SGL predicts another challenging year for airfreight

By Damian Brett

Credit: Shutterstock

Fast-growing freight forwarder Scan Global Logistics (SGL) is predicting another challenging year for airfreight as strong demand, ocean freight problems, ground handling issues and slow to recover air cargo capacity combine to keep the industry under pressure.

On the capacity side, the Denmark-based company said that it does not expect belly capacity to recover to pre-Covid levels this year as Covid-19 continues to put the breaks on a recovery in the passenger volumes.

Freighter capacity is already 100% utilised on all routes where possible, the company added.

“The vast majority of airlines are currently in limbo mode, having initially planned to add flights on most major routes in the coming period,” SGL said.

“However, with passenger travel taking a serious hit during the last month on account of the Omicron outbreak, these plans have been parked for the time being.

“Accordingly, a major capacity increase will be delayed and will be more moderate than expected.”

Another challenge for the industry will be on the ground, the company said.

SGL expects ground handling congestion triggered by lack of available labour to persist, resulting in delays, while a lack of haulage capacity will add further pressure.

Both issues will combine to push up prices, SGL said, while airfreight rates are also expected to remain elevated.

“An increase in ground handling charges and haulage rates is expected, with these two components functioning as counterweights from a price perspective.

“We also expect oil prices to go up during 2022, resulting in rate levels being sustained at a high level.”

On the demand side, high ocean freight prices and ongoing e-commerce demand are expected to support volumes.

The company added that while inflation is up, which could slow consumer spending, inventory levels are expected to remain low, which tends to boost the use of air as companies look to quickly transport cargo to meet demand.

“With ocean freight rates at an all-time high, airfreight is widely expected to continue to benefit from this situation as the relative price difference is less than it has been for many years,” SGL said.

“On top commercial drivers on the consumer side, specifically, e-commerce growth, is pushing volumes towards airfreight to ensure consumer demand is met.

“All in all, a busy and challenging year is on the horizon within the airfreight industry. It is, however, important to emphasise that relatively speaking, we consider airfreight to be further ahead than ocean freight in terms of market stabilisation.”

SGL expanded into the UK in October 2021 with the acquisition of Horizon International Cargo.

Scan Global Logistics expands into UK with Horizon deal

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