The Russia - Ukraine Situation Might Cause Global Air Cargo Rates Soar

Russia and Ukraine are important players in the global air cargo market, with geographic locations on the most time-saving direct routes between Asia and Europe, Asia and North America. However, affected by the current intense situation between Russia and Ukraine, many airlines and nations have banned Russian airlines from entering their airspace. And Russia has also closed its airspace to many countries, further squeezing the air cargo capacity already strained by the pandemic. This is bound to bring challenges of soaring shipping costs, longer delivery times, etc for companies shipping goods around the world.

Air Freight Rates Is Expected to Soar as Russia's AirBridgeCargo Exits Europe

Volga-Dnepr Group’s AirBridgeCargo removed all its aircraft from Europe as the EU and the UK banned Russian planes from their airspace. AirBridgeCargo accounts for nearly 4% of global international air cargo traffic, most of which is between Europe and Asia. The US also recently announced that it will ban Russian aircraft from US airspace. Sanctions against Russia are reducing much-needed capacity in the global air cargo market, driving up the air freight rate between Asia and Europe.

Air Freight Rates Soar as European Airlines Suspend or Re-route

Shipping between Europe and North Asian destinations is at the forefront of disruption. The air cargo market has become increasingly paralyzed and expensive as more airlines suspend flights to Russia, Japan, South Korea, and China. Many European airlines are re-routing flights, and due to longer routes, shipping will also take longer, and costs such as fuel will be more expensive. The war has sent the price of crude oil above $110 per barrel in the past 5 days.

"Eastbound air freight rates Europe to China have soared as well. The market FAK (freight all kind) spot rate has increased dramatically, at a scale of €3.60 to $5/kg", said a freight-forwarder in Shanghai.

Asia - North America Freight Routes are Also Expected to Be Affected

Congestion at the US ports is worse than it was a year ago, with container shortages meaning more products need to be shipped by air. At the same time, the situation in Russia and Ukraine has made air freight capacity tight, and air freight rates between Asia and North America are very likely to rise. But the Asia-North America cargo route will be less affected than the Asia-Europe route because many airlines already use Anchorage, Alaska, as a freight hub and stopover.

Some Shipping Companies Stopped Shipping to Russia and Ukraine

Two of the world's largest shipping companies, UPS and FedEx, had earlier stopped shipping to Russia. Meanwhile, German shipping company DHL has suspended deliveries to Ukraine. We also have temporarily suspended all shipping methods of dropshipping to Ukraine.

Impact on Dropshipping Businesses

Airfreight rates have soared once due to supply chain shortages, canceled flights, surges in freight, lack of capacity, due to the pandemic, causing severe repercussions for many dropshippers. As the Russia-Ukraine crisis increases pressure on air freight in much of the world, it is likely to cause another surge in air freight rates.

Currently, airlines in Asia and the Middle East can still use Russian airspace, and dropshipping from China to parts of the world, except Ukraine, has not been affected for the time being. But for those who work with European or North American dropshipping suppliers may face the challenge of prolonged delivery times and rising shipping costs because airlines from 36 countries are banned from Russian airspace. Faced with so many uncontrollable factors, what you can do is to take precautions and offset the possible increase in freight costs by switching dropshipping suppliers with shorter shipping routes or improving profits in other areas.