Today, anyone intending to fly consignments from Europe or the USA to China, or out of China to those areas, will need luck in finding an airline willing to uplift the goods. If successful, then the service will come at a substantial price because rates for intercontinental air freight transport to/from Beijing, Shanghai, or Zhengzhou are currently going through the roof, as freight forwarders confirm.
“The sky is the limit!” is EMO Trans’ Route Development Manager, Niklas Bergmann’s description of the current rate hike for shipments flown into or out of China. The price curve is increasing
upwards: the higher the infection rate, the more expensive air freight becomes. These two curves are shooting up in parallel.
Will this end soon? Considerable doubts are warranted. According to the World Health Organization (WHO), the pandemic has not yet peaked, as evidenced day after day by the rapidly increasing number of new infections.
Cathay cuts down China services
Last Friday, Hong Kong closed its borders to mainland China, leaving the Hong Kong-Zhuhai-Macau Bridge and the airport the only remaining open entry points to Hong Kong. Cathay Pacific and Cathay Dragon together announced cutting 783 flights per week in February and 835 per week in March to mainland destinations. Private companies such as Apple, Airbus, Swatch or BMW, to name but a few, decided to shut their China-based production sites down until further notice.
In contrast, the forced leave decreed by the Chinese government for employees working in many of the state companies, ends this Monday (10.2.). Yet, it is highly questionable that this command enacted by Beijing’s rulers will work in view of the still rapidly spreading virus and have a significant impact on production.
No matter what the price
Forwarders point out other problems: “If you have an instrument, tool, or spare part that needs to be flown to China extremely urgently, you are willing to pay just about every price,” Quick Cargo Service’s CEO, Stephan Haltmayer, says, describing current frequent urgent demands.
His company signed a major capacity purchase agreement with China Southern, valid for the entire year. However, the carrier stopped flying, so QCS shipments are piling up at Frankfurt and other airports where the agent runs stations, with no or very little chance of being uplifted.
The situation at EMO-Trans is similar. "As soon as flight operations resume, a huge pile of goods will have to be processed,” says Mr. Bergmann.
Worst cargo collapse since the outbreak of the 2008 financial crisis
The current capacity squeeze leads to the somehow bizarre question if forwarders should not perhaps thank the Coronavirus for leading to this price explosion in air freight.
However, that is a rather daft assumption!
The bold fact is that they are losing a great deal of money despite the skyrocketing rates, because the entire air transport market to and from China has largely collapsed with no end in sight at present.
No flights, no air transportation, no earnings. It is as simple as that.
Charter chains bring only small relief
In their distress, some car producers and other global players running large production plants in China in close cooperation with their forwarding agents have now started own charter chains from Europe to Chinese destinations. It is kind of an emergency maneuver to prevent the standstill at their China-based production sites due to a lack of components.
The pandemic cripples many businesses
There is another line of business the Coronavirus is increasingly endangering: that of agents specializing in tourism. Germany, for instance, welcomes between 1.2 and 1.5 million Chinese travelers every year. Spain, Italy, or France report even higher numbers of visitors. Now, this stream has trickled down to a tiny rivulet leaving little to do for the local service providers. Simultaneously, shopkeepers and retailers are also suffering from the lack of Chinese buyers.
In summary, it can be concluded that a local Wuhan epidemic, initially negated by the Chinese bureaucracy under the pressure of their Beijing rulers, has grown to a tsunami, impacting the global economy, airlines, forwarders, and industrial producers. Not forgetting all those who have fallen victim to the Coronavirus.
We always welcome your comments to our articles. However, we can only publish them when the sender name is authentic.