Air cargo disruptions intensify at Shanghai Pudong

09.02.2021

Delays to freight shipments via China’s largest cargo airport are mounting due to the Covid-related closure of one of PVG’s main cargo terminals, reduced handling and customs capacity, and flight cancellations.

Disruptions and delays to air freight shipments through China’s largest cargo airport, Shanghai Pudong International (PVG), are mounting as new coronavirus infections have led to the closure of one of PVG’s main cargo terminals, reduced handling and customs capacity, and triggered flight cancellations, according to various freight and logistics sources.

The latest disruptions affecting key Chinese export locations are expected to add to already high air freight prices and more strain on struggling or recovering supply chains, according to airlines and logistics providers.

Freight forwarder Flexport yesterday reported that «five Covid cases discovered in PVG airport last week, related to airline ET, terminal handler PACTL and ground service provider SIAS, are affecting flight operations industry-wide, with many flights being put on hold».

Space scarce

Flexport said it was rerouting some charters to depart from Hong Kong (HKG) instead of PVG, adding: «Space is scarce, and only smaller shipments get prioritised by airlines.»

It said transit times ex-PVG «will be extended by 5 to 7 days compared to the previous week for TPEB (transpacific eastbound) lanes. EU destinations are currently delayed by 2 to 3 days.»

Supply chain risk analyst Everstream Analytics yesterday reported that cargo operations at a terminal of the world’s third busiest airport by cargo traffic, remained suspended for a fifth consecutive day following a new COVID-19 outbreak among the workforce.

«The outbreak took place at ground handling agent Shanghai International Airport Services (SIAS), which handles operations for major cargo carriers including Air China, Qatar Airways, and Cathay Pacific, with significant delays and backlog expected over the coming days as airport authorities implemented sanitation protocols for hundreds of employees,» reported.

«The closure at PVG has already led Japanese car maker Mazda to suspend operations at its plants in Hiroshima and Yamaguchi due to disrupted supplies of in-vehicle components using semiconductors.»

Everstream said health authorities had detected at least five cases among cargo workers at the airport by 21 August, prompting airport authorities to suspend ramp operations. That led a number of carriers to suspend freighter flights and cargo-only passenger flights until further notice.

Growing backlog

«PVG remains open to passenger flights with a limited workforce; however, the growing backlog of air cargo shipments and increasingly limited air cargo capacity has prompted multiple freight forwarders to stop accepting bookings bound for PVG and warn of delays for export shipments,» Everstream added. «Customers seeking to import or export out of China should anticipate significant delays due to the outbreak as shipment backlogs will build and diversions to other airports will add to transit times.»

Everstream said officials in Shanghai have tested over 80,000 people in response to the new infections and quarantined several hundred people believed to be close contacts of the infected airport workers at SIAS. The ground handler subsequently suspended operations due to workers being tested or quarantined.

Reduced handling capacity

While delays have been reported at several airports across China — particularly in Beijing, Shanghai, and Guangzhou — as new quarantine rules have come into effect under China’s zero-tolerance policy towards COVID-19 outbreaks in recent weeks, the new outbreak at PVG «will likely add to the backlog of air cargo shipments that has started to build up since July», Everstream highlighted.

It said that in early August, PVG «was only operating at 33% of capacity, as workers were required to follow a policy known as ‘7+7+7’, i. e. working for one week, quarantining in a hotel for one week, and then quarantining at home for one week.»

The suspension of operations at SAIS has resulted in some flights leaving PVG without cargo or being severely delayed due to limited manpower, Everstream reported, while cargo handling times have reportedly been 2-3 times longer than average — also partly due to high turnover among staff due to the stricter quarantine rules.

Carriers divert or cancel PVG flights

Of the 22 airlines relying on SIAS services at PVG, 17 were instead now operating out of the PACTL terminal and five were operating in the ETL terminal, Everstream said.

