The escalating Houthi Yemen Red Sea crisis has ignited a surge in demand for air freight, signaling heightened concerns among companies and shippers. According to supply chain intelligence firm Xeneta, the anxiety surrounding the crisis has led to a staggering 62% spike in air cargo volumes on the major apparel route from Vietnam to Europe in the week ending January 14.
While the cost of air freight has not surged as sharply, industry experts predict that if Houthi attacks persist and cargo demand remains high, prices are likely to experience an upward trajectory. Niall van de Wouw, Chief Air Freight Officer for Xeneta, expressed concern, stating, “You’ll have more and more companies getting nervous.”
The crisis-induced diversions for ocean cargo vessels have significantly impacted air freight volumes, especially for cargo bound for Europe. Companies are increasingly opting for air transport to avoid longer Red Sea diversions around Africa’s Cape of Good Hope, as reported by Xeneta.
Niall van de Wouw highlighted that the recent surge in air freight usage is distinctive, breaking the usual trend of a quieter period for air freight during the last week of December and the first week of January. The crisis has prompted companies, particularly retailers, to consider air freight as a means to expedite product deliveries directly to customers.
Comparisons to pandemic-related supply chain shocks are being made, but there are key differences. Unlike the pandemic, the surge in air freight demand is not driven by increased consumer spending but by companies’ urgent need to move products and mitigate ocean transit delays.
Xeneta’s data reveals a notable 62% increase in air cargo volumes on the major apparel route from Vietnam to Europe in the week ending January 14, surpassing the peak week in October 2023 by 6%. This surge is more rapid than seen during the early months of the pandemic.
Around 28% of the world’s container trade passes through the Suez Canal/Red Sea, with almost 30% of the goods in these containers including furniture, household goods, clothing, and apparel. Longer transits from Asia to Europe have prompted brands with significant European exposure to consider air freight, including Phillips-Van Heusen Corporation, Birkenstock, Capri Holdings Limited, Nike, Ralph Lauren, VF Corp, and Levi Strauss & Co.
Sailing around the Cape of Good Hope to avoid the Red Sea adds significant time to shipping journeys, making Europe’s route longer than the U.S., thus driving up air freight usage.
As the crisis unfolds, logistics managers are favoring the Suez Canal due to its status as the fastest route from Southeast Asia to Europe and the U.S. East Coast. Auto companies like Suzuki Motors, Tesla, and Volvo have already announced manufacturing impacts due to delayed components.
Companies such as Ikea, Next, and Crocs have warned of product delays. Brian Bourke, Global Chief Commercial Officer for SEKO Logistics, noted the industry’s shift toward air freight for various products, ranging from fashion apparel to automotive parts, driven by additional delays and a pre-Lunar New Year rush before factory shutdowns.
In conclusion, the Houthi Yemen Red Sea crisis is reshaping the dynamics of global logistics, propelling air freight to the forefront as a critical solution for companies navigating supply chain disruptions. As the situation evolves, businesses must remain agile, seeking innovative strategies to ensure the continued flow of goods amid geopolitical challenges.
