In the latest Baltic Exchange market round-up, Chan said that despite a year on year drop in demand over recent months, supply chains remain congested and there could be a surge in production when factories in China re-open following Covid curfews.

“Early in the year, I expressed some level of surprise that we were not seeing even more upward rate trajectory based on the removal of air cargo capacity due to ongoing conflict in Ukraine,” said Chan. “I posited that upward pressure there was being offset, in large part, by a production vacuum in China as a result of widespread Covid-related lockdowns.

“For context, the percentage of the population under lockdown in China right now is estimated to be larger than the entire population of the US.

“And, while critical economic functions are still technically operational, the systemic nature of the quarantine restrictions means that production output from some of the country’s largest manufacturing centers are at their lowest levels since the initial shutdown in early 2020.”

He said that as well as a clearing of backlogged China freight, other factors that could again disrupt the market include ongoing capacity reductions related to the conflict in Ukraine and if US west coast port and labour negotiations result in strike action.

“Assuming no sharp and sudden deterioration in baseline demand levels (which cannot be guaranteed), there is a distinct scenario in which airfreight rates spike again, even from these elevated levels,” Chan said.

He pointed out that even though the market has softened on the demand side in recent weeks, due to pressure on consumer spending and a post-Covid rotation from goods to services, rates in April remained at historic high levels – although there have been some signs of pricing easing on some trades since then.

The latest figures from the Baltic Exchange Airfreight Index (BAI) show that in April the average rate from Hong Kong to North America reached $9.57 per kg, which is 12.9% up on a year earlier.

From Hong Kong to Europe average rates in April stood at $6.01 per kg, which is up 30.4% compared with last year.

“Logistics networks remain very congested and there is a real possibility that any temporary pull back in bottlenecks and rates are ‘head fakes’ and volatility will continue to be an issue until the core problems are resolved,” Chan said.

Peter Stallion, head of air and containers, at derivatives broker Freight Investor Services, agreed that many had expected prices to have weakened in April, although he said spot market prices are likely to be lower than index rates which also incorporate pricing on longer term deals.

“While we may have expected a drop off in rates from the first quarter of this year, the removal of Russian-owned airfreight capacity has artificially levered up the constraints for airfreight shippers,” he said.

“Asia to US rates have also seen a sharp increase, posting double digit rate percentage point increases following a collapse of available airfreight demand. However, this increase is still quite muted versus the true spot price.

“Transatlantic prices continued to jostle as they have done all the way through since second-quarter 2020.”

Stallion added that higher fuel prices are also likely to impact rates.

“The impacts of this fuel demand is reasonably clear, with Singapore Jet Fuel closing back up towards its previous high of $150.39/barrel (now $138.73/barrel).

“This will feed through into fuel surcharges and forms a component of general inflation that bleeds through into the cost of running airfreight operations.”

Source: www.aircargonews.net

Image: www.pexels.com

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ICS2 means that from March 2023 airlines will need to submit shipment information to a new centralised system named the Shared Trader Interface before the goods are loaded onto an aircraft.

Previously, the shipment information needed to be submitted electronically no later than four hours before arrival at the customs authority where the goods first reached the borders of the EU.

In another change, airlines can submit only the basic information and the forwarders and logistics providers can add the more sensitive details to the Shared Trader Interface at a later date.

This provides competitive protection for forwarders as they are not sharing customer details with the carriers.

Simon Lembke, director of customs and forwarding applications at Dakosy, said: “Freight forwarders and logistics providers no longer need to disclose the names of their customers and their related critical data to the shipping companies or airlines in the course of the procedure.”

Dakosy said that participants in the ICS process should prepare for the changeover in good time.

“It must be ensured that sufficiently precise data can be provided,” explained the software firm. “A standardised format called the Entry Summary Declaration (ENS) has been defined for ICS2, which does not permit any deviations.

“The required accuracy of the data is also becoming stricter, for example in the case of the HS code (Harmonised Commodity Description and Coding System). Previously, either the goods description or at least four digits of the HS code  had to be provided for the entry summary declaration; in the future, all six digits of the HS code must be transmitted.”

Lembke added: “For our customers, which include many major airlines and shipping companies, we already work with this format. So for them, by and large, everything remains as it is, and we take care of the new reporting path and, if necessary, an adaptation of the interfaces.

“However, we recommend checking well in advance to find out the extent to which business processes need to be updated and employees need to be trained.”

Source: www.aircargonews.net

Image: www.pexels.com

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The Xeneta-owned data provider’s latest numbers show that air cargo volumes decline by 8% year on year in April following on from a 4.5% fall in March.

