Why choose air freight when sea freight is cheaper?

According to a report from China Business News, in the past one and a half months, Ty, the manufacturer of Beanie Babies, a doll toy that has been popular in North America for many years, has chartered more than 150 flights between China and the United States. Brought to the United States and successfully bypassed the century-old congestion in American ports.
These planes took off from Shenzhen, Guangzhou, Shanghai and other places with various Doudou baby dolls, flew over 6000 miles (about 9,700 kilometers) and arrived at Chicago O`Hare International Airport on time. According to Thiel, each aircraft The cost of the flight is between 1.5 million and 2 million U.S. dollars (approximately 9.6 million to 12.8 million yuan).

This is not an extreme case: Ty is not the only company that chooses to ship important holiday products by air to avoid getting stuck in shipping before the holidays.

How did the freight gap between air and Sea Freight narrowed during the epidemic?
The global Air Freight rate is about 2.5 times higher than before the epidemic.
On several major trade routes with particularly high demand, such as China-United States, Southeast Asia-United States, etc., the current air freight rate is five to six times higher than the average freight rate during the peak season before the epidemic.
So, why choose air freight when sea freight is cheaper?

Increased demand for goods
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 about US$14/kg, which was twice the price of the same period a year ago, while the cost of air freight to the East Coast was about US$13/kg. It is also twice the amount in the same period in 2020.
We all know the reason now. More than half of the world's air cargo comes from passenger planes. When the epidemic spread to the world and passenger travel was restricted, most passenger planes stopped flying. This year, with the normalization of the epidemic, border restrictions have begun to decrease, people's travel needs have increased, and airlines have begun to recover, but international air capacity is still about 70% lower than the level before the epidemic.

At the same time, demand for goods in North America is at a record level. Because of economic stimulus policies and other measures, people have more disposable income, and they spend most of this income on goods rather than services. At this time, the manufacturing industry encountered chaos and labor shortages, resulting in inventories that have been unable to keep up, so the market is extremely hot.
Compared with 2019, North America's shipping demand has increased by more than 20%. From the 80 container ships waiting for berths at the Port of Los Angeles and Long Beach last week, it can be seen that a large number of port backlogs and cargo delays have caused carriers and ports to be overwhelmed.
According to data from the International Air Transport Association, since at least September, global air cargo demand has begun to grow: compared with September 2019, global air cargo demand has increased by 9.1%.

Air freight can make up for lost time costs
For perishable and high-value commodities, air freight is usually the only mode of transportation, and the profits of these commodities are enough to pay for the additional transportation costs.
But it is unbelievable that for many companies, especially those retailers who are worried about the shortage of large-scale holiday goods, they are trying to make up for the time lost by shipping by air transportation.
The freight rate for a 40-foot container from China to the west coast of the United States is as high as US$20,000, including a series of insurance premiums and surcharges. This level has reached 10 times the level before the epidemic, but this does not include the shipment of goods from ports to all parts of the country. Domestic transportation costs.
Therefore, for cargo owners, it is easy to transfer from sea to air, because the price of air freight is much more competitive than before.

Air freight is now only 3 to 5 times higher than ocean freight
The International Air Transport Association (International Air Transport Association) and industry experts have compared the cost of air freight and ocean freight. With a container weight of 9000 kg, the freight rate of the container can be converted into a counting method of "USD/kg", so that it can be compared with the charging standard per kg of air cargo in the internal system of the International Air Transport Association.
The calculation result is: the air freight rate before the epidemic was about 13 to 15 times that of ocean freight, but now it is only 3 to 5 times higher than ocean freight. The advantage of low cost ocean freight is not as obvious as before. This is why many cargo owners even choose air freight. Driving factors.
Airbus A350 leads the new trend of retrofitting freighters
Since last Friday, Boeing has received a series of new orders for modification and construction of new freighters. The company has decided to build more production lines to transform old passenger aircrafts to load containers. These further indicate that investors Full of confidence in the long-term prospects of air transport.
Boeing predicts that by 2039, air cargo volume, including express delivery, will double, with an annual growth rate of 4.1%.

Air cargo volume growth calculated in revenue ton-kilometers
Air Lease Corp placed an order for 7 aircraft in the first batch. Boeing said that the Emirates Cargo Department will purchase two Boeing 777 wide-body freighters, DHL Express has signed 9 modified 767 aircraft, and a leasing company in Iceland has chosen to modify 11 Boeing 737-800 small aircraft.
Consulting group Seabury predicts that air cargo volume will increase by 6% next year. Aircraft manufacturers expect that air cargo will continue to maintain a strong momentum due to positive long-term trends.
So far, electronic products have been the biggest driving force for air transportation, and air transportation of medicines and perishables is also increasing.
Boeing's "Commercial Market Outlook 2021" predicts that the demand for freighters, including new and modified models, will increase. By 2040, the number of global cargo aircraft will increase by 70% compared to before the epidemic.
There are several structural drivers driving the demand for retrofitting and new construction of all-cargo aircrafts. Analysts say that passenger demand may not return to pre-epidemic levels in the next two to three years, and some large cargo owners who rely on shipping It is seeking more cargo capacity, and thus operating a freighter company may obtain higher profits.
Source:https://www.sofreight.com/