Russia’s invasion of Ukraine is driving up air cargo costs

CNBC ^ | Fri, Mar 4 2022 | Leslie Joseph

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The cost of transporting goods by air has surged since Russia’s invasion of Ukraine last week, just as consumers are already grappling with the fastest pace of inflation in nearly 40 years.

Carriers, including KLM Royal Dutch Airlines and United Parcel Service, are filling their planes with pricier fuel for longer Asia routes to avoid Russia due to airspace closures. Jet fuel prices in the United States this week hit the highest in more than a decade.

The U.S. on Tuesday joined Canada and much of Europe in barring Russian aircraft from its airspace. In January, more than 2,500 flights that departed the U.S. used Russian airspace, while 493 flights from Russia used U.S. airspace, according to aviation data firm Cirium.

“With the uncertainty of Russian airspace restrictions to civilian aircraft, UPS decided on Mar. 1 to avoid use of Russian airspace for our Northern Pacific (NOPAC) operations until further notice,” UPS’ pilots union told aviators on Wednesday.

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Air cargo rates from China to Europe jumped 80% this week from last to $11.36 a kilogram, the highest since October, according to freight booking and data platform Freightos.

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U.S. benchmark jet fuel was going for $3.32 a gallon on Wednesday, the highest in just over a decade that followed the biggest two-day jump since Hurricane Ike hit Texas in September 2008, said Matthew Kohlman, associate director for refined products pricing, S&P Global Commodity Insights.

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Freightos said ocean shipping rates could also continue to rise as a result of the war in Ukraine. The Asia-to-U.S. West Coast price on Thursday was $16,155 per 40-foot equivalent container, more than triple the rate from the same time last year.

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