Soaring air transport leads to capacity crisis and higher rates

2017-11-21 07:05:55

Snowball cross-border e-commerce and high level of emergency transportation have pushed the demand for air transport. Some shippers' demand for market acceleration is threatened by limited capacity at peak hours and at the airport center.

Air transport’s busiest time this year has started. Shippers are fighting for space on the plane and paying more for their goods because the strong sales of Asia Europe and North American trade will soon offset available capacity.
In the last two months, air freight prices doubled from Shanghai to Frankfurt according to the data from e-booking and air cargo automation platform Freightos WebCargo. In September, the price was $2.5/kg, rising to $3.7/kg in October, and $5/kg in November.

Manel Galindo, the CEO of Freightos WebCargo said, under the impetus of strong e-commerce sales and holiday season, air transport capacity has been stretched. The spot market is seriously affected by the early air transport capacity of carriers, along with product release, such as Apple’s iPhoneX. 

Greg Guillaume, the senior vice president strategic development at Atlas Air Worldwide Holdings, believed that the root cause of the rise in demand is e-commerce. In the long run, e-commerce will increase the proportion of retail sales, which is the general trend of our times. Especially in the developed economies, we find that e-commerce often uses express air transport as a mode of delivery. With the expected development of future e-commerce in emerging economies, its impact on air transport will drive growth in the coming years.

By the end of 2017, the global retail e-commerce sales are expected to reach $2.29 trillion, by the end of 2021 will increase to $4.48 trillion, equivalent to 16.1% of the total retail sales. On the basis of e-Marketer research consultant, Chinese consumers will create almost half of the 2017 global e-commerce sales. 

Atlas air, along with the global airline, is expected to have a boom season and continued through 2018. When airlines predict a good time, shippers can expect to raise rates. Strong demand led to packaging freighter out of Asia in key industries. Over the past two months and 2018, high availability and tight space will drive up prices. 

Guillaume said, the divergence in recent growth rates is extreme. The current situation will cause higher pricing environment and better capacity factor, which is the reason for optimism in the near future. Bjorn Vang Jensen, the vice president of global logistics for Electrolux said that his company was dynamic in the air transport market this year, but he did not experience too much space restriction. With the advent of the festival season, this situation may change. Rates are decidedly a little higher than last year.