21 ms·

Demand for medical equipment is making air cargo fees ‘crazy’

174 points by hhs 7y ago

angel_j 7y ago
What about all those grounded commercial flights?
- roywiggins 7y ago
  Yup, commercial airlines have started running cargo flights: https://www.forbes.com/sites/jamesasquith/2020/03/28/commercial-airlines-are-now-operating-cargo-only-flights/#772ff98b6f0e https://www.forbes.com/sites/jamesasquith/2020/03/28/commerc...
stateofnounion 7y ago
This article's title seems to imply global shipping and logistics infrastructure can't keep up with the incremental demand for PPE, but doesn't provide any further arguments or evidence to establish that.
- mokash 7y ago
  It also goes on to say: "An unprecedented collapse in passenger demand is prompting airlines to use their fleets to transport more cargo, including medicines" shouldn't this, if anything, bring down the cost of chatering a plane?
  - ldoughty 7y ago
    I imagine the cost of using passenger planes as cargo planes is at least 4x more than dedicated cargo plane. Probably at least 70% less storage capacity. Probably can only handle smaller packages, probably not as easy to load/unload, and weight distribution without passengers might even make it so the full (available) space cannot be used. However, it probably has similar fuel requirements (slightly reduced from less load), and still requires a pilot to transport a much less valuable trip.. making the fixed costs still very high Just my simple guesses. I'm no expert.
    - anarazel 7y ago
      Most passenger airplanes also takes cargo containers (of a size specific to a group of plane types) below the passengers. Not that many of course, compared to a cargo plane. E.g. even a A321 takes 10 LD3-45 containers. Depending on the density of what's being transported the lower volume might or might not matter. E.g. the a321, according to Wikipedia, has a max payload 25t (I assume with reduced range). That's not that hard to fill with 10 containers of 3.7m3 each. I'd assume that one significant reason the flights are that cheap is that they have contractual cargo obligations requiring them to fly some flights anyway. A handful of additional passengers won't reduce the payload capacity meaningfully, but will still bring in more than the increased fuel/service costs.
Frost1x 7y ago
I'm a bit confused. Shouldn't chartered flights go down in cost now that there are lots of airlines with planes, costs, competition, and virtually no passenger demand? I realize passenger and cargo planes are different, but probably don't understand just how different in terms of effort/cost of adapting passenger planes to haul cargo primarily vs passengers and what the typical revenue is for a given flight (total revenue for passenger tickets). Even if it makes any economical sense to repurpose existing passenger jets for supplies unless of in dire need (which this may be the case for).
- toomuchtodo 7y ago
  There is only so much air cargo capacity, and passenger aircraft cannot be rapidly converted into that capacity. The cost is excessive to convert passenger aircraft to cargo service.
  - Frost1x 7y ago
    Yea that's my assumption. Don't know what it takes to pull out seating, overheard, flooring?, etc. and what sort of effort that takes time wise. I assume it's not simple and takes time.
    - throwaway_pdp09 7y ago
      For smallish cargoes I don't see why you'd need to rip out anything. Place it on the floorspace in front of seats, place it on the seats. Getting it in an out is a matter of people lifting and carrying. (am not an air cargo freight expert if you haden't realised already, so be gentle)
      - ThrowawayR2 7y ago
        I'd imagine that if these parcels are not strapped down and the load shifts in flight because of severe turbulence, that could shift the center of gravity enough to result in a chain of events leading to a crash.
mjthrowaway1 7y ago
There’sa lot of demand and also reduced supply from what I understand.
stevespang 7y ago
The airlines will screw you even in a disaster, DOJ should go after them now.
arketyp 7y ago
Below triple the price? Relatively non-crazy.
chadlavi 7y ago
So, price gouging? Pretty shameful in a time like this (unless shipments of medical supplies are getting the normal rate from a few weeks ago).
- chadlavi 7y ago
  Sorry downvoters, is it not shameful to price gouge in a global pandemic?
  - JumpCrisscross 7y ago
