Ocean Shipping Lines Turn to Planes as Supply-Chain Snarls Deepen
Containership operators buy aircraft, hunt for aviation partners as customers opt for pricier but more reliable air shipping
For the giants of ocean trade, big ships aren't enough anymore; they need planes, too.
The pandemic, which accelerated the shift toward online shopping, followed by post-lockdown demand and now the war in Ukraine, scrambled the intricate ballet that shipping companies rely on both at sea and in port to deliver goods on time.
Port congestion has forced ships to wait at anchor for weeks. A lack of workers to load and unload ships has further slowed deliveries. Empty containers have piled up in places with nothing to put in them; exporters elsewhere, eager to move their goods, can't find enough of them.
The three European companies that dominate container shipping -- Denmark's AP Moeller-Maersk, France's CMA CGM Group and Switzerland's Mediterranean Shipping Co. -- have in the past largely shunned airfreight as an expensive distraction from their globe-spanning fleet of giant vessels, container terminals and related logistics businesses.
But years of global supply-line disruptions have pushed many customers to opt for more expensive -- and more reliable -- air shipping, executives say.
Now, these container ship companies are racing each other into that market.
"For some key customers airfreight is a must," said Michel Pozas Lucic, global head of Maersk's airfreight division.
Auto-parts suppliers, clothing manufacturers and tech companies, which all typically rely on sea freight to move their goods, had started to switch to air, concerned that the Covid-related snarls at ports would disrupt just-in-time supply chains or cause them to miss deadlines for the launch of new products or the start of new fashion seasons.
"You can't rely only on ships anymore," said Abbie Durkin, the owner of Palmer & Purchase, a women's clothing and accessories boutique with three stores in New York. "I'm flying in our entire winter collection to make sure it arrives before Christmas."
Maersk last year bought German airfreight forwarder Senator International, doubling its air-cargo volume.
Maersk has also been buying airplanes for its air-cargo division, formerly known as Star Air.
The division, which has for several years flown freight for United Parcel Service Inc. and Germany's DHL, operates 15 Boeing 767 freighters. It is leasing another four and has ordered three more 767s and two 777s.
The airfreight industry grew more than 21% last year from a year earlier, based on a metric measuring tonnage and distance flown, according to the International Air Transport Association, a trade group.
Revenue hit $289 billion, up from $238 billion in 2020 and $264 billion in 2019 before the pandemic.
"E-commerce grew three to five times faster during the pandemic, and e-commerce centers were developed across the world," said Darren Hulst, vice president, commercial marketing for Boeing Co. "These centers need a fleet of aircraft to provide same-day or second-day delivery services."
IATA expects world airfreight to further grow 4.4% this year. Strong demand pushed freight rates up by nearly 200% between January and April this year compared with the same period last year.
Over the past three years, 400 freight planes were added to the world fleet, a 20% rise, according to Boeing.
The plane maker estimates the global freighter fleet will increase to more than 3,600 in 2040 from around 2,000 now.
Maersk rival CMA and Air France-KLM agreed earlier this year to share freight space on the companies' planes.
As part of the deal, CMA also agreed to pump about $400 million into the cash-strapped airline.
The carrier, like much of the commercial aviation industry, has relied on air cargo to help it get through the travel bust of the pandemic.
CMA also started its own airfreight division last year and is currently operating four Airbus A330 freighters and two Boeing 777s. It will add two more 777s next year and four Airbus A330s that will be delivered in 2025 and 2026.
"Shipping and cargo, if you can have it together then you have a broader product," said Air France-KLM chief financial officer Steven Zaat.
MSC, meanwhile, made a joint bid with German airline Deutsche Lufthansa for ITA Airways, the beleaguered Italian carrier formerly known as Alitalia.
MSC had said the airline could bolster its air-shipping network, while also feeding its cruise-ship business.
Last month, MSC and Lufthansa lost that bid -- to a consortium including Air France and Delta Air Lines.
Encouraging the shift, the economics of shipping are changing.
The price of air cargo can be more than three times higher than sea freight if the shipment is big and heavy. But for products like computer chips, gadgets and electronics, the difference is smaller.
Accounting for fast-rising charges imposed by ports and carriers when containers arrive late, airfreight makes sense not only for big importers but also for smaller businesses.
For airlines, freight was a lifeline during lockdown. For many carriers, it is now a business line they have decided to continue pursuing.
"In the boardrooms of most airlines in the world, cargo has a more important place," said Air France-KLM's head of cargo Adriaan den Heijer. "One of the lessons from the crisis has been, with all the disruptions, we have to make the supply chains more robust and resilient."