Airspace closures after Ukraine invasion stretch global supply chains (updated)

EVA Airways

01/03/2022 07:26

* Flights between Europe and north Asia most affected
    * European airlines are cancelling cargo flights
    * Air freight rates were already elevated due to pandemic

 (Adds comments from Taiwan's EVA Airways, China Airlines)
    By Jamie Freed
    March 1 (Reuters) - Global supply chains, already hit hard
by the pandemic, are facing further disruption and cost
inflation as airspace closures after Russia's invasion of
Ukraine affect the air freight industry.
    Transport between Europe and north Asian destinations like
Japan, South Korea and China has become particularly problematic
due to reciprocal airspace bans that bar European carriers from
flying over Siberia and Russia airlines from flying to Europe.
    Airlines responsible for moving around 20% of the world's
air cargo are affected by those bans, Frederic Horst, managing
director of Cargo Facts Consulting, told Reuters on Tuesday.
    Germany's Lufthansa  LHAG.DE , Air France KLM  AIRF.PA ,
Finnair  FIA1S.HE  and Virgin Atlantic have already cancelled
north Asian cargo flights over airspace issues, though major
Asian carriers like Korean Air Lines  003490.KS  and Japan's ANA
Holdings  9202.T  are still using Russian airspace, as are
Middle Eastern airlines.
    Pure cargo carriers like Russia's AirBridgeCargo Airlines
and Luxembourg's Cargolux are also subject to the airspace bans,
in a move that could send air freight rates - already elevated
due to a lack of passenger capacity during the pandemic -
soaring further. 
    In December, air cargo rates were 150% above 2019 levels,
according to the International Air Transport Association (IATA),
adding to inflation affecting industries and economies around
the world.
    Sanctions imposed on Russia in the wake of its invasion of
Ukraine are expected to further disrupt global supply chains.
    Russia's AirBridgeCargo alone moves just under 4% of global
international air cargo, with most of that between Europe and
Asia, Horst said.
    "All up you could be looking at perhaps a quarter of air
cargo between Asia and Europe needing to find alternate means of
transportation," Horst said. 
    "Yields are high enough that flying a longer route via
Southeast Asia, South Asia or the Middle East is an option, but
it will still pull capacity out of the market."
    Demand for air cargo last year was 6.9% above 2019's
pre-pandemic levels, according to IATA, as e-commerce surged
during the pandemic and shipping container shortages and port
bottlenecks led to more products being flown by air. In
December, air cargo rates were 150% above 2019 levels, IATA
said.
    Taiwan's EVA Airways  2618.TW  said on Tuesday its cargo
flights to and from Europe were operating normally and it would
consider adding more services to meet market demand. China
Airlines  2610.TW , also based in Taiwan, said it would continue
to pay attention to the global economic and political situation
and flexibly adjust cargo capacity.
    Asia-North America cargo routes are expected to be less
affected than European routes, analysts say, because many
carriers already use Anchorage, Alaska as a cargo hub and
stopover point.
    Japanese automakers Toyota Motor Corp  7203.T  and Nissan
Motor Co  7201.T  said on Tuesday they were keeping an eye on
any disruption to supply chains as a result of what Russia calls
its "special operation" in Ukraine. 
    U.S.-based United Parcel Service Inc  UPS.N  and FedEx Corp
 FDX.X , two of the world's largest logistics companies, have
halted deliveries to Russia.

 (Reporting by Jamie Freed in Sydney; Additional reporting by
Satoshi Sugiyama in Tokyo and Ben Blanchard in Taipei; Editing
by Stephen Coates and Michael Perry)
 ((Jamie.Freed@thomsonreuters.com;))