Meanwhile, capacity increased by 1% year on year in April, resulting in a nine percentage point fall in the global dynamic load factor – taking into account both weight and space –  to 62%.

However, load factors were “exceptionally high” in April last year at 71%.

CLIVE said that the conflict in Ukraine and Covid restrictions, and the rising cost of living were all having an impact on air cargo.

The fall in demand is likely “exacerbated by the staff shortages jolting airport handling services and manufacturing production”.

Despite the lower volumes and load factors, airfreight rates in April increased by 26% on last year.

“The rationale behind lower load factors and higher rates is the bottleneck on the ground – which appears to be being caused now by not only the shortages of people handling cargo at airports around the world and the severe lack of truck drivers to move the goods, but also by a wider shortage of people for lower paid logistics jobs,” said Niall van de Wouw chief airfreight officer at Xeneta. “We are now seeing this larger theme impacting the entire supply chain.”

Shortages of goods in stores or available online, longer lead times for some products, higher shipping costs, and flight delays and cancellations are all consequences of these market conditions, he added.

“The hike in living costs and lower disposable incomes for consumers are other undoubted contributors to the slowdown in volumes.”

Looking ahead, van de Wouw said that the re-introduction of passenger services for the summer season would also begin to impact the market.

On the transatlantic, for example, load factors dropped by 12 percentage points in one month.

“This was caused by a big jump in North Atlantic passenger capacity as airlines stepped up their summer schedules,” CLIVE said.

Additional passenger flights are also expected to “takes some of the heat out of the demand/supply market,” he said, and potentially lead to a downward pressure on rates.

“During the last week of March, capacity increased by 15% compared to the previous week,” said van de Wouw. “This significant increase in space reinforces our previously stated forecast that the North Atlantic market will most likely be the first to return to some kind of normal, because of the high share of belly capacity on this lane.

“In terms of the dynamic load factor, we are seeing this shift starting to happen as we move from a Seller’s market to a Buyer’s market for air cargo. However, the issues on the ground might delay the Buyer’s market a bit longer.”

Source: www.aircargonews.net

Image: www.pexels.com

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The use of the passenger cabin for cargo, known as cargo-in-the-cabin flights, have been operating since 2020, after the EASA issued approvals and exemptions for the transport of cargo in passenger cabins on a case-by-case basis.

These approvals and exemptions were time-limited and while the EASA extended the rules in August 2021, it will not extend the timeframe again, it said in a statement on April 11.

The decision to allow cargo-in-the-cabin flights followed the grounding of passenger aircraft at the start of the pandemic and the subsequent high demand placed on freighter aircraft. In addition to the use of cargo-in-the-cabin flights (with seats in place and seats removed) the pandemic also saw a number of airfreight stakeholders invest in passenger to freighter aircraft conversions.

However, passenger operations – and therefore the availability of bellyhold capacity – are beginning to ramp up while the need to transport urgent pandemic related cargo such as PPE has eased.

The EASA said it “has concluded that the logistical challenges that arose in 2020 as a result of the Covid-19 crisis no longer exist to the same extent”.

In its Issue 6.0 guidelines for “Transport of cargo in passenger compartment – Exemptions under Article 71(1) of regulation (EU) 2018/1139 (The Basic Regulation), published on April 11, it further explained: “Cargo capacity in the holds of passenger aircraft is expected to increase by summer 2022, thus reducing the pressure on the logistic chain.”

The EASA said that in accordance with the guidelines it has “determined that the exemptions delivered in this context will not be extended beyond the current validity of July 31, 2022. The same applies for existing approvals that have been granted based on the use of the Deviation on transportation of cargo in passengers compartments.

“This Deviation can also not be applied to any certification projects for which the approval is issued after that date.”

The Civil Aviation Administration of China (CAAC) last year ruled that from January 2022 the passenger cabins of China-registered aircraft would only be able to carry pandemic-related cargo.

However, contacts have told Air Cargo News that Chinese carriers have continued with cargo in the cabin flights past the deadline.

European regulator extends temporary-freighter exception into 2022

US extends cargo-in-the-cabin exemption

Chinese airlines to refit seats in response to stricter cabin rules

Source: www.aircargonews.net

Image: www.pixibay.com

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For more than a month, the Ukrainian army has been resisting Russian occupation in a bloody battle. Although the people of Ukraine and Russia suffer most directly from the war, the rest of the world has also indirectly fallen victim to Putin’s decisions. I have already explained the impact the war in Ukraine has had on the freight sector as a whole, but I would now like to highlight the ongoing air transport sector. It is currently suffering not only from soaring fuel prices, but also from a lack of capacity, which is also having an irreversible effect on consumer wallets around the world.

