Congested US airports push trans-Pacific air cargo rate to record high

Greg Knowler, Senior Europe Editor | Dec 01, 2021 12:53PM EST

Air cargo rates from Shanghai to North America continued to climb from already-record levels this week as heavy seasonal demand on the trans-Pacific collided with worsening congestion at US gateway airports.

For shippers of ocean freight, high rates and poor schedule reliability is a story that has been playing out on the congested Asia–North America trade all year, but for shippers of air cargo — many of which were driven to air by the ocean bottlenecks — airport congestion is yet another hurdle in the ongoing disruption.

Niall van de Wouw, managing director of air freight analyst CLIVE Data Services, told reporters Wednesday that global air cargo load factor — a ratio of cargo volume to available capacity — in November was 2 percentage points lower than in October, something he described as “quite remarkable” at this point in the peak season, when the load factor tends to rise.

Click to enlarge.

However, this is not due to a lack of demand, which globally was up 9 percent year over year in November, but rather because cargo is unable to move efficiently through the system.

“There are issues at so many airports on the ground that are limiting the volume that can move through the supply chain,” van de Wouw told reporters. “The current inefficiencies on the ground must have opportunity costs for airlines, forwarders, and shippers alike, because cargo will be missing flights.

“This is also what we’ve seen reported in the ocean freight market at US West Coast ports,” he added. “Labor shortages are a factor in all sectors, but this is especially having an impact on such a labor-intensive industry as air freight, especially on the ground. Volume ready to ship is stuck in warehouses and terminals and can’t move.”

Two-week delays

Although van de Wouw said the data did not show which airports were suffering the worst bottlenecks, forwarders are reporting delays of up to two weeks at terminals in the main US gateway airports, including New York’s John F. Kennedy International (JFK), and Los Angeles International (LAX).

Van de Wouw noted that the bottlenecks would be difficult to clear in the middle of a peak season and may not wind down until Chinese New Year at the end of January.

“Two months ago, we described the air cargo market as ‘fragile’ heading into the traditional peak season, and this fragility is being visualized on social media through airport [videos] showing countless pallets and containers waiting on the tarmac,” he said.

Coupled with a lack of available capacity, that fragility and uncertainty are translating into soaring freight rates. Average rates from Shanghai to North America of $13.84/kg were almost 90 percent higher than the same week in 2020, beating the previous record set last week by $0.22/kg, according to the Baltic Freight Index. Shanghai–North Europe rates of $7.34/kg were up 22.5 percent year over year, while the Frankfurt–North America rate of $5.05/kg was the highest it has ever been.

CLIVE data also revealed that the opening of trans-Atlantic air travel to fully vaccinated travelers in Europe and the United Kingdom did not ease the tight capacity on the trade lane. In fact, it had the opposite effect, van de Wouw said.

“In week 46, after the US opened up [on Nov. 8], there was a steep drop in available capacity on all aircraft types to the US,” he said. “The opening up did not provide any relief because the capacity on the passenger aircraft was taken up by luggage.”