Air freight costs soar to record high

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Air freight costs soar to record high

Cargo prices surge as Christmas demand piles further pressure on strained supply chains

Prices have almost doubled on key air freight routes.

The cost of flying cargo around the world has reached record levels as companies attempt to meet surging demand in the run-up to Christmas.

Prices have nearly doubled on key air freight routes linking manufacturing hubs in China to consumers in the US and Europe over the past three months, leaving the industry struggling to find enough aircraft to keep up.

Prices on routes from Shanghai to North America reached $14 per kilogramme for the first time last week, up from $8 at the end of August and above the previous record of $12 achieved when the pandemic first hit supply chains in early 2020.

There have been similar rises from Hong Kong to Europe and the US, and on the transatlantic routes between Frankfurt and North America, according to data from the Baltic Exchange Airfreight index and TAC Freight, cargo data providers.

“Everyone knows if they want something on to the shelves before Christmas they have to use air freight,” said Yngve Ruud, head of global airfreight at Kuehne+Nagel, one of the world’s largest freight forwarders.

Companies have been moving finished products such as fashion goods and consumer electronics by air, but also components including auto parts or semiconductors.


There has also been a rush to order Covid-19 tests and personal protective equipment into Europe to deal with the Omicron coronavirus variant, according to industry executives.

Supply chains have always been at their busiest during the fourth quarter because of Black Friday sales and Christmas, but the seasonal surge in demand comes with the industry under immense pressure.

Companies have turned to air cargo following chaos in the shipping industry, where there is a shortage of containers and bottlenecks at ports.

Half of air cargo would normally be carried in passenger jets, but many have been grounded during the pandemic, and when airlines have recommenced flying it has often been on leisure routes rather than major trade hubs. Omicron also threatens to disrupt passenger traffic.

WTO director-general says supply chain problems could last months.

Some airlines have switched to flying cargo and dedicated air freight companies such as FedEx and DHL have picked up some of the slack.

Yet the industry is still 13 per cent down on 2019’s capacity, according to Marco Bloemen, cargo advisory lead at Seabury Consulting, an arm of Accenture.

The shortfall comes as demand has risen 6 per cent over the same time, leading to a nearly 20 percentage point gap between supply and demand, Bloemen said.

Even the reopening of transatlantic travel has not helped because airlines have switched aircraft back from carrying cargo to accepting passengers, and hold capacity has been limited because leisure travellers, who tend to check in multiple suitcases, have returned faster than business travellers, Ruud said.

Prices between Frankfurt and North America have risen from $3.50 to $5.40 per kg since the Biden administration announced it would reopen its border to international visitors.

East Midlands Airport, a major freight hub in the UK, expects to handle 470,000 tonnes of goods this financial year, up from 370,000 pre-pandemic.

“Those businesses that relied on bellyhold space on passenger planes for moving goods are likely to continue to use dedicated air cargo services . . . until transatlantic passenger routes return to pre-pandemic levels,” said Clare James, the airport’s managing director.

With supply chains under stress, the impact will ultimately be felt by consumers, according to Bharat Ahir, chief executive of supply chain consultancy 28one.

“There are two clear impacts — availability will be lower, and what you have got is going to be more expensive,” he said.

Bron: / Philip Georgiadis


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