Demand-supply gap in air freight segment closing, says DB Schenker executive

Consumer demand dropping due to high inflation but freighter operations to continue

October 26, 2022 08:50 pm | Updated 11:33 pm IST - Mumbai

Image for representational purpose only

Image for representational purpose only | Photo Credit: PTI

German supply chain management and logistics solutions major DB Schenker is seeing demand and supply gap in air freight decreasing, among other reasons, on account of high inflationary pressure in western markets , a top executive said. 

“Last year was a very busy year. We were very successful. Our volumes went up in the market and yield was pretty high. As we started this year, we continue to see that momentum coming in to this year as well. So our volume and yields are holding. But now we are moving into a very different situation due to what is happening to the world economy,” said Asok Kumar, executive VP, Head of Global Air Freight, DB Schenker.

“More capacity is coming to the market and consumer demand has dropped due to the high inflation. We have started to see a situation where the capacity demand imbalance has started to correct. We need to closely look into the market and adopt accordingly,” he added.

Elaborating he said, “The supply and demand imbalance remains in favour of demand meaning demand is higher than supply. But that gap is closing. We are in a situation where demand is exceeding supplies. Now yields are higher than pre- COVID but coming down because consumer demand is dropping.”

He said the company would continue to deploy air freight charters across the globe including India to airlift cargo despite more capacity in passenger aircraft returning to the market following restoration of air connectivity post COVID. 

The company which earlier used to book aircraft belly space had ventured into deploying its own operated chartered freighters for dedicated flight operations for benefit of its customers.  “Our own flight operations which were enhanced during the COVID will continue to be our forte. It will be part of our portfolio of products we offer to customers. We are not an airline and we do not intend to be an airline though we operate these planes. We will continue air freight operations,” he added.   “Though capacity is coming back and passenger flights are increasing, we will still continue our [air freighter] flights,” he further said.

The company was once operating 58 flights a week around the world and now this number has reduced to 48 a week due to the demand situations. Earlier, it used to operate two flights a week to India and it flies once a week.  Mr. Kumar said that DB Schenker would promote sustainability in air cargo and would invest to achieve its objectives. 

“I am confident that we are the sustainability leader in air freight globally. We want to continue this business but in the clean way. One aspect of that is Sustainable Aviation Fuel (SAF). This will be a key enabler. We are the largest purchaser for SAF [which costs three times more than kerosene/ATF) that is used by airlines as fuel] in the freight forwarding market. Over 16,500 tonnes of SAF have been purchased and we will continue to buy more SAF,” he said.

Currently, one flight [Lufthansa Cargo] which is 100% CO2 neutral operates once a week between Germany and China. “We will continue to drive SAF solutions and if India needs that, we will do that here as well. that [sustainability] is our future,” Mr. Kumar said. “India is a growth story. This is fully supported by us. We are supporting the objective of the government and we are here to grow with the country. We have to support sustainability,” he added.

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