As global supply chains adapted to chaotic conditions, businesses turned to multi-modal solutions. Air cargo movement became a prominent piece of those multi-modal solutions.
As conditions normalize, let’s look at how air shipment compares to when these crises were at their peaks.
- Is air shipment competitive as the crises eventually subside?
- What are the risks of relying on air shipment in the future?
- Is air shipment a key transformational movement strategy.
The crucial question is: Are businesses better off with an increased reliance on air shipment or not?
In answering that question, we’ll look back to March 2021. We’ll look at capacity, safety, cost, performance, and risks.
Air Freight: Reducing capacity constraints
Capacity remains a troublesome issue hamstringing supply chains. As a result, many businesses pivoted to increasing their reliance on air shipment. In doing so, that has placed constraints on air freight companies. Demand for capacity has increased, whereas the supply of capacity has not kept pace.
One measure air freight companies and shippers have taken is to procure new cargo planes. This measure by itself is not enough to meet increasing demand.
Retrofitting commercial planes is another measure taken to ease capacity constraints. Like new procurement, this solution falls short on its own. But together with new procurement, it helps relieve capacity constraints.
A third measure is the normalization of commercial air travel. As Covid’s effects subside, air passenger travel is returning to former service levels. Yet China poses an obstacle in a return to normal conditions for air travel.
China’s rigid approach to Covid-19 has affected air cargo shipments. According to JOC.com, the Shanghai airport lockdown affected air freight. It has delayed deliveries and reduced outbound air shipments. This has led to diverting shipments to other airports not affected by the lockdown.
The return of air passenger business is a major piece of shipping air cargo. Until air passenger service returns to it pre-pandemic level, capacity constraints will continue.
Volatility and unpredictability wreak havoc with air freight rates
Because of airport lockdowns in China, air freight rates are erratic. Some are declining and some are climbing. Where drops in volume occur, rates are falling. The opposite is true where volumes have increased. (See JOC.com.)
Additionally, pressuring jet fuel rates is the ongoing Russo-Ukrainian war and sanctions. A quick solution remains elusive with each passing day. That places further uncertainty concerning fuel prices, prolonging chaotic conditions that affect freight costs.
As long as the crises listed above prevail, stable pricing is problematic. And spiraling inflation further complicates the operating environment.
Air freight performance resists continuous pressure
Global supply chains must operate through disruptions—major or minor. Driving the constant need for 24 x 7 supply chains is consumer expectations. Since the onset of the pandemic, consumer expectations haven’t fallen. Instead, they’ve increased because of the shift to online shopping or eCommerce.
That dynamic has dragged on air freight performance. But it also has led to innovative solutions to improve performance. Innovation is the adoption of drone technology by Amazon in particular. However, that’s a nascent solution that lags early promises made.
Barriers to drone delivery as a viable mode of delivery are ample. FAA regulations represent a major barrier, as does safety. Achieving compliance while operating safely continues to challenge this growing technology. To provide a solution to scale, drones can mitigate the effects of the rising in eCommerce. Drones not a cure-all, but they are another tool in a multi-modal toolbox.
On the bright side, air shipment provides relief for ground and ocean transportation. Diversification helps temper congestion and delays at ocean terminals, railheads, and elsewhere.
The increased reliance on air shipment is clear as European—U.S. air freight volume increased 25 percent since March 2021, according to The Journal of Commerce. Also, air freight transportation offers shipping of time-sensitive products. In addition the scope of time-sensitive products has increased to include auto parts and perishables. That further increases reliance on air shipping.
Putting yet more pressure on performance is that businesses are still working off backlogs at ocean terminals, rail yards, and airports. Those conditions further challenge air freight performance. Nonetheless, air freight is moderating the performance of other modes from flaring up.
A case in point is that air freight has a moderating effect on intermodal operations. As a growing mode of transportation, air freight helps smooth out intermodal operations, enhancing the performance metrics for other modes of transportation.
The last criterion to assess is risks to air freight operations.
Reducing risks with air freight solutions
Many of the risks mentioned above: Covid-19, war, sanctions, and inflation are difficult to remedy. The operating risk environment has become more severe and unpredictable. Operating in the New Normal means operating in a high-risk environment.
We see that with the ever-expanding sanctions on Russia. Many of the biggest U.S. and European logistics firms no longer ship to Russia. As long as backlogs, constrained capacity, and rising costs affect supply chains, air cargo shipping will factor markedly in the New Normal.
Nonetheless, air freight is a powerful solution in mitigating risk. Air freight builds agility and resilience through diversification of delivery modes. It also offers the highly sought-after speed demanded by today’s consumers.
Still, cost and capacity limitations prevent air freight from replacing other delivery modes. What your business needs is a multi-modal strategy that optimizes cost and performance. And you must balance that with meeting your customers’ needs.
The benefits of air freight
Compared to last March, air freight solutions have helped moderate costs and improve performance. Air freight ahs acted like a relief valve, relieving pressure on the transportation system.
Also increased reliance on air freight has had more benefits than disadvantages. Given the rise of eCommerce, air freight will remain a key component of any multi-modal solution.
Also, in the near-and mid-term, fuel prices are likely to remain erratic, but in the far-term, they should decline. That would reduce risk of employing air freight solutions over time.
Whether a trend towards greater reliance on air freight is shaping up for the long-term is unclear. In the near- to mid-term that seems to be the case.
Regardless, multi-modal solutions will likely figure more prominently in the future because they promote supply chain agility, speed, and resilience.
American Global Logistics has a team of experienced transportation professionals. Our team can help you create and perfect your deliveries. They take a balanced approach that considers cost, performance, and customer satisfaction.
Contact us to learn more about how to get the capacity you need when you need it.
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