Global demand for air freight remained low in early January and with no surge in demand from Asia, that would normally precede Chinese New Year, volumes have been trending downwards since the first half of 2022.

The China airfreight market has remained subdued post the Lunar New Year holidays, with volumes falling by over 10% week on week and load factors only reaching 54% in January.

The Baltic Air Freight Index (BAI) tracks weekly transactional rates for general cargo and is a weighted average of 17 key trade routes.

The BAI dropped -33.5% in the 12 months to the end of January, but despite that steep fall the index is almost double where it was in January 2020, before the start of the COVID pandemic.

While index levels for the biggest outbound destinations, including Hong Kong and Shanghai, are either similar to, or well above pre-Covid levels, that is not the case for some smaller but also significant markets, including Vietnam and India, which are slow and likely to slow further in coming weeks.

There is no denying the multiple challenges that face airfreight in 2023, with high inflation and subdued demand, and with any significant economic recovery not anticipated before the 3rd quarter, volumes will remain flat, though rising levels of business in post-lockdown China, is boosting demand and capacity into an otherwise weak market.

Looking ahead, IATA has predicted a 4.3% decline in air cargo volumes in 2023, with yields for carriers expected to decline by around 22%.

Inventory levels will need to replenish to meet demand, when it returns, but with recession likely, economists do not see that happening until the second quarter for many retailers.

The continuing conflict in Ukraine is a drag on the global economy and consumer confidence and there are uncertainties around China’s re-opening which will depress demand.

Global average airfreight rates remain above pre-Covid levels, which suggests that carriers will remain financially stable and the eCommerce sector continues to bloom, with over a fifth of retail goods purchased online and a large percentage of that flying.

Since the advent of the COVID pandemic the biggest challenge has been securing air freight capacity, but weaker demand and returning passenger flight belly-capacity means that is not an issue now on most routes and with the start of the summer holiday schedule in the second quarter, you can add in even more capacity.

There are expectations that freighter fleets may expand on a few routes, which is in addition to the sea/air capacity we can access via Dubai and Singapore (when they are economically attractive).

As soon as the global situation improves, economies are very likely to recover quickly and, as consumer confidence returns, demand for air cargo capacity will rapidly increase, which could quickly lead to capacity constraints and higher prices, but we have volume contracts in place and are ready to adapt to changing market conditions, as necessary, with alternative services, routes and cross-border solutions, if the market really does take off.

Despite the ongoing challenges, we continue to find cost-effective solutions for urgent and time-sensitive shipments, using a blend of scheduled, dedicated and chartered air cargo services. 

EMAIL Elliot Carlie for further insights and advice on our air cargo solutions, or to discuss the current market position for live urgent movements. 

On the 1st March 2023, the European Union is launching a customs pre-loading and pre-arrival safety and security programme, which will require the pre-advice of mandatory information and failure to provide the correct data in good time may lead to goods being rejected by the airline.

The EU’s Import Control System (ICS) processes large-scale advance cargo information to  monitor the security of the EU´s external border and automation of the process means that data can be exchanged more efficiently between carriers and EU member states. 

ICS2 is an automated entry process that will apply to all air cargo moving to and via the EU from the 1st March 2023 and requires customs pre-acceptance and pre-arrival security and safety clearance.

We are preparing for the new requirements by adapting our processes and systems to meet the new EU requirements, but compliance with ICS2 changes will depend on the active participation of shippers. 

Carriers will require full airway bill data, which we will provide them with, before acceptance to fulfil their responsibility for the pre-loading filing (PLACI). 

The carrier’s pre-loading and pre-arrival information data set, including the journey details, is sent to ICS2, where it is automatically reviewed for possible security threats. The pre-loading and pre-arrival messages are collectively referred to as the Entry Summary Declaration (ENS).

We will require the following information, so that we can ensure the pre-loading data is made available to the carrier in good time:

EU Customs analyse the data and return approval to load, request for information or Screening, or direct not to load.

When the ENS information is not provided to EU customs, shipments will be stopped and will not be processed for customs clearance, which will lead to delays and potential fines.

We are working closely with our airline partners, test-submitting these new data elements in our airway bill and consolidation lists, to ensure the smooth implementation of this new EU customs process. 

 If you have any concerns or questions, regarding the ICS2 roll-out please EMAIL Elliot Carlile.

Leading garment manufacturer, Bangladesh, has withheld over USD $200 million of airline funds for repatriation, reportedly using the funds to shore up its depleted treasuries, leading foreign airlines to scale back their services and discouraging new market entrants.

The International Air Transport Association warned last month that the amount of airline funds for repatriation being blocked by governments has risen by over 25% in the last six months to USD $2 billion. 

Over 27 countries and territories are blocking funds from repatriation, the IATA said, with Nigeria topping, followed by Pakistan and Bangladesh coming in third position.

By the middle of 2022, Bangladesh’s Hazrat Shahjalal International Airport, in the capital Dhaka, was operating 140 international flights daily, on average.

Turkish Airlines usually operates 14 flights weekly in Bangladesh, but has been operating only seven flights a week since November as it cannot remit around USD $24 million and most other foreign airlines including Malindo Air, Kuwait Airways, and Cathay Pacific face the same issue and have slashed their flight frequencies to and from Bangladesh.

Fund repatriation by foreign airlines operating in Bangladesh has remained suspended since March 2022, with IATA calling on governments to remove barriers to airlines repatriating their revenues, in line with international agreements and treaty obligations.

Moreover, carriers are having to pay for refuelling their aircraft in Bangladesh by bringing in dollars through inward remittances, having been asked to pay it in dollars several years ago.

The country’s tourist trade body has predicted that the number of flights by foreign airlines from Bangladesh may decrease by 60% in the next six months to one year.

Around 80-90 international flights currently operate from Dhaka airport each day, equivalent to a 40% drop on last year.

Willie Walsh, Director General of IATA said, "No business can sustain providing service if they cannot get paid and this is no different for airlines…and it is critical for any economy to remain globally connected to markets and supply chains.”   
 
IATA continues to monitor the situation very closely and is engaging with the Bank of Bangladesh. It urged the countries' governments to quickly release all outstanding funds of the airlines to avoid disruptions in the smooth flow of passengers and goods into their economies.

There will be more to feature and share on this subject over 2023 and we will continue to keep you updated with the latest development in any country that you are trading with globally. Unfortunately the situation is not unique to Bangladesh in relation to economies running out of foreign exchange and the impact is likely to increase globally with fallout across the supply chain, regardless of the mode.

Despite the challenges, we continue to get our customers’ shipments lifted from Bangladesh. We work closely with our local partners to monitor the situation, market capacity and new service opportunities that might benefit our customers, such as placing shipments through alternative gateway airports in India or Singapore with a land-bridge or ocean first leg connection.

Evaluating and booking space on viable services early, including cross-modal and cross-border solutions, is a critical factor in achieving our customers’ deadlines. 

EMAIL Elliot Carlie to review our time-sensitive solutions for your Bangladesh and Asia shipments.