Air freight rates expected to skyrocket as Russia's AirBridgeCargo leaves Europe
Air cargo carriers on Asia-to-Europe routes should expect prices to rise after a substantial amount of capacity has exited the market.
The EU and UK ban on Russian planes in their airspace has seen Volga-Dnepr Group's AirBridgeCargo withdraw all its planes from Europe in the last three days.
At least four planes left the EU yesterday when the ban came in, according to FlightRadar24 . ABC has 15 747Fs and one 777F in its fleet, a large amount of capacity, particularly given the current market.
The planes are currently in Russia or operating to destinations in Asia, primarily China, but Asia-Europe is their key operating region. It remains to be seen what volumes it can carry in its new restricted world.
Volga-Dnepr Airlines planes have also left the EU, with an AN-124 destined to arrive in Marseille yesterday, diverted to Tunisia. Canada has also banned Russian airlines from its airspace, but an AN-124 appears to be in Toronto and it is unclear if it will be able to leave.
The United States is considering a ban on Russian airlines, but has not yet implemented it. ABC had two planes in the US over the weekend; They both already left.
The EU airlines associated with Volga-Dnepr (Cargologicair in the UK and Cargologic Germany) continue to operate normally and all aircraft are currently in the EU or the UK.
But not only Russian airlines are affected. Finnair Cargo has cut all its operations in East Asia, reducing capacity again. A spokesman told The Loadstar that it would not operate to Osaka, Tokyo, Seoul, Shanghai or Guangzhou, and that the situation would be reviewed on March 6.
The airline said: “The possible closure of Russian airspace would notably affect air traffic between Europe and Asia, which plays an important role in the Finnair network. The negative financial impacts on Finnair will be significant, especially if the situation continues."
CEO Topi Manner added: “The crisis in Ukraine affects all Europeans and we understand the EU's decision to close its airspace. We are implementing our contingency plan as the situation has a considerable impact on Finnair. Bypassing Russian airspace significantly prolongs flight times to Asia and therefore the operation of most of our passenger and cargo flights to Asia is neither economically sustainable nor competitive."
The airline, which said it would withdraw its earnings guidance as a result, added that it was "considering different solutions should the situation drag on."
SAS said it was continuing to operate routes to Tokyo and China, but was also "closely monitoring the situation".
The impact on the market is likely to be substantial. An industry executive said: “If this continues, it will be difficult to overestimate the implications for the supply chain. Supply chains are so intertwined that there are many potential side effects.”
He also pointed to possible macro effects, such as additional inflation in Europe, which would hit consumer demand. But he also speculated on how ABC might try to operate.
"There could be a creative solution, perhaps through Istanbul or working with partners," he suggested. “Although customers can increase the pressures on the airline. In an already fragile environment, this will have a profound impact on supply chains."
Rail in Asia-Europe is also likely to be affected, further reducing capacity. Flexport was one of the first carriers to stop accepting bookings on ground service, but others are likely to follow as economic sanctions and a Swift payment ban kick in.
The UK freight forwarders association, BIFA, has advised shippers to make sure they know the route of the cargo and to check with insurers about their liability, “as cover may be withdrawn and/or premiums increased. for goods being shipped to/from Russia, for example.”
Vogla-Dnepr Group was not available for comment, but the impact will be felt strongly by its customers, who are expected to rush to find new capacity, as well as by its European staff.
The group was thought to be shocked by news of the invasion, and a high-level source in Volga-Dnepr expressed deep regret at the news that rival Antonov's AN225, Miria (translated as 'dream'), has been destroyed. Antonov, through social networks, said yesterday: “Until the AN-225 has been inspected by experts, we cannot report on the technical condition of the aircraft. Stay tuned for more official announcements.”
However, Ukrainian Foreign Minister Dmytro Kuleba said in Twitter : “Russia may have destroyed our Mriya , but they can never destroy our dream of a strong, free and democratic European state. We will prevail.
The Ukrainian defense company Ukroboronprom, which runs the Antonov, also said the plane had been destroyed, but said a five-year, $3.000 billion reconstruction would be carried out by Russia.
The aircraft had been undergoing maintenance and had not been able to leave Ukraine on time.