China cabin cargo ban will add to pressure on air capacity and freight rates

14.12.2021

Cargo in aircraft passenger cabins will no longer be accepted by China in the new year — a move expected to keep air freight rates high.

China’s Civil Aviation Administration (CAAC) said «only anti-epidemic-related items are allowed to be loaded in the cabin».

It added: «At the same time, the new regulations also require that cabin seats cannot be removed to increase cargo space. Aircraft that have removed seats or are undergoing modification projects should be restored to their original configuration.»

The CAAC said the reason was «mainly for safe transport considerations, to avoid hidden transport safety hazards caused by the inability of the cargo in the cabin to be effectively fixed».

But the authority acknowledged it would lead to additional pressure on the market.

«This new regulation will further reduce air cargo capacity and aggravate the current air capacity shortage. The superimposed fuel price is still high,» it said.

«On the other hand, the tightness of air transport capacity may lead to part of the demand for air transport being transferred to shipping, leading to a further increase in shipping rates and, overall, freight prices are expected to continue to rise.»

The three major state-owned Chinese carriers are said to have already started the process of returning aircraft to their original configuration.

However, both the European Union Aviation Safety Agency (EASA) and US Federal Aviation Administration (FAA) have extended their exemptions for cargo in cabins until July next year, indicating that non-Chinese airlines will continue to use them — but not in China, outside of Covid-related equipment.

Covid-related shipments however are currently creating large volumes. The past fortnight has seen a «tremendous increase» in demand, according to one Shanghai forwarder.

«It’s been caused mainly by one commodity — Covid rapid testing kits — for which there has been huge demand in Europe, It’s like what happened last year with PPE. Factory orderbooks are full, so it doesn’t sound like the peak will soften soon.»

He added that this had led to a variance in rates out of mainland China, where PPE is manufactured, and Hong Kong, which is focusing on general cargo and is seeing lower rates.

«Hong Kong is busy, but not as crazy as the mainland.»

On the mainland, he said capacity remained low, with the majority of charters now taking place on passenger freighters, with the CAAC approving perhaps only half of all charter applications.

«A big shortage of capacity will remain a major issue. The new passenger freighter ban will be very strict and certainly reduce capacity, and elevate prices.»

He also warned of challenges for supply chains once the Beijing Winter Olympics begin in early February.

«There will be a big impact on Beijing flights. Normally, [when there is an event in China] trucks are limited in their movements — no dangerous goods can be moved, no charters are approved and flights reduced to a minimum.

«We do not think there is any chance of the government relaxing the current strict quarantine requirements until after the games, so there will be little opportunity to get more flights or capacity into the market.»

The transpacific market remains tight, he said, «the worst market». Cargo destined for South America is going via the US, as «there is very little capacity via Europe», leaving rates very high — «around $18 to $20 per kg», said the forwarder. Pure freighter charter rates are currently «sky high», at some $1.8m to $2m.

The forwarder said rates had risen 10%-15% this week and «we are looking at the highest ever rate level now, which is similar already to the record of last year» adding: «It’s funny that even courier door-to-door prices could now be cheaper than air freight — but couriers are severely delayed too.»

Analytics on topic
Report
27.05.2020
Report
27.05.2020
Review of the current state of sea and air cargo transportation market: crisis recovery scenario

The coronavirus outbreak exposed the fragility of global supply chains that move goods between countries. Due to the volatility of the logistic market, carriers are facing new risks and the need to promptly respond to changes in order to manage them. The global cargo transportation market is experiencing significant difficulties caused by abrupt decrease of the transport infrastructure throughput due to the coronavirus (COVID-19) pandemic.

Report
29.12.2022
Report
29.12.2022
The Eurasian Railway Route: Prospects for Exports from Russia to China

In 2022, the Russian transport administration faces unprecedented logistics challenges: massive trade restructuring prompted by restrictive sanctions has necessitated urgent operational decisions to combine different routes through friendly and neutral countries. The biggest changes are expected in cargo turnover with Russia’s largest trading partners — the European Union and China