Early spring for Asian airfreight

Early spring for Asian airfreight

From Bangkok to Seoul, the story's the same: Air-cargo gateways are flooded by an unexpected surge in shipments from Asia to the U.S. Forwarders are scrambling for airfreight capacity and paying more for it.

"Usually we experience a spike in business the last two weeks of March, but this spike is earlier than normal and much greater," said Tom Post, director of global sales of Morrison Express, the largest forwarder in Taiwan. Kelvin Leung, managing director for Hong Kong of forwarder DHL Danzas Air & Ocean, said low U.S. inventory levels have produced full flights from virtually all Asian points.

The cargo surge has caught many operators unprepared. Sean McWhorter, vice president of network management of Northwest Airlines Cargo, said he had heard of backlogs in excess of 500 tons out of South Korea. He said Northwest was experiencing smaller backlogs in Tokyo.

Steve Akre, chairman of Portland, Ore.-based forwarder OIA Global Logistics, said backlogs have slowed traffic from South Korea, Hong Kong, Taiwan and Japan. "Many carriers are not taking bookings from Southeast Asia because that would be flooding their capacity," he said.

Gateways in China also are clogged. Morrison is routing some freight from Shanghai to the U.S. via Taiwan. In the absence of direct air links between Taiwan and the mainland, that cargo goes first to Macau or Hong Kong to catch connecting flights to Taipei.

McWhorter said operators find it difficult to set up alternative routings because the space shortage is affecting the entire region. Capacity has been particularly tight at Hong Kong, said Ole Ringheim, vice president of airfreight, technology and global freight management at Exel Global Logistics.

Airlines have seized the opportunity to raise rates or insist that forwarders upgrade to premium services in order to secure space. Akre and Post say some forwarders are being charged express rates. In Shanghai, Chinese airlines increased prices by $1 per kilo in the second week of March and indicated there would be another increase of 35 to 40 cents a week later, Post said. An Asian carrier executive said rates that ranged from $2.00 to $2.20 in February reached the $2.80 to $3.00 mark by mid-March, and are still rising.

Large forwarders have been cushioned from the increases by long-term agreements with airlines. Ringheim said most carriers have honored such arrangements. Northwest, which has tied up much of its capacity in such deals, has done so, but has raised rates for ad-hoc bookings, McWhorter said. "We're seeing non-contracted rates that are 30 to 40 percent higher than normal," he said.

Forwarders are calling for measures to ease the congestion. During the West Coast longshoremen's lockout in 2002, "Korean Air and others moved freighters over from Southeast Asia to have more capacity out of northern Asia," Akre said. "We're in the midst of planning how we can do this all over again."

Akre said forwarders and carriers sometimes resort to moving cargo to North America via Europe or Australia. This time, however, the European route seems largely unavailable, because Asian exports to that region are exceptionally strong, said Lars Winkelbauer, director of capacity management at U.S. freighter airline Polar Air Cargo.

Forwarders hope to see more chartered flights, particularly from Hong Kong and China. Polar has operated charters from Hong Kong, but it had to turn down some requests because it didn't have aircraft available, Winkelbauer reported.

Northwest's McWhorter noted that many freighters are busy with Middle East contracts for the U.S. government. With fewer planes available, charter rates have jumped 10 to 15 percent, Winkelbauer said.

Forwarders, worried that they won't be able to pass higher costs to customers, hope the situation will ease soon. But there are no guarantees. "We expect to be flat out for the rest of the month," Ringheim said. "There are no indications that it's easing up."