News / E-commerce traffic surge raises airfreight capacity concerns

Faced with uncertain economic indicators, most forwarders have backed away from capacity commitments and kept a large portion of their airfreight spend ad hoc.

However, bucking the trend, Seko Logistics has reserved more long-term lift out of Asia.

The forwarder has signed deals for capacity on scheduled flights and charter operations, reported chief commercial officer Brian Bourke.

The unexpectedly strong surge in demand during November and December was a challenge for everybody, he explained. “If nothing changes, this year will not be different; it could actually be worse.”

The spike in traffic was driven by several segments, but e-commerce was “the big one”, he said. Moreover, its impact was magnified by the likes of Temu and Shein shipping individual orders direct from Chinese factories to final destination, bypassing large distribution centres in North America. It’s a strategy that leaves less room for ocean transport, but relies heavily on airfreight.

This created particular challenges on the sectors from China to the US, he explained. Driven by rampant travel demand, global bellyhold capacity showed double-digit year-on-year growth during the second half of last year, but the China-North America sector was the exception. US, Canadian and Chinese passenger airlines are still operating only a fraction of their pre-pandemic schedules in this market.

Last month, transpacific eastbound was the only sector where the Drewy east-west airfreight price index showed a rise in pricing, year on year. And Mr Bourke is optimistic that this year will produce a growth spurt in passenger flights between China and North America, noting that aviation was an issue that the US and Chinese leaders touched on in their recent talks.

He emphasised the importance of belly capacity for the market, especially for e-commerce. Not only does an increase in passenger flights offer more routing options, it also lowers the cost of airfreight.

“In e-commerce, a lot of clients are price-sensitive and time-sensitive,” he noted. “Having a multitude of options is healthier.”

The direct shipment of individual orders reinforces the need for speedy service options that do not come at premium airfreight rates.

“We’re faster than the post office, but cheaper than express,” Mr Bourke said. “That’s only possible when international belly capacity is back to pre-Covid levels, and then some.”

With space on non-stop flights from China to the US still at a premium, Seko and other forwarders had to broaden their carrier base, he said.

“We work with airlines that we may not have worked with as much in the past,” he added.

While he is optimistic that belly capacity will continue to increase, some concern remains.

“If not, it will be a tough peak season again,” he warned.