Global shipping companies now want to air freight their cargo too

French company CMA CGM launched its air cargo division in March 2021.

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Ocean carriers are adding air freight to their operations as shippers look for a “one-stop shop” to ship their goods around the world.

“We’re finding more and more that our customers really need an end-to-end logistics solution,” Michel Pozas Lucic, global head of Maersk Air Cargo at Muller, said on a call with CNBC.

“They are looking for this one-stop shop that not only removes the complexity of logistics, but also makes it an optimized, efficient and effective solution,” he added.

Maersk, the world’s largest container shipping company, launched its air cargo unit in April and now has 15 aircraft, while rival CMA CGM launched its aviation unit last year and will have 12 planes in service by 2026.

Supply chain disruptions have resulted in the need for air freight, Pozas Lucic said.

“For most of our customers, air is part of their needs, either because they need the speed of a particular product or because of disruptions… [and] Ocean freight is not ideal because it takes too long, so we realized it was important to have airlift as part of the puzzle,” he told CNBC.

Demand for air cargo in the first half of the year was higher than before the Covid-19 pandemic, up 2.2% compared to 2019 levels, according to the International Air Transport Association.

“Nobody really cares about the supply chain”

The pandemic has raised the profile of supply chains, said Marc Zeck, an analyst at wealth management firm Stifel. “It’s been shown to a lot of companies over the past three years that their logistics departments are not up to the task,” Zeke told CNBC by phone.

“Before the pandemic started, nobody really cared about the supply chain. Now, it’s an issue or topic for the executive board,” he added.

“In the pre-pandemic era… [if companies] Something needs to be shipped by sea, then you go to the sea carrier and book the shipping…it arrives and the job is done. Now, that’s not the case,” Zeke said.

The Chinese factory closed in 2020. Then, when the lockdowns began to lift, demand for commodities surged in 2021, causing widespread supply chain disruptions.

That disruption has continued this year, with flights being cancelled recently due to delays caused by congestion at North American ports and strikes at European ports.

‘Flooded with cash’

For ocean shippers, planes are an attractive buy, said Michael Field, senior equity analyst at Morningstar.

“A lot of these ocean carriers are flush with cash right now, have had a good few years, and they’re looking for ways to spend it — and buying airfreight capacity is definitely one of those ways,” he told CNBC by phone. At the same time, airlines are suffering from a severe pandemic and need the money, Field added.

In its latest guidance, Maersk said it expects free cash flow of more than $19 billion this year and will deliver seven Boeing 767s (three on purchase and four leased) around early November. The aircraft will fly the Asia-American and Asia-Europe routes. Maersk will also buy two Boeing 777s, scheduled for delivery in 2024, according to a company spokesperson in an email to CNBC. Maersk also bought freight forwarder Senator International last year.

CMA CGM, the world’s third-largest ocean carrier, signed an agreement with Air France-KLM to share cargo space in May and said it would buy a 9 percent stake in the airline.

But is now a good time for ocean shippers to buy planes?

“Anyway, air capacity has increased during the pandemic. As we’ve seen, now ocean freight demand is falling over the past few months. So the pressure is abating, so it’s probably not the best time to buy now Airline,” Field said.

“Will they make money in the long run? Yes. Good idea in terms of upsells [to customers]? Yes,” he added.

what will the future be like

Companies that transport the goods are also planning further, Field said. “The operators are telling them that if you want capacity, you have to lock it in with us for a year or two, and they’ll guarantee capacity … I think we’ll see a continuation of that,” he said.

“Customers…are seeing these shippers as more of a partner than someone who just calls when you need something. In the long run, that will definitely put shippers in their Benefit from the actual planning process and possibly ensure that the supply-demand imbalance doesn’t get out of hand like we’ve seen over the past decade or so,” Field added.

— Lori Ann LaRocco of CNBC contributed to this report.

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