Categories: Uncategorized

Omicron set to restrict cargo capacity and keep rates high

By Damian Brett

Air cargo rates are set to remain at an elevated level. Source: Bollore Logistics

The Omicron variant is set to keep air cargo capacity tight and as a result air cargo rates will remain at an elevated level.

In the latest Baltic Exchange market update, investment bank Stifel senior analyst Bruce Chan said that the new variant will restrict network capacity due to safety protocols, episodic infection and national response.

He added: “This and other new variants are likely going to delay a return to pre-pandemic international business travel (or international travel in general), which means that the complete return of belly capacity on those core lanes will also get pushed out.”

Chan said that there was also at least some risk that belly capacity may never fully recover if there is a permanent switch to hybrid in-person/virtual business.

“With renewed lockdowns in some countries and geographies, and with continued and not unreasonable public concern about viral spread, we believe the eventual transition of discretionary dollar spend away from goods and back to services may be elongated as well,” he said.

“These factors should support persistently elevated airfreight rates, in our view, and any shippers that were looking for relief in the seasonal first quarter freight lull may not find it – at least to the extent that they expect.”

Last week, IATA’s director general Willie Walsh also warned that a knee-jerk reaction to the Omicron variant from governments could have an impact on cargo capacity if restrictions dampen passenger demand.

Walsh said that after almost two years of Covid-19, governments have the experience and tools to make better data-driven decisions than the “mostly knee-jerk reactions to restrict travel that we have seen to date”.

“Restrictions will not stop the spread of Omicron,” he said. “Along with urgently reversing these policy mistakes, the focus of governments should be squarely on ensuring the integrity of supply chains and increasing the distribution of vaccines.”

The warnings come as airfreight rates continued to increase last week.

The latest figures from the Baltic Exchange Airfreight Index (BAI) show that prices from Hong Kong to North America reached a new index record of $12.41 per kg, compared with $6.77 per kg in the same week last year and $3.66 per kg in 2019.

There was also a new index record on services from Hong Kong to Europe, which reached $8.46 per kg compared with $5.61 per kg in the same week last year and $3.27 per kg in 2019.

Admin

Recent Posts

Korean Air to launch new route to Macau

April 26, 2024 by Payload Asia route to Macau (Seoul, April 26, 2024) – Korean…

10 mins ago

HKIA Crowned World’s Busiest Cargo Airport Again in 2023

HKIA Crowned World’s Busiest Cargo Airport Again in 2023 World’s Busiest Cargo Airport Hong Kong…

1 week ago

Air Cargo Demand Maintains Double-Digit Growth in February

Geneva -  The International Air Transport Association (IATA) released data for February 2024 global air…

4 weeks ago

Air cargo demand still growing after LNY but rate of improvement slows

21 / 03 / 2024 By Damian Brett There had been much speculation in air…

1 month ago

Progress Report: Sustainability, Digitalization and Safety in Air Cargo

12 March 2024 Hong Kong -  The International Air Transport Association (IATA) reviewed progress in…

2 months ago

Air Cargo Demand up 18.4% in January

5 March 2024     Geneva -  The International Air Transport Association (IATA) released data for January…

2 months ago