Despite tighter capacity and rising rates, air cargo has become an even more critical part of the supply chain. Instead of the traditional need for Air Freight to handle short-term peaks, companies are relying on it to move products to stores and production lines as congestion in global sea-trade grows unabated.
Rising Demand, Less Capacity
One reason capacity remains constrained is the large number of international passenger flights still grounded. Normally, passenger planes haul about half of all cargoes, and for most routes it doesn’t make economic sense to fly planes with cargo only and few passengers.
It might sound odd but, the lack of intercontinental passenger flights is causing the intercontinental air cargo market strain. The jump in ocean freight costs also prompts some shippers to move to air. The delta between ocean and air costs is not that significant, considering how much faster air can be. While increased airport congestion may add a few days to a shipping schedule, seaport congestion currently can add weeks, so for retailers concerned about receiving their shipments before the upcoming holiday season, air shipments’ extra cost is often worth it.
At the same time, airports face their own challenges. One is congestion, due in part to a labour shortages. Even once employees are hired, it may take several weeks before they obtain the credentials needed to access the airfields. As a result, some potential workers may be unable to wait, they look elsewhere for employment.
These shifts are converging to continue driving air cargo rates higher. In August 2021, for instance, they were 112% more than pre-COVID levels.
Freighters add capacity
About 300 passenger planes had their seats removed completely, facilitating even more in-cabin transport options. While these moves can help, removing seats from passenger planes has minimal impact on overall capacity. The reason? Cargo typically moves within either containers or pallets, which are cumbersome and time-consuming to load into a plane’s passenger area.
Keep an open mind
Shippers should keep an open mind by considering different airports. Given the continued growth in demand, shippers can expect longer than normal lead times and elevated rates compared to the pre-pandemic normal. There is not enough capacity in the entire supply chain.
While air is generally faring better than ocean, processing times have been extended as facilities and airports work to keep up with heightened demand.
Shippers need to incorporate all modes of transportation, including air, into their transportation.
Communicate early and often
Communication is KEY. Shippers should communicate their demand needs early and often with their freight forwarders.
They also should be aware that travel restrictions and policies regarding inbound crew and local workers are likely to remain fluid. As a result, short term changes could impact operational efficiencies.
A Silver Lining
It’s difficult to accurately predict where the air cargo market goes from here. Still, capacity, and thus rates, likely will remain tight until passenger flights return to roughly the level they had been before the pandemic.
Until the tight capacity situation is rebalanced, we can expect to see higher than standard rates continuing.
Yet, there’s an upside. “The silver lining of the pandemic, despite the horrible toll it has taken on lives, is that people are thinking outside the box and looking for different solutions for their supply chain efficiency. Again, air cargo demonstrates its importance to those who didn’t previously offer it much consideration.
And all involved in the airfreight industry continue to help find or develop solutions. We are all in this together, and we’ll find our way forward together.