Air freight rates hit record highs

Air freight rates around the world have surged to record levels as shippers try to meet soaring demand over the upcoming Christmas season.

Air freight rates hit record highs (Photo: ACI)

Air freight rates have nearly doubled on key air routes linking manufacturing hubs in China with consumers in the US and Europe in the past three months, leaving the air freight industry struggling to find enough planes to meet the demand.

Air freight rates on routes from Shanghai to North America hit $14/kg for the first time last week, up from $8 at the end of August and higher than the previous record of $12 achieved. when the pandemic first hit global supply chains in early 2020.

According to data from the Baltic Exchange Airfreight index and TAC Freight, providers of freight data, there were similar increases from Hong Kong to Europe and the US, and on transatlantic routes between Frankfurt and North America.

Yngve Ruud, global head of air freight for Kuehne+Nagel, one of the largest freight forwarders in the world, said: “Everyone knows if they want something on to the shelves before Christmas they have to use air freight."

Businesses already ship finished products such as fashion and consumer electronics by air, as well as parts including auto parts or semiconductors.

Aviation industry executives have also rushed to order Covid-19 test kits and personal protective equipment to deal with the Omicron corona virus variant.

Global supply chains were the busiest in the fourth quarter because of sales for Black Friday and Christmas, but the seasonal spike in demand put the airline industry under enormous pressure.

Many shippers have turned to air freight after the chaos in the shipping industry, due to lack of containers and congestion at major ports.

Many shippers have turned to air freight due to the chaos in the shipping industry

Many shippers have turned to air freight due to the chaos in the shipping industry

Normally, half of the cargo would be transported by passenger plane, but many of these planes have been grounded during the pandemic and when airlines are advised to fly again, it has yet to be able to meet the demand of flights connecting major commercial centers. Omicron also threatened to disrupt passenger traffic.

The WTO director general said supply chain problems could last for months. A number of passenger airlines have turned to freighters by taking advantage of their passenger planes. And specialized air freight companies such as FedEx and DHL have also worked to solve the difficulties.

However, according to Marco Bloemen, head of cargo consulting at Seabury Consulting, a subsidiary of Accenture, the aviation industry is still down 13% of capacity compared to 2019.

The shortfall comes as demand has grown 6% year-on-year, Bloemen said, leading to a gap between supply and demand of nearly 20 percentage points.

Even reopening transatlantic travel has not helped as airlines have switched aircraft capacity back from cargo to passenger, and capacity is limited as tourists relax. The intellectuals, who tended to carry a lot of suitcases, returned faster than the business group, Ruud said.

Prices between Frankfurt and North America have increased from $3.50 to $5.40/kg since the Biden administration announced it would reopen borders to international visitors.

East Midlands Airport, a major freight hub in the UK, is expected to handle 470,000 tonnes of cargo this year, up from 370,000 tonnes before the 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 strain, the impact will eventually be felt by consumers, according to Bharat Ahir, chief executive officer of supply chain consulting firm 28one.

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

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