    > is it not shameful to price gouge in a global pandemic? Rising prices do not singularly mean price gouging. As others have mentioned, the global freight market is a relatively-efficient one. A single country regulating prices would only ensure that country reduces its own access. If a global consortium capped cargo rates, the quantity supplied would diminish. For example, it's more expensive to run cargo on passenger planes than on dedicated cargo planes. If you cap prices pre-crisis, those passenger planes would never run cargo profitably. So total capacity would be reduced. Freight rates rising are doing what they're supposed to. They're increasing the quantity supplied while rationing availability to the most-urgent users.
    - chadlavi 7y ago
      Sounds like they're rationing availability to the most cash liquid users. This is nothing more than price hikes to profit from a tragedy and it's shameful.
      - JumpCrisscross 7y ago
        > This is nothing more than price hikes to profit from a tragedy and it's shameful If it's shameful to move more freight in a crisis than less, let them be shameful. This sort of armchair moralizing, without the consideration of unintended consequences of one's proposals, if enacted into policy, can cost lives.
eliaspro 7y ago
Well, now finally all those military cargo planes could be put to good use...
- jdjriekfkf 7y ago
  They are. Also, apparently all NATO countries are allowed to charter a certain number of NATO flights per year, some countries used this to transport medical supplies.
thedance 7y ago
Imagine if there was a country with an "Air Mobility Command" having 50000 airmen and fifty gigantic aircraft (among hundreds of smaller aircraft), each of which can carry 40 pallets. Wouldn't that seem useful at this moment?
- Frost1x 7y ago
  They'd then be competing against the airline industry when they're on the ground and some politicians may lose their some of their super PACs. Imagine how upset all the huge airline investors and corporate heads would be, never mind the pandemic medical urgency that should temporarily supercede these sort of concerns.
  - gwright 7y ago
    The market solution is to just let private cargo companies rent the government's cargo capacity. Even better would be to auction the capacity off to get the best price. Of course while the left hand is doing that, the right hand can be ordering vast amounts of medical supplies at market rates for delivery as needed.
- jhayward 7y ago
  Would you care to guess what the cost of moving goods via that resource would be? You may be astounded. It's still cheaper and more effective to use commercial, even if the price has gone up.
  - thedance 7y ago
    I'm sure it's amazing but you only get to count the marginal cost of actually moving the material because we already pay all the other costs of the AMC regardless of whether they do any useful service or not.
    - jsymolon 7y ago
      Don't forget to add in the additional flight hours on equipment as an additional cost vs sitting.
robecommerce 7y ago
According to the Loadstar [1], this may be true for medical supplies, but demand for airfreight on a macro-level into Europe/US is dropping - a complete reversal from 3 weeks ago. The bullwhip effect [2] in action? "The Loadstar warns air freight demand is expected to plummet as consumers in Europe and the US are forced to stop buying by shops closing. The automotive industry has already stopped requesting components as plants have closed; retail has cancelled significant volumes of orders - “Shopping is just not a priority,” said one forwarder. “The only real air freight demand now is medical equipment and some urgent products. “Just-in-time may be changed for ever. “There is also no cashflow.” He said air freight demand was now “the absolute reverse of two to three weeks ago; the dynamic has changed”. Another forwarder noted that while demand was, perhaps 15% of what it was three or four weeks ago, supply is at about 10%. “So there is still high demand in a relative sense.” [3] 1 https://theloadstar.com/change-of-dynamic-air-freight-demand-now-the-reverse-of-three-weeks-ago/ https://theloadstar.com/change-of-dynamic-air-freight-demand... 2 https://en.wikipedia.org/wiki/Bullwhip_effect https://en.wikipedia.org/wiki/Bullwhip_effect 3 via reddit r/SupplyChain daily update -- highly recommended: https://www.reddit.com/r/supplychain/comments/fqlh9a/covid19_update_saturday_28th_march/ https://www.reddit.com/r/supplychain/comments/fqlh9a/covid19...
Skunkleton 7y ago
Does that mean there is a market where if I paid enough, it would bump a cargo flight of medical supplies? That is a bit disturbing IMO.
- erikpukinskis 7y ago