Capacity is affected not only by ban but also by destruction

In early March, two weeks after Russia’s invasion of Ukraine, Northeast Asia-Europe’s transport capacity had fallen to 22% since the pre-war period. Now, almost a month later, it is even lower. The capacity of air carriers is most affected by the sanctions imposed on Russia. As a result, the delivery of goods to Europe is banned for the largest Russian cargo airline operator Volga-Dnepr, whose subsidiary AirBridgeCargo has more than 800 different cargo aircrafts. However, this is not the only aspect that affects the capacity of hauliers. Aircrafts destroyed as a result of war, which rubs salt into the wound of the industry, also play an important role. For example, in the battle against Hostomel Airport, the industry lost a historically unique specimen – the world’s largest cargo plane, the Mriya. Although the Ukrainian government has announced that every effort will be made to rebuild the plane, it will take time and at least $ 3 billion. It has also recently been confirmed that AN-26 and AN-74 aircrafts have been destroyed as a result of the Russian invasion.

To Asia around Russia

Due to the war, many air carriers have decided not to cross the airspace of Russia, Ukraine and also Belarus, citing the safety factor of employees as the main reason. This position has been publicly confirmed by industry giants such as UPS, DHL and FedEx, which own about 1,000 cargo planes. I believe that not only the issue of security, but also the image and political pressure of the company played a major role in making this decision. Now that most companies in various sectors are leaving Russian territory, thus clearly expressing their political position, the big logistics and freight companies must not lag behind either. It is clear to them, as to any other business expert, that the image of a company is easy to tarnish but hard to polish, and the smartest way to avoid becoming a black sheep right now is to turn your back on Russia.

Consumers become the victims

A series of all the above decisions and events will inevitably increase the costs for air cargo carriers, which will not only hurt market players but also consumers. There are already companies in the industry that are increasing the additional costs for international freight. One of them is FedEx, which took such a step in March. Although the company is one of the first to change its pricing policy as a result of events, it will certainly not be the last.

The most logical solution – more cargo planes

Once again, as in the Covid-19 outbreak, when the industry was struggling with a lack of capacity, the most effective solution is to transform passenger planes into freight transport. Such restructuring of airlines would significantly increase the capacity of air cargo carriers. Moreover, according to Insider, it is more profitable than buying new cargo planes. According to the media, such a move could save companies hundreds of millions of dollars. Airlines such as Qatar Airways and the Emirates Group, known to the general public as passenger airlines, took this step in early 2020. At the end of March, Alaska Airlines joined them, adapting five different passenger planes for cargo transportation.

Whatever the future decisions of air carriers, one thing is clear: only by working together in a crisis situation will it be possible to meet the needs of both the industry and the customer.

Author: Roland Peterson, logistics expert

Image: www.pexels.com

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As a result, many flights are diverting south, but with some airspaces in the Middle East restricted or closed, airlines are limited in their options.

Diverted routes can lead to lengthy blockages on key flight corridors, which in turn causes cancellations, limited capacity for freight and potentially increased costs.

Various flight times have also increased due to the diversions, which can result in increased fuel usage and potential further increased costs, which may need to be passed on to the end customer.

Since the crisis, fuel prices have been rising; for the week ending March 4 2022, jet fuel (kerosene) cost $1,119 per tonne – an increase of 28% from the previous week, and a 45% increase since the start of 2022.

This is a concern for an industry which has already seen airfreight prices rise to two and a half times higher than pre-pandemic levels, and is still recovering from the impact of Covid-19.

Passenger travel and airfreight are intrinsically linked and in 2020, with only limited numbers of passengers flying, UK airfreight volume fell to 2,002,000 tonnes, a 21% drop in comparison to the 2,535,000 tonnes in 2019.

The sector started to see green shoots of recovery in November 2021 – according to the Civil Aviation Authority, total UK airfreight tonnes increased by 5.9%, compared with November 2020 – but, just as it starts to recover, these latest developments could once again see turbulence on the horizon for the sector.

Air cargo and road transport capacity are needed urgently to move donated food, medicines, clothing and other items to Poland and Ukraine-surrounding countries to support those affected by the war.

If capacity is to become constrained, humanitarian aid must be prioritised.

Despite the challenges facing the airfreight sector, it has a reputation for facing and solving complex problems, as highlighted in recent years.

As when transporting medical supplies throughout the pandemic, the sector will adapt to prioritise essential goods, while also ensuring the rest of the supply chain is maintained.

Logistics UK is working with the CBI to link members able to transport donated goods either via air or road and is urgently seeking air capacity to help the lift of aid to Poland, Germany and Moldova.

