Airfreight’s role in the Red Sea shipping crisis takes shape

Supply chains continue to be under threat due to the Red Sea shipping crisis, and airfreight is busy establishing its role in the situation.

Since October 19 last year, missile attacks on ships in the Red Sea by Houthi rebels have caused fractures in the international supply chain.

But with approximately 15% of all seaborne trade usually passing through the Red Sea en route to customers across the world, how can deliveries of goods continue to be made safely and efficiently, and how can airfreight companies ease the pressure on supply chain stakeholders? 

More than two dozen vessels have now been targeted with missiles by Houthi rebels loyal to the Hamas regime in Gaza.

Despite the majority of vessels using the Suez Canal route via the Red Sea having no links to Israel, attacks have continued into February 2024 and those moving goods to customers in Europe and the UK have been forced to seek alternative routes after the use of convoys through the region failed to protect vessels.

40% of all Asia-Europe trade usually travels via the Red Sea to the Suez Canal, including oil and diesel bound for Europe as well as food products like palm oil and grain. 

Freight shipping platform Freightos has estimated that, typically, approximately 30% of all global container traffic and more than 1m barrels of crude oil per day are transported through the Suez Canal every day.

Using the route around the Cape of Good Hope in Africa to Europe can add up to two weeks and more than $1m to every sailing, and so shippers are seeking reliable alternatives.

Some have considered rail as a potential alternative route for goods from China to the UK, but shipments have been delayed by disruption caused by the Ukrainian conflict, which is edging closer to northern rail routes from the Far East to Europe.

Airfreight provides a reliable, yet more costly alternative to move goods from the Far East into Europe. The cost to the shipper or end user can be significant, sometimes three to four times more than using a sea or rail route, but often the cost of not having the goods at all is far greater.

Observers have predicted a significant rise in the use of airfreight, but this has yet to be fully realised, with spot rates for shipments in December only up 6% on the previous month.

One possible alternative for shippers is the combined use of sea and airfreight. A multimodal solution allows for some reduction in costs before the final transit leg is taken by air, avoiding the Red Sea and providing a significant reduction in transit times.

To make this solution viable, airfreight capacity needs to be released in Asia or America, which would enable logistics businesses to make a swift switch while continuing to deliver for customers.

Logistics as a sector is always flexile and adaptable, airfreight especially so, but it is clear that the current situation is testing this theory to the limit, with shippers and carriers needing to be agile and adaptable.

Depending on how long the situation in the Red Sea continues, there will undoubtedly be an inflationary push from the increased cost of modal switch.

However, as summer approaches and bellyhold capacity increases from locations such as Dubai or Los Angeles, airfreight carriers have the opportunity to protect the world’s supply chain while creating significant business from rerouted cargoes.

This modal switch may not be cost effective in the longer term, but will ensure that the world’s supply chain remains intact, and economies can continue to operate effectively.

Logistics UK and its members will maintain a close watch on the situation to ensure that business can continue to access the goods it needs as required.

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