As anyone involved in international trade or logistics will be well aware, cargo and freight shipments are much more difficult and more expensive currently. This has been a problem over the pandemic with lower capacity and remains so now as demand increases. This has shaken up the industry, with cargo aircraft chartering becoming more popular than ever before.
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The Current Cargo Crisis
Cargo shipments at the moment are more challenging than ever. Prices have risen significantly amidst reduced capacity. Several factors are to blame, including:
- A reduction in cargo capacity on commercial flights. During the pandemic, scheduled flights have dropped significantly. This remains a problem, particularly on longer international routes.
- Growing pressure on shipping options, with container shortages globally.
- Rapidly increasing demand as we emerge from the pandemic, with capacity slow to improve.
- Staffing shortages at critical port facilities.
- Driver shortages for road transport – particularly in Europe.
- In Europe and the UK, challenges connected to Brexit.
Approximately 90% of the world’s freight moves by sea, but with the problems, more of this is shifting to air. Shipping prices are up, and there is huge uncertainty. Shipping time between China and the US or Europe has more than doubled, for example.
The potential for more cargo to more to air is huge. Commercial options are coming under the same pressure though with limited capacity. Chartering is a solution to this.
To get an idea of rising prices and availability constraints, consider The Baltic Air Freight Index (BAI). In Septermber, this reached its highest level ever, showing an average global increase in cargo rates of 166%.
Chartering as a Cargo Solution
Aircraft chartering has always been an option for cargo flights. While there are ways to save money, it is generally seen as more expensive than commercial cargo options.
Chartering offers more than it did before, though. It has always been simpler and very reliable. In the current market, it is also a way to get around capacity limitations and potential delays. Companies that need to guaranteed and timely freighting have increasingly turned to charter services.
High Levels of Chartering
Chartering activity has increased around the world. As of late 2021, problems remain particularly acute on transpacific routes. Production has increased significantly, but commercial air traffic remains suppressed.
Marc Schlossberg, executive director for air cargo at New York-based Unique Logistics, explained in October how the company had been involved in chartering over 100 flights just from India, Bangladesh, and Vietnam over the past two months. He explained to freight news portal FreightWaves:
“Retailers, among others, have recognized that the global ocean freight supply chain is broken and they cannot rely on any estimated times of arrival, so they are converting massive volumes to air freight for the holiday shopping season, and likely beyond, as there is no sign that the ocean congestion is improving.”
The situation is the same in Europe and the UK. Air Charter Service reports UK-based cargo charter demand up 150% compared to pre-pandemic levels – and 70% up just in October 2021 with the worsening situation.
Rates have, of course, increased along with this rise in demand. FreightWaves quotes the current transpacific Boeing 747 charter rate, for example, as between $1.5 million and $2 million. Two years ago, it was around $500,000.
When Will the Cargo Situation Improve?
Like so many things at the moment, there are many estimates for when cargo costs and movement will improve. There is also the question of what the “new normal” level it returns to will be.
It certainly won’t happen this year. As we approach Christmas, demand is increasing further.
Talking to FreightWaves, Brady Borycki, executive vice president of global business development at Wen-Parker Logistics, explained the situation in late 2021 as:
“There is absolutely not enough commercial lift. There are problems at origin, problems at destination. Honestly, if you’re not chartering right, I’m not sure how you’re managing to service your customer base because the demand for airfreight is so high.”
The normalization of passenger services and associated cargo capacity will likely start to calm the situation. However, in some regions, such as Africa and Asia, volume could remain low for much longer.
There is also a shift in airline strategy underway, which could affect this recovery. Many airlines are dropping widebody aircraft and favoring small narrowbodies (such as the Airbus A321LR and upcoming A321XLR). These offer good options for longer point-to-point passenger routes but have much lower cargo capacity.
Final Thoughts
Cargo rates remain significantly higher than usual and there seems little chance of this changing. Even after airline volume normalizes, there will be ongoing uncertainty of how it will change in the future. While this remains, chartering will continue to offer increased appeal and advantages.