If any members can pledge their support, please email supplyukraine@logistics.org.uk

Source: www.aircargonews.net

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The latest figures from CLIVE Data Services, which is part of the Xeneta rate benchmarking platform, show that demand for March was 4.5% down compared with a year earlier – and 6.5% down on pre-Covid 2019 levels – marking a “sudden interruption to the recovery trend of recent months after the peak Covid disruption of the past two years”.

Capacity in March was down 3% compared with last year and 14% against 2019 levels.

As a result, dynamic load factors – accounting for both weight and volume – stood at 66%, which is the same level as recorded in 2019 and six percentage points lower than 2021 after record levels were reached that year.

Despite aircraft being less full in March than they were a year ago, rates have actually increased by 27% year on year and are up by 141% compared with two years ago.

Niall van de Wouw, chief airfreight officer at Xeneta, said this was down to disruption on the ground.

“There are also still many issues with capacity on the ground. One bottleneck got replaced with another one,” said van de Wouw.

“Load factors are lower this year than they were last year, but prices are higher. The latest disruption in Shanghai is not unexpected but it adds to the worldwide issue of staff absence because of high Covid cases.

“Pilots, cargo handling workers, truck drivers etc, unlike many others, cannot work from home. It’s hardly surprising then to hear the International Monetary Fund (IMF) blaming soaring shipping costs for driving up inflation rates.

“Right now, the airfreight and oceanfreight markets are in general a mess, with shippers and consumers having to pay the price. In the first two months of 2022, we were talking of growing resilience in the airfreight market and a recovery to pre-Covid levels. March data shows how quickly this can change.”

CLIVE also noted an increase in the placement of capacity into the spot market on certain trade lanes, such as Europe-Japan trade, where the amount of chargeable weight at a spot rate increased to 60% of the market, or 20 percentage points higher than February’s spot share.

Rates from Japan to Europe increased to around €5 per kg, nearly 50% higher than the weeks preceding the Ukraine war.

Carriers on the route had removed capacity as they sought flight paths that avoided Russian airspace.

“In overall air cargo market terms, March was a step back from the trend we saw late last year and earlier this year. We have been reminded of how the limited control the general airfreight market has over its own destiny and how it is impacted by passenger traffic trends, disruption in the ocean freight market, and geopolitical events,” said van de Wouw.

He added that ongoing disruption in ocean shipping could provide a boost to air cargo demand while higher inflation could have a negative impact.

“Although it is too soon to tell what the skyrocketing inflation numbers in the US will result to, the logistical difficulties on the water between these two continents must put some wind into the sails of the air cargo market.

“With continuously declining schedule reliability of the ocean liners, logistical departments will likely be required to resort to airfreight because of disruptions to their supply chains caused by these record low service levels,” he said.

Source: www.aircargonews.com

Image: www.pexels.com

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Speaking at a press conference, Lufthansa Cargo chief executive Dorothea von Boxberg said this is because of restrictions for global fleets. Russian carriers are restricted by airspace sanctions by the European Union, UK and US, European carriers are not able to fly over Russia and Ukraine, while, Japanese carriers are flying around the Russian airspace and Middle Eastern airlines have seen no changes.

Two high profile airlines to be affected are Volga-Dnepr Group airlines, which are not able to operate flights to Europe and North America, and Narita-hubbed Nippon Cargo Airlines that has temporarily suspended flights to Europe.

Lufthansa Cargo also calculated a 10% capacity reduction for its freighter operations from Asia Pacific to the European Union.

She confirmed that the closure of Ukraine airspace and Russia’s decision to close airspace to airlines from 36 countries has impacted operations.

“That affects some of our most important routes into China, Japan and South Korea.”

These routes would usually cross Russian space, but now a route south of Russia and Ukraine is being taken that means flights take 1.5 to 2.5 hours longer than normal. However, as the average door-to-door time of a shipment is five to six days, this extra time won’t make much difference to shippers.

“It is more a question of the capacity that is missing than the time of getting it transported.”

Payload restrictions are also an issue.

“We’ve got the 777 which is a great aircraft, I think the only one that would do these distances and payloads without intermediate stops. But then it cannot carry the 100 tons anymore. That’s why altogether it means something like a 10% reduction in our available freight capacity.

“The capacity of course is still there but in terms of tonnage we can transport, it will about that less (-10%).

Source: www.aircargonews.net

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The latest annual TIACA Air Cargo Industry Sustainability Survey, organized in conjunction with consultancy Change Horizon, revealed that 55% of the 204 respondents said that the pressure to invest in sustainability had increased in 2021 compared with a year ago, although this is three percentage points down on the previous survey.