But it said the affected airlines «will temporarily stop operating cargo-only passenger flights and freighters to PVG until further notice. Qatar Airways, Air Bridge Cargo, and Polar Air Cargo have diverted future shipments to either Guangzhou International Airport (CAN), Zhengzhou International Airport (CGO), and Shenzhen Bao’an International Airport (SZX). China Eastern Airlines and China Southern Airlines have announced cancellations on many of their US-bound flights from PVG. Similarly, Etihad Airlines, Lufthansa Cargo, and American Airlines have all cancelled flights departing from the airport in recent days.»

Delays set to persist

It said disruptions to cargo operations are expected to continue in the coming weeks «as it remains unknown when flight schedules will normalise at PVG. Ongoing limited air cargo capacity will likely further increase spot rates that have already climbed by more than 6%, month-over-month.»

Everstream concluded: «Customers are advised to use airlines still operating out of PVG, such as Cargolux, Nippon Cargo, ANA, Kalitta Air, and SF Express, which are relying on unaffected ground handlers. Using trucking services to alternative gateways such as Hong Kong for onward flights into North America or Europe should also be considered.

«Freight forwarders have also turned to different forms of transportation such as shipping to Singapore via ocean and then flying from Singapore Changi Airport (SIN) to final destinations, all of which are likely to increase to transit times.»

As a result, airlines and freight forwarders are scrambling over the weekend to divert cargo shipments and deliveries to other airports, international freight forwarder SEKO Logistics told Hong Kong’s South China Morning Post (SCMP).

«The impact of this suspension will see a serious backlog in Pudong in the coming days. Airlines are diverting flights to airports to the south or west of China,» a SEKO spokeswoman said. «Key Chinese airport gateways have applied a ‘closed-loop management’ rule due to the increase in coronavirus cases, meaning that the export-handling speed is 30 to 40 per cent of the normal [pace], and import cargo [has to] meet very strict inspections. Cargo flight cancellations are impacting airfreight rates.»

Alternative export methods

Some freight forwarders were also considering alternative export methods, including a combination of ferry and air service via South Korea, or container shipping and air service via Singapore or Dubai, SEKO told SCMP. SEKO itself had been redirecting cargo bound for the United States and Europe to airports in other Chinese cities, including Zhengzhou, Guangzhou and Shenzhen.

The company confirmed that Pudong’s cargo business is also being hampered by a labour shortage, because of new Covid staff rotation rules. «This has impacted ground operations, causing delays and flight cancellations,» SEKO told SCMP. «Airlines now have only three hours at the terminal to load and unload cargo before the aircraft must depart. In this case, we have now seen flights unable to offload any cargo before having to depart from Pudong carrying the freight back to its origin.»

Cathay Pacific Cargo had experienced similar problems, saying they had to limit their acceptance of cargo, had diverted goods to Zhengzhou, and would be handling deliveries by truck, SCMP reported. Cathay said its warehouses at PCG were overflowing with outbound cargo, and a lot of its freight had already been cancelled.

One ground staff member at PVG confirmed to SCMP that airlines were cutting flights, with cargo schedules for various airlines, including mainland carriers China Eastern Airlines and China Southern Airlines, indicating that flight routes were being adjusted. But China Eastern Airlines told SCMP its cargo terminal and cargo flights were «operating normally», but that there would be adjustments to its «passenger-to-freighter» conversions — when passenger aircraft are modified to operate as cargo-only aircraft.

An enormous challenge

Lufthansa Cargo told Lloyd’s Loading List that the current situation surrounding the spread of SARS-CoV-2 «is an enormous challenge for all of us», highlighting that «strict entry regulations continue to apply in a large number of countries due to the Corona pandemic».

The carrier added: «In addition, and in response to the recent development of the epidemic in China, measures have been taken to strengthen epidemic prevention and control. These new regulations apply to airport personnel considered as ‘frontline staff’ for international air services and have led to a significant reduction of cargo handling capacities at some Chinese airports.

«The ongoing situation in PVG forces us to make adjustments to our flight plan. Due to operational reasons, we have an import embargo for all cargo into PVG until and including 29 August.

As the situation remains volatile, further updates may follow. The Lufthansa Cargo team is doing their utmost to minimise the impact for our customers.»

SEKO told SCMP it expects more flight cancellations, but does not yet anticipate delays at Pudong to impact Christmas deliveries.

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