Dive Brief:
- Ceva Logistics is rolling out two new options through its airfreight division that it said are meant to provide better supply chain stability at a time when the market is "experiencing significant volatility," Peter Penseel, Ceva Logistics COO for airfreight, said in a statement about the offerings.
- One of the services, Skycapacity, is a network of capacity Ceva purchases on dozens of flights every week, the company said. It offers the network as guaranteed space and on the spot market.
- The company is also rolling out an offering for time-sensitive shipments targeted at the healthcare, automotive, aerospace and manufacturing sectors. The team dedicated to this offering will be able to respond to any request for service within 15 minutes, Ceva said.
Dive Insight:
A turbulent ocean shipping market and port delays sent many shippers to air cargo. But rates and capacity are volatile in airfreight, too.
"Strong ocean conversion demand and high charter activity caused reduced commercial capacity and sharply increased rates since mid-March," C.H. Robinson said of airfreight between Asia Pacific and North America.
One event that sped up the sea-to-air conversion in March was the blockage of the Suez Canal, according to Peter Stallion, the head of air and containers at Freight Investor Services. But even with the canal clear, air rates are expected to stay elevated through May.
"However, looking forward into April and May 21, we’ve seen corresponding buy interest pushing up Asia to Europe prices," Stallion wrote in a note this month, referring to airfreight.
Rates between China/Hong Kong and North America have increased more than 58% since March 15 to reach $8.06 per kilogram as of April 19, according to figures from the TAC Index. Freightos noted in a market update that fuel prices are also impacting rates.
As demand for freight increases, many shippers have noted they will be placing a greater focus on guaranteed capacity in future contracts.
"In ... previous years, I would say, 'You need to balance redundancy with not eroding cost or volume optimization.' This year, I think you need to protect your business and focus on redundancy and protection," Mary McNelly, Croc's director of global logistics, said at a conference earlier this year talking about the company's ocean freight strategy.
Ceva said it is seeing similar demand in the airfreight market.
"We have already signed long-term contracts by customers looking for stability, reliability and consistent pricing, and we believe that this program will continue to be a key differentiator in 2021 and 2022," Penseel said in a statement.
The cargo market has been a bright spot for passenger airlines over the last year. And this has not let up, according to the most recent round of earnings.
"One reason for our strong performance also has been our cargo team, which continued to execute well with record Q1 revenues of $497 million, up 74% versus '19 and up 88% versus 2020," United Airlines Executive Vice President and Chief Commercial Officer Andrew Nocella said on the company's earnings call this week.
The most recent figures from the International Air Transport Association show that air cargo volume increased 9% in February compared to February 2019. These trends did cool in March, according to the Baltic Air Freight Index, which dropped more than 4% from the previous month and was down 3% compared to the same month in 2019.
"Also, air cargo has been gaining share in global goods trade over other modes of transport — a pattern typical during the recession recovery cycle," IATA noted in its monthly airfreight report.
