Australian forwarders fear air cargo capacity crunch if Covid support ends
28 / 05 / 2021
Australian freight forwarders are concerned that they could face air cargo capacity shortages and higher rates if a government subsidy programme ends in September as planned.
The Austrade International Freight Assistance Mechanism (IFAM) was set up earlier in the Covid outbreak to support airlines’ air cargo operations and keep supply chains moving given the loss of bellyhold operations.
The programme offers financial support to airlines to maintain flights and also grants to shippers of between 30-35% to help offset higher airfreight costs.
The International Forwarders and Customs Brokers Association of Australia (IFCBAA) said that while passenger operations – and therefore bellyhold capacity – are increasing, it has concerns for airfreight capacity and rates when the current IFAM programme concludes in September.
“The general consensus is there will be an impact to space capacity and rates following the withdrawal of IFAM support, if no additional capacity is added,” it warned, adding: “The concerns for importers will be the space availability and freight costs after September entering the peak season, further compounded by booming ocean cargo volumes.”
The association said that there was already “too much freight fighting for too little space” on the import side, given surging e-commerce demand and ocean shipping congestion.
On exports, the IFCBAA warned that the loss of subsidies for shippers could result it becoming too expensive for them to continue exporting freight.
Prices will in effect immediately increase by between 30-35% for shippers using the scheme because of the lost subsidies, which could make it too expensive for many to continue exporting.
In turn, with lower export revenues, airlines could withdraw capacity and this could push up prices further.
“The shake out of demand and supply will inevitably impact exporters of perishables and general cargo shipments encountering less capacity and high freight rates,” IFCBAA said.
In a submission to an inquiry into supply chain vulnerability, the association said: “IFCBAA urges the government to continue funding the IFAM program beyond September 2021 to provide continued stability of capacity and rates in the market for importers and exporters to access.”
The association said that since IFAM commenced in April 2020, there have been 13,726 supported flights serving 67 destinations from nine locations, with an expected cost of A$800m by September.
Over 1,000 of these flights have been pure IFAM freighter flights and 475,000 tonnes of product worth over A$6.8bn has been airfreighted under the programme.
The government launched the programme last year when the Covid outbreak saw commercial passenger flights drop by more than 90% almost overnight.
“This had an immediate and devastating effect on Australia’s ability to airfreight goods. As an island nation, Australia is heavily reliant on passenger flights for time-sensitive freight, with 80% of Australia’s airfreight typically carried in the bellies of passenger flights,” the IFAM website states.
The government has already extended the programme once.