Airfreight is all about supply and demand.
While it would seem that airfreight costs should be going down due to the drop-off in people moving amid the COVID-19 pandemic, the reality is that because of the model for moving items around the world, there is actually a dramatic drop in supply. According to this article from Flexport: "Demand might be low for passengers, but it most certainly isn’t for desperately needed personal protective equipment (PPE) and medical supplies."
More than 50% of airfreight flies in the cargo holds of passenger planes, and that actually goes up to 80% for transatlantic flights. But with many passenger fleets now grounded, the airfreight capacity has dropped 35% from last year. So due to very limited capacity, airfreight prices have actually skyrocketed!
It seems like a year ago, but it was only Feb. 20 when we posted "Air shipment costs rising due to impact of COVID-19." Since then, so much has happened with the global spread of the virus and it has brought international relocation and new assignments to a standstill. A little over two months feels like 10 times that.
As employees that would be mobile abide by national, local and company policies to "shelter in place" or "stay at home," the global supply chain that supports the mobile talent industry has been dramatically affected. The human and economic impacts have been felt across every element of the supply chain in the relocation industry from destination services to household goods shippers to immigration and temporary lodging providers. Even when many of the services fall under "essential service" categories, many relocating employees are holding back on moving forward until testing options improve and global economies begin to open back up.
In the meantime, since Feb. 20, when we discussed that the costs for shipments going into China and surrounding areas had escalated due to reduced capacity, that trend obviously has been spreading along with the virus around the globe. Coming back to this topic today, because there has been a radical reduction of flights that can carry airfreight at this time. We are seeing some really dramatic increases in airfreight costs and are expecting this to continue globally until countries open up their borders and (more) normal operations resume.
How dramatic is the increase in costs?
As an example, an air shipment from London to New York that may have previously had an airfreight cost of $3,500 USD is now running at $35,000 USD. Ten times the cost is very dramatic!
So because of this, here are some things to consider:
- If you obtained an airfreight quote for an assignee prior to the pandemic, and in the event they are looking to have these goods moved now, you will need to obtain a new quote.
- If you obtain a new relocation or request to move goods via airfreight, please note that the costs may be well above any capped allowance and you should advise that airfreight may not be possible due to the current costs.
- Consider alternatives such as land or sea freight shipments for the time being due to these cost increases.
- Note that there is some increase in ocean freight costs but not nearly as much as shipping by air.
For more information on how COVID-19 is impacting global expatriate assignments, try grabbing a hot copy of AIRINC's "Pulse Survey COVID-19 and International Expat Assignments".
What we see in the air freight market is unprecedented. Pricing is breaking all records and falls well outside the past five years’ range of prices. But nowhere is the exponential increase more dramatic than in the Transpacific trade lane. China to North America spot airfreight pricing is now well north of 10 USD per kilogram, and full freighters are selling above 1M USD per flight—and increasing every week. Looking at the China to Europe airfreight rates, the news is not much better, having seemingly tripled in the past month. On top of that: Some ground-handlers in North America and the EU are imposing COVID-19 emergency support surcharges.