DHL Cargo aircraft are unloaded at Halle-Leipzig Airport in Leipzig on February 28, 2014. The soon-to-be-expanded hub will handle 2,000 tons of freight or 100,000 packages and documents every day. Up to 60 cargo planes land every week.
Marco Prosch | Getty Images
The Houthi attacks in the Red Sea are not only causing sea freight to skyrocket, but air freight will also increase as global trade flows become increasingly disrupted.
In recent weeks, ocean freight rates have risen by as much as $10,000 per 40-foot container as container ships took long detours around South Africa's Cape of Good Hope to avoid attacks, carrying over $200 worth of cargo Billions of US dollars were diverted from the critical trade artery.
The delays in maritime trade could prompt some retailers to switch to air freight as companies that normally ship their goods by sea want to ensure faster delivery, analysts said.
This means air freight will play an increasingly larger role in the supply chain ecosystem. With air freight, delivery times can be shortened to just a few days, compared to weeks of transport by sea.
“Some shippers are already in survival mode and have one goal in mind: 'Make sure my cargo is moved by any means possible,'” said Matthew Burgess, vice president of global maritime services at CH Robinson.
Anticipating an influx of sea-to-air conversions, the transportation logistics company is already blocking additional air capacity on core trade routes to keep freight moving, Burgess said.
German logistics giant DHL told CNBC via email that the company has received several inquiries but not that many conversions yet.
“We expect that this will change if the situation in the Red Sea continues,” said Andreas von Pohl, head of air freight at DHL Global Forwarding Americas.
If that happens, interest rates will inevitably rise even further.
“We will see an increase in air freight rates,” said Parash Jain, global head of shipping and ports research at HSBC. He said industry watchers expect increases in the next two to three weeks, particularly as Chinese New Year approaches in February.
Traditionally, the annual holiday period sees a surge in exports from Asia as companies try to move more goods before stores go offline for two weeks.
“The predictability of air freight means the industry will benefit from increasing international disruption,” wrote sea and air freight analytics platform Xeneta in a recent report.
The analytics firm noted that the overall air cargo spot rate saw an 18% year-over-year decline in December. According to Xeneta data, the global average spot price for air cargo peaked at about $2.6 per kg in December.