Few alternatives exist as PVG freighter cancellations mount

On Aug. 23, roughly a third of scheduled international cargo arrivals into Shanghai Pudong (PVG) were cancelled as the world’s No. 3 cargo airport by throughput grapples with a COVID-19 outbreak that has infected three ground handling agents in the international cargo wing of the airport. With a growing pool of handling agents being pulled into quarantine, freighter flight cancellations could swell to 40% to 50% in the days ahead, leaving operators with few options to reroute cargo originating in or destined for mainland China. [caption id="attachment_96703" align="alignright" width="450"] Cargo moving through PACTL’s Shanghai (PVG) facility. Photo/Royal Media[/caption] Scheduled freighter activity at PVG was noticeably lighter on Monday, Aug. 23, with about 30% of international arrivals and 20% of scheduled departures cancelled, according to arrival and departure statistics from the airport. Foreign carriers bore the brunt of the cancellations, with Air France, All Nippon Cargo, Emirates, Hong Kong Air Cargo, Polar Air Cargo, Singapore Airlines and Silk Way West Airlines among the operators with delayed or canceled flights on Monday, according to airport statistics. Flight cancellations alone, however, do not reveal the full extent of the disruption. Even for flights that are operating, “there are very few freighters that are being handled,” said Neel Jones Shah, executive vice president and global head of airfreight at Flexport. “I actually think it's more significant than 50%,” said Shah, referring to the overall capacity dislocation at the airport. Operational status varies from handler to handler, based on employee exposure to positive COVID-19 cases, and quarantine requirements. “Some [ground handlers] have effectively shut down, while others are sort of at half-staff. So, you know, part of it's just the luck of the draw,” said Shah. Rerouting around the disruption Some affected operators have rerouted cargo through alternative domestic airports where they have existing scheduled services. Russia-based AirBridgeCargo has diverted five PVG-bound flights to Zhengzhou between Aug. 20 and Aug. 23 and in a sign the situation will not improve rapidly, plans to divert seven more between Aug. 23 and 29. “We were able to secure landing for all PVG flights to CGO because we had extra slots available for us in CGO,” Eric Lamare, director of scheduled cargo operations, APAC for AirBridgeCargo, told Air Cargo World. So far, its handler at CGO, All-Star, has been able to absorb the additional volume, Lamare said. Flexport, which charters five-weekly trans-Pacific 747-400F flights, has consolidated two of three Shanghai flights to Hong Kong for the next week. “We've shifted our capacity south, and we've shifted our cargo south,” Shah said. Cargo warehoused in Shanghai is increasingly moving to Hong Kong while consolidations that had been scheduled to depart from PVG but have yet to leave customer facilities are now being routed to HKG. When the new restrictions began on Aug. 21, it was clear the disruption would have a significant impact on airfreight rates from Shanghai, with SEKO Logistics’ VP Global Airfreight Shawn Richard telling Air Cargo World that rates could climb to at least $15/KG “very soon,” and that seeing rates higher than that “is not unlikely.” Flexport’s Shah said today that rates ex-PVG have not reached that level yet, but that “rates out of Shanghai next week are probably going to be north of $12/KG and in Hong Kong probably similar, because the markets do move to a certain extent in tandem with one another. From Taiwan (TPE), which “has always had a rate structure that’s been significantly higher than both Hong Kong and Shanghai,” Flexport reported rates for express cargo as high as $14 to $15/kg. “We haven’t seen $15/KG for general cargo yet, but it’s not to say that we won’t get there,” Shah said. “We still have a lot of demand, there’s a lot of ocean-air conversion, the U.S. economy is doing well, people are out spending money,” Shah noted. “We continue to see a very strong pipeline from our shippers.” No alternatives for some carriers Flight diversions are unlikely to absorb more than a fraction of the capacity currently absent from PVG. Nearby airports “also have constraints, and they can only handle so many freighters a day,” said Shah. For airlines without scheduled services and existing landing slots elsewhere, rerouting flights is not feasible at the flip of a switch, “Simply changing to an alternate airport such as CGO is really not an option for those of us that do not have regular operations there,” said Shawn McWhorter, President NCA Americas of Nippon Cargo Airlines. NCA has cancelled three to four flights per week between Tokyo (NRT) and PVG. “We continue to operate at least daily service there, so we can maintain our basic business,” McWhorter said. Freight forwarders Air Cargo World spoke to expect domestic carriers with passenger services at secondary and tertiary airports in South and West China will have an easier time utilizing alternative airports. A source familiar with Beijing-headquartered Air China Cargo’s network plans told Air Cargo World the carrier was exploring the potential use of Hangzhou (HGH), Chengdu (CTU), Chongqing (CKG) and Nanchang (KHN) for freighter flights. Guangzhou-based China Southern Cargo, on the other hand, is expected to utilize Guangzhou (CAN) and Shenzhen (SZX) over tertiary airports, according to a source familiar with the carrier’s plans. While airport diversions or the use of ferries to feed cargo moving through other major freighter gateways in the region such as HKG, Tokyo (NRT) and Seoul (ICN) may alleviate some of the capacity pressure, carriers and forwarders fear that China’s “zero-tolerance policy” for COVID-19 has made staffing shortages endemic across nearly every major port in the country, which could continue for the duration of the pandemic. “It's going to be a challenging fourth quarter for the industry without a doubt because, you know, this outbreak happened, but that's not to say the outbreak won't happen again in two weeks,” Flexport’s Shah noted. “If we were to get into that sort of a cycle, I'm not sure what the overall impact [would be]. I don't even want to think about that because the impact is so dramatic. But that's something that the industry is going to have to confront, if we were to go through this again.”

Few alternatives exist as PVG freighter cancellations mount

Ex-PVG airfreight rates head toward $12/KG, ex-TPE climbs to $14/KG

Few alternatives exist as PVG freighter cancellations mount

Consultant Insight: DB Schenker may not be for sale, but other freight forwarders may be

Consultant Insight: DB Schenker may not be for sale, but other freight forwarders may be

Cargo Facts Free Newsletters

Cargo Facts Connect Podcast

Follow Us

Welcome Back!

Retrieve your password