Soaring air freight charges pinch exporters’ pockets

TE Raja Simhan Chennai | Updated on June 26, 2020

Lack of ‘belly’ capacity in passenger aircraft, lower frequency of freighters behind trend

Covid-19 has left exporters in tears over soaring air freight charges. From April, air freight rates have skyrocketed by three to five times, following severe shortage of space due to the absence of ‘belly’ capacity in passenger aircraft, consequent to the complete stoppage of international flight operations due to the pandemic.

Only freighters have been operated and that too with lower frequency. Hence, airlines are charging exorbitantly, said agents who book cargo on behalf of their clients.

The increased air freight is affecting the cost of operations. Earlier, air freight accounted for 5-7 per cent of the total cost. However, it has now increased to 15-17 per cent, said Ajay Kumar Singh, Managing Director of Chennai-based Shivam Apparels.

“We managed to get orders from global buyers at low margins due to global competitive pricing. However, an increase in air freight cost is pushing us into losses. If this trend continues, we may have to shift to sea transport for survival,” he said.

Agreeing with Singh, KK Radha, Director, Air Connection Pvt Ltd, said that before Covid-19, the air freight rate to the US was ₹225 to ₹250 per kg; that has increased to ₹650 to ₹800 now, in a nationwide trend. The story is the same for most other destinations, too.

Over the past two months, critical pharma products have been shipped out of India, apart from fresh vegetables, sea foods and flowers, on a regular basis. In May, there was some movement of wearables, including leather and textile garments, he said.

Before Covid-19, besides regular freight operations, passenger aircraft used their ‘belly’ space to carry cargo. However, once the pandemic set in, only a limited number of freighters were in operation, and passenger flights were mostly stopped, thus creating a huge shortage of space. This spurred airlines to increase their freight rates significantly, said Radha.

‘Opportunity’ for airlines

Airlines are looking at the crisis as an opportunity, while exporters are trying to grapple with the twin challenges of limited orders in hand and escalated freight rates, said AV Vijayakumar of Paramount Shipping.

G Raghu Shankar of International Clearing & Shipping Agency said that due to the lockdown restrictions, passenger aircraft from and to India are prohibited. From handling 608 flights in March, the number dwindled to zero. The number of freighters operated came down from 244 to 88 in April.

S Nataraja, President, Chennai Customs Brokers Association, said airlines realised the potential for improving their revenues by increasing their freight rates manifold in April/May. They further used the criticality of shipment ― mostly medical and pharma products — that were in demand for airlifting, he added. The demand-supply gap in the cargo space (and consequently freight rates) will take some time to stabilise, he added.

‘Government should step in’

When the market is thus exploited, the government should step in and direct Indian operators to charge within a ‘range’ to safeguard the interests of all stakeholders, said B Govindarajan, COO, Tirwin Management Services, an air cargo consulting firm. The government has such a range in place for domestic air tickets. In air cargo, too, such a practice existed in the past, he added.

Indian air cargo capacity is dominated by foreign airlines. So, there cannot be a better time than now for the government to facilitate the building of national air cargo capacity to place India on a self-reliant growth path, observed Govindarajan, a four-decade veteran in this field.

Published on June 26, 2020

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