Help Supply Chains by Swearing Off Travel Bans

Y esterday, DHL released its Airfreight State of the Industry report, a summary of what happened in the air-freight market this year and what might happen in the immediate future.

The most important takeaway concerns capacity.

A majority of air freight travels on passenger planes, not cargo planes. At the start of the pandemic, 69 percent of air freight was carried by passenger flights, compared with 31 percent carried by cargo flights. By this year, according to DHL’s report, the split had been reduced, to 60 percent on passenger flights and 40 percent on cargo flights — and the reduction is due almost completely to a decrease in passenger flights. (Freighter capacity has remained more or less the same throughout the pandemic.)

DHL’s report says that air-freight capacity worldwide is down 21 percent from November 2019, right before the pandemic hit, while passenger-plane cargo capacity has declined 31 percent and demand for air freight has increased about 5 percent over the same period. And a 5 percent increase in demand combined with a 21 percent decrease in supply has naturally caused prices to increase: Globally, air-freight rates are up 118 percent over the 2019 baseline, the report says.

That’s a huge increase, but it’s nothing compared to ocean-freight rates, some of which are up 1,000 percent over pre-pandemic norms. So while the absolute price of air freight has increased significantly, the price of air freight relative to the price of ocean freight has declined, increasing the demand for air freight among businesses in a position to choose between the two.

Cargo terminals at airports have not seen the epic delays experienced at, for instance, the ports of Los Angeles and Long Beach. If the problem with ocean freight is that there are too many ships for our ports to handle, the problem with air freight is that there aren’t enough planes to meet shippers’ needs, because Covid-related travel bans have slowed the recovery of the international passenger-travel market.

All of which is to say that if we want air-freight rates to come back down, travel bans need to go. On December 8, after the Omicron variant was discovered in South Africa, the International Air Transport Association (IATA) — the primary international trade group for airlines — put out a statement urging countries not to adopt travel bans. Of course, there’s self-interest at play here: The IATA’s members lose money when countries adopt travel bans. But the group’s reasoning is still worth considering.

“The goal is to move away from the uncoordinated, evidence absent, risk-unassessed mess that travelers face,” said IATA director general Willie Walsh in the statement:

Once a measure is put in place, it is very challenging to get governments to consider reviewing it, let alone removing it, even when there is plenty of evidence pointing in that direction. That is why is it essential that governments commit to a review period when any new measure is introduced. If there is an over-reaction—as we believe is the case with Omicron—we must have a way to limit the damage and get back on the right track. And even in more normal circumstances, we must recognize that our understanding of the disease can grow exponentially even in a short period of time. Whatever measures are in place need to be constantly justified against the latest and most accurate scientific knowledge.

We know that travel bans did not prevent the spread of the Omicron variant, which has now been detected in most countries around the world. We also know that other variants will appear in the future. But implementing more bans in response won’t achieve the desired effect; it will only further snarl the market for air travel, contributing to our supply-chain woes by reducing air-freight capacity.

Part of this problem is outside of America’s control. Two of the busiest cargo airports in the world are in Hong Kong and Shanghai, which are both subject to China’s draconian Covid policies, meaning they can be completely shut down due to one confirmed case. The DHL report notes that Chinese airports are experiencing manpower shortages that are causing delays, and airlines with large Hong Kong operations, such as Cathay Pacific, are canceling many flights.

Qatar Airways has a significant stake in the ownership of Cathay Pacific, and its CEO, Akbar Al Baker, told the South China Morning Post on December 18 that Hong Kong’s Covid policies are “killing” the Hong Kong-based airline. “You can’t just shut the aviation industry [down] because somebody got infected coming in [on] someone’s aeroplane,” he said.

According to the Post, Hong Kong has in place a 21-day quarantine for residents returning from abroad and a ban on travelers from 92 countries, including its neighbors in Asia, the U.S., and the U.K. Again, those restrictions did not prevent Covid from reaching Hong Kong, but they continue to cause severe industrial problems for a vital hub in the global air-freight network.

Fortunately, the U.S. is a much bigger player in the global air-freight market than it is in the ocean-freight market, so American policies can make a bigger difference. With that in mind, the U.S. should swear off implementing any travel bans in response to future variants, which will provide some stability to the international air-travel sector and allow capacity to expand and prices to come down.

If we want to prevent Covid-related illness and death, vaccination is our best option. Travel bans were an understandable initial response to the pandemic, but time has shown that they don’t achieve the desired effect, and the progress in medicine since the start of the pandemic has made them doubly unnecessary. If President Biden wants to help ease America’s supply-chain struggles, he should provide some certainty to the air-freight sector by eliminating the current bans and promising not to implement any new ones in the future.