Use air freight to avoid US port congestion, air cargo lobby says

Use air freight to avoid US port congestion, air cargo lobby says

HONG KONG — It was no surprise to find air cargo executives at the WCA Worldwide forwarders conference in Hong Kong lobbying for more shippers and forwarders to send their cargo via air, but the U.S. port congestion provided a helpful marketing tool.

Glyn Hughes, the head of cargo at IATA, encouraged shippers to factor air freight into their supply chains as a strategy to avoid ocean side delays.

“We would make an appeal to all those poor U.S. shippers who are impacted by congestion on the West Coast and in other ports around the world where there are blockages, to have a look at air cargo,” he told reporters.

“What airports do very efficiently is move freight. Even though we are talking about taking 48 hours of of the air cargo supply chain, that is still cutting six days down to four days, which is a significant improvement on the 28 days of slow steaming that it will take sending cargo by ocean.

“Yes, air cargo is a premium service. Yes, it costs more than sending things by ocean, but today’s consumers want products in their hands pretty close to the time they are manufactured. Air cargo is the only way to do that,” Hughes said.

David Kerr, vice president of cargo for Etihad Airways, said there would be a correction once the West Coast port issues were resolved, but there has been a trend of commodities moving to more stable supply chains offered by airlines.

“Shipments will ebb and flow as some commodities go in and out of stock, but the underlying trend is that as new products come on board, they will require speed to market. As the latest innovations are produced they will continue to use air freight to get to market quickly,” he said.

The WCA is the largest network of independent forwarders in the world, and a spokesman for the association said that as trans-Pacific cargo volumes began to increase in the second half of last year, many of their members were forced to quickly find alternatives to ocean freight between Asia and the U.S. West Coast to avoid the port delays.

“But it seems there will be a boost beyond the short term for air freight because some of the shippers have found an air solution they had not previously considered and will continue to use in the future,” the spokesman said.

The air cargo data for 2014 is encouraging and shows an industry firmly in expansion mode, with the strong momentum out of Asia continuing into the new year and the ongoing U.S. West Coast port congestion providing additional lift.

Asia-Pacific air cargo played a large role in the growth of global cargo traffic during last year, accounting for 46 percent of the total volume. Global air cargo traffic was up 4.5 percent year-over-year, according to data from the International Air Transport Association (IATA).

That momentum has spilled over into January as shippers get their spring and early summer orders to market before the Chinese New Year factory shutdown. Trans-Pacific trade has been one of the great drivers of air freight demand in the past few months as the U.S. economic recovery strengthens and West Coast port congestion remains at critical levels.

Just one month into 2015 and total tonnage at Shanghai Pudong International Airport Cargo Terminal Co. Ltd. (Pactl) in January was already up 13 percent year-over-year. The Sino-German joint venture terminal handled 124,824 tons during the first month of the year, while the 67,669 tons of outbound international cargo tonnage was a 7.7 percent improvement on January 2014, data supplied by BB&T Capital Markets showed.

The clogged West Coast ports were benefiting air freight, BB&T said in a note to customers. “We continue to hear of more shippers, including several major retailers, that have utilized airfreight as a way to mitigate some of the impact from the West Coast port disruptions and avoid supply-chain disruptions,” the note said, adding that Hong Kong Air Cargo Terminals Ltd. (Hactl) said recently that bottlenecks at the ports resulted in a “temporary” shift from sea to air.

IATA director general Tony Tyler has cautioned that downside risks to the industry should be carefully monitored this year, and that recent concerns over the health of the global economy and a corresponding fall in business confidence had not yet impacted air cargo.

However, Oliver Evans, chief cargo officer of Swiss WorldCargo, said it was important to consider that while the proportion in terms of volume transported by air was going down, the value of those goods was increasing.

“It used to be that air freight was 33 percent of global value and it is now 35 percent. The goods have such high value that they need to get to market as quickly and that means air freight,” he said.

The 35 percent of goods transported by air represented a value of $6.8 trillion, but by volume was only one percent of international trade. For Hughes, this presents an opportunity to grow market share.

“If we were to transport ourselves back 10 years we would be transporting big computers,” he said. “Then laptops came in and an 11.5 kg shipment became 2.5 kg. Then tablets came in, then mobile phones. What we transport by air is getting smaller and smaller and is affecting our volume. What goes by ocean tends to stay the same size.

“That’s why we need to increase the product range of what is being transported by air because some cargo can disappear. Microsoft used to transport millions of Windows software discs in a box with a 2kg manual, but that has vanished.”

Contact Greg Knowler at gknowler@joc.com and follow him on Twitter: @greg_knowler.