The Red Sea shipping crisis and e-commerce are driving demand for airfreight and consequently capacity is looking tight for the peak season.
Since October 2023, more than 75 cargo ships have been attacked by Houthi rebels in the Red Sea. 12% of all global trade traditionally took this route, via the Suez Canal, but as a result of the pirate incursions, shippers have been forced to seek alternative routes to market for their goods.
For some, taking an alternative route via the Cape of Good Hope seemed appropriate. But with an increased travel distance of 9% requiring more vessels, and increased cost of fuel, time and resources, shippers have seen costs continue to rise exponentially.
At the same time, capacity on deep sea shipping has reduced by between 15% and 20%, not helped by the congestion in Baltimore caused by the harbour bridge collapse.
With no end in sight to the situation in the Red Sea, and many shippers not confident of moving their goods through such a volatile region, the opportunity for airfreight has been seized by many businesses. According to Accenture, global international air cargo capacity has been growing strongly in early summer, compared with a similar period in 2019, up 10% year on year.
And with many businesses unwilling to take the risk of travelling through the Red Sea route, the opportunity is there for airfreight operators to take advantage of increased demand and deliver for businesses needing a guaranteed delivery time.
However, according to reports by Reuters, the most seismic shift in airfreight is currently being driven not by the Red Sea disruption but by the rise of Chinese fast fashion retailers, which are using TikTok and other social media channels to promote their goods.
Their customers demand an almost instant delivery service which airfreight can deliver and, despite limited air cargo space, these brands are prepared to pay to ensure rapid transit times and instant gratification for their shoppers.
Many of these brands ship directly from their factories in China to consumers themselves in personally addressed packaging, cutting out the need for a warehousing operation and boosting airfreight costs from Asian hubs like Hong Kong.
And with fast fashion now accounting for half of China’s total external e-commerce shipments, the growth of these online retailers could soon take up all the spare airfreight capacity, which could be a problem if the Red Sea situation persists towards the Christmas peak.
This shift in demand has driven a change in behaviour from some airfreight carriers, which have made more charter capacity available to meet the needs of the online retailers.
However, with limited capacity available in the longer term and increasing costs as the Christmas peak approaches, it is unclear whether this shift to airfreight can be sustained in the longer term if the retailers are not to be forced to pass on significant price rises to consumers.
https://www.aircargonews.net/monthly-exclusive/new-uk-government-shines-spotlight-on-aviation/
https://www.aircargonews.net/policy/environment/logistics-uk-welcomes-funding-for-green-aviation-projects/
