Rates climb as airfreight capacity constrained by Ukraine war

by Krystyna Shchedrina

Sanctions against Russia and the closure of Ukraine’s airspace have severely impacted global airfreight patterns and are resulting in lost capacity and rising prices.

The International Air Transport Association (IATA) predicts the war will have significant negative effects on air cargo. The delays and detours in the supply chain caused by forced rerouting will be reflected in rising prices for consumer goods

Willie Walsh, IATA director-general, said the war would affect cargo markets. Shifts in manufacturing and economic activity will lead to rising oil prices and geopolitical uncertainty. “Capacity is expected to come under greater pressure, and rates are likely to increase. To what extent, however, it is still too early to predict,” Walsh said in a release.

Airspace closed, flights cancelled

Russia retaliated against sanctions by closing its airspace to 36 countries, including Canada, the U.K., Baltic and Nordic states, and 27 E.U. nations.

Many European airlines, including KLM, Air France, Finnair and Virgin Atlantic, have cancelled most North Asian flights.

Those still operating are introducing fuel surcharges, as they are flying longer routes to avoid closed airspace. Cargolux, for instance, announced a war surcharge of $0.20/kg for cargo dispatched to and from Asia. FedEx has doubled rates on some flights from Hong Kong to Europe, the Middle East, Africa, and countries in Latin America and the Caribbean.

Freightos Group said last week the cancellation of international passenger flights would further increase Shanghai air cargo rates, which have already increased by 42 percent to the US East Coast this March because of rising fuel costs and decreased capacity.

“Rates from Europe to Asia are also rising, with prices from Frankfurt, for example, increasing 17 percent to Shanghai and 110 percent to Hong Kong, as it struggles with its own surge. The removal of Shanghai’s passenger capacity will only put more pressure on rates,” Freightos said in a weekly market briefing.

Russian aircraft grounded

Russia’s leading heavy-lift provider, Volga-Dnepr, has grounded almost every aircraft, leaving just two AN-124s flying to Bangladesh and China. Russia is also struggling to repossess most of its aircraft stuck at international airports due to the sanctions. Even those with European certificates cannot leave the U.K.

An Antonov An-124 that arrived in Toronto from China on Feb. 27 is the only aircraft at Pearson prohibited from departing, said a spokesperson for Toronto Pearson airport last week.

On Mar. 18 the US Commerce Department grounded 100 planes operated by Russian passenger and cargo carriers that allegedly recently flew to Russia and violated the US export controls. The department listed 33 Aeroflot-operated Boeing planes, twelve Boeing 747s operated by AirBridge Cargo, and the entire Volga-Dnepr fleet .