Capacity shortage and rate hikes trigger new sea-air requests

The COVID-related shortage in air freight capacity and the hikes in rates it has triggered have led to sea-air solutions becoming viable on certain new trade lanes, according to a leading forwarder.

“For example, you never normally saw any sea-air business out of India because air rates were so low; but they have increased so much that it can make sense now to go by ship to Dubai and from there to Europe and the US by air,” explained Jan Kleine-Lasthues, the chief operating officer for air freight, at Hellmann Worldwide Logistics, in an interview with Lloyd’s Loading List.

“Funnily enough, we’ve even seen a sea-air shipment from India to China as a result of air freight rates doubling on the route, compared to those on the Dubai-China route. So, a fast-connection sea freight service in five days from India to Dubai and on to China by air has been a feasible option –given that you still arrived at the destination in one week and at a heavily-reduced shipping rate.”

The squeeze in air freight capacity is also hitting niche markets, which in normal times would depend heavily on airlines’ passenger services for airlift – one example being fruit and vegetable shipments from New Zealand to Europe.

Perishables capacity challenge

“Our perishables business is challenging because there are so few passenger flights,” Kleine-Lasthues said. “The fruit and vegetables are there but getting them out of the country is a real issue at the moment. There are still some freighters operating, but nothing like we’ve had before.”

Capacity ex-Latin America is less constrained and has enabled Hellmann to further develop its flourishing perishables exports from the region – asparagus from Peru and berries out of Argentina and Mexico – Kleine-Lasthues revealed.

Perishables aside, pharma is vertical which has performed “amazingly well” for Hellmann through the corona crisis, especially shipments out of India, Kleine-Lasthues noted.

Luckily, the German firm has been less exposed than some of its peers to the automotive vertical – which has suffered a serious downturn but is now showing of recovery, he said. “Volumes in this vertical have decreased on the traditional trade lanes such as Europe to North America – industry-wide, and also for Hellmann,” he noted.

“With the temporary closure of production plants across the world, the volumes transported dipped significantly during the global lockdown period. It is slowly coming back; but one of the main manufacturing countries, Mexico, is still heavily impacted by the pandemic.”

Full and split charters

Faced with the continuing capacity shortage, Hellmann remains an active market player for both full and split charters, even though there has been a significant fall-off in PPE shipments by air – which was the main driver of the flights earlier in the year.

“Back in March, April, May, we were flying between 60 and 100 flights a month,” Kleine-Lasthues said. “The number is far lower now. But we continue to operate fixed flights from China to the US and China to Europe – for example, Hong Kong to Liège – as well as split charters from Europe to North America. We have also increased our block space agreements (BSAs).

“There were a few airlines who canceled all scheduled services and were only offering charter flights in a bid to generate as much revenue as possible. But the majority of airlines were ready to work in partnership with forwarders. In general, they were co-operative and have not taken advantage of the capacity shortage – especially considering the billions they have lost in revenue on the passenger side.”

According to Kleine-Lasthues, the capacity situation would be “nightmarish” if Q4 coincided with the first batches of a corona vaccine; but excluding such an eventuality, there could be some relief from the peak season squeeze in the form of a potentially “huge” fleet of passenger aircraft in cargo-only mode (P2Fs) should demand spiral.

“We’ve chartered pax aircraft, notably for PPE, and continue to do so, depending on the cargo,” he noted. “But as always, it’s all about whether the price is right.

Rate volatility

“On transPac routes from China, the rates went down for a few weeks and this led to some carriers leaving the market as they reckoned, they were no longer making enough money to make it worthwhile. However, as soon as the rates started rising again, they were back. This is one of the reasons why there is rate volatility in the Transpac market – capacity is coming in and out.”


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