Expeditors the latest to outline ongoing air cargo constraints

By Damian Brett

Credit: Shutterstock

Congestion and capacity shortages in air cargo are expected to continue as the industry deals with the impact of ocean shipping chaos, heightened demand and lost belly capacity, according to Expeditors senior vice president of global air Kelly Blacker.

Speaking on a company podcast, Blacker described the freight market as an eco-system with issues in one mode of transport having a knock-on effect in other modes.

The ongoing issues in ocean shipping — with container shortages, port congestion, delays and record prices — was pushing demand over to airfreight.

“The bulk of our consumers goods move ocean,” said Blacker. “So when you have the capacity situation that we have and demand that we’re seeing in ocean, the ocean market is not having the containers in the right place, not being able to get loaded, not being able to get your containers, then all of those other industries shift over into air as well.

“Your general goods, whatever it might be. Automotive, home goods, everything might shift over into air so we see that conversion. The challenge is very small amount of ocean has a big impact on air in terms of total capacity.”

She said that higher prices in ocean shipping were also helping make air a more attractive option.

According to IATA, the average cost of air cargo in May was six times more expensive than seafreight, compared with 12 times more expensive pre-crisis.

Figures from Freightos show that ocean rates from China to the US west coast in the first week of July stood at $6,533 per 40ft unit, a 151% increase on a year ago. From China to the US east coast prices were up 209% at $10,30 per 40ft unit.

Blacker said that another issues faced by air cargo is airports suffering with congestion as airlines consolidate services at the main hubs, which in turn concentrates cargo volumes at these locations.

“We’re seeing some significant congestion in the US traditional gateway locations,” she said. “There’s just too much cargo. It starts with the airline ground handlers and trying to unload the aircraft and get that turned around and make it available for us.

“They can’t handle it as well, they don’t have the capacity, warehouse capacity to turn it quickly. Labor is also an issue. Equipment is also an issue in terms of forklifts and things like that to get the cargo mode. Then it compounds into the container freight station operations, same issue, lack of warehouse capacity and labor and just being able to do that throughput.”

On the return of bellyhold capacity, expectations are that it will not return to pre-pandemic levels until 2024, which means constrained cargo capacity until then, she said.

And demand levels are expected to remain high: “People are ordering, demand is not going down, inventory to sales ratios are historic lows. [The Purchasing Managers Index] is still very high.

“There’s all these indicators that show that that demand is going to continue and [shippers] are under a lot of pressure to get the goods in and try to get them back on the shelf.”

Blacker is not the only person to predict ongoing capacity constraints in air cargo.

After announcing its latest quarterly results, Kuehne+Nagel (K+N) said that it also expects airfreight capacity shortages to last into next year.

The forwarder’s chief executive Detlef Trefzger said that Asian exports continued to grow strongly while passenger belly capacity was short of previous levels.

He doesn’t expect a return of belly capacity to previous levels globally until 2023 or 2024.

K+N would therefore utilise charters and block space to meet demand.

FedEx also indicated it is not expecting a full recovery in air cargo capacity until 2024.

The express giant said that trade volumes have surpassed pre-pandemic levels and are on course for the fastest year of growth in over a decade.

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