Two-Thirds of Trans-Atlantic Air Cargo Capacity Lost in Coronavirus Containment Measures
The end of passenger flights between Europe and the U.S. has led to a two-thirds drop in air cargo capacity for those routes, said Neel Jones Shah, Flexport's global head of airfreight, during a March 24 webinar. “Freighters are stepping up, they are filling some of the gap, but rates are much higher,” Shah said. He said that for trans-Atlantic air cargo, importers should expect to pay $4 to $6 a kilogram.
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“This sort of event will shake you to your core,” he said, and called it a black swan event no one in the industry could imagine would happen. Less of the air cargo traffic from China was in the belly of passenger planes -- and freight airlines are adding capacity across the Pacific, he said. “We’ve seen over 1,300 tons per day of additional freighter capacity,” which if delivered consistently would make up for the 4,600 tons a week lost from the ending of passenger flights between China and the U.S.
He said it costs a little more than $800,000 to charter a freighter from China, and more than $1 million to charter one from Taiwan.
Carriers are using force majeure clauses to change prices or shipping times, he said. But he said that Flexport is finding carriers are honoring its contracts, and that delivery times have been pretty close to what was promised, though not in every case.
“One of the interesting developments that’s happened in the last 10 days,” Shah said, is that many of the large passenger carriers are running their passenger cabins empty but the cargo holds full, as what he called mini-charters. He said American Airlines, United, Lufthansa and Cathay are all companies doing this. He gave Dallas-Frankfurt as an example of a successful route. But he said with the long flight times between the U.S. and Asia, that trend is more common from the U.S. to Europe than it is across the Pacific.
This trend is a drop in the bucket, he said, and predicted that no more than 10% of the wide-body passenger fleet would be put into service in this way. “I don’t think it’s going to have a dramatic impact on demand,” he said.
“Freighter capacity can’t be increased much more than it is today,” Shah said, but he thinks that prices will fall in May, as industrial production also falls, so there is less need for shipments.
He said when lockdowns end, he expects to see a surge in demand for air freight, as companies seek to build inventories quickly, even with goods that would usually travel by ship. But he said that after that, the proportion of imports that come by sea and by air should return to normal.