As air cargo demand continues to surge and freight rates are set to rocket, air hubs in Asia and Europe are reportedly struggling to find space for the ramped-up levels of cargo. Freight forwarders are now complaining of delays in moving goods, and many fear the situation will worsen as the peak season approaches.
As airlines urge freight forwarders to avoid impending capacity shortfalls by booking early, freight forwarders, in turn, are advising their clients to book early as the peak season approaches. “Act now and take precautionary actions to avoid capacity shortages, longer transit times and potential delays,” they told shippers, as reported by Air Cargonews.
This situation follows global airfreight’s remarkable performance during the first half of 2017, referred to as a “fairy tale” by Netherlands research firm Worded, and which took many commentators by surprise.
According to The International Air Transport Association (IATA), the upturn during the first half of 2017 produced a 10.4 percent year-on-year growth in airfreight, as measured in freight tonne kilometres (FTKs), representing the strongest upswing in seven years.
Further figures released for June showed traffic rose by 11 percent, and, perhaps signalling a portent of impending capacity shortfalls, this upturn was more than double the 5.2 percent increase in freight capacity.
IATA attributed the strong cargo demand to improvement in global trade, with new export orders remaining close to a six-year high.
“Air cargo is flying high on the back of a stronger global economy. Demand is growing at a faster pace than at any time since the global financial crisis,” revealed Alexandre de Juneau, IATA’s director general and CEO.
Taking a regional perspective, Asia and Europe were the top performers during the first half of this year, accounting for two-thirds of the annual increase in FTKs, with solid contributions from North American and Middle Eastern carriers, said IATA.
The summer period is traditionally a calmer period, but this year has been an exception with a strong market uplift which is likely to continue for the rest of the year, further widening the gap between supply and demand, freight forwarders told Air Cargo News.
They said the Far East peak season is expected to start earlier than the traditional September and be even stronger than last year’s demand. “The transatlantic trade is already seeing tight belly capacity during a period where airlines have added capacity for the summer season. This will eventually be phased out, tightening supply and demand on the trade further,’’ they added.
Many industry experts believe airfreight is undoubtedly experiencing a global boom at present. Mark Whitehead, chief executive of Hong Kong Air Cargo Terminals Ltd (Hactl), suggested it is too early to attribute this to pre-Christmas stock shipments.
Whitehead cited a variety of factors – mainly related to ocean trade – behind the upturn, “It is difficult to pinpoint why June was so far ahead of the previous year, but the overall reasons for this year’s industry-wide performance are clear to see: reductions in ocean capacity on many trades, traffic problems at major ports due to the growth in mega vessels, and slow steaming are all adding to shippers’ concerns about the dependability of ocean freight.”
He added, “For the ocean freight industry, these lost volumes to air will be almost imperceptible, but for airfreight, they make a noticeable impact and are a welcome bonus.”
Sunny Ho, executive director of Hong Kong’s Shippers’ Council, concurred with Whitehead that problems in the container shipping sector encouraged shippers to switch to air. Despite this, he stressed the primary factor leading to the positive results was blossoming exports from Asian countries, including China, and export orders from the US.
These expanding cargo figures have inevitably resulted in a knock-on effect on freight rates. The TAC index, the key benchmark for freight prices around the world, showed prices in Hong Kong reached US$3.27 per kilogram in June, a year-on-year increase of 38.6 percent.
Another effect of burgeoning activity is a looming capacity crunch. Ho said carriers in Hong Kong are keen to add more flights, but this was problematic due to limitations in take-offs and landings. The carriers did put in a request to the Civil Aviation Department (CAD) for more slots to accommodate extra flights to ease the capacity crunch, and the CAD acceded but offered more slots only at night.
Ho bemoaned, “That helped, but not a lot.”
Cathay Pacific Cargo, the top carrier in Asia, said its two wet-leased freighters were operating at full capacity because of the robust demand for cargo, revealed Nelson Chin, general manager, cargo, commercial. Cathay leased the two Boeing 747-8 freighters from Atlas Air Worldwide in May to supplement capacity as demand for cargo rose.
In Europe, a similar situation is unfolding – an impending capacity crunch and a resulting spike in prices.
Lufthansa, which transports about 50 percent of freight shipments in the bellies of passenger aircraft, is moving to cope with the growth in air cargo demand and lack of space on passenger planes in the summer season. Its team from load planning and control is working to ensure an optimal balance between luggage and freight, said a Lufthansa press release.
Summertime is usually meagre rations at Lufthansa Cargo, but this year business is buzzing in the summer months of July and August because of the unexpected surge in cargo demand.
Cargo continued to increase at Frankfurt Airport, Europe’s busiest cargo hub, said Frankfurt operator Fraport in its latest figures for July. Freight and airmail was up 4.2% to 188,009 tonnes in the month. Year-to-date it was up 4.7% to just over 1.28m tonnes.
“We cannot detect any holiday depression over the last few weeks and have our hands full here in Frankfurt,” said Bernd Reifert, director of transit & warehouse management. Observers stated that with the peak season around the corner, Frankfurt could face a capacity crunch as cargo traffic rises.