  The COVID-19 crisis definitely falls in the category of “events people are prepared to exploit financially”. So yes, these markets are running normally and cash is still king. If you could’ve bid higher than California you probably could’ve gotten all those masks. That’s the point of these global crises. They create a new trade regime to play in, when the big finance entities feel like they’ve wrung all the money they can out of the old one. What was going to happen to Boeing, Ford this year? Nothing good. They had squeezed out the last cycle and we’re in danger of drying out. Now what’s going to happen? Bailouts and cover for layoffs. Comparatively good outcome for shareholders I bet. And amazing outcome for leadership who won’t be blamed for the hard times, but otherwise would have been left holding the bag. I’m not saying Boeing released COVID-19, or steadied the government’s (do nothing) hand during the response. But someone with deep pockets for sure is doing the latter.
  - KarlKemp 7y ago
    > I’m not saying Boeing released COVID-19 That’s pretty much what you said before, though. I. e. „That’s the point of these global crises.“ Either it’s a conspiracy or not, make up your mind.
- gruez 7y ago
  Welcome to the free market.
- arpowers 7y ago
  Although it's disturbing, economics shows that this is the best way to optimize a complex system. People with more needs are willing to pay more, generally. There are caveats, but these are generally built into economics models. Best to let the experts in government decide on how capitalism should play out. A lot of arm-chair socialists around here demonstrating their lack of education.
cs702 7y ago
The Law of Supply and Demand, as always and as ever, is working exactly as expected.[a] And that's not necessarily a good thing right now. It sure doesn't feel "right" :-( -- [a] https://www.investopedia.com/terms/l/law-of-supply-demand.asp https://www.investopedia.com/terms/l/law-of-supply-demand.as...
omgJustTest 7y ago
The image from the article, is from a UA flight (passenger craft). I would imagine that the airlines come out of this shining through. They just got 'grants' to pay their employees not to show up to work, they are in discussion with the US DOT to merge low volume flights across competing airlines and they are picking up cargo flights. The cost of jet fuel is likely just icing on the cake. There will be reorg costs, but they will be offset by not having to pay workers for 2-3months and the extra work to support the supply problems. Unidirectional flights problem will get solved through [1] reconfiguration of flight hubs and [2] aggregation of passengers across airlines. These will shore up enough margin to make this sustaining or profitable. Airlines are logisticians!
leoc 7y ago
Ireland has started sending its flag-carrier passenger airline to China for PPE. https://www.rte.ie/news/2020/0329/1127076-ppe-equipment-china/ https://www.rte.ie/news/2020/0329/1127076-ppe-equipment-chin...
- imeron 7y ago
  Same in Hungary with Wizz Air.
mhb 7y ago
Fly from Florida to California for $13: https://news.ycombinator.com/item?id=22731785 https://news.ycombinator.com/item?id=22731785
binarysolo 7y ago
For people wondering why we can't just convert spare passenger capacity to air cargo easily: I do supply chain: everything is handled in pallets. If we filled all passneger space up with individual small boxes that's a lot of extra "touches/unit" which equals labor cost and quickly drives price of delivery up. Instead of 1. load pallet at warehouse -> 2. transport to airport -> 3. plane flies pallet -> 4. unload pallet -> 5. move to warehouse -> 6. unpack/distribute, we have: 1. load pallet -> 2. transport to airport -> 3. unpack pallet -> 4. load into system that's compatible with passenger seat constraints -> 5. plane flies stuff -> 6. repack individual boxes into pallet, 7. move to warehouse -> 8. unpack/distribute Right now pallets are the "unified language" of shipping; so once you break things down the units are super variable and not meant or resistant to non-pallet circumstances.
hef19898 7y ago
Last week I got rates of roughly 0.06 € pet mask from Shanghai to Frankfurt. Equals somewhere just shy of 8 € per kg, all handling charges included. Rates were valid until last Sunday, bo idea where they are now. But even double that would still be on the cheap side of things compared to the price increase for masks. Offer doubled within three days last week, and the 4 € per mask from Saturday aren't valid anymore. That the German government basically put out calls for offers under conditions that don't involve price negotiation certainly didn't help. Good thing, so, as long as money isn't the driving factor, air cargo capacity is available. What hurt a lot as well, was the shutdown of passenger flights. These covered a considerable share of air freight.
fithisux 7y ago
Crisis is opportunity. Welcome to an antisocial brave new world where death is profitable. BTW we have 20% off in coffins.

