffic, which is also declining. FedEx, UPS, DHL and Amazon (NASDAQ:AMZN) also say they are seeing slower growth. FedEx (NYSE:FDX) responded by cutting 40 daily flights and grounding 16 wide-body aircraft during the first quarter of 2023. Amazon Air hasn't added as many new routes to its network this fall as it has in previous quarters, and is said to be developing freight plans, according to Bloomberg. .third parties for the first time.

Ups Stops Flying Cargo Planes Over Russia

It should be noted that market conditions this year are more of a slowdown than a crash. Business is still relatively good. Full-year demand is likely to end up 6% lower than it was in 2019, but shrinking passenger space combined with airport congestion and industry labor shortages has pushed up prices. Rates are still about 80% better than pre-COVID rates.

The International Air Transport Association (IATA) expects airline freight revenues to reach $201.4 billion. This is an improvement over the June forecast, just 1.5% less than in 2021 and more than double the $100.8 billion generated in 2019. However, the airline group expects freight revenue to decline by $50 billion.

There is a lot of uncertainty heading into the new year, but if the expected global recession moderates and companies bring in supplies early in the year, air freight demand could be strong next year, several industry insiders say.

Boeing and Airbus saw a big jump in new freighter orders in 2021 and 2022, led by the new 777-X and A350 models, which won't be available until the second half of the decade. According to Cirium, about 115 freighter orders have been placed so far, including for Boeing 767s and 777s, up from about 95 last year. With a build rate of about 40 aircraft per year, it would take about five years to complete the 220 aircraft backlog.

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An Airbus A330-300 with a new cargo door takes off for a test flight. (photo: Elbe Flugzeugwerke GmbH)

But the real growth in freighter production is in the aftermarket sector, where aircraft used to transport heavy containers are rebuilt on the main deck.

Since the beginning of the pandemic in early 2020, more than 700 passenger aircraft have been requested to convert to freighters due to lack of cargo capacity, expectations of future freight growth, depreciation of some aircraft, and an influx of leasing companies looking for surplus passenger aircraft replacements and profit maximization for investors.

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The two companies reported nearly 200 orders for converted freight shipments in the first 10 months of the year after logging 370 orders in 2021, according to Cirium.

Lufthansa Cargo To Equip 777 Freighters With Fuel Efficient Surface Technology

Cirium recently expected about 165 converted freighter aircraft to be delivered in 2022, a significant increase from the previous record of 120 conversions. Transfers are usually between 65 and 70 per year. The number of converted freighters would have been even higher were it not for supply chain and labor issues that have slowed production at many refurbishment facilities.

The highest level of activity is for standard narrow-body conversions of the Boeing 737-800 and the newer Airbus A321, which were purchased by airlines to replace the aging 737 and popular 757, as well as expansion.

Engineering firms with aggressively approved freight modification projects added new production lines this year to meet demand, with new facilities popping up in the UK, Serbia, Turkey, China and Costa Rica. New conversion programs are emerging: A320 production began last summer,

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