When the pandemic swept the globe, the effects on the aviation industry were severe. Demand for passenger flights plummeted dramatically. Global trade became dependent on the sustainability of cargo flights, and the e-commerce market exploded.

With nearly 50 percent of the world's air cargo carried in the belly holds of passenger aircraft (belly cargo), the drop in people's demand for travel due to the pandemic caused chaos. The sudden loss of half of the global air cargo capacity put the entire world on heightened alert. In response to this crisis, logistics companies sought alternative sources for air cargo transportation and airlines made necessary adjustments. Demand for converting passenger aircraft into cargo planes skyrocketed. On the other hand, the unprecedented pandemic that knocked the industry into a deep coma opened the door to a brand-new opportunity from within the industry.

The high demand for converting passenger aircraft into cargo planes this time created a supply-demand imbalance. The passenger-to-freighter conversion facilities were fully booked until 2026 due to demand that was much higher than they could accommodate. 

Fortunately, the post-pandemic rebound was faster than anticipated. People's demand for travel rose sharply across the globe, which led to an increase in cargo volumes carried by passenger aircraft. This took some pressure off the aircraft conversion market. With a combination of slot problems, staff shortages, and the fact that the aircraft scheduled for conversion started to carry passengers again, aircraft conversion companies, which were struggling to meet all the demand in the market, could breathe a sigh of relief. The passenger-to-freighter conversion market will unavoidably see a sharp decline in the next few years. But the same cannot be said for the air cargo market.

Even though the air cargo market figures have fluctuated over the last four years, it is certain that the industry will keep expanding in the future. With a 5.7% annual growth target for the years 2023 to 2028, the air cargo market is expected to reach a USD 413 billion industry by 2028, increasing by an additional USD 125 billion over the next five years.

Labor costs have been rising dramatically since the pandemic. Transportation issues caused by local COVID-19 restrictions affecting companies' production capacity, particularly in China, were a serious concern for the future, including the condition of export networks and the continuity of supply chains. But a few months ago, everyone breathed a sigh of relief when China also shelved its zero COVID policy and opened its borders to the outside world. Many more freighters will now be needed to support trends towards diversification of production and creating new links for the supply chain, both in and outside of China.

However, we will have to change our rhetoric over time when we want to take an x-ray of the air cargo industry. For instance, when analyzing the conversion figures from passenger to freighter aircraft, it will be more insightful to compare the figures with the pre-pandemic (more normal) era, rather than the pandemic period, when all-time highs were reached. Likewise, when comparing the growth of the overall air cargo market, we will be able to draw more rational conclusions if we take pre-pandemic levels as our benchmark. Otherwise, it would be incorrect to claim that our analyzes are realistic. In other words, in the coming period, even though the market growth appears to have slowed down compared to 2020-2021, and even 2022, it is essential to make a useful and sensible assessment in the coming period whether this is really the case. In the years to come, it will be useful to consider whether the rapid rises in the graphs of the recent past are organic or due to specific reasons.

Due to the significant political and economic uncertainties affecting the entire globe, the performance of the air cargo industry has declined compared to the record highs reached in 2021. The fact that governments in developed countries are determined to continue measures to combat inflation by cooling the overheating economies could result in cargo volumes declining by around 5.6% in 2023 compared to 2019. The good news for the air cargo market, however, is that productivity and total revenue for 2023 will continue to be significantly higher than pre-pandemic levels. 

As the global aviation industry deals with geopolitical tensions, ongoing conflicts, inflationary pressures, labor problems, and operational issues in the aftermath of the Covid-19 pandemic, the performance of the air cargo market in this chaotic environment is praiseworthy.

Before concluding, a brief look at the Turkish air cargo market shows that ACT, ULS, and MNG, the three major cargo companies operating in Türkiye, have the wind at their backs. These companies took advantage of the opportunities arising from the pandemic and increased their investments, resulting in balance sheets that have hit the highest levels in their histories. Turkish Cargo is of course the other significant player in the Turkish air cargo market, aside from these three companies. Let's take a quick glance at Turkish Airlines’ financial statements to examine Turkish Cargo’s position. Turkish Airlines ended 2022 with a net profit of USD 2.7 billion. Since 2020, Turkish Airlines has managed to achieve net profit for the sixth consecutive quarter, despite numerous pressing problems experienced worldwide. In 2022, Turkish Airlines' total revenues reached a historic high of USD 18.4 billion, 39 percent above 2019 figures. The share of air cargo in this is undeniable. Cargo revenues, which account for 20 percent of total revenues, saw a rise by 120 percent in 2022 compared to 2019, totaling to approximately USD 3.7 billion. However, cargo revenues fell by USD 280 million compared to 2021. Having quadrupled its market share in cargo transportation in the last 10 years, Turkish Airlines became the fifth largest air cargo carrier in the world in 2022 according to IATA statistics. Turkish Cargo flew to 355 destinations across 132 countries with 21 freighter and 373 passenger aircraft. The SMARTIST-related investments made for Turkish Cargo at Istanbul Airport are paying off in spades. The goal for the near future is to rank among the top three. Reaching the top of the global air cargo market will then become a natural goal if internal dynamics within Turkish Airlines, political developments in the country, talks for the incorporation process, and external variables create an appropriate ground for this.

If the air cargo market is able to reach its forecasted annual growth target of 5.7%, the world will require 1.7 times more freighter fleet than it has today. To summarize, we can expect strong growth signals both in the air cargo industry and in the passenger-to-freighter aircraft conversion market. While all this is happening, it is useful to closely monitor the state of the e-commerce market, because it is possible that the market growth will considerably accelerate. In the meanwhile, we continue to follow the developments in the sector closely with great interest.