174 points by hhs 7y ago

angel_j 7y ago

What about all those grounded commercial flights?

roywiggins 7y ago
Yup, commercial airlines have started running cargo flights: https://www.forbes.com/sites/jamesasquith/2020/03/28/commercial-airlines-are-now-operating-cargo-only-flights/#772ff98b6f0e https://www.forbes.com/sites/jamesasquith/2020/03/28/commerc...

stateofnounion 7y ago

This article's title seems to imply global shipping and logistics infrastructure can't keep up with the incremental demand for PPE, but doesn't provide any further arguments or evidence to establish that.

mokash 7y ago
It also goes on to say: "An unprecedented collapse in passenger demand is prompting airlines to use their fleets to transport more cargo, including medicines" shouldn't this, if anything, bring down the cost of chatering a plane?
- ldoughty 7y ago
  I imagine the cost of using passenger planes as cargo planes is at least 4x more than dedicated cargo plane. Probably at least 70% less storage capacity. Probably can only handle smaller packages, probably not as easy to load/unload, and weight distribution without passengers might even make it so the full (available) space cannot be used. However, it probably has similar fuel requirements (slightly reduced from less load), and still requires a pilot to transport a much less valuable trip.. making the fixed costs still very high Just my simple guesses. I'm no expert.
  - anarazel 7y ago
    Most passenger airplanes also takes cargo containers (of a size specific to a group of plane types) below the passengers. Not that many of course, compared to a cargo plane. E.g. even a A321 takes 10 LD3-45 containers. Depending on the density of what's being transported the lower volume might or might not matter. E.g. the a321, according to Wikipedia, has a max payload 25t (I assume with reduced range). That's not that hard to fill with 10 containers of 3.7m3 each. I'd assume that one significant reason the flights are that cheap is that they have contractual cargo obligations requiring them to fly some flights anyway. A handful of additional passengers won't reduce the payload capacity meaningfully, but will still bring in more than the increased fuel/service costs.

Frost1x 7y ago

I'm a bit confused. Shouldn't chartered flights go down in cost now that there are lots of airlines with planes, costs, competition, and virtually no passenger demand? I realize passenger and cargo planes are different, but probably don't understand just how different in terms of effort/cost of adapting passenger planes to haul cargo primarily vs passengers and what the typical revenue is for a given flight (total revenue for passenger tickets). Even if it makes any economical sense to repurpose existing passenger jets for supplies unless of in dire need (which this may be the case for).

toomuchtodo 7y ago
There is only so much air cargo capacity, and passenger aircraft cannot be rapidly converted into that capacity. The cost is excessive to convert passenger aircraft to cargo service.
- Frost1x 7y ago
  Yea that's my assumption. Don't know what it takes to pull out seating, overheard, flooring?, etc. and what sort of effort that takes time wise. I assume it's not simple and takes time.
  - throwaway_pdp09 7y ago
    For smallish cargoes I don't see why you'd need to rip out anything. Place it on the floorspace in front of seats, place it on the seats. Getting it in an out is a matter of people lifting and carrying. (am not an air cargo freight expert if you haden't realised already, so be gentle)
    - ThrowawayR2 7y ago
      I'd imagine that if these parcels are not strapped down and the load shifts in flight because of severe turbulence, that could shift the center of gravity enough to result in a chain of events leading to a crash.

mjthrowaway1 7y ago

There’sa lot of demand and also reduced supply from what I understand.

stevespang 7y ago

The airlines will screw you even in a disaster, DOJ should go after them now.

arketyp 7y ago

Below triple the price? Relatively non-crazy.

chadlavi 7y ago

So, price gouging? Pretty shameful in a time like this (unless shipments of medical supplies are getting the normal rate from a few weeks ago).

