Falling air freight rates are dampening demand for combined use of ocean and air transport to ship goods from Asia to Europe, says a GAC executive, as forwarders and shippers increasingly take the straight path through the air.
The excess supply in the air cargo market, which has seen rates dip on Asia-Europe lanes, was also discouraging the use of sea-air options via the main hub for the trade at Dubai, said Peter Orange, GAC’s regional manager of freight sales in Asia Pacific and the Indian Continent.
“The volume in 2011 is down compared to 2010,” he said. “In general, volume is heavily dependent on prevailing air freight rates. If the rate dips significantly, the cost advantage of sea-air freight disappears. That is the current situation, but this is a moving target and cyclical.”
Ocean carrier efforts to boost earnings were also squeezing the business by pushing up the cost of ocean shipment, he said.
“In recent months, the prices have dipped and carriers are again struggling,” said Orange. “However, the carriers are continuing to put pressure to increase rates at every opportunity and just as freight prices move south, the recent spike in bunker adjustment factor due to increasing oil prices has also impacted shipment costs.”
However, Orange was optimistic non-traditional sea-air shippers in the electronics sector, which are willing to pay for pure air freight transport, would gradually push more tonnage to the mode.
“GAC’s focus is to educate the customers on the benefits of sea-air freight beyond the traditional areas of garments and fashion sectors, which remain the main industries using this service,” he said. “Rapidly changing industries such as electronic and footwear could save [on time and cost].”
Using sea-air freight transport from northeast Asia to Europe instead of pure air service saves shippers 35 percent to 40 percent, Orange said. When compared to ocean freight, the sea-air mode reduces transit time by more than a third, from 21-22 days down to 12-13 days.
“The proximity of the ports in Dubai to the airport, the speedy discharge of containers and efficient palletising for air carriage, make it possible for the cargo to be ready for flight in as little as six hours from arrival at port,” Orange said.
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