Needless to say, every industry has been massively affected by the COVID-19 global pandemic. Coming seemingly out of nowhere, most companies have had to adjust their business strategy in order to stay afloat. Just because a disease reared its ugly head did not mean the world could continue to remain still. In fact, the world needed many of the industries affected by COVID-19.
One of the many industries impacted by this epidemic was and is the airfreight industry. Traveling to and from is still something very much needed. While many believe that the pricing for air freight must be low, they would be incorrect. If you believe that pricing would be down due to people needing to remain at home and not travel, you would be mistaken. Demand may be low for passengers, but this is not the case when it comes to personal protective equipment. As well as medical supplies.
Passenger Planes Make Up More Than 50%
When it comes to passenger planes, more than 50% of air freight in fact flies in the cargo holds of these planes. Transatlantic lanes cause that number to rise up to 80%. As you can imagine, due to COVID-19, things have dropped a bit. Such as global air cargo capacity dropping 35% from the previous year. What does all of this mean? The limited capacity of passenger planes has caused the price of air freight to shoot through the roof. This is particularly the case when it comes to mainland China.
Neel Jones Shah, the EVP and Global Head of Airfreight; explained:
“Demand for PPE has ratcheted up the usual level of demand for air. Everyone’s competing to get on an airplane, but we’re in a situation where capacity is just tapped out.”
Where Pricing Is Now
Pricing is higher than what we have seen in the past five years. This is especially true when it comes to the Transpacific trade lane. You can see the chart below, which explains the percentage difference from 2019 to 2020.
Currently, the China to North America spot air freight pricing is above 10 USD per kilogram. On top of that, full freighters are selling above 1M USD per flight. This number has been increased each week. If you look at the China to Europe air freight rates, the rate has tripled in the past month. Additionally, there are some ground-handlers in the North American region and the EU who are imposing aCOVID-19 emergency support surcharge. As if things haven’t cost enough. This is not something someone who runs a company that relies on air freight wants to hear.
PPE Currently Dominates
Currently, many passenger fleets are currently grounded. This means that PPE is dominating any existing capacity. Keep in mind that airplanes can only be flown a certain amount of times before they need to be taken out of the rotation. This is so these planes can be repaired and go through the proper maintenance protocols to get the approval to fly again. But, due to the PPE demand, planes are being flown to their maximum capacity. Which, is a little frightening; because this means that they aren’t being taken out of rotation quickly enough for the proper maintenance.
The Perfect Storm of a Disease
COVID-19 hit China just at the same time of the time factories would normally be shut down for Chinese New Year. Meaning that manufacturing was dormant for several weeks. This delayed factory output. What does this mean? Orders in limbo and not being delivered. But, people still need their orders. With the world demanding what they want, being stagnant is not an option. Not only for them, but for the well being of your company as well. Due to this fact, there have been some buyers that have switched from ocean freight to air freights. This is in hopes of getting their orders quicker.
There has been a very dramatic reduction in air freight space availability, And which is fueling a lopsided competition of merchants who are trying to send out their product. Due to the demand of PPE, elevated prices for airfreight is not likely to drop any time soon. Not until the Coronavirus is contained. And preferably, until a vaccine is developed.
Precautions To Take
It might seem as if this COVID-19 diabolical is making air freight virtually impossible. Especially if the prices continue to go up. The last thing anyone wants is to see the prices continue to rise, but it is unfortunately the reality of the world that we are living in right now. This is why there are certain precautions you must take in order to help fight against any sort of soaring prices that may affect your business.
- Make sure you are working alongside your freight forwarder on shipping plans. This way you can help reduce the quantities of your shipping orders. Your forwards can move smaller quantities easier.
- This is by using passenger freighters. It is actually easier to get uplift for your smaller shipments as opposed to chartering planes. This is something to take into consideration when looking at the reality of the situation every industry is in so you can continue with business, despite the challenges that COVID-19 presents.
Conclusion: When Can The World Go “Back to Normal”?
When will things go back to normal? That can’t be said for sure. The thing is, no one knows when this COVID-19 disease will be squashed. Many people simply look at this year as a year that will be affected, but the truth is if there is no vaccine and people do not continue social distancing, the Coronavirus problem could last in 2021. Not only that, but let’s take a look at the SARS outbreak. Even when the SARS disease was cured, people were still hesitant to travel. So it is going to take a while for things to “go back to normal” even after COVID-19 has been contained. Even then, who knows if the air freight industry can ever go back to the way it was before.
