COVID-19 has dramatically changed global operations. While most of these changes involve challenges for land, ocean, and air freight, it has led to some unique innovations and workarounds. Businesses like Boeing and Airbus have begun exploring planes with greater cargo capacity, and many leading U.S. companies are using airfreight versus land and ocean for their operations.
However, even with global markets trying to return to a state of normalcy or finding ways to adapt and modify their operations, the challenges posed by COVID-19 still threaten the optimal flow of airfreight. One of these challenges is the complete lockdown of Shanghai, China.
Starting on March 28th, Shanghai started a nine-covid lockdown of their city. This lockdown has hampered operations, and many airlines have canceled their flights or chosen alternative routes for their cargo, causing delays and higher rates.
Although Shanghai’s busiest airport–Shanghai Pudong International Airport (PVG)–isn’t closed, some neighboring airports are being closed or with limited operations. Additionally, production at warehouses has become dramatically reduced or at a standstill due to the work from home order. Coupled with a decrease in transportation across the city, many flights going in and out of PVG are canceled.
While this isn’t the first time China has entered a strict lockdown, Shanghai’s most recent lockdown is perhaps the second most extensive lockdown in the past two years–only rivaled by the initial outbreak in Wuhan.
China’s stringent zero-Covid policy puts both small and large businesses at risk. Even though theoretically flights are allowed into PVG, the lack of manpower and increased rules and regulations has resulted in delays and cancelations.
For example, while airport workers are permitted to work in Shanghai amidst the lockdown, most trucks outside of Shanghai aren’t allowed to enter the airport or ports. This puts a huge constraint on freight across the board. Carriers to and from destinations like Los Angeles, Amsterdam, and Chicago have canceled flights, and major airlines like Turkish Airlines and Singapore Airlines are canceling flights until the lockdown is lifted.
For carriers that do decide to proceed with PVG as their destination, they face long delays at customs–exacerbated by both reduced staffing and increased regulations. With airfreight diverted from PVG, prices have begun increasing. Transit times are increasing too.
According to data collected from the TAC index, current China to U.S. rates sit at $8.54 per kg. While this is only a 0.2% increase in recent weeks, it’s also a 22% increase from March, which saw rates around $6.97 on March 7th. With the price of fuel increasing, shippers are forced to accept surcharges again.
Many experts point to China’s zero-covid policy as a key culprit. First adopted since the start of Covid, this policy has resulted in frequent lockdowns across the country—including major cities like Beijing and Shanghai.
Such economic consequences have led to China exploring ways to adjust its policy. Some adjustments include increasing the scope of testing, mandating local governments complete testing in 24 hours, and having factories use a “closed-loop” production method.
The closed-loop method allows production to still happen during the lockdown. This method does so by utilizing rapid antigen tests, letting minor or asymptomatic cases quarantine inside isolation facilities instead of hospitals, and increasing the viral threshold required for testing positive.
However, even with these adjustments in place, and even if the lockdown in Shanghai becomes lifted, the ripple effects are sure to impact the air freight industry for weeks or months to come.