Air cargo costs have experienced a significant drop, offering relief and opportunities for Irish exporters. The closure of Russian airspace and the demand during the pandemic caused a surge in global air cargo prices, but they have now plummeted. According to the International Air Transport Association, global air cargo yields have fallen by over a third this year. Xeneta Air, a global data consultancy, has reported a 41% decrease in air freight rates this summer compared to last year.
This decline in air-cargo costs is particularly beneficial for Ireland’s pharmaceutical exporters, who mainly rely on air transportation to the US. Spot rates to the US have dropped by two thirds from their peak in late 2021. Additionally, the maritime shipping industry has recovered, alleviating the cargo capacity issues that led to the boom in air transport. Maritime shipping rates have fallen even more rapidly than air cargo, with an 82% slump since last August, according to Drewry, an international freight consultancy.
The decrease in air-cargo costs opens up opportunities for Irish exporters to reconsider selling their products in distant markets. The fishing industry, which heavily relies on airfreight, can once again supply high-demand and lucrative fish markets, including those in China and Japan. Glenmar in Union Hall, Co Cork, is a notable supplier of high-quality crab, lobster, and prawns to European and Asian markets. The transportation of live brown crab, which is in high demand in China, necessitates the use of airfreight.
However, many freight forwarders who secured multi-year contracts during the peak of the pandemic are now facing financial difficulties. As a result, they are under pressure to renegotiate rates. Industry experts believe that this downward cycle is just the beginning and that the current market conditions could persist for the foreseeable future.
The performance of key players in the air-freight sector reflects the weakening market. Kuehne and Nagel, DHL Global Forwarding, and DSV, the Big Three air-freight forwarders in Ireland, have reported declines in quarterly air revenues compared to last year. Dedicated cargo airlines, including market leader FedEx, have grounded aircraft and reduced operations due to falling rates and demand.
Air cargo plays a crucial role in Ireland’s trading economy, accounting for about a third of the country’s export trade in goods. Night-time flying is essential for this mission-critical export service, as it allows for the swift and certain delivery of time-sensitive items. International delivery, especially for consumer products, is often measured in hours rather than days. Guaranteed delivery times and next-day delivery are key offerings for Irish exporters. Multinationals also rely on speedy delivery for legal and business documents critical to manufacturing components and medical or pharmaceutical products.
Night-time operations provide a vital window for moving goods and packages with minimal loss of productivity between business days. The freight industry and the broader economy are closely intertwined, with freight volumes and transportation reflecting changes in consumer demand and manufacturing output. The periods surrounding recessions in 1975, 1982, 1991, and 2008 saw capacity shrink and freight rates rise rapidly. While lower freight rates are advantageous for exporters, the availability of airline and sea freight capacity remains essential. Collaboration between exporters, the air and sea freight industry, and airport operators is more crucial than ever.
John Whelan, an expert in national and international trade, emphasizes the need for exporters and the freight industry to work together in these challenging times.