Port congestion | The cargo plane to the freighter’s rescue

This is the option traders and importers want to avoid. But grappling with persistent port congestion, they are increasingly forced to turn to air freight in order to receive their orders on time – even as it skyrockets transportation costs.

Julien arsenault
Press

In some three decades in the industry, Jean Chu believes he has never had to face such a “chaotic” situation.

Director of imports and transport logistics at Lanctôt, distributor and manufacturer of major sports brands, he recently resigned himself to bringing 2,000 kg of goods by air from Shanghai, China.

“A shipment like this is probably going to cost me between $ 25,000 and $ 30,000,” he says. That’s probably half the price for the marine option, even with the current container price. These are clothes samples for our sellers. We have time constraints. We do not have a choice. ”

This family business founded in 1953, which supplies both independent boutiques and large chains, has seven divisions: skiing, cycling, golf, clothing, team sports equipment, optics and fashion.

This is mostly clothing and seasonal items that are carried more by air freight, says Chu, who brings in, year after year, about 100 40-foot containers from Asia.

From time to time traders are turning to air freight, but that is changing. Linda Di Genova, director of Lanctôt’s clothing division, anticipates an increase of around 50% in air freight orders for the spring, mainly for the golf division. Why does the company agree to pay such exorbitant prices? To show his customers they can trust him, says M^me Di Genova.

“We’re talking about polo shirts, shorts and other items,” she explains. Our margins are slimmer, but at least we don’t end up with order cancellations. “

This phenomenon does not spare large companies. Giants like Nike and Levi Strauss & Co. have publicly said they have ordered more items by air freight, pushing up their costs.

Neutral everywhere

All over the world, ports are still congested for health reasons or lack of manpower, leading to delivery delays and skyrocketing the price of containers for companies wanting to bring in goods from. Asia.

Due to the delays accumulated during each stop, the journeys of container ships are longer, causing the price of containers to skyrocket, which could vary between US $ 3,500 and US $ 5,000 before the pandemic. According to the World Container Index, the international barometer, the price of a 40ft container was estimated to be over US $ 10,000. Over 80% of the world’s goods are transported by sea.

However, the trend was similar for air freight rates. The price to ship an item from Hong Kong to North America is around US $ 10.45 per kilogram, according to Freightos, which is more than 200% increase in about two years.

Compared to 2019, the proportion of items ordered by air for the fall-winter season shows an increase of 15 to 20%, she added. Tristan occasionally used the transport of goods by plane, but “it was as little as possible”, according to its president.

“When the goods are ready to leave, we confirm the method of transport,” says Mr.^me Fort. Can we take the risk of waiting? Yes ? So it’s by boat. Otherwise, we change. ”

Will these additional expenses be passed on to consumers? Not directly for the moment, estimates the president of Tristan, who underlines that it is the number of articles in promotion which is likely to be less large.

Reitmans, owner of brands like Penningtons and RW & CO, told shareholders on September 23 that its transportation costs climbed in the second quarter.

Spokeswoman for the retailer, Katherine Chartrand, declined to release financial data, but in an email, she explained that the company believes it has “doubled” its “normal air freight expenses” in the “six in the last eight months ”.

“Due to the seasonality of fashion clothing and accessories, it is important for us to receive the products on time,” wrote M^me Chartrand, adding that products “for the holiday season” were “priority”.

Reitmans estimates that in some cases the bill for importing goods by air is “up to 10 times” higher than for the maritime option.

A rare exciting niche for the airline industry

Medical personal protective equipment, COVID-19 vaccines, e-commerce, supply chain bottlenecks: Since the start of the pandemic, freight transport has been one of the few lifelines for the airline industry.

There are giants like FedEx and DHL, but a significant proportion of freight is carried in the holds of passenger planes.

The collapse in the number of international links, which has still not returned to its pre-pandemic level, continues to put pressure on available capacity, which is helping to push prices up.

“If you turn to companies like FedEx, DHL and UPS, you will probably pay more, either US $ 15 or US $ 16 per kilo,” says Jean Chu, director of imports and transport logistics at Lanctôt. Space is also limited on commercial flights. “

Thus, alongside the long delays on the maritime side, there are also pitfalls when one wants to opt for the air route in order to import goods, he believes.

Online business

Interest in air cargo has prompted airlines like Air Canada to capitalize on this niche as its business continues to suffer from the health crisis. The country’s largest airline has converted several of its retired Boeing 767-300ER aircraft into cargo planes. By the end of the year, it will also receive the first of its eight aircraft which will be exclusively intended for the transport of goods.

Many observers believe that e-commerce is one of the main factors driving demand for air freight, but supply chain disruptions appear to be playing a role as well.

For the first nine months of the year ended Sept. 30, the company saw revenue from its air cargo operations stand at $ 1 billion, up 58% from the same period in 2020, when however, the health crisis has temporarily paralyzed air traffic.

Congestion advantageous?

In an email, Air Canada spokesperson Pascale Déry pointed out that on certain routes between Europe and Canada, the volume jumped by 40%.

Even the International Air Transport Association (IATA), which has rarely had encouraging news to report since the novel coronavirus spread around the world, changes its tone when it comes to air cargo.

According to the most recent data from this international organization which represents 290 airlines, this segment should generate revenues of 175 billion US this year. The volume is expected to be 8% above its pre-pandemic level.

In September, demand grew by 9.1%.

“Supply chain congestion is an advantage, since the [entreprises] look to air travel for its speed, says IATA CEO Willie Walsh. However, capacity constraints limit the ability of air freight to absorb this demand. ”

For its part, the price per tonne transported per kilometer, an indicator of the profitability of this sector, should increase by 15%. In 2022, revenue is expected to decline to US $ 169 billion, primarily as prices are expected to decline as growth in the number of commercial flights is expected to increase capacity.