A question Logistics Managers (like myself) and Supply Chain Managers are hit with regularly, especially now.
It has been an extremely challenging time for anyone in the logistics industry – all across the board: Brexit, Covid, Lockdowns, Driver shortages, Port congestion, Container Shortages, Limited Flights – the list goes on. I definitely have a lot more grey hair than I did two years ago. Now, on top of the all these challenges – war.
The war in the Ukraine has had more of an impact on the global airfreight industry than many people realise. Just because you do not import or export to the Ukraine or Russia does not mean you are not affected.
For example: As part of my role as a Logistics Manager I need to coordinate airfreight imports from Japan to the UK on a weekly basis. This was (was being the key word) booked on a direct flight from KIX – Kansai International Airport (Osaka) to LHR – London Heathrow. This direct flight took about 13-14 hours taking the flight over the likes of Mongolia, Kazakhstan, Russia, Ukraine, Poland, Germany, Netherlands then UK. With the war in Ukraine and the sanctions on Russia and Russia airlines (with retaliatory action) this is now no longer possible. Many flights now need to divert using indirect routes, such as stopping in United Arab Emirates or Oman before continuing to the UK.
Many other flights to/from the UK and Europe are affected in a similar way due to the restrictions on airspace.
These diversions have a huge and immediate impact on airfreight costs because of:
- Reduced flights
- Reduced flight capacity for cargo
- Additional handling cost and time
- Additional air port fees
- Additional fuel costs
Additional fuel costs and decreased cargo capacity unfortunately go hand-in-hand. The fuel capacity required for each flight is calculated by a series of complex calculations taking into account factors such as:
- Flight distance
- Weight of the plane itself
- Number of passengers
- Weight of passenger baggage
- Weight of cargo
- Weight of the fuel
- Safety buffer factors such as poor weather
Airlines do not tend to fly fully fuelled if they do not need to as fuel itself adds to the weight so therefore they would use more fuel.. a catch 22 situation. Quite simply put: as the airlines now need to divert via an indirect route this has increased the flight time, which has increased the amount of fuel required, which has decreased the cargo capacity on an already limited route.
This decreased cargo capacity translates as a further reduction in supply within a marketplace with increasing demand. On top of the other factors I mentioned earlier has only help to drive up the already high airfreight freight rates.