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-Via AIMU Newsletter

The world’s biggest shipping lines, flush with cash, are buying their own fleets of cargo planes and adding airlifts for big clients willing to pay extra to get around supply-chain snarls at sea resulting from the Covid-19pandemic.

Flying goods by air is the last - and priciest - option for many manufacturers and retailers. Still, demand for air cargo surged last year amid port backlogs and high volumes of goods trying to move around the globe.

Liners like Danish giant A.P. Moller-Maersk AMKBY -0.94% A/S and France’s CMACGM SA, which together operate more than 1,000 ships, say they aren’t looking to compete directly with airfreight majors like FedEx Corp. and United Parcel Service Inc., which deliver millions of packages across the world.

Shipping executives say they plan to use the planes to supplement their core ocean freight business, at a time when moving cargo on time is at a premium. They are also looking to expand beyond their boats into end-to-end logistics providers.
Scores of ships continue to queue up outside major ports like Los Angeles, Tianjin and Ningbo in China, Felixstowe in England, and Antwerp in Belgium, often waiting weeks to load or unload thousands of containers.
“We’ll grow airfreight fast because we need it,” said Ferwin Wieringa, head of airfreight at Maersk.

Airfreight accounts for less than 1% of global trade by volume but 35% by value, according to the International Air Transport Association, a trade group.
Maersk agreed last year to buy German freight forwarder and airfreight specialist Senator International for $644 million, with the buyout set to double the company’s air-cargo volume when it is completed later this year. Maersk subsidiary Star Air operates 15 Boeing 767 freighters and is leasing another three. It has also ordered two 777 aircraft.
CMA CGM, which in 2019 bought logistics specialist CEVA Logistics for $1.67billion, launched its own airfreight service in 2021 when much of the global commercial-jet fleet was grounded because of the pandemic’s travel restrictions.
Airfreight is on average more than six times the cost of ocean cargo, though rates vary depending on the route and other factors, according to Peter Sand, chief analyst at Xeneta, a transport analytics market platform. 

Before the pandemic, airfreight was as much as 17 times the cost, Mr. Sand said. The price gap has shrunk because of record-high ocean-freight rates over the past year. (The Wall Street Journal, 2/4/2022)

Insuring Air Cargo is generally 30-40% less expensive than ocean freight so shippers should take advantage and include coverage for the freight charges as well. Regardless of your high-cost mode of transport, marine insurance remains the best option to make your client whole again when the unexpected happens.