These last months have been busy…like real busy! No capacity, no trucks, screening delays – and pretty much just more of the same we have all experienced the last two years in this industry. But there is a glimpse of light at the end of the tunnel. Come March 26th, the summer schedule for the airlines will be published. Historically, the summer schedule puts more capacity into Rome, Athens, Orlando, and Bali – the typical tourist spots. However, this year it is also expected that a lot more capacity will open to the traditional lanes. With Covid cases and the severity of it easing, we expect to see more capacity overall. What a joy it would be to have the airlines calling around hustling for freight again!
What we did not expect was the Russian invasion of Ukraine and what impact that will have on our industry…
Let’s examine a few of them:
Rail - service between China and Europe has become a competitor to Sea/Air services and at times even an alternative to deferred airfreight service. Hundreds of trains travel between Asia and Europe via Ukraine or Russia. They could all come to a halt which would increase the demand for air cargo capacity.
Conventional Airlines – they can no longer cross Russian air space, so they must fly the Southern route over India. That adds about two hours to the journey equaling two hours’ worth of fuel, and thereby less cargo capacity on board. As a result, many cancelations were made today. Finn Air canceled all their Asian routes with immediate effect, and many others will follow. It is simply not financially viable to operate in said environment.
Oil prices - they are increasing and will make it more expensive to operate aircrafts as well as fuel powered vehicles used within the industry.
ABC (Airbridge Cargo) - a Russian airline that operates 16 full freighters. A majority of those are between Europe and Asia. They have now been banned by the EU and UK to operate in Europe and have flown back to Russia. That is 100s of tons of capacity taken out of the market.
War Surcharge - we have already seen the first carriers introduce a $0.20/kg War Surcharge Fee.
So, what can we expect here in the USA?
With reduced capacity and higher rates between Europe and Asia, it will put pressure on the capacity from the Middle East to Asia. We will have to compete with the Europeans for space out the Middle East into the Sub-Continent and Southeast Asia. The Asian carriers will follow suit.
Full Freighter capacity will be sparce to say the least - pressing the charter market upwards.
Anything positive coming out of this? Yes, maybe some of the aircrafts taken out of the Asian routes, may be deployed on Trans-Atlantic routes. But that’s hardly a flicker of light at the end of the tunnel unfortunately. In the end, we will all come out of this but not without a few bumps and turns to maneuver through. As always, Shipco Transport is here to help you with all your air, ocean, rail, and domestic trucking needs during these trying times ahead of us.
For more information or assistance, contact us at airfreight@shipco.com or visit our website at www.shipco.com
