Understanding the dynamics between ocean freight and air cargo

Singapore freight forwarders – Star Concord

In recent years, airfreight demand has surged due to the rapid growth of e-commerce and higher consumer expectations for delivery speed. Meanwhile, ocean freight remains dominant for bulk and non-urgent shipments. The global economy relies on efficiently delivering high-quality products to consumers worldwide at competitive prices.

Air cargo plays a crucial role in this, transporting over US$6 trillion worth of goods, representing about 35 percent of world trade by value.

Ocean freight has extensive reach to major coastal ports, making it essential for bulk international trade and its capacity to handle massive volumes makes it indispensable for transcontinental shipping.

Airfreight offers broader geographic accessibility to landlocked regions and is crucial for rapid delivery across vast distances. It significantly reduces transit times, providing a competitive edge in logistics.

Primary influences

The decision between air and sea often hinges on balancing cost with delivery speed. Before the pandemic, air cargo transportation costs were typically 13 to 15 times higher than ocean freight.

However, recent data from the International Air Transport Association (IATA) and industry experts indicate that the price gap has narrowed, with airfreight now being only three to five times more expensive than ocean shipping – a shipment costing US$195 via ocean freight could amount to US$1,000 when shipped by air.

This makes airfreight particularly suitable for high-value or perishable goods that needs the speed, safety, and reliability ocean freight can lack. Whereas, larger and heavier shipments tend to be more cost-effective via ocean freight due to scalable capacity.

Reliable routes

The Red Sea crisis has triggered a significant increase in demand for airfreight. Shippers are moving cargo from sea to air to bypass delays, especially for urgent deliveries.

This shift is contributing to a projected rebound in the airfreight market, which is expected to reach an estimated value of around US$210.3 billion by 2027.

Airfreight typically offers more consistent and faster delivery times. However, it can be subject to flight delays and cancellations, though less frequently than ocean freight disruptions.

Ocean freight generally sees more variability in delivery times due to factors like weather conditions and port congestion. Predictability can be less than air, with the ocean being generally slower than air, as customs procedures and delays can further exacerbate the transit times.

However, Express Less than Container Load (LCL) services are increasingly available across various shipping routes, provided by many forwarders. These services typically ensure guaranteed delivery dates and are faster compared to traditional ocean freight methods.

Transit times

Ocean freight can take three to five weeks, requiring more advanced planning and larger safety stock. Airfreight, although more expensive, supports agile supply chains with transit times usually under a week. The quicker transit times of airfreight facilitate lean inventory models and reduce holding costs, albeit at higher freight costs.

Although 90 percent of imports and exports rely on ocean freight, airfreight offers unparalleled speed, slashing shipping times from China to the US from 20-30 days by ocean to just three days by air cargo. Although ocean freight may still offer cost advantages, airfreight maintains its superiority in terms of reliability and scheduling.

Environmental consideration

Ocean freight produces lower CO2 emissions per tonne-mile compared to airfreight, making it a more environmentally sustainable option for long distances.

While airfreight accounts for 2 percent of global carbon emissions and sea freight for 3 percent, air travel is far more carbon-intensive, emitting 47 times more carbon per tonne-kilometre than sea freight, due to higher fuel consumption, according to the International Transport Forum.

Capacity and risk

Ocean vessels can carry vastly more cargo both in volume and weight, making them suitable for transporting large quantities of goods economically. For instance, a single container can hold as many as 10,000 beer bottles. Ocean freight faces risks like piracy and theft, especially in high-risk areas such as the Gulf of Aden, meaning risk management requires comprehensive maritime security protocols and insurance coverage. Aircraft are limited by volume and weight constraints, making them less suitable for very heavy or bulky cargo but ideal for high value and less bulky items.

Airfreight also has to wrestle with concerns include terrorism and cargo theft during transit. Security measures are stringent, involving tight airport security protocols and specialised cargo handling to mitigate risks. Moreover, airlines adhere to more stringent regulations for shipping hazardous materials.

Technology’s impact

Recent advances in ocean freight have included the use of AI and IoT for route optimisation and predictive maintenance, which boosts operational efficiency and sustainability. Early adopters of AI-enabled supply chain management have, so far, achieved significant improvements, reducing logistics costs by 15 percent, lowering inventory levels by 35 percent, and enhancing service levels by 65 percent compared to their slower-moving competitors.

In airfreight, innovations like automated handling systems and data analytics for real-time tracking have bolstered efficiency. Sustainable aviation fuels and more efficient aircraft designs are reducing the environmental impact.

The post Understanding the dynamics between ocean freight and air cargo appeared first on Air Cargo Week.

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Author: Edward Hardy