The drivers for being sustainable are also changing with its importance to customers, employees, business partners and local community decreasing slightly, while importance to shareholders and regulators was on the rise (see charts below).

Other key findings in the survey were that 85% of respondents felt that Covid-19 had a positive or neutral impact on the industry’s sustainability agenda and 73% declared they have a sustainability strategy in place.

However, “only” 52% (down nine percentage points compared to 2021) have at least one dedicated person in charge of delivering the sustainability agenda and just 37% (-6 percentage points v 2021) have a specific budget.

Also, 60% of the companies confirming they have a dedicated sustainability budget said this had increased on the previous year but “only” 50% of corporates in the air cargo industry share their sustainability performance externally, which TIACA said is well below the global trend of 80% of companies worldwide.

TIACA director general Glyn Hughes said: “The second TIACA Air Cargo Sustainability Report confirms the industry is ramping up its action to run business in a way that does not degrade the environment and brings benefits to society.

“However, while the leadership is now paying attention to the sustainability agenda, there is still a long way to go as the resources and budgets to push it forward are still very scarce.

“The pressures on this industry to prioritize sustainability are ever increasing as customers, employees, business partners, and increasingly, investors and regulators are asking air cargo businesses for their sustainability credentials.”

On sustainable aviation fuels (SAF), while less than a third of respondents are actively involved in SAF deployment, a “striking third feel it doesn’t apply to them”.

TIACA urges all air cargo businesses to set up concrete targets to accelerate their sustainability transformation; measure progress made by collecting data and facts regularly; communicate on achievements with transparency; and get recognized for the progress made by embarking on TIACA’s Sustainability Assessment, Validation and Verification Programme, currently under development.

Source: www.aircargonews.com

Image: www.pixibay.com

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This is according to the latest data from industry analysts CLIVE Data Services, which found chargeable weight in February was at 0.7% down on the pre-Covid level in 2019, and up 2.6% compared to February 2021, with capacity in the market down 5.4% and up 6.9% to the respective 2019 and 2021 figures.

However, CLIVE warned that the war in Ukraine means the air cargo market is heading into another period of significant uncertainty with a rise in rates.

“Airfreight market conditions feel insignificant when you see what is happening in Ukraine and the suffering of the Ukrainian people since Russia’s invasion,” said Niall van de Wouw, managing director of CLIVE Data Services, which was acquired by air and ocean rate data provider Xeneta in January.

“The war in Ukraine is another example of an external event of which the air cargo industry has no control over, but which is having a profound impact, as happened with Covid. When we consider the recovery of the aviation industry from the pandemic, the return of passengers is still a big question mark. The war in Ukraine presents another big question mark, particularly over Europe-Asia trade flows. It is difficult to overestimate what this could mean down the line.”

The sudden drop in capacity on Europe-Asia routes and overflight issues were already having an effect into North East Asia routes in the closing days of February, he said. CLIVE is closely monitoring the situation on a daily basis. Rising oil prices are also expected to significantly impact global airfreight rates.

“Whilst we were seeing some clear signs of normality returning, there is still so little slack in the global air cargo system. It is quite unlikely that the trend of slowly declining rates will continue in March,” said van de Wouw.

“The war in Ukraine causes immediate capacity issues to North East Asia and, therefore, will likely  push up rates even more for these particular markets. Air cargo trucking services might also be affected as numerous Ukrainian drivers – which form an important share of the truck drivers in Europe – have decided to go back to their home country.

“A fragile global air cargo supply chain is already sensitive to minor shocks. War in Europe and its resulting sanctions could turn the industry upside down once again, just at the time when the covid impact was looking more under control. We remain in volatile and uncertain times.”

CLIVE’s weekly and monthly analyses of the general air cargo market continues to measure performance to the pre-Covid 2019 level, as well as giving 2021 year-over-year comparisons, to provide a meaningful assessment of its current performance.

Consequently, CLIVE’s ‘dynamic load factor’ – which considers both the volume and weight perspectives of cargo flown and capacity available to produce a true indicator of airline performance – of 65% was 4.5 percentage points lower than in 2021 and close to two percentage points higher than in 2019.

After the peak season pressures placed on supply chains in November and December, which saw average airfreight rates increase by as much as 168% in the final month of 2021, the quieter market conditions at the start of the year saw overall rates ease for a second consecutive month.

Rates, while still very high, were seen to be slowly winding down in February  – up 137% versus 2019 – as capacity returned to the market and the stress on supply chains seen over the past two years began to ease.

General air cargo volumes in January 2022 recorded a 0.1% increase in chargeable weight compared to January 2021.

Source: www.aircargo.com

Image: www.pixabay.com

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