5.4 – Air Freight

Air Freight

90% of shipments are by sea freight due to it’s lower cost and reliability.

However, for very small quantities or urgent goods, air freight may be the best shipping option for you.

For example, China-US freight shipping time usually is 20-30 days by ocean and only three days by air cargo.

When should I ship by air?

There are three considerations you should have in mind to determine when you should ship by air:

  • Speed – Think five days from a factory in China to a warehouse in the United States. Airplanes are about 30 times faster than ocean liners. In general numbers, air freight is usually 5X the price of trucking and 16X the price of ocean freight, according to the World Bank.
  • Reliability – People are pickier than packages, which has encouraged the freight market to develop more dependable freight cargo services, and combined with better air freight data movement, shipping by air provides better air freight tracking and the knowledge that your goods will get to the right place at the right time.
  • Protection – Based on data goods are more likely to be damaged in ocean freight shipping than air shipping.

What are the costs of air shipping?

When it comes to air freight shipping, weight and volume are key factors. Air carriers will charge by either volumetric weight (also known as dimensional weight) or actual weight, depending on which is more expensive.

The air shipping global rule of thumb is to calculate the volumetric weight is to multiply the item’s volume in cubic meters by 167. The volume is for a package that is W: 40cm, H: 40cm L:40 would have a .064 (the product of all sides divided by one million). Multiple by 167, and you get a volumetric weight of 10.67 kg.

If the volumetric weight exceeds the actual weight of the product, the volumetric weight becomes the chargeable weight. For light air shipments, use this chargeable weight calculator to work out whether your shipment will be charged by actual weight or dimensional weight.

What goods are generally shipped via air freight?

Since air cargo rates are prohibitively expensive, it’s usually limited to smaller, high-value goods or time-sensitive items, such as:

  • Electronics. Steve Jobs famously purchased the entire available air freight capacity along key Asia-US routes to ship the first iMac prior to the holiday season.
  • Apparel. Seasonal trends in clothing can shift fast. As a result, companies generally need to get clothing from factories to stores as quickly as possible. Again, clothing’s small size and high value make it a great trade-off.
  • Pharmaceuticals. Given their small size and value, medical goods are frequently shipped by air.

Comparison

Air Freight Sea Freight
Type of Cargo Unless special aircraft chartered, there are limited dimension and weight for loading. Apart from the traditional parcel or box freight, sea is also used to transport heavy equipment, cranes, project cargoes, etc.
Time Sensitivity This mode is chosen mostly due to its quick transit time and their usually reliable scheduled arrival and departure times. Benefits may be lower inventory carrying costs and the opportunity to capture market share. A transit time of a month from point to point is quite normal for a sea freight shipment.
Cost Air cost higher mainly due to the capacity available on a plane, the higher fuel consumption and operational costs of a plane. A cargo ship can carry much more at once.
Safety of Cargo Airport regulations are controlled quite strictly, and these regulations include the storage, handling and securing of your cargo. If the cargo inside the container is not packed properly, or LCL, there is a risk of cargo getting damaged.
Accessibility As handled quicker, there may not be congestion at the airports as compared to the long queues at the seaports. Even had, it could be solved in days. Periods of severe congestion in seaports could happen, which brings with it its own problems of additional costs like demurrage and detention.

 

How are base rates determined?

Each freight forwarder operates differently, and likely has a different approach to displaying carrier base rates. As a general starting point, carriers use a shipment’s weight and volume when calculating cost. From here, they will determine rates by choosing among the higher of two options, selecting what is known as chargeable weight.

Actual Weight vs. Volumetric Weight

To determine chargeable weight, carriers look at two options:

  1. Actual weight is just that: how much the item actually weighs, otherwise known as gross weight. 
  2. Volumetric weight (also known as dimensional weight) is an estimated weight calculated by using the item’s length, width, and height. For freight forwarding purposes, volumetric weight is the weight of the package at the minimum density accepted by the carrier.

Calculating this is relatively simple:

Volumetric Weight = Length x Width x Height/Dimensional Factor

Measurements can be made in inches or centimetres, as long as the appropriate dimensional factor is also used.

This approach to determining base air freight rates protects carriers from losing money on moving cargo that has a low density-to-weight ratio.

Additional charges

Many different parties handle your cargo throughout its journey from origin to destination. At any point where cargo changes hands, carriers may require additional preparation, paperwork, time, and fees.

Fuel surcharge (FSC) fees account for fluctuating regional and seasonal fuel costs, one of the top expenses for carriers. Fuel surcharges are dependent on the average fuel price and are typically calculated as a percentage of a shipment’s chargeable weight. Carriers can use their own formulas for assessing, calculating, and charging related fees.

Container freight station (CFS) fees are for cargo that is temporarily stored in facilities when leaving or entering a country. Once proper customs documentation is provided, the cargo is released from the airport CFS warehouse.

Security surcharges cover any additional fees for security measures required at airports. The cost associated with security surcharges applies to the screening and handling processes certain goods must undergo in accordance with the relevant location’s security regulations.

Security-related fees are charged at both the origin and destination, and only apply to air freight rates.

Airline Terminal Handling Fees:

There is a fee for handling the cargo of air shipments. This is commonly referred to as an airline terminal fee.

When applicable, the airline terminal fee could appear as both an origin charge and a destination charge on your quote or invoice. However, airlines do differ and it may instead be included in the air freight fee, rather than listed as a separate fee.

Door-to-door costs include the above, and:

Customs clearance fees are the routine charges paid to customs brokers for the entry of goods into a country. If customs examine your cargo, there may be additional fees.

Associated trucking fees occur when cargo is picked up from an airport or warehouse and transported to the next point in the cargo’s journey. These are standard fees paid to a trucking company to cover factors such as fuel and the driver’s wages.

Cargo insurance is typically arranged through a shipper’s freight forwarder, and it covers the cargo included in a given shipment. Because liability falls on the shipper, and not on the carrier or forwarder, cargo insurance is a must-have.