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Cargo Newswire

Capacity crunch elevates air cargo rates in August as the global supply chain shows its fragility

September 3, 2021
in Airlines
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Resilient international demand for air cargo capacity in August versus a shortfall in supply pushed average global air cargo rates up 112% to their pre-Covid level, as a local lockdown in Vietnam and the closure of cargo handling terminals at Shanghai Pudong International Airport after a handful of new Covid cases demonstrated the fragility of supply chains.

CLIVE Data Services’ industry analyses for August 2021 shows volumes up 1% compared to the same month of 2019 before the pandemic took hold, and +19% versus August 2020. The biggest challenge for businesses importing and exporting goods by air remained the low level of available cargo capacity at -16% below the level seen in August 2019. CLIVE continues to measure and report air cargo market performance to pre-Covid 2019 levels, as well as providing 2020 year-over-year comparisons, to provide meaningful analyses of the current state of the market. Year-over-year, capacity was +18% compared to August 2020.

CLIVE’s ‘dynamic load factor – which measures both the volume and weight perspectives of cargo flown and capacity available to produce a true indicator of airline performance – was 66% for August 2021, +6% points versus August 2019 or -1% point under the same month of last year.

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In interviews with the Wall Street Journal and South China Morning Post, CLIVE’s Managing Director, Niall van de Wouw, said even before the latest disruptions in Pudong and Vietnam, air cargo capacity was already tight due to fewer international passenger flights, with very full flights elevating rates significantly on prime intercontinental trade lanes. Rising demand is also being driven by the number of retailers having to pivot from traditional ocean freight-based supply chains to air cargo to replenish stock levels in time for their peak sales season.

CLIVE’s August 2021 analyses, however, show the impact on ground operations in Shanghai, contributed to a 10% drop in volumes from China to Europe in the past two weeks of August, while westbound capacity was reduced by 18%. As a result, spot rates increased by nearly 20% in the last week of August compared to the last week of July.

“The problem for the air cargo industry is not demand, it’s clearly capacity,” Van de Wouw said. “The market is solid from a demand viewpoint, but it is currently based on a scarce and fragile infrastructure. As we saw in August, a small handful of Covid cases at Pudong airport led to the closure of air cargo terminal operations. When something like this happens at what is the world’s third-largest cargo airport, it only reflects how fragile things are for global supply chains and the immediate impact on rates that were already high.

“Shippers want to see more cargo capacity from the return on airline passenger operations, but some signals suggest this may get pushed back again on intercontinental routes following the recent EU recommendation to pause on all non-essential travel from the USA to Europe,” Van de Wouw added. “For passenger airlines operating cargo-only flights, it’s all about the margin per flight and not about adding capacity to grab market share. Airlines want and need passengers back and I suspect airline cargo departments are anxious to see this too because of the pressure they are under to generate revenue – but even when cargo revenues double, if passenger revenues are down 80%, it’s not a sustainability situation for passenger airlines.”

Tags: Air CargoChinaClive Data ServicesEuropeNiall van de WouwShanghai Pudong International AirportVietnam
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Devender Grover

Devender Grover

Devender was born in the year when the Beatles Group was formed. He holds two master’s degrees in English Literature and Public Administration. He also has an Honors degree in English Literature and a post-graduate diploma in Corporate Communications and Public Relations. He was closely associated with the Indian State Transport Undertakings and Ministry of Transport in his role as Corporate Communications and PR specialist for over two decades handling domestic and international organizations. He ventured into business forming his own Media House, Profiles Media Network Private Limited which is now a twenty years old company. Excelling as an editor, Marketing, PR, Anchor, and Advertising specialist, he is now expertly navigating the world of social media. A widely traveled professional internationally, Devender has a deep understanding of the Air Cargo, Cargo Business, Cargo Airports, Freighters and Cargo Industry at large.

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