chadlavi 7y ago
Sorry downvoters, is it not shameful to price gouge in a global pandemic?
- JumpCrisscross 7y ago
  > is it not shameful to price gouge in a global pandemic? Rising prices do not singularly mean price gouging. As others have mentioned, the global freight market is a relatively-efficient one. A single country regulating prices would only ensure that country reduces its own access. If a global consortium capped cargo rates, the quantity supplied would diminish. For example, it's more expensive to run cargo on passenger planes than on dedicated cargo planes. If you cap prices pre-crisis, those passenger planes would never run cargo profitably. So total capacity would be reduced. Freight rates rising are doing what they're supposed to. They're increasing the quantity supplied while rationing availability to the most-urgent users.
  - chadlavi 7y ago
    Sounds like they're rationing availability to the most cash liquid users. This is nothing more than price hikes to profit from a tragedy and it's shameful.
    - JumpCrisscross 7y ago
      > This is nothing more than price hikes to profit from a tragedy and it's shameful If it's shameful to move more freight in a crisis than less, let them be shameful. This sort of armchair moralizing, without the consideration of unintended consequences of one's proposals, if enacted into policy, can cost lives.

eliaspro 7y ago

Well, now finally all those military cargo planes could be put to good use...

jdjriekfkf 7y ago
They are. Also, apparently all NATO countries are allowed to charter a certain number of NATO flights per year, some countries used this to transport medical supplies.

thedance 7y ago

Imagine if there was a country with an "Air Mobility Command" having 50000 airmen and fifty gigantic aircraft (among hundreds of smaller aircraft), each of which can carry 40 pallets. Wouldn't that seem useful at this moment?

Frost1x 7y ago
They'd then be competing against the airline industry when they're on the ground and some politicians may lose their some of their super PACs. Imagine how upset all the huge airline investors and corporate heads would be, never mind the pandemic medical urgency that should temporarily supercede these sort of concerns.
- gwright 7y ago
  The market solution is to just let private cargo companies rent the government's cargo capacity. Even better would be to auction the capacity off to get the best price. Of course while the left hand is doing that, the right hand can be ordering vast amounts of medical supplies at market rates for delivery as needed.
jhayward 7y ago
Would you care to guess what the cost of moving goods via that resource would be? You may be astounded. It's still cheaper and more effective to use commercial, even if the price has gone up.
- thedance 7y ago
  I'm sure it's amazing but you only get to count the marginal cost of actually moving the material because we already pay all the other costs of the AMC regardless of whether they do any useful service or not.
  - jsymolon 7y ago
    Don't forget to add in the additional flight hours on equipment as an additional cost vs sitting.

robecommerce 7y ago

According to the Loadstar [1], this may be true for medical supplies, but demand for airfreight on a macro-level into Europe/US is dropping - a complete reversal from 3 weeks ago. The bullwhip effect [2] in action? "The Loadstar warns air freight demand is expected to plummet as consumers in Europe and the US are forced to stop buying by shops closing. The automotive industry has already stopped requesting components as plants have closed; retail has cancelled significant volumes of orders - “Shopping is just not a priority,” said one forwarder. “The only real air freight demand now is medical equipment and some urgent products. “Just-in-time may be changed for ever. “There is also no cashflow.” He said air freight demand was now “the absolute reverse of two to three weeks ago; the dynamic has changed”. Another forwarder noted that while demand was, perhaps 15% of what it was three or four weeks ago, supply is at about 10%. “So there is still high demand in a relative sense.” [3] 1 https://theloadstar.com/change-of-dynamic-air-freight-demand-now-the-reverse-of-three-weeks-ago/ https://theloadstar.com/change-of-dynamic-air-freight-demand... 2 https://en.wikipedia.org/wiki/Bullwhip_effect https://en.wikipedia.org/wiki/Bullwhip_effect 3 via reddit r/SupplyChain daily update -- highly recommended: https://www.reddit.com/r/supplychain/comments/fqlh9a/covid19_update_saturday_28th_march/ https://www.reddit.com/r/supplychain/comments/fqlh9a/covid19...

