Major airlines have hiked prices for air freight including medical equipment shipped from China to Britain as passenger numbers dwindle due to coronavirus-related travel restrictions.
The price of sending goods from Shanghai to Heathrow has risen 35.2pc over the past week, and 58.3pc this month, according to data collected by TAC Index, a Hong Kong-based air cargo pricing data company.
A backlog of orders for ocean shipping, which were delayed by Chinese New Year and its extension due to Covid-19, has forced many companies to resort to sending goods in the belly holds of planes, capacity for which has been reduced due to the withdrawal of passenger flights. John Peyton Burnett, managing director of TAC Index, said he expected next week’s price data to reveal another surge.
“About 97pc of the world’s cargo goes by sea containers and 3pc by air, but the dollar value by revenue is about 60pc/40pc in favour of sea,” he said. “You just need a small number of conversions to make a huge impact on air, which is generally expensive and now ridiculously expensive.
“Ours is a $70bn-$100bn market and usually 50pc of the world’s capacity goes in the hold of passenger planes. There’s just not enough capacity and that’s what’s driving the rates up.”
Ian Mallon, managing director of Cheshire-based Neon Freight, said: “Air freight prices were $3-$4 a kilogram from the Far East to the UK and now they’re $8.50 a kilo. There is an element of people taking the p—.
“We’re trying to bring in some personal protective equipment from the Sichuan province for this new hospital in London. It’s either consumers or the Government [who will bear the cost].”
Glyn Hughes, head of cargo at the International Air Transport Association, said it was working with states to keep borders open for cargo-only operations to increase capacity, which in turn would reduce freight rates.
However, repurposing 300-seat passenger planes and ensuring they had cargo with which to return east was time consuming, he said: “Sometimes they’re securing the cargo on seats.”
The pharmaceuticals and medical devices sector was the second-most negatively affected sector by coronavirus-induced disruption to international trade, according to a survey by the Institute of Directors (IoD).
Allie Renison, head of EU and trade policy at the IoD, recommended that policymakers work with other governments to ensure the UK is exempt from export restrictions on key equipment.
Charles Schlumberger, lead air transport specialist at the World Bank, said: “Airlines are going bankrupt. What states can do is subsidise certain urgent medical cargo.” Rising cargo charges come as airlines hoard cash owed to customers affected by the pandemic.
Analysts estimate IAG, which includes British Airways, is sitting on roughly £6.5bn of customer cash for future bookings – although some of this may be withheld by credit card companies. It also may relate to flights due to take off after the current restrictions are lifted. Airlines must refund passengers on a cancelled flight by law.
Emirates is only offering passengers vouchers that can be turned into cash in a year’s time. Virgin Atlantic warned customers may have to wait 90 days. Tui, the world’s biggest travel agent, asked travellers to wait for the company to get in touch over refunds for recently cancelled journeys.
The company was bailed out by the German government on Friday.
Rory Boland, of Which?, said: “Despite travel restrictions being in place around the globe, passengers who booked flights before this outbreak began that have not yet been cancelled are now left trapped between a rock and a hard place – unable to fly while also being denied a refund.”