Air cargo demand takes off amid supply chain disruptions
Air cargo industry expected to carry a record amount of cargo this year: IATA
FOX Business' Grady Trimble reports that airline industry executives expect air cargo demand to continue to grow, at least in the short-term.
Airline industry executives said they expect air cargo demand to continue to increase, at least in the foreseeable future, amid continued supply chain disruptions.
Deputy director of operations and planning at Chicago Rockford International Airport, Zack Oakley, said in an interview that aired on "Varney & Co." that ocean shipping companies, such as CMA CGM Group, "are now becoming airlines as well."
"They know their shippers are requiring it to meet those demands and to get the product back in the market," Oakley continued. "It’s going to be a solution they have to offer all their customers."
The air cargo industry is expected to carry more than 68 million tons of cargo this year, a record high, according to the International Air Transport Association (IATA).
"That’s the million-dollar question, how long it will last – but I think for most probably the near future, let’s say, for a year, year and a half, we still depend heavily on freighters," Head of Operations and Procurement Americas at DB Schenker, Benno Forster, said.
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Speaking from Chicago Rockford International Airport, FOX Business’ Grady Trimble reported that companies have been using passenger planes for cargo amid increased demand, noting that the number of passenger planes being converted to cargo planes over the next few years is expected to more than double from pre-pandemic levels.
FILE PHOTO: The city of San Francisco is seen as shipping containers are unloaded from ships at a container terminal at the port of Oakland, California, U.S., October 28, 2021. REUTERS/Carlos Barria (REUTERS/Carlos Barria / Reuters Photos)
Ports have become one of many bottlenecks in global supply chains as ships in recent months have been filling up with boxes carrying everything from electronics to appliances. During the pandemic, backlogs led to some empty shelves at stores, which prompted companies to come up with alternative methods, including an increased reliance on air cargo, in order to get their goods from one place to the next.
Demand for air cargo increased by about 7% last year compared to 2019, according to IATA data, and the increase in demand was largely because of the disruptions with shipping on ocean freighters.
Though transporting goods by air is more expensive compared to shipping by ocean, however, the difference in cost is now smaller than it was in the past.
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The cost of shipping cargo from South Korea to Los Angeles, for example, is $831 for ocean/sea freight and $1752 for air cargo, according to Freightos.
The rising fuel prices, however, present major headwinds for the industry as well as for consumers, who often have to account for the higher input costs by paying higher prices.
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In fact, United Airlines CEO Scott Kirby told reporters on Monday that he expects fuel prices to stay elevated in the long-term, and that based on current prices, the airline's fuel bill would total $12 billion in 2022, Reuters reported.