AirBridgeCargo exit hits forwarder market access

The loss of AirBridgeCargo (ABC) from the major Asia-Europe trade lane as a consequence of Russia's invasion of Ukraine is having a significant impact on the airfreight market. [caption id="attachment_90302" align="alignright" width="450"] AirBridgeCargo 747F in Madrid. Photo courtesy of WFS.[/caption] The Volga-Dnepr Group (VDG) subsidiary — with its freighter fleet of almost 20 aircraft and growth in annual tonnage over the past five years of 15% — has become a key player in such dynamic verticals as pharmaceuticals and health care, e-commerce and high-tech cargo. It was one of the first carriers to launch flights for the transport of COVID-19 vaccines. When Europe closed its skies to Russian-owned or controlled planes at the start of March, ABC’s European schedule included 10 weekly rotations to and from Frankfurt Airport (FRA) and a similar number at Belgium’s Liege Airport (LGG). “The impact has been immediate, and it will likely get worse in the months to come as there is very limited capacity to replace ABC,” Mads Ravn, executive vice president and head of global air freight procurement at DSV, told Air Cargo World . “The worst-affected routes are to and from Beijing and Hong Kong where, among other things, we are experiencing skyrocketing rates and will undoubtedly see prolonged, general supply chain disruptions on these lanes into H2. “Offhand, it is difficult to find a one-to-one substitute for this loss of air freight capacity,” he said. “All freighters are being utilized to the maximum and the capacity coming into the market is in many cases dedicated to specific clients or segments which will not offset any of the missing capacity.” The company is opting for intermodal solutions where possible, Ravn added. “For instance, we link our sea freight operations out of Southeast Asia with our Middle Eastern airfreight hub.” Short-term replacement capacity At a time when the much-anticipated post-COVID market recovery has yet to materialize, the loss of capacity offered by ABC was “another major setback for the entire industry,” said Timo Stroh, head of global air freight at Germany's Dachser. “The combination of a modern fleet of aircraft — flexible, yet reliable network plans and traffic rights to and from major cargo airports — is difficult to impossible to adequately compensate for,” Stroh said. To help address the loss, earlier this month Dachser added a temporary weekly charter flight on the FRA-Shanghai (PVG) route. “It's a short-term solution that expires in April,” Stroh said. “However, we are constantly monitoring the situation in order to be able to create solutions and capacities with further offers in the charter sector.” German forwarder DB Schenker said there is no doubt the grounding of the ABC fleet was a blow to an already tight market. “This, compounded with the Russian and European airspace closure [for Russian carriers] has overall taken out about 25% of the capacity on the Asia-to-Europe sector,” a company spokesperson said. “We've had to find replacement capacity at short notice to make up for the shortfall, primarily between China and Europe and on the return leg. Because we reacted fast, we were able to do so, albeit, unfortunately, at higher rate levels.” The forwarder now expects the volatility of 2021 to continue “for at least a few more months.” Routes to and from Asia were already congested before ABC's withdrawal from the market, noted Niek van der Weide, global head of carrier management, air logistics, at Kuehne+Nagel. “On top of this, carriers have rerouted the flights, no longer flying over Russia, which has led to quite a drop in payload and capacity to and from Asia,” van der Weide told Air Cargo World . “U.S. routes operated by ABC or CargoLogicAir [another VDG-owned carrier] has had a lesser impact. “We have been able to find alternatives for our customers ex-Asia on our own capacity, be it full charters or in our allocations with the carriers,” he said. Turning to the market outlook for the months to come, van der Weide expects there to be “a lot of pressure on capacity, especially to and from Asia. However, we still have to see the impact of COVID-19 in China, as exports can be affected.” For the capacity that remains, the loss of ABC is having an “extreme” effect on rates , said Stephan Haltmayer, CEO of Frankfurt-based SME forwarder Quick Cargo Service. “Demand on eastbound routes from Germany to Asia, particularly to China, remains very strong,” Haltmayer said. “On the supply side, in addition to ABC leaving the market, airlines are having to fly south of Russia to avoid the country's airspace and the longer routes mean uplift has been reduced. Another hurdle is that two-engine aircraft are not allowed to overfly the Himalayas.” The upshot is that airlines are only selling limited unit load device (ULD) space for the summer schedule to forwarders, he said. “They prefer to sell space 'ad-hoc' at the daily market rate. This provides scope to generate higher revenues throughout the summer season. “Some of the 'multinational' forwarders are chartering their own flights,” Haltmayer added. “Forwarders who have round-trip business are in a better position to negotiate with the carriers. The Chinese airlines are in prime position at the moment. Customers who are willing to pay the increased rates will have the best chance of getting shipments flown.”

AirBridgeCargo exit hits forwarder market access

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