Risk of turbulence: Air cargo limits hit Ireland’s exporters

Enda Corneille, the country manager forEmirates in Ireland, said the freight carried by his company’s fleet to Dubai helped Irish products enter markets that they would never reach otherwise – including Donegal crabs.

“We would carry almost a tonne of seafood every day, beef, yoghurts and crisps," he said. "You would never know what’s underneath the floorboards - a huge variety.

He added: “For example, we were carrying a lot of crabs from Donegal, and they would actually be on a restaurant table in China 24 hours after they left Donegal. So, that sort of supply chain can only be facilitated by an airline, and an airline such as Emirates with that kind of network reach.”

While demand for Irish-made goods grows at seemingly supersonic speeds, air freight is struggling to keep up.

Ireland’s economy is more dependent on exports than most and in 2020 goods worth a record €160bn were sold overseas, of which almost 40pc was medical and pharmaceuticals, while the US was the largest single market, accounting for 31pc of exports.

Covid-19 has dealt a hammer blow to the airline industry, with passenger routes that carry cargo from Ireland to destinations across the world facing the axe. It has meant Irish exporters have been hit with increased costs and issues accessing the services that remain.

According to Minister for Transport Eamon Ryan in a recent written answer to a TD, around 60pc of all air cargo travels in the hold of passenger aircraft operating regular scheduled air services, with the remainder travelling on dedicated air cargo operators or smaller air operators.

A recent report published by the Freight Transport Association Ireland found Dublin Airport handles 35pc of all Ireland’s trade by value. The report says that the value of a tonne of air freight is estimated to be 53 times more valuable than a tonne travelling via another mode of transport.

The report said that pharmaceuticals, machinery, transport equipment, agriculture, and fisheries all rely heavily on air freight, particularly when there is a need for delivery speed.

The cutting of passenger services has placed considerable pressure on Irish exporters in these sectors who use air freight to sell their wares to valuable overseas customers. The pressure is being felt in markets such as the Middle East and Asia, which have been flagged as crucial as we recover from Brexit.

Corneille said the pandemic’s impact on traveller demand had meant air freight services across the globe were constrained for exporters. For Emirates and others, flights carrying cargo are viable with passengers, but less so without them.

Emirates has had to cut its number of flights here from 14 a week, which would carry 700 tonnes of cargo, to just four.

According to Corneille, even those four flights could be at risk, pointing to hotel quarantine as potentially harming demand and therefore flight viability.

“The real concern with the recently announced hotel quarantine process [is] is that going to affect even the four flights that are there. Could that reduce capacity even more and therefore reduce capacity for Irish exporters?

“So that is a real concern, and we hope it won’t happen, but it certainly had a huge effect on the passenger demand,” he added. “Not on the cargo demand, which remains very buoyant and still very important, but obviously any further reductions in the schedule would have a direct impact on exporters. That is something that is a concern to us all.”

That concern regarding the future of passenger air cargo trade has been echoed by Simon McKeever, chief executive of the Irish Exporters Association. He feels there are long-term implications of losing routes that need to be considered.

“Irish exporters and supply chain actors are contending with a number of challenges at present, in particular reduced air cargo capacity owing to international travel restrictions. As an island nation, connectivity is everything, and it is the reason Ireland punches above its weight in the global trading arena.

“When we think of air travel, we rarely consider the cargo capacity onboard planes (in their belly-hold) and how crucial this capacity is to our trading ability. We have concerns about how reduced air capacity will impact connectivity, and in turn, our ability to trade in the long run.”

Paul O’Kane, chief communications officer at semi-state airport operator DAA, noted the air cargo business's contrasting fortunes at Dublin Airport. The hardest hit had been the cargo handling companies, mainly relying on passenger routes to support their business model. With the considerable loss of passenger flights, much of that business is gone for now or has moved to other modes.

“On the other end of the scale, the large integrated and dedicated cargo carriers have seen an increase in business due to the lack of overall capacity in the market,” he said.

“As an island, air cargo is vital for Ireland’s economy and connectivity, especially to the North American market,” he later added.

To give a sense of the pressure on air freight capacity caused by the loss of some passenger flights, O’Kane said cargo volumes at Dublin Airport declined by about 18pc last year. This wasn’t helped by the fall in scheduled passenger flights, which led to a 52pc reduction in belly-hold cargo.

“A lost route is significant to the airport and the country,” said O’Kane. “For example, where there is an established direct air route, trade between those two regions is four times greater than regions with no direct air route.”

O’Kane added that the increase in air cargo rates was running at eight to ten times pre-Covid across the world at the height of the pandemic. This had come down more recently, he added, as more passenger airlines are operating cargo-only flights with their long-haul passenger aircraft.

Fergus Murphy, a director at Premier Brands International, echoed O’Kane on the rising costs. His company is a specialist in food and beverage exporting and helps Irish companies sell their products across the Middle East and Asia.

Murphy said the pandemic initially affected his ability to get some products overseas. He said air cargo prices aren’t coming down, with rates for some routes up around 40pc to 50pc from pre-Covid levels. He added that the cost for the Saudi Arabia route was up around 75pc.

Capacity wise, Murphy said routes to Dubai, Singapore and Hong Kong are those feeling the most significant strain. He has noted the capacity constraints meant delivery times on some routes had grown from around 48 hours to about 72 hours.

The cost and delays have led to competitiveness issues as brands pass the expense on to consumers. Murphy said Irish companies have to pass on the costs, meaning buyers may look to brands closer to home.

“Price increases have made our brands more uncompetitive on the shelves. It is definitely having a negative impact when having a discussion with buyers on the cost of getting a product to the market. It’s a real concern.”

Co Kilkenny honey producer Mileeven has experienced issues with air freight. Founder Eilis Gough, who uses air cargo to ship to destinations in the Middle East, Hong Kong and Australia, said time and cost had been the most significant issues for her when exporting goods by air. She said you may have to wait for a week to get a slot to ship products.

“The biggest problem is just finding how to get it there, and when,” she said.

Gough has been lucky in that most of her export products are sent via sea freight. However, the additional costs and delays on air freight are affecting what she calls rush orders.

Shipping products by sea has also increased in cost, with delays being caused by a shortage of containers. Indeed, since the Suez Canal blockage, there have been media reports of companies across the world switching supply routes to air.

For Gough, the sea shipping issues have been more immediate, with costs around 30pc higher.

“Generally, shipping from our point of view is difficult,” she said. “It is less predictable than it used to be.

“It [exporting globally, including air freight and shipping] takes more time. You can’t assume that anything is the way it used to be.”

Emirates’ Corneille is at the air freight sector's coalface and is also well aware of the issues facing those who ship goods. He said demand for air cargo space remains high at his business, adding there is a wait of around two to three weeks before an empty slot becomes available.

Despite the devastating effect of Covid-19, Corneille believes we will see more passengers on flights soon. He hopes passenger demand will rebound in September.

Corneille knows it will take time for a full recovery to happen. With the hotel quarantine system currently in force and the well-documented issues it has created for travellers, there could yet be more turbulence for Irish exporters.

“It will be some time before we get back to 14 flights simply because demand won't be there. It will maybe be 2022 or 2023,” Corneille said. “But certainly, the business now is to maintain the current schedule and try and grow it within the next four or five months, keeping in mind public health advice along the way.

“The only fly in the ointment is if the reductions in demand for traffic in passenger side that we are seeing as a result of the hotel quarantine,” he added. “If they continue and the viability of the operation is called into question, then we are looking at a different scenario which we hope we don’t have to look at.”

Online Editors