The war in Ukraine, resulting sanctions and lockdowns in China muted the growth of general air cargo volumes and capacity in March, causing a sudden interruption to the recovery trend of recent months after the peak Covid disruption of the past two years, according to CLIVE Data Services.
Data from the air cargo market intelligence firm, which is part of the Xeneta rate benchmarking platform, showed that weekly data for March, and up to April 3, shows volumes compared to the pre-Covid level in 2019 fell 6.5% last month and were 4.5% lower than March 2021.
Similarly, general air cargo capacity stood at -14% versus March 2019 and at -4% compared to the same month a year ago.
"This was exacerbated by the closure of Russian airspace and the immediate cancellation of some airline capacity, which led to a quick 20% fall in Europe-NE Asia capacity," CLIVE said in its report.
CLIVE's 'dynamic load factor' — which considers both the volume and weight perspectives of cargo flown and capacity available to produce a true indicator of airline performance — was largely unchanged month-over-month at 66%.
The report said this was the same level seen in the same month of 2019, but 6% points lower than March 2021 after record load factor levels in the opening weeks of last year.
Overall airfreight rates remained at similarly elevated levels to those seen in February, averaging +141% compared to March 2019 and +27% higher than March 2021.
Recovery takes a hit in March
Niall van de Wouw, chief airfreight officer at Xeneta, noted disruptions on the ground causing the decline.
"There are also still many issues with capacity on the ground. One bottleneck got replaced with another one," he said. "Load factors are lower this year than they were last year, but prices are higher. The latest disruption in Shanghai is not unexpected but it adds to the worldwide issue of staff absence because of high Covid cases."
"Pilots, cargo handling workers, truck drivers, etc, unlike many others, cannot work from home. It's hardly surprising then to hear the International Monetary Fund (IMF) blaming soaring shipping costs for driving up inflation rates," van de Wouw added.
"Right now, the airfreight and ocean freight markets are in general a mess, with shippers and consumers having to pay the price. In the first two months of 2022, we were talking of growing resilience in the airfreight market and recovery to pre-Covid levels. March data shows how quickly this can change," the Xeneta chief airfreight officer further said.
CLIVE also identified a rise in the amount of airline cargo capacity being placed on the short-term spot rate market, with particular impact regionally.
It said in the Europe-Japan trade, for example, the amount of chargeable weight at a spot rate increased to 60% of the market, or 20 percentage points higher than February’s spot share.
Rates from Japan to Europe increased to around €5 per kg, nearly 50% higher than in the weeks preceding the Ukraine war, CLIVE added.
Air cargo carriers utilizing the route had slashed capacity as they sought other flight paths to avoid the airspace of Russia amid its ongoing conflict with Ukraine which resulted in sanctions.
"In overall air cargo market terms, March was a step back from the trend we saw late last year and earlier this year. We have been reminded of how the limited control the general airfreight market has over its own destiny and how it is impacted by passenger traffic trends, disruption in the ocean freight market, and geopolitical events," van de Wouw said.
Uncertainty on sea drives cargo to air
Meanwhile, CLIVE noted looming disruptions between Europe-North America.
"Although it is too soon to tell what the skyrocketing inflation numbers in the US will result in, the logistical difficulties on the water between these two continents must put some wind into the sails of the air cargo market," van de Wouw said.
"With continuously declining schedule reliability of the ocean liners, logistical departments will likely be required to resort to airfreight because of disruptions to their supply chains caused by these record low service levels," he added.
Discussing the challenges impacting the ocean market, Peter Sand, chief analyst at Xeneta noted that the average of 9.5 days of late arrivals is more time than is spent crossing the Atlantic itself.
"At the same time, carriers are adding more capacity to cater to the obvious solid demand into US East Coast, not only from North Europe but also adding more capacity from the Far East into this region," he said. "What this also means is that congestion will worsen in the coming weeks and months."
