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Air Freight Capacity Issues
Peak season used to traditionally take place in August and September as shippers were rushing to get freight delivered for the upcoming holiday season, via ocean. However, the current marketplace, influenced by consumer’s reliance on e-commerce, has shifted away from ocean toward air cargo. As a result, we are not only seeing a bigger peak season for air cargo than ocean, but we are seeing higher volumes for air shipments year around.
One region hit particularly hard this peak season has been Europe, where volume has caused air carriers to max their capacity and driving up spot rates to $13/kg. As a result of these capacity issues, carriers are unable to meet the transit times and pricing requirements that were agreed upon in contracts with clients.
Not only are airlines at max capacity, in many cases, entire airports are reaching capacity to the extent that they don’t have enough gates or ground personnel to handle flights. As air terminals continue to become overcrowded the end result will be even longer wait times to pick up or deliver freight. Per IATA there are currently 189 full airports around the world. It is estimated that upward of another 100 airports may be declared full within the next decade.
Considering the fact that entire airports are reaching capacity, there are not any signs that air cargo rates will be going down soon.
We expect air rates to continue to climb. What can shippers do to minimize their transport costs? Below you will find areas of focus that shippers can work on to lessen the strain of the capacity issues and higher costs.
Make sure that the proper mode is being used; sending shipments under 70 Kg via small package might result in a lower transport cost.
Ensure that the packaging of the shipping items is the best option for the chosen mode. Putting a few smaller boxes onto a larger pallet will likely drive up the dim weight of your air shipment. If a pallet must be used make sure it is one that fits with the length and width of the desired cargo. Ask about dim weight.
Be aware of your minimum charges. If you have smaller shipments you may be paying a minimum charge that will represent a higher cost than your typical cost per kg. Considering consolidating and making bigger shipments to not overpay on minimums.
Understand your incoterms. Don’t foot the bill when the cost is not your responsibility. Learn more about incoterms here: Common Incoterms Mistakes.
Increase use of least cost carrier. See that you get the most of your transportation spend. Don’t just choose a carrier because they are responsive and easy to work with. Learn about the Logistics Control Tower.
If you have any questions or if you would like additional questions on what a company can do to lower transportation cost please contact Allyn International at sales@allynintl.com.
About Allyn International
Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North America, Europe, and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China and Prague, Czech Republic. For more information, visit www.allynintl.com.