COVID Vaccine Fallout: General Air Cargo, Wait Your Turn
Fri, 10/30/2020 – 12:45
By Eric Kulisch, air cargo editor at American Shipper,
Shippers of general commodities such as auto parts, wine, apparel and telecommunications equipment should be prepared for air transportation delays in the coming months, because any new releases of COVID-19 vaccines will take priority, logistics experts say.
Cargo carriers, including airlines operating passenger aircraft as mini-freighters, are likely to bump general cargo from flights to make room for emergency shipments of lifesaving vaccines, which also will command the highest rates because of requirements for expedited delivery and special handling.
“COVID-19 is going to be the biggest product launch in the history of mankind. We all know when Apple launches a new product what it does to capacity for everybody else. It’s a big sucking sound and all of that capacity goes toward moving that single product,” said Neel Jones Shah, global head of airfreight at Flexport, a San Francisco-based freight forwarder with advanced technological capabilities to connect supply chain partners.
Apple chartered many freighter aircraft to get the iPhone 12 and iPad Air to warehouses and stores ahead of last week’s highly anticipated product launch.
Potential shipping delays for nonpharmaceutical businesses stem from the severe shortage of airfreight capacity that already exists, because most of the international, widebody passenger fleet remains suspended in the face of weak travel demand caused by the pandemic. About 60% of global air cargo capacity resides in the bellies of passenger aircraft, according to industry analysts.
Fully integrated express carriers like FedEx, UPS and DHL are expected to carry the first wave of vaccines, especially ones requiring ultra-cold storage.
There are nine vaccines in the third, and final, phase of clinical trials around the world, and its possible health regulators could issue some emergency use authorizations by the end of the year. Pfizer expects to provide two months of safety data about its trial, following the final dose of the vaccine, to the U.S. Food and Drug Administration by the third week of November and will then apply for emergency use authorization, company officials said on Tuesday’s earnings call with analysts.
Satish Jindel, president of freight analytics company ShipMatrix, said the integrators won’t divert aircraft and other assets to exclusively handle vaccines, “but some of their customers may get delayed.”
The extent a vaccine will impact general air cargo depends on several factors, including the timing of a vaccine approval, how much medicine gets produced and distributed regionally by truck, and how much packaging and dry ice are required.
“Once we get a little bit more clarity on that and the exact volumes, and what types of aircraft are best suited [for the job], I think we’ll have a much clearer picture on the overall commercial impact of this project,” Jones Shah said during a press briefing this month organized by The International Air Cargo Association and Pharma.aero.
Vaccine deployment will take place over the better part of two years, although planning should get easier over time as drugmakers ship doses on regular schedules instead of making emergency hotshot shipments, according to logistics companies.
“This isn’t a four-week effort. This is a 2021 into 2022 effort. So it will be spread out over a number of months and not just impact the Christmas logistics season,” Jones Shah said.
Christopher Spyrou, CEO and founder of Neutral Air Partner, said consumer and industrial goods always take a back seat to pharmaceutical products when space is scarce on flights.
“In a normal environment, pharma gets priority over general cargo anyway. So imagine what will happen with a vaccine,” he said, adding that small and medium-size shippers will be impacted the most.
Neutral Air Partner is a Hong Kong-based international freight cooperative designed to increase the buying power and collective expertise of independent forwarders.
Spyrou said access to air cargo aircraft will be determined by who can pay.
Airfreight rates have been elevated all year and are escalating again as the peak shipping season for the holidays hits full stride. Rates from China to the U.S. and Europe have increased 25% to 45% in the past two weeks, according to data from Freightos. And shipping prices could go even higher when vaccines get released.
“The general cargo shippers might not be able to afford to pay the $10, $12, $15 per kilo to make their cargo a priority over the vaccines,” Spyrou said.
Pfizer, which has begun parallel production alongside the clinical trials to speed up distribution upon approval, has a contract with the U.S. government to provide 100 million doses by March, but officials said it’s possible they could meet a provision to provide 30 million doses by the end of the year. That initial tranche would cover 15 million people, likely targeted for health care workers, first responders and nursing homes.
“As we move into the first months of 2021, then we are going to have a much more massive distribution of the vaccine around the world,” said Albert Bourla, Pfizer’s CEO and chairman.
If a vaccine comes out during the peak shipping season before Christmas, airfreight capacity will get even tighter, Bryan Schreiber, manager of air cargo business development for the Columbus Regional Airport Authority in Ohio said Monday on the FreightWaves TV show/podcast “WHAT THE TRUCK?!?”
The airport authority manages Rickenbacker International Airport, which mostly caters to all-cargo aircraft.
With ocean capacity from Asia essentially maxed out and rates to the U.S. nearly double or triple last year’s level at this time, many companies are converting shipments to air.
“You throw vaccine transportation on top of that and it’s going to be interesting, particularly for the integrated carriers … that are going to be carrying your holiday packages,” Schreiber said.
Source : zerohedge.com