Shippers should brace themselves for rate hikes from the airlines, warned Peter Pasman, COO air freight, Europe, at Rhenus Logistics. Lift on major routes is going to be tight in the coming months, driving up air freight costs, he predicted.
He added that increases in spot rates will have a knock-on effect on pricing of capacity contracts that come up for renewal.
Andre Delarue, the company’s COO air freight, Asia, noted that demand has stabilized recently but is expected to rise again in September.
“The same can be said about air freight rates in the spot market where rates are dropping around the summer time, but also here indications show that rates will go up again coming September,” he remarked.
“Asia, and especially China, to the US saw a boom in both rates and capacity added in the first half of the year. We will see what impact the new imposed tariffs on imports into the US have going forward,” he added.
Pasman reckons that more forwarders will seek to boost their allocations with additional block space agreements to avoid potential delays and higher costs down the road. This is going to reduce available capacity further still, he said.
Faced with the prospect of excess demand in the coming peak season leading to juicy yields, airlines have been reluctant to commit their capacity in advance. They have been holding back space to sell ad hoc closer to the peak, forwarders have reported.
Carriers are also managing allocations more closely, noted Delarue.
“Airlines are more selective in offering extra capacity on certain lanes. The performance of allocations and blocked space agreements is monitored strictly by the airlines. In case of under-performance allocations will be reduced or cancelled much quicker than in the past few years,” he said.
Finding lift is not the only challenge. Last year’s peak season produced backlogs at a number of major gateways in Europe as well as in North America, as air cargo facilities were inundated with traffic. Slot restrictions at major hubs like Amsterdam are compounding the problem.
“It is currently not possible to add more capacity to the market, as the main European airports have currently reached the operational maximum,” stated Pasman.
Rhenus tries to stay on top of developments through close communication with its clients.
“We do ask them to provide forecasts about the volumes they expect to ship and to plan as far ahead as possible in order to avoid capacity shortages, which would result in longer transit times, delays and cost increases. At the same time, the digitization of processes and products is steadily becoming more important in order to increase efficiency and transparency. This influences the freight forwarding industry in general,” commented Pasman.
His company is continuing its international expansion drive, most recently with the acquisition of Dublin-based Avant Air & Sea for an undisclosed sum. The Irish forwarder, which specializes in temperature-controlled cargo and hazardous materials, adds to its new owner’s Asian footprint with its branch offices in Hong Kong and Shanghai.
Rhenus strengthened its position in Asia last year with the opening of additional branch offices in the Philippines, South Korea, Singapore, Thailand and Indonesia. It also acquired Melbourne-based O’Brien Customs and Forwarding last year.
At this point the company employees 29,000 people in 610 locations, up from 580 locations at the beginning of this year.
Bangkok has become a major gateway for the forwarder’s air cargo flows in Southeast Asia. It has established a cross-dock operation near Suvarnabhumi Airport with 24/7 customs clearance.
Management has indicated that it intends to add further locations in Asia.
By Ian Putzger
Air Freight Correspondent | Toronto