Supply chain issues: why not just put cargo on planes?
With major US seaports crowded with ships full of cargo, it’s not unreasonable to wonder why shippers aren’t using airplanes instead. Ships are old fashioned and slow, and many Americans probably didn’t realize how much we still depended on them until the shipping crisis hit the headlines. Planes are faster and more modern, and they’re not limited to coastal destinations.
However, air freight and ocean freight are not as close substitutes as you might think. Here are a few reasons.
The main reason is the economies of scale. Ships are much bigger than airplanes and the more cargo you pack on a ship, the less expensive each individual piece of cargo is to ship. To give perspective on the scale, remember Never given, the container ship stuck in the Suez Canal. It is 1,312 feet long. It is more than five times longer than a Boeing 747-8, one of the largest widely used cargo planes in the world. The Never given is 192 feet wide, nearly ten times the width of the 747-8’s cabin.
However, the difference in scale is really seen when you measure the freight. The unit of measure for ocean freight is the 20-foot equivalent, or TEU. It is a volume measurement based on the space occupied by a standard 20 foot long container. Air freight, on the other hand, is measured in kilograms. A TEU can hold tens of thousands of kilograms of cargo. The Never given can wear 20,000 containers. You can see how ocean freight is growing by orders of magnitude faster than air freight.
Sea freighters are also used exclusively for sea freight. Although there are specially designed cargo planes, most air cargo is shipped in the holds of passenger planes. (The reduction in passenger flights during the pandemic caused major problems for the air cargo industry, and some airlines have started shipping cargo to passenger cabins to keep generating income.) If you want to ship a large amount of air freight, you have to charter your own plane which adds another huge cost.
Air freight packing is also more difficult than packing sea freight. There are challenges to packing a sea container, but they are pale compared to packing an airplane. Air cargo is loaded onto a pallet, called a “cookie sheet,” which is wrapped as tightly as possible in a warehouse, then wrapped in plastic and secured with bungee cords and rope. This process is much less standardized than filling a sea container, and it is extremely important to do it well. If the contents of the pallet move during the flight, it can crash the plane. The packaging of ocean freight does not require this level of precision, and errors do not have this level of consequences.
These extra costs and hassles mean air freight is used sparingly. About 90 percent of all shipments are made by sea. The obvious case where air freight is worth it is when speed is the primary concern. Goods shipped by sea are also more susceptible to damage than goods shipped by air, so delicate items like electronics and designer clothing are often shipped by air. Mostly, air freight is used for big ticket items since the income they earn will offset the higher shipping costs.
But with the surge in sea freight prices, the gap between air and sea freight prices has narrowed. According to a Trade Review item as of July, “Before COVID-19, the average price of global air freight was 12 times more expensive than sea transport, but in May it fell to 6 times more. It’s still a lot more expensive, just less than usual.
This decrease in the price difference means that air freight has become attractive to more shippers than normal. According to the Financial Time, “With factory lines in the United States and Europe relying on the rapid arrival of parts and components, and manufacturers suffering from depleted inventories, no premium seems too much to pay for cutting down time. journey from Asia takes weeks by container ship to a matter of days by plane. More air shipping means those prices have gone up as well, with year-over-year increases of 70 to 100% on some routes. This is nothing compared to the 1,000 percent increases on some shipping routes, but airlines still struggle to keep pace the influx of freight.
Shipping prices are not set by shipping companies. They are determined in a global market based on economic forces. This determination process takes into account real factors, such as the capacity of aircraft and ships. Due to these real factors, it is hard to imagine a scenario in which the price of air freight could ever be lower (or even close) to the price of ocean freight in absolute terms. But the price of shipping by air compared to the price of sea transport has declined, so that more companies are using air freight than before. However, air freight will never replace sea freight, and it is not possible to simply use more planes and solve the shipping crisis.
Something to consider
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