High demand for cargo capacity, rising freight rates, and pandemic-related restrictions all continue to create challenges for companies that rely on air freight in Canada. Like what’s taken place in land, sea, and rail over the last few months, air freight has witnessed its share of labor shortages, supply chain interruptions, and other logistical challenges as the world works through the impacts of a persistent global pandemic.
“2021 has basically been a continuation of 2020, with COVID-19 continuing to impact the airfreight market,” said Thomas Straube, Director Trade Management and Compliance for DB Schenker. “There’s been a slight recovery in terms of adding more flights, but air freight capacity as a whole remains constrained due to the cancellation of many passenger flights that have yet to come back online due to the ongoing travel restrictions.”
Adding to the complexity is the fact that the Canada air freight market is largely passenger-driven and has very few true cargo freight services. As a result, the country’s air cargo providers are dependent on passenger airlines for capacity.
Air Canada was one of the first airlines to shift to dedicated cargo operations when global cargo capacity increased and passenger traffic decreased during the early stages of the pandemic. Since then, FreightWaves says Air Canada has operated more than 10,000 cargo-only flights. That trend continued in 2021, with Air Canada operating 3,257 all-cargo flights in the second quarter of the year, during which time its all-cargo revenue represented 67% of total cargo revenues.
Managing Capacity Constraints
Right now, Straube says capacity remains constrained in the transatlantic market, which is down by about 34% in terms of outbound air freight while inbound capacity for flights to Europe is currently about 36% less than normal. “Asia-Pacific is just about on an even keel,” he added.
With U.S. travelers able to cross the border into Canada as of August 9, but with overseas travelers still facing restrictions in this regard, Straube expects higher demand for passenger airlines in the coming months. This, in turn, will increase the number of flights coming in and out of the country and subsequently increase available cargo capacity.
Until that happens, and with the current high demand for cargo capacity both from regular users of air freight and those companies seeking alternate transportation sources, capacity will likely remain constrained. On a positive note, Straube said air freight rates have “somewhat stabilized” for most areas, with Asia-Pacific being the one notable exception to that rule (and mainly due to high demand for imports from that area of the world).
“Rates on incoming air freight from Asia-Pacific are volatile right now,” Straube said. “They’re changing on a weekly basis, which makes forecasting and providing shippers with stable rates extremely challenging.”
Even with airlines like Air Canada shifting their focus over to cargo during the pandemic, air freight capacity remains constrained. Where they may have played a valuable role in transporting lighter goods like personal protective equipment (PPE) in 2020, for instance, airlines aren’t financially incentivized to fly planes with empty seats and full cargo holds. This has created further capacity constraints, cancellations of unprofitable flights, and other logistical challenges.
Helping Shippers Navigate a Perfect Storm
Knowing that space constraints, flight cancellations, and fluctuating freight rates continue to challenge Canadian shippers, DB Schenker has been lending a hand with demand planning, forecasting, and demand sensing, all of which help companies better project their future air freight needs. With that information in hand, the logistics provider can secure space, set up pre-bookings, and take other steps to ensure shipments get from point A to point B in the most timely and affordable manner possible.
Most recently, DB Schenker’s Canadian team organized an Antonov Air Charter from Switzerland to Canada. The shipment was a complete laser welding line for the automotive industry and had to be delivered to Woodstock, Ontario. The shipment included 22 crates and weighed 95 tons. Delivering the oversized crates (the longest of which was 11 meters and the heaviest was 17 tons) required flatbeds and drop deck equipment. The largest crates were transferred onto the tarmac from the plane to the trucks, and DB Schenker split the delivery over two days in order to accommodate the client’s hours of operations.
This is just one way DB Schenker continues to support customers’ unique airfreight requirements in Canada. The logistics provider also maintains space allocations with certain carriers for specific lanes. Also known as “protected space,” this capacity may be in the form of soft allocations (where an airline saves space for the logistics provider in anticipation of its future needs) or more formalized blocked space agreements (BSAs), the latter of which are primarily used for Asia-Pacific-to-North America routes. “These strategies help us give our customers space security on operating flights,” said Straube.
In Toronto, DB Schenker recently rolled out an in-house cargo screening service that includes x-ray machines and other tools needed to screen and clear inbound cargo. The logistics provider also builds out pallets of goods for air freight, secures the goods at its own warehouses, and manages the screening. The logistics provider also runs its own Flight Services Network, through which it operates the aircraft and oversees 100% of the capacity on those aircraft.
“We’re getting freight to and from Chicago (ORD),” said Straube. “Using that network, we’re handling both imports and exports through line haul services (with two trucking carriers from Toronto), and then disbursement further into Canada.”
For one of its customers, DB Schenker brings in air freight from China to Chicago using the logistics provider’s own chartered capacity. It then loads the freight on a truck, manages the border clearance, and transports the goods right to the company’s Canadian facility. “This saves the shipper transit time and also some transportation costs,” said Straube. “We can do this for other customers as well and particularly for larger shipments that would fill a plane and/or a truck.”
With no immediate end in sight to the global pandemic or its associated challenges, Straube said it could be later in the year until shippers begin to see expanded air freight capacity and a more normalized rate environment. “I don’t think we’ll see a huge drop in rates because the demand is still going up,” he added, “but we may see a better balance between increased capacity and that growing demand as we move into 2022.”