Newsletter – January 15, 2021
AIR FREIGHT UPDATES
Industry confusion over plan for new TSA air cargo security regime
Preparations for a mandate to screen all cargo moved on freighter aircraft this summer got off to a rocky start in the US this week when the Transportation Security Agency (TSA) presented a plan to allow shippers to secure cargo on their own premises to bypass screening at airports. Read more here (login required).
Air Canada suspends routes as COVID restrictions bite travel
Air Canada (TSX: AC) is reducing passenger system capacity by 25% and laying off 1,700 workers in the first quarter due to new Canadian travel restrictions aimed at curbing the resurgence of COVID-19, the company said Wednesday.
More than 200 employees in the airline’s regional express division are also being furloughed. Air Canada said it is working with unions to mitigate the impact on employees. The company released 20,000 workers in May. Read more here.
OCEAN FREIGHT UPDATES
Ocean freight issues adding to squeeze on air cargo capacity
A critical lack of ocean containers and capacity for ex-China exports, together with vessel schedule disruption, are continuing to drive modal shift to air that is adding to a squeeze on air freight capacity already stretched by buoyant demand generated by COVID vaccine transport, PPE and the B2C e-commerce boom, according to a leading air charter broker. Read more here.
Charterers still in the driving seat, making carriers offers they can’t refuse
The absence of open containerships on the charter market has resulted in carriers being forced to conclude fixtures months into the future.
Moreover, the duration of time-charters has lengthened considerably, it is becoming increasingly common to see terms agreed for 24 or 36 months as carriers gamble on a long bull-run for the liner industry.
For example, OOCL has just concluded a 36-month extension of the 8,533 teu Seamax Stratford at $38,500 a day. Read more here (login required).
CANADA BUSINESS – GOVERNMENT UPDATES
Canadian airlines invest in more freighter capacity as demand for space rises
Canada is upping its freighter capacity, with both Cargojet and Air Canada expanding to take advantage of new opportunities.
Cargojet announced this week it had raised C$350m (US$275.2m) to help it acquire five 767 and two 777 freighters for delivery from this year into 2023.
It will also invest in a new hangar and additional land-based infrastructure and pay off debt, it said. Read more here.
INTERNATIONAL BUSINESS – GOVERNMENT UPDATES
Online retailers pay almost double in logistics costs
Retailers with more than 50% of revenue from the online channel have logistics costs as a percentage of sales that are almost double those of their store-focused counterparts, according to Gartner.
2020 was a year spent primarily expanding online fulfillment capabilities, but now retail supply chain leaders are now looking for opportunities to control, contain and, where possible, reduce their associated last-mile costs. How? Read more here.
Rethinking freight procurement and the RFP process
As better market information and transparency inform logistics procurement, wasteful and inefficient request-for-proposal (RFP) processes are coming under pressure and in many cases being entirely reconceived.
It takes a long time to complete an annual RFP process — four months on average — and market conditions render the agreed-upon rates obsolete about six months after that in a typical year. Truckload carriers bid aggressively on underpriced freight to maintain asset utilization, knowing they’ll have to walk away from their contracts when the spot market heats up so they can turn a profit. Read more here.