Since Russia’s invasion of Ukraine last week the cost of transporting goods by air has surged, adding to the logistical complexity and cost for the air cargo industry.
This is primarily due to airspace restrictions, and the lingering aftereffects of COVID as the industry still struggles to recover.
The conflict has also had the effect of driving up fuel prices, which is also crucial to the running of aircraft.
Jet fuel prices in the United States reached the highest in more than a decade this week, exuberating the problem.
Why is this happening?
Europe, Canada, the US, UK and Baltic and Nordic states have all banned Russian aircraft from entering its airspace since the invasion of Ukraine on 20th February. Russia has responded since then, banning British aircraft from Russian airspace with a total of three dozen airlines internationally.
Because of these airspace restrictions, carriers are forced to take alternative tedious routes to avoid Russian airspace and, to remain cautious, avoid Ukraine, Belarus and Moldova.
These alternative routes are longer and increase flying time and fuel consumption, causing carriers to spend more money in response.
What worsens matters is the fact that air cargo demand and prices had already been on the rise for the past two years.
The effect of rising costs
Carriers are responding differently.
KLM Royal Dutch Airlines and United Parcel Service (UPS) have opted to fill their planes with pricer fule for longer Asia routes to avoid Russia.
Air cargo rates from China to Europe jumped 80% this week, the highest since October 2021.
The U.S ban of Russian aircraft entering its airspace, announced during President Biden’s first State of the Union last Tuesday, included Russian cargo giant Volga-Dnepr.
Outside the U.S, all Western companies have lost access to Volga-Dnepr for the same reason.
The war in Ukraine has also had the effect of reducing cargo capacity at a crucial time when the supply of air cargo is still struggling to recover to post-COVID cutbacks.
Those most affected are shippers with outsize and heavy cargo that doesn’t fit well in regular cargo jets.
Chicago-based Seko Logistics, which specialise in global supply chain solutions, predicted that air cargo rates will be from 30 – 50% higher this month compared to February.
Sooner rather than later, higher transportation costs are likely to start impacting regular consumers as it continues to become more expensive for cargo to travel and reach consumers by air.
What do you think about the rising cost?
