Cargo carriers charge premium to clear backlog

PUBLISHED : Friday, 23 April, 2010, 12:00am
UPDATED : Friday, 23 April, 2010, 12:00am

The volcanic ash cloud that crippled European aviation is proving to have a silver lining for Hong Kong carriers.

Desperate exporters are paying a hefty premium to clear a mountain of backed up cargo. Cathay Pacific, DHL and UPS have raised freight rates to Europe three- or fourfold - to about HK$100 per kilogram - to move everything from electronic goods to high fashion.

It is estimated the city will need at least 50 Boeing 747 freighters to clear thousands of tonnes of cargo left after the five-day closure of European airports caused by volcanic clouds from Iceland.

'We can either accept the price or use the Silk Road trade lane like our ancestors,' said Sunny Ho Lap-kee, executive director of the Hong Kong Shippers' Council. He said some exporters had earlier shifted to shipping their cargo by sea, to avoid having to pay compensation for late delivery.

An estimated 5,150 tonnes of air cargo was stuck yesterday in warehouses from Sha Tin to Chek Lap Kok, according to data from the Hong Kong Association of Freight Forwarding and Logistics.

'It is unprecedented, as these warehouses are designed for temporary storage,' Paul Tsui Hon-yan, the association's chairman, said. He said the 50 Boeing 747s estimate was a conservative one, as it excluded cargo being held by manufacturers.

Hong Kong International Airport, the busiest international cargo hub, handled 905,000 tonnes of cargo in the first quarter, about 10,000 tonnes a day. The week-long shutdown of European airports was estimated to have created a backlog of 8,000 tonnes of European-bound cargo.

Cathay, the city's largest freighter operator, has suspended new bookings for European shipments until Monday. An executive from its cargo division said: 'We hope that we can clear the backlog by Monday before receiving new orders.'

The airline, which operates 23 weekly freighter flights to Europe, plans to return to 100 per cent capacity by today. Freight rates to Europe have risen to HK$100/kg from less than HK$30/kg before the European airports closed.

Charter rates for a Boeing 747 freighter had surged to US$700,000 per flight in Hong Kong, compared with US$480,000 to US$500,000 before the volcanic eruption in Iceland, an executive from a European freight forwarding company said.

Airline executives said the rise in rates was driven mainly by genuine demand and supply as well as losses incurred in the grounding of aircraft.

Airlines have been hit by revenue losses plus the additional costs associated with parking of planes and rerouting. For example, a freighter operated by Cathay en route to Brussels last week needed to reroute to Dubai after the shutdown of European air space. The aircraft was sent back to Hong Kong without cargo after parking in Dubai for two days, an airline executive said.

The surge in freight rates has been partly blamed on the redeployment of aircraft to more lucrative charter services from scheduled services.

The number of cargo flights at Hong Kong Air Cargo Terminal Ltd was back to normal, with 10 freighters taking off for Europe yesterday, Lilian Chan, the general manager for marketing and customer service, said.

The firm, which accounts for 70 per cent of total cargo and mail tonnage at the city's airport, handled about 7,000 tonnes of cargo yesterday, on a par with the average daily tonnage in the first quarter.