The Houthi rebel attacks in the Red Sea have led to significant diversions for ocean cargo vessels, causing a surge in air freight volumes and raising concerns among retailers and auto companies. Companies are turning to air freight to avoid longer diversions around Africa's Cape of Good Hope, leading to a spike in demand and potential cost increases. The crisis has heightened fears of supply chain inflation, with comparisons being made to pandemic supply chain shocks. Major retailers and auto companies are already experiencing manufacturing impacts, and logistics managers are favoring the Suez Canal for its faster route from Southeast Asia to Europe and the U.S. East Coast.
The recent Houthi attacks in the Red Sea have not only caused a spike in sea freight rates, but are also expected to drive up air freight rates as global trade flows are increasingly disrupted. Delays in maritime trade may lead some retailers to switch to air freight for faster delivery, prompting an expanded role for air cargo in the supply chain ecosystem. Industry experts anticipate a surge in air freight rates in the next few weeks, particularly as the Chinese New Year holiday approaches, potentially benefiting the air cargo industry amidst international disruption.
Shippers are increasingly turning to air freight to bypass the Red Sea, as the ongoing crisis in the region disrupts maritime routes. The blockage of the Suez Canal and recent attacks on ships in the Red Sea have prompted companies to seek alternative transportation methods to ensure the smooth flow of goods. This shift to air freight reflects the growing challenges in global logistics and supply chain management.
FedEx, facing a decline in air cargo demand, is encouraging its pilots to apply for a job with PSA Airlines, a regional carrier unit of American Airlines. The move comes as air cargo demand has slowed significantly, leading to overstaffing at FedEx. Interested FedEx pilots are eligible for an expedited interview process and sign-on bonuses. The decline in air cargo demand is attributed to a plunge in ocean freight rates and the resumption of travel post-pandemic, allowing passenger flights to carry cargo. Meanwhile, US passenger airlines are experiencing a pilot shortage.
