Logistics companies report a surge in manufacturers seeking to transport their products by air in the upcoming weeks, compelled by attacks on shipping vessels in the Red Sea to explore alternative routes. This shift presents a potential benefit to the air cargo sector, which has experienced a slump in demand following the COVID-19 pandemic, coupled with excess capacity.
The Red Sea and the Suez Canal are situated on a major trade route where approximately 12% of global shipping traffic transits, with the Suez Canal being the shortest maritime route between Asia and Europe.
The assaults carried out by the Yemeni Houthi group against vessels in the region for over two months have impacted businesses and raised concerns among the world powers, amid escalating tensions in Israel’s war on Gaza.
Air freight prices have remained relatively stable due to the shipping crisis coinciding with a seasonal lull in demand; however, data from the international shipping booking and payment platform “Freightos” indicated a 91% week-on-week increase in freight prices from China to Europe last Sunday.
The global economic slowdown has helped mitigate the impact of the Houthi attacks on trade flows.
Envi Rood, Head of Air Logistics at global logistics services company “Kuehne+Nagel”, mentioned that they have “already engaged with numerous clients regarding the increase in air capacity… In January alone, we have about 20-30% more discussions and proposals than usual.”
Air shipping is costlier compared to sea freight and is less competitive for bulky goods with low-profit margins. These factors have contributed to air freight’s diminished role in global trade movements to less than 1%, according to data from the International Air Transport Association (IATA).
However, following the attacks that forced shipping companies to utilize maritime routes that affect delivery times due to longer distances, air freight has emerged as an increasingly attractive option.
Several logistics service companies from Germany, France, and the United States have reported working on providing additional air cargo space.
Logistics sources have added that clients are exploring multimodal shipping opportunities, such as transporting goods by sea to the Middle East, followed by air freight to Europe.
Kuehne+Nagel acknowledged that some clients have already started to send containers to transit hubs like Dubai and Los Angeles, then transferring the cargo by air to the next destination.
Asia-focused air freight company “Dimerco” indicated that customers are considering the cost of combining sea and air freight via Dubai, in addition to direct air freight services.
Freight companies anticipate an uptick in the number of manufacturers resorting to air shipping if the Red Sea crisis persists.
