Demand for air freight rises due to Red Sea disturbances

Logistics companies announced that there is an increase in the number of manufacturing companies seeking to transport their products by air in the next few weeks, after attacks on cargo ships in the Red Sea forced them to search for alternative routes, in a shift that may benefit the air freight sector, which suffers from weakness. Demand following the Covid-19 pandemic and from spare capacity.

The Red Sea and the Suez Canal are located on a major trade route through which about 12% of global shipping traffic passes, and the Suez Canal is the shortest sea route between Asia and Europe. As reported by Sky News.

The attacks launched by the Yemeni Houthi group on ships in the region for more than two months have affected companies and raised the concern of major powers in light of the escalating consequences of the escalation in Gaza.

The head of the Suez Canal Authority, Lieutenant General Osama Rabie, said on Friday that the canal’s revenues had decreased by 40% since the beginning of the year compared to 2023, after Houthi attacks in Yemen on ships diverted their sailing path away from this corridor.

Air freight prices remained relatively stable due to the shipping crisis coinciding with a seasonal lull in demand, but data from the reservation and payment platform for international shipping (Fretos) showed an increase in shipping prices from China to Europe by about 91% on a weekly basis on Sunday.

The slowdown in the global economy helped mitigate the impact of Houthi attacks on trade flows.

“We are already talking to many customers about increasing air capacity,” said Envy Rudd, head of air logistics at global logistics company Kone + Nagel. “In January, we have about 20-30% more discussions and proposals than usual.”

Air freight is expensive compared to its sea counterpart, and is not competitive for large goods with a low profit margin.

These factors contributed to reducing the contribution of air freight to global trade movement to less than one percent, according to data from the International Air Transport Association (IATA).

But air freight has become an attractive option since the attacks forced shipping companies to use sea routes that affect delivery times due to the long distance.

Several German, French, and American logistics companies said they are working to provide additional space for air freight.

Logistics sources added that customers are studying multimodal shipping opportunities, such as shipping by sea to the Middle East, then by air to Europe.

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