Opportunities and Challenges:

The air travel and cargo industries have distinct histories. Before the pandemic, air travel demand was booming domestically and internationally and carriers expanded their networks. Air cargo demand on the other hand, began to slow down around 2015 and experienced slower growth relative to air travel. During COVID, air cargo rapidly expanded due to time critical demand of PPE and electronics, while lock down caused air travel to plummet and airlines to shut down their networks. The collapse in air travel disrupted the air cargo supply curve as 50% of supply is provided by passenger belly capacity. To utilize their assets and capture heightened air cargo rates, many passenger planes were quickly converted to freighter planes.

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Post pandemic, the industries have reversed their course as air cargo is slowing relative to its previous peak and air travel is growing once again as people are back traveling. A critical question yet to be answered is the long run effect of working from home and its influence on business air travel demand.

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Some of the structural challenges facing the industry include labor shortages and emissions regulation. Many pilots and mechanics are approaching retirement and airlines are having trouble recruiting and training new candidates. This will continue to be a challenge for years to come. Regarding emissions, regulations are being developed differently by distinct jurisdictions with solutions including carbon taxes being proposed.