Whether you call it a special military operation or war, Russia’s invasion of Ukraine is driving up air cargo costs and impacting everyone.
Just when air freight was recovering from the pandemic, it is now struggling with the impact of sanctions locking Russian planes out of Europe and North America. As a result, American and European carriers are prevented from flying the shortest route from Europe to Asia.
The new routing adds about 6% to flight times. While that doesn’t sound like much to the layman, many carriers have decided that it’s uneconomic to fly around Russia via India and the Middle East.
So, what does that mean for air freight?
Escalating costs are crippling air freight
It’s a perfect storm; cargo space on aeroplanes was already a scarce commodity because passenger flights, which ship around half the world’s air freight, still haven’t recovered to pre-pandemic levels.
The longer routes we mentioned earlier also mean the planes that are flying must carry more fuel and, therefore, less cargo.
One of the impacts of the war on Ukraine is the recent spike in fuel prices. With the flight restrictions and mounting fuel costs, air freight costs are being driven to unprecedented levels.
That means Joe Public, who’s already grappling with rising heating bills and inflation, will find goods costlier than ever before.
Consumers bear the brunt
Although the freight carriers are being hit hard, bear a thought for the consumer. The higher transport costs associated with manufacturing components, perishables and other goods must be passed on because businesses can no longer absorb them.
What does that mean in real terms?
Well, the freight booking and data platform, Freightos reported that air cargo rates from China to Europe jumped 80% in a week. The highest it’s been since October last year.
FedEx announced that its Express unit is increasing surcharges for international packages and freight. According to a notice on its website, some peak surcharges will more than double, seeing the rate for shipping from Hong Kong to Europe, Africa, and the Middle East, rise from 55 cents a pound to $1.20 a pound.
What happens next?
That is the million-dollar question.
The air freight industry is a vital player in the logistics sector and an essential element of supply chain management for companies across most sectors. All the industry can do now, along with the rest of the world, is watch the Russian/Ukraine situation develop and hope a resolution is found soon.
Smart Directions provide a bespoke logistics service, ensuring their clients maintain excellent levels of customer service at all times. Call the team on 01442 507 240 to find out more.