Air freight rates skyrocket amid passenger flight cuts,
Chinese factory restarts
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[March 11, 2020] By
Lisa Baertlein and David Kirton
LOS ANGELES/SHENZHEN (Reuters) - Air
freight rates are skyrocketing after the grounding of many passenger
flights in Asia has left shippers scrambling to book limited spots on
cargo planes as Chinese industrial production restarts, according to
industry insiders.
About half of the air cargo carried worldwide normally flies in the
belly of passenger jets rather than in dedicated freighters. But deep
flight cuts in response to the coronavirus outbreak have made the market
more dependent on freight haulers.
Freight forwarder Agility Logistics said on its website that China's air
cargo capacity was down 39% in February relative to last year because of
the passenger flight cuts.
Shippers wishing to rush products out of China by air face sticker
shock, said Refael Elbaz, chief executive of Israel-based Unicargo,
which specializes in freight forwarding for Amazon.com sellers.

"The price is three times higher – at least - because there is just no
capacity," Elbaz said.
Freight Investor Services said in an update to clients on Monday that
cargo pricing on China-to-U.S. routes had reached "abnormal highs" and
that intra-Asia traffic was up by 22% over the previous week. TAC Index
data shows China-U.S. cargo rates have risen by 27% over the last two
weeks to $3.50 a kilogram.
The price surge will benefit freight haulers and help cargo-heavy Asian
airlines like Cathay Pacific Airways Ltd <0293.HK>, Korean Air Lines Co
Ltd <003490.KS> and Japan's ANA Holdings Inc <9202.T> offset some of the
steep revenue losses from halting many of their passenger flights.
Chris Mu, who runs a small logistics company in Shenzhen, China, that
often uses air transport to supply Amazon <AMZN.O> sellers in Europe and
to transport UK-made car parts for assembly in China, said prices had
tripled since before the Lunar New Year and are rising by the hour.
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People wear face masks as they change subway lines in Beijing as the
country is hit by an outbreak of the novel coronavirus, China, March
10, 2020. REUTERS/Thomas Peter

"With reduced options, we have to take whatever we can get, flying goods from
the UK to the Netherlands, then from Liege in Belgium to Nanchang in Jiangxi
province, just to get them to a factory in Shanghai," Mu said. "For the
airlines, it's fine because they're still making money, but it's the middlemen
like us who are bearing the costs, and we don't like to go to our customers
every day and tell them the price has gone up."
DHL's express volumes have started to recover in China and the company is
putting planes back into the network, Deutsche Post AG <DPWGn.DE> finance chief
Melanie Kreis said on Tuesday, noting that its fleet is a major asset given the
grounding of many passenger planes.
In mainland China, the number of freighter arrivals has increased in recent
weeks as factories resumed production. China's aviation regulator said the
number of freighter flights was expected to reach 870 this week, up from 788 in
the week starting Feb. 17.
"The number of air charter requests we've gotten in the past week are more than
the number we've received in a normal quarter," said Brian Bourke, chief growth
officer at SEKO Logistics, a Chicago-based freight forwarder.
Most of those requests involved moving goods from China to the United States, he
said.
(This story corrects TAC Index cargo rates in paragraph 6.)

(Reporting by Lisa Baertlein in Los Angeles and David Kirton in Shenzhen;
additional reporting by Jamie Freed in Sydney, Tim Kelly in Tokyo, Stella Qiu in
Beijing and Emma Thomasson in Berlin; Writing by Jamie Freed; Editing by Gerry
Doyle)
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