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Nov 19,2021

Why is the air freight service suddenly cheaper than the ocean freight service?

The cost of shipping goods to all parts of the world through air supply logistics has increased by about 2.5 times compared to before the epidemic. On major trade routes with particularly high demand, such as China and Southeast Asia to the United States, freight rates during peak freight rates are five or six times higher than normal.


So, when ocean freight is at a high level, how does air freight become relatively cheap?


According to the Freightos Aviation Index, the price of air freight from China to the West Coast of the United States in the first week of November was approximately US$14 per kilogram, which was twice what it was a year ago. The cost of air freight to the east coast is approximately US$13, which is twice as much as in 2020.


We all know the reason. Passenger planes are the source of more than half of the global air cargo volume. When the epidemic began to restrict travel and travel, most passenger planes stopped flying. The reduction in US border restrictions this year has increased demand and helped airlines begin to recover, but international air capacity is still about 70% lower than pre-epidemic levels.


At the same time, especially in the United States, it is at a record level, because white official relief and higher savings rates give American citizens more disposable income, which they use for goods instead of services. The manufacturing industry suffered chaos and labor shortages, and inventories as a whole could not keep up with consumption.


air supply logistics


Air freight services are usually limited to perishable items and high-value goods, and their profits can pay extra. Incredibly, for many companies, air freight has become a relatively cheap mode of transportation compared to ocean freight, especially when measuring the cost of out-of-stock and lost sales.


When the supply chain is turned upside down due to ongoing chaos, demand can be reversed.


Compared with 2019, North America's shipping demand has increased by more than 20%. Carriers and ports have been overwhelmed, resulting in huge delays and port backlogs, as the 80 container ships waiting for berths at the ports of Los Angeles and Long Beach last week best illustrate this point. From the outbreak of the epidemic to minor failures in the port system, as well as a shortage of workers, it has had a great impact.


When a series of premiums and surcharges appear, a spot tariff of 40-foot equivalent units from China to the West Coast can cost more than $20,000 for instant transactions that are not subject to more preferential long-term contracts. This is 10 times the ratio before the epidemic, and does not even include inland transportation of goods to the United States.


Air freight services


In particular, large retailers are short of products for holiday shopping activities, and are trying to transfer goods by sea to air, so as to make up for the lost time.


For shippers, the decision to switch from ocean freight to air freight is easier because air freight is more cost-competitive than ever. To


According to the International Air Transport Association and industry experts, before the epidemic, the average freight price of air supply logistics was about 13 to 15 times that of ocean freight, but now it is only 3 to 5 times more expensive.