Reports claim that airlines are charging between US $ 3.20 and US $ 3.30 per kilogramme from the Hazrat Shahjalal International Airport to any airport in the European Union — 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 — without trucking facility. Trucking facility is a facility provided by airlines to carry goods from the airports of destinations to the buyers.
While the rates are US $ 3.55 to and US $ 3.65 per kilogramme with trucking facility but in March last year, the rates were around US $ 1.70 to US $ 1.80 while suppliers who ship goods to North American markets have not been spared either as airlines are realising US $ 5.90 to US $ 6.20 per kilogramme of goods from the Hazrat Shahjalal International Airport to airports in the USA, which is reportedly way higher than that of US $ 2.80 to US $ 2.85 charged in March.
There seem to be no end to worries of Bangladesh garment exporters when it comes to freight charges!
After the significant increase in shipping charges that followed after the major shipping lines reportedly decided to levy emergency cost recovery surcharges (ECRS) on outbound and inbound shipments to Bangladesh — a move which comes amid acute congestion at the hubs, linked to pandemic-related reduced numbers of port workers — straining the already stretched garment makers; now they have a new issue to deal with – that of air cargo charges, which have almost doubled in the last few months.
According to media reports, apparel exporters have been dealt a fresh blow by a doubling of air shipment rates for cargoes flying out of Dhaka’s Hazrat Shahjalal International Airport, as airlines raised the rates subsequent to the growing demand for air shipment amid improving global outlook and squeezing of carrying capacity from the Hazrat Shahjalal International Airport by 60 per cent on the back of suspension of cargo and passenger flights by some international flight operators.
Before we get into the figures in terms of increase in air freight, let us first get a grasp on what is the volume of air freight from the Hazrat Shahjalal International Airport.
If media reports are something to go by, currently, 400 tonnes of cargos — the volume was 900 tonnes before the COVID-19 pandemic hit the country in March 2020 — are transported through air from the airport every day, with garment accounting for 80 per cent even as according to the apex garment makers’ body in Bangladesh, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), in 2020, the air shipment of garment items declined 33.68 per cent to 134,806 tonnes from 203,256 tonnes in 2019.
It may be mentioned here that around 40 local and international airliners used to carry the goods earlier but nearly 50 per cent of them have reportedly either suspended carrying goods or stopped flights from the Hazrat Shahjalal International Airport as they deem them unprofitable since they do not get enough goods to carry, so claim recent reports.
Given the recent turn of events, apparel exporters are faced with a real big challenge even as many international airlines are reportedly also imposing higher freight rate to make up for the losses suffered between March and September 2020, because of the suspension of international flights and hiring staff at higher costs to load and unload goods at the airports.
The higher shipment of masks, personal protective equipment (PPE), COVID-19 related gowns, bedsheets and isolation bed sheets coupled with the garment shipment have fuelled the demand for air shipment from the Hazrat Shahjalal International Airport lately.
“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,” maintained the Managing Director of Kappa Fashions, Ahmed F Rahman, speaking to the media, adding, “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 on the excuse of higher port operational costs, said Ahmed adding that currently, the shipment to carry a 40-foot equivalent unit through seas is being charged US $ 6,000 from US $ 2,000 a month ago.
It may be mentioned here that it all began after feeder vessel operators to and from Chittagong Port and the hubs of Colombo, Singapore and Port Klang reportedly decided to levy emergency cost recovery surcharges (ECRS) on outbound and inbound shipments to Bangladesh as feeder vessels calling at Colombo reportedly had to wait for up to five days and, in Singapore, more than two days to get a berth, which created uncertainty for feeder containers to get onboard their mother vessels, which prompted feeder vessel operators to announce an ECRS to recover extra costs due to the congestion.
“Any additional charge ultimately creates pressure on shippers or consignees affecting trade,” said an official of a main line operator in Dhaka while Chairman of the Bangladesh Shipping Agents Association, Ahsanul Hoq Chowdhury on his part maintained that the congestion at several ports was causing a pile-up of containers, and this has led to additional operating costs for vessels, forcing shipping lines to increase the freight rates even as 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 US $ 1,600 for carrying a twenty-foot equivalent unit (TEU) of goods; now they charge US $ 4,700 to carry goods to Europe and in case of 40–foot equivalent unit, the charge rose to US $ 7,800 from US $ 2,600 to US $ 3,000 and the charge goes higher when other costs are added, he said.
Since many international airlines have suspended carrying cargoes from the Hazrat Shahjalal International Airport, passenger flights have been turned into cargo flights in some cases, reportedly claimed an executive of an international cargo airliner working at the Hazrat Shahjalal International Airport, who added that air shipment of garment items has increased as buyers want quick delivery.
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, said some industry insiders.
“The air freight business has not restored yet. The airfare almost doubled compared to the pre-pandemic period,” underlined the President of the Bangladesh Freight Forwarders Association, Kabir Ahmed even as 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.
Since there is no option to carry cargoes in passenger flights, goods are flown out through cargo freighters and the freighter rate is always higher than the passenger flight, Kabir Ahmed explained while Syed Ershad Ahmed on his part observed that the gross value-addition for the global logistics industry dipped by 6.1 per cent even as 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 amidst many expressing apprehensions that 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 kilogram rose by 100 per cent to 200 per cent compared to the pre-COVID-19 period.
It thus goes without saying that the beleaguered garment exporters, who are already at their wits’ ends dealing with multiple of challenges already, have now a new issue to deal with, which undoubtedly does not augur well for the export-oriented apparel sector of Bangladesh, which is considered the lifeline of the country’s economy.
