Coronavirus: Supply Chain Update

Air Cargo Capacity and Pricing

Many countries have issued travel restrictions and bans in the wake of the fast-spreading coronavirus. Passenger airlines from North America are either suspended or flying far less frequently to China, Japan and South Korea, until at least the end of April. Some carriers have announced suspensions until October. Only four airports in Canada are currently accepting international flights.

The subsequent reductions in cargo space will significantly impact capacity and rates in both directions. Space is available, but at premium rates and without transit time guarantees. We have seen a sharp increase in rates to both Europe and the United States triggered by new entry restrictions from Europe to the US. The air cargo rates have surged by up to 50 percent in just the last 36 hours.

All major Asian airports are showing declines in cargo capacity in the regions where the majority of Avnan’s manufacturing facilities are located. Specifically, Hong Kong, Shanghai and Beijing are experiencing the largest declines in cargo capacity. In an effort to offset prices and improve capacity, many airlines are now using commercial passenger planes exclusively for cargo. We hope this will alleviate some of the strain.

Flight cancellations have removed more than 5,100 tons of capacity from China per day on average. Wide-body belly capacity on outbound China flights was down 84 percent just over the past two weeks, according to Seabury. It is causing tremendous pressure among all mainland China export markets as production resumes and passenger flight cancellations are sustained.

Typically, the vast majoriy of our customers ship by sea. However, after China’s shutdown for nearly two months, many of are requesting air as an option. While we are happy to accommodate these requests, we feel we need to be upfront about the reality of shipping by air right now.

We anticipate increases in air shipping prices, as well as in air transit time. We urge our customers: If you have product that you urgently need to ship by air, please contact us as early as possible. We can make arrangements to meet your delivery date.

We will continue to communicate with you throughout this critical situation. Your supply chain safety will always be our priority.

We invite you to contact us if you have any questions or concerns.