Skunkleton 7y ago

Does that mean there is a market where if I paid enough, it would bump a cargo flight of medical supplies? That is a bit disturbing IMO.

erikpukinskis 7y ago
The COVID-19 crisis definitely falls in the category of “events people are prepared to exploit financially”. So yes, these markets are running normally and cash is still king. If you could’ve bid higher than California you probably could’ve gotten all those masks. That’s the point of these global crises. They create a new trade regime to play in, when the big finance entities feel like they’ve wrung all the money they can out of the old one. What was going to happen to Boeing, Ford this year? Nothing good. They had squeezed out the last cycle and we’re in danger of drying out. Now what’s going to happen? Bailouts and cover for layoffs. Comparatively good outcome for shareholders I bet. And amazing outcome for leadership who won’t be blamed for the hard times, but otherwise would have been left holding the bag. I’m not saying Boeing released COVID-19, or steadied the government’s (do nothing) hand during the response. But someone with deep pockets for sure is doing the latter.
- KarlKemp 7y ago
  > I’m not saying Boeing released COVID-19 That’s pretty much what you said before, though. I. e. „That’s the point of these global crises.“ Either it’s a conspiracy or not, make up your mind.
gruez 7y ago
Welcome to the free market.
arpowers 7y ago
Although it's disturbing, economics shows that this is the best way to optimize a complex system. People with more needs are willing to pay more, generally. There are caveats, but these are generally built into economics models. Best to let the experts in government decide on how capitalism should play out. A lot of arm-chair socialists around here demonstrating their lack of education.

cs702 7y ago

The Law of Supply and Demand, as always and as ever, is working exactly as expected.[a] And that's not necessarily a good thing right now. It sure doesn't feel "right" :-( -- [a] https://www.investopedia.com/terms/l/law-of-supply-demand.asp https://www.investopedia.com/terms/l/law-of-supply-demand.as...

omgJustTest 7y ago

The image from the article, is from a UA flight (passenger craft). I would imagine that the airlines come out of this shining through. They just got 'grants' to pay their employees not to show up to work, they are in discussion with the US DOT to merge low volume flights across competing airlines and they are picking up cargo flights. The cost of jet fuel is likely just icing on the cake. There will be reorg costs, but they will be offset by not having to pay workers for 2-3months and the extra work to support the supply problems. Unidirectional flights problem will get solved through [1] reconfiguration of flight hubs and [2] aggregation of passengers across airlines. These will shore up enough margin to make this sustaining or profitable. Airlines are logisticians!

leoc 7y ago

Ireland has started sending its flag-carrier passenger airline to China for PPE. https://www.rte.ie/news/2020/0329/1127076-ppe-equipment-china/ https://www.rte.ie/news/2020/0329/1127076-ppe-equipment-chin...

imeron 7y ago
Same in Hungary with Wizz Air.

mhb 7y ago

Fly from Florida to California for $13: https://news.ycombinator.com/item?id=22731785 https://news.ycombinator.com/item?id=22731785

binarysolo 7y ago

For people wondering why we can't just convert spare passenger capacity to air cargo easily: I do supply chain: everything is handled in pallets. If we filled all passneger space up with individual small boxes that's a lot of extra "touches/unit" which equals labor cost and quickly drives price of delivery up. Instead of 1. load pallet at warehouse -> 2. transport to airport -> 3. plane flies pallet -> 4. unload pallet -> 5. move to warehouse -> 6. unpack/distribute, we have: 1. load pallet -> 2. transport to airport -> 3. unpack pallet -> 4. load into system that's compatible with passenger seat constraints -> 5. plane flies stuff -> 6. repack individual boxes into pallet, 7. move to warehouse -> 8. unpack/distribute Right now pallets are the "unified language" of shipping; so once you break things down the units are super variable and not meant or resistant to non-pallet circumstances.

hef19898 7y ago

Last week I got rates of roughly 0.06 € pet mask from Shanghai to Frankfurt. Equals somewhere just shy of 8 € per kg, all handling charges included. Rates were valid until last Sunday, bo idea where they are now. But even double that would still be on the cheap side of things compared to the price increase for masks. Offer doubled within three days last week, and the 4 € per mask from Saturday aren't valid anymore. That the German government basically put out calls for offers under conditions that don't involve price negotiation certainly didn't help. Good thing, so, as long as money isn't the driving factor, air cargo capacity is available. What hurt a lot as well, was the shutdown of passenger flights. These covered a considerable share of air freight.

fithisux 7y ago

Crisis is opportunity. Welcome to an antisocial brave new world where death is profitable. BTW we have 20% off in coffins.