16/10/2021
Why Is Airfreight So Expensive?
COVID-19 has brought about widespread travel restrictions, from border closures to mandatory lockdowns. It should come as no surprise that the air travel industry has been greatly hurt, with the number of commercial flights down by 73.7% from April 2019 to April 2020.
A typical passenger plane carries more than just passengers; around 45% of the world’s cargo is carried on passenger flights. With thousands of passenger flights grounded for the foreseeable future, the world’s air cargo capacity dropped by nearly 50%.As the global economy has stagnated because of COVID-19, this drop would seem inconsequential.
Consumers should be making fewer purchases, and companies should have fewer goods to ship.
But recall that the economy is stagnating because of a public health crisis. To keep the disease from spreading, healthcare centers need more personal protective equipment (PPE) such as gloves, gowns, and masks for all their employees to wear virtually all the time. Few, if any, healthcare centers had enough protective gear when COVID-19 first hit.
Because the disease spread so rapidly, the worldwide demand for PPE skyrocketed overnight. Hotspot countries like the US and Italy were unable to manufacture enough for themselves, either because of lack of infrastructure or the amount of time it would take to scale manufacturing.
Conveniently, the world’s number one manufacturer of PPE was also the first country affected: China, providing half the world’s pre-COVID-19 PPE supply of masks (20M per day). By the end of March, China was producing over 100M masks per day to meet their own demand and that of countries worldwide. But getting those masks from China to other regions of the world required international and intercontinental shipping.
The need for PPE meant that air cargo demand only dropped by 15% in March 2020. But air cargo capacity dropped by 23% due to the loss of passenger flights.
8% may seem like a small margin, but for a global industry, this was a substantial gap to bridge. Because there was a greater demand than supply, costs skyrocketed, especially between Asia and the US/European markets.
Air cargo rates from Hong Kong to the US jumped by 27% at the end of March, and rates from Shanghai to Europe increased by 50%.
Demand was up — and airlines were eager to meet it.