Low-cost carriers in Asia are stuffing passenger planes with cargo for revenue boost as passenger demand is not expected to return to pre-coronavirus levels any time soon.

Budget airlines, like most of the industry, are expanding their freight operations and converting some of their passenger planes to accommodate the increasing demand for capacity to move e-commerce and high-value commodities in the region.

The coronavirus has piled on the pressure for budget airlines as the majority of flights are still grounded across the region and in many parts of the world. Transporting cargo has provided a relief for low-cost carriers to stay afloat despite the passenger downturn.

A spokesperson for AirAsia’s logistics wing, called Teleport, said like many airlines, the airline obtained Transportation of Cargo in Passenger Cabin (TCPC) certification allowing it to carry cargo on seats, overhead compartments and under the seats, and have operated 112 TCPC flights since May, the first utilizing an Airbus A320 passenger aircraft from Surabaya, Indonesia, to Hong Kong.

“Since the beginning of the pandemic, we have been moving large amounts of medical aid, especially due to the shortage of capacity to carry cargo ex-China to deliver masks and PPEs to ASEAN regions,” Adrian Loretz, chief operating officer of Teleport, told Asia Cargo News.

Demand to move healthcare-related goods, although still present, has waned since the peak of the crisis, however, and is now back to general cargo.

“There is a constant (albeit a slowdown) [trade] in medical supplies such as PPEs, masks and Covid-19 test kits from China. Nevertheless, we foresee that there will be a spike in demand when the Covid-19 vaccines are ready,” Loretz said.

“In our [current] cargo flights, there is a strong demand for time-sensitive goods such as e-commerce or courier products, pharmaceuticals, perishables and frozen product,” he added, noting that he has seen an increasing demand from shippers to reestablish their supply chains for a variety of goods that used to be shipped via airfreight before Covid-19.

The digital logistics venture of the airline noted that the focus for their freight operations have largely been in Asia – and that it is also ready to transport Covid-19 vaccines in the region once available.

“We are maintaining a strong network in our core markets in Southeast Asia routes for cargo-only planes and mainly focus on both domestic and international routes from China and India, such as Shenzhen-Kota Kinabalu, Chennai-Kuala Lumpur and Bangalore-Kuala Lumpur,” Loretz told Asia Cargo News.

Once the vaccines are out, Loretz noted that Teleport is “ready and committed” to focus its operations to support the distribution of Covid-19 vaccines in the region, banking on AirAsia’s network in Southeast Asia.

E-commerce, high-value commodities to lift cargo 

The Teleport COO said e-commerce and high-value commodities including perishables will drive the demand for cargo moving forward as the coronavirus pandemic forced businesses to go digital. 

“Covid-19 has definitely made an impact, especially on businesses which are not on any digital platform whatsoever. This posed as a new space for them to venture into. With this pandemic, e-commerce boomed,” Loretz said, “so, there’s definitely a demand for cargo right now.”

To accommodate this anticipated demand, Loretz noted that the company is ready to convert “up to four” of AirAsia’s passenger aircraft for all-cargo operations. “Currently we have decided against converting any of AirAsia’s passenger planes to fully run cargo operations. However, we are looking at up to four aircraft that we may convert to use to run freighter operations.”

“With every single thing now at our fingertips, it is up to us to help deliver products of any kind to customers who have made their purchase,” he added.

Meanwhile, Philippines-based Cebu Pacific Air (CEB) told Asia Cargo News that while it had started ramping up its cargo business before the onslaught of the coronavirus, the pandemic has accelerated those efforts noting how critical a steady and reliable logistics is in maintaining the supply chain.

“CEB has explored alternative revenue streams to weather the pandemic, though even prior to the pandemic, we already made the investment to convert two of our ATR turboprops into freighters. This pandemic accelerated our push into the cargo business,” said Alex Reyes, Cebu Pacific’s vice president for commercial.

The Philippines’ largest airline in terms of passengers flown noted that it has implemented “hybrid flights” during this period where it carries passengers on one sector of the flight and runs the return sector as all-cargo, depending on the protocols in each jurisdiction where it operates.

Reyes told Asia Cargo News that Cebu Pacific have converted one of its widebody A330 jets into a freighter, just this November, by removing the passenger seats. The low-cost airline is also anticipating the arrival of its second ATR freighter before the month ends. 

“These dedicated cargo aircraft ensure we are able to address the growing demand for affordable cargo services. Now more than ever, we have seen how critical steady and reliable logistics is to moving goods,” he said.

Domestic, regional all-cargo service

The Cebu Pacific executive noted that the airline’s freighters are currently flying goods to and from top domestic destinations in the Philippines, and that it has also flown all-cargo flights to international hubs such as Hong Kong, Tokyo, Bangkok, Shanghai and Guangzhou. 

He said the carrier’s ATR freighters are especially “suited for Philippine conditions,” as they can bring cargo in and out of areas that cannot land jets. He says that only about one-third of the Philippines’ 90 airports are able to land Airbus or Boeing passenger jets. 

“All-cargo flights on international routes continue to be CEB’s main cargo revenue driver,” Reyes said, adding that top products exported from the Philippines include semiconductors, automotive parts, aquaculture products, fruits and flowers.  

The decision to convert A330 to a full-cargo aircraft was, however, brought about by demand. 

“We expect this side of the business to continue flourishing in the coming years,” the Cebu Pacific official told Asia Cargo News. “Our cargo operations remained very active and have in fact become our main revenue driver under the current situation.”

Reyes said based on the carrier’s third quarter results, 66% of Cebu Pacific’s revenue this year has been from its cargo business, versus only 8% during the same period last year, which he said is already one of the highest ratios in the world among LCCs. 

“For Cebu Pacific, cargo has been a good source of revenue even in normal years. We anticipate this to continue contributing to our bottom line, yet we remain hopeful passenger demand [also] picks up soon,” he added.

The International Air Transport Association said in 2019 that cargo accounted for a mere 12% of airline revenues, but it is expected to triple its contribution to 36% of airlines’ bottom line this year.

Loretz, of AirAsia’s Teleport, said like the trend in major carriers to pursue cargo, low-cost carriers will also continue expanding freight operations as demand continues to rise. 

“If there isn’t a trend already, I believe that other LCCs should follow suit. With a majority of flights being heavily grounded across regions and countries, it is hard for the aviation industry to sustain itself in terms of business,” he said.

“Cargo is increasing in demand and air freight rates are on the rise and it will increase due to the factors of e-commerce, high-tech launches and general retailers moving online. It would only be deemed fitting for other LCCs to follow suit,” Loretz said.

By Charlee C. Delavin

Asia Cargo News | Hong Kong