Air cargo charges double in fresh blow to RMG exporters
Readymade garment exporters in Bangladesh have been dealt a fresh blow by a doubling of air shipment rates for cargoes flying out of Hazrat Shahjalal International Airport (HSIA).
The rate hike has piled additional pressure on the garment manufacturers who have been struggling for nearly a year to stay afloat amid a rush of order cancellations and rate decrease during the pandemic.
Airlines say they raised the rate because the growing demand for air shipment amid improving global outlook and squeezing of carrying capacity from the HSIA by 60 per cent over the last three months because of suspension of cargo and passenger flights by some international flight operators.
International airlines are also imposing a higher rate to make up the losses incurred between March and September because of the suspension of international flights and hiring staff at higher costs to load and unload goods at the airports.
Airlines are charging between $3.20 and $3.30 per kilogramme (kg) from the HSIA to any airport in the European Union without trucking facility.
Europe is the largest export destination for Bangladesh with a concentration of more than 60 per cent of the national export and 64 per cent of the garment shipment.
The rates are $3.55 to and $3.65 per kg with trucking facility – a facility provided by airlines to carry goods from the airports of destinations to buyers. In March, the rates were $1.70 to $1.80.
Suppliers who ship goods to North American markets have not been spared. Airlines are realising $5.90 to $6.20 per kg from the HSIA to airports in the US, way higher than $2.80 to $2.85 in March.
The higher shipment of masks, personal protective equipment (PPE), Covid-19-related gowns, bedsheets and isolation bed sheets coupled with the garment shipment have fueled the demand for air shipment from the HSIA.
Currently, 400 tonnes of cargos are transported through air from the airport every day, with garment accounting for 80 per cent. The volume was 900 tonnes before the pandemic hit the country in March.
About 40 local and international airliners used to carry the goods. Nearly 50 per cent of them have either suspended carrying goods or stopped flights from HSIA as they deem them unprofitable as they do not get enough goods to carry.
In 2020, the air shipment of garment items declined 33.68 per cent to 134,806 tonnes from 203,256 tonnes in 2019, according to data from the Bangladesh Garment Manufacturers and Exporters Association.
"A month ago, I even asked one of my European buyers to cancel work orders when he asked me to send the goods through air, which is more expensive than my production costs and profit," said Ahmed F Rahman, managing director of Kappa Fashions.
"I will face a major loss if I send the goods to him via air. Luckily, the buyer agreed to bear the air shipment cost."
The shipping charges through sea have also surged from last month on the excuse of higher port operational costs, the entrepreneur said.
Currently, the shipment to carry a 40-foot equivalent unit through seas is being charged $6,000 from $2,000 a month ago, Rahman said.
"Since many international airlines have suspended carrying cargoes from the HSIA, passenger flights have been turned into cargo flights in some cases," said an executive of an international cargo airliner working at the HSIA.
The air shipment of garment items has increased as buyers want quick delivery, he said.
In some cases, buyers bear the cost of the expensive air shipment. But in most of the cases, the suppliers have to pay the expenses, he said.
The air shipment charge may go higher when the transportation of Covid-19 vaccines begins, the airline executive said.
"The air freight business has not restored yet. The airfare almost doubled compared to the pre-pandemic period," said Kabir Ahmed, president of the Bangladesh Freight Forwarders Association.
Since there is no option to carry cargoes in passenger flights, goods are flown out through cargo freighters. The freighter rate is always higher than the passenger flight, he said.
Syed Ershad Ahmed, country manager and managing director of Expeditors (Bangladesh), said because of the coronavirus outbreak, important supply chains in the logistics and transportation industry have been hampered.
He said gross value-addition for the global logistics industry dipped by 6.1 per cent. The estimated impact of Covid-19 on logistics markets varies country to country, from a 0.9 per cent decline in China to an 18.1 per cent fall in Italy.
The global freight forwarding market was expected to shrink by 7.5 per cent in the worst-case scenario in 2020 compared with 2019.
Ahmed said once airlines resumed operations after the outbreak of the coronavirus, the rate per kg rose by 100 per cent to 200 per cent compared to the pre-Covid-19 period.
KI Hossain, president of the Bangladesh Garment Buying House Association, said sea fare went up significantly.
One and a half months ago, shipping companies used to charge $1,600 for carrying a twenty-foot equivalent unit (TEU) of goods. Now, they charge $4,700 to carry goods to Europe.
In case of 40–foot equivalent unit, the charge rose to $7,800 from $2,600 to $3,000. The charge goes higher when other costs are added, he said.
Mohammed Mansur, general secretary of the Bangladesh Fruits, Vegetables & Allied Products Exporters' Association, said Middle-East-bound airlines had already increased the rates by 50 per cent as the usage of air cargo was increasing gradually.
For instance, the airliners that had levied a rate of $1.90 in December 2019 are now charging $3.20 to $3.30 per kg, he said.