News / Asia-Europe airfreight traffic could be permanently lost to rail or sea

Major supply chains out of Asia could see a sustained modal shift in the aftermath of global coronavirus lockdowns, as supply and demand in the air fright sector continues to fluctuate wildly.

Jan van Casteren, vice president of Europe at Flexport, told The Loadstar this week the response of carriers to coronavirus was pushing many shippers to rethink their supply chains.

“The first quarter in ocean freight saw a decent recovery, and the coming few weeks are likely also to be decent, in terms of Asia-Europe volumes, but after that demand will slow, with something like 30% of purchase orders cancelled,” he said.

“That said, the [ocean] carriers are being disciplined, and 15-20% of capacity has already been taken out of the Far East westbound route. So we think demand and supply should match up.

“However, air freight is very different. Aside from medical supplies, demand is nowhere near normal levels and supply is nowhere near normal levels. It’s a very volatile rate environment – if you are quoted a rate, you need to decide on it within an hour or it’s gone,” he said.

As a result, Mr van Casteren explained, the volatility in air freight supply made it hard for a shipper to consider it a viable mode.

“It is very hard to make predictions in air freight, because supply depends so much on passenger flights, and we expect to see a lot of shippers switching from air to ocean.

“We have already seen that on the transpacific, where plenty of shippers have been comfortable with switching from air to premium ocean products, and at some point those shippers will get used to the premium ocean products and potentially be lost to the air freight sector.

“Currently, there are no premium ocean products on the Asia-Europe trade – if anything, the main trend is for carriers to further reduce ship speeds to soak up capacity. But you could well consider Asia-Europe rail services as effectively a premium ocean product and there is definitely an increased interest – people are looking for ways to get their goods into Europe as fast as possible and, without air freight, that is the best option,” he said.

His comments came as his company formally announced the opening of its UK office, albeit “virtually” for the time being.

Flexport has appointed Christos Chamberlain (pictured below) as its first general manager in the UK. He was most recently chief operations officer at UK furniture retailer Swoon, and prior to that, UK operations director for meal delivery firm HelloFresh.

Mr Chamberlain told The Loadstar: “The reaction to the coronavirus is very sector-specific – there are some sectors where customers are thinking about future demand and delaying making purchase orders, while some, such as the home and garden vertical, are seeing tremendous growth. Some companies in that field are publicly reporting 40% sales growth.

“So, although we are going to see a severe demand slowdown, it is a very mixed bag.

“For a lot of sectors, it is still too early to say what the longer-term future holds, but as soon as the quarantine measures are lifted there is certainly going to be a demand bounce-back. We hope this will happen by the third quarter, particularly if the dramatic shift to e-commerce continues ”