COVID-19 Outbreak at Shanghai Pudong Airport Disrupts Critical Export Shipments

COVID-19 Outbreak at Shanghai Pudong Airport Disrupts Critical Export Shipments

As of August 24, cargo operations at a terminal of Shanghai Pudong International Airport (PVG), the world’s third busiest airport by cargo traffic, remained suspended for a fifth consecutive day following a new COVID-19 outbreak among the workforce. The outbreak took place at ground handling agent Shanghai International Airport Services (SIAS), which handles operations for major cargo carriers including Air China, Qatar Airways, and Cathay Pacific, with significant delays and backlog expected over the coming days as airport authorities implemented sanitation protocols for hundreds of employees. The closure at PVG has already led Japanese car maker Mazda to suspend operations at its plants in Hiroshima and Yamaguchi due to disrupted supplies of in-vehicle components using semiconductors.

Health authorities had detected at least five cases among cargo workers at the airport by August 21, prompting airport authorities to suspend ramp operations that led a number of carriers to suspend freighter flights and cargo-only passenger flights until further notice. PVG remains open to passenger flights with a limited workforce; however, the growing backlog of air cargo shipments and increasingly limited air cargo capacity has prompted multiple freight forwarders to stop accepting bookings bound for PVG and warn of delays for export shipments. Customers seeking to import or export out of China should anticipate significant delays due to the outbreak as shipment backlogs will build and diversions to other airports will add to transit times.

Authorities’ COVID-19 protocols cause staff shortages

Officials in Shanghai have tested over 80,000 people in response to the new infections and quarantined several hundred people believed to be close contacts of the infected airport workers at SIAS. The ground handler subsequently suspended operations due to workers being tested or quarantined. The infected employees had no recent travel history and officials indicated that the source of the outbreak was likely imported material and neglect of personal protection. At least two of the infected workers had received a vaccine.

Outbreak exacerbates backlog of air cargo shipments

While delays have been reported at several airports across China – particularly in Beijing, Shanghai, and Guangzhou – as new quarantine rules have come into effect under China’s zero-tolerance policy towards COVID-19 outbreaks in recent weeks (link to previous article: Everstream Analytics Special Report – COVID-19 Delta Variant Outbreak China), the new outbreak at PVG will likely add to the backlog of air cargo shipments that has started to build up since July 2021. In early August, PVG was only operating at 33 percent of capacity as workers were required to follow a policy known as “7+7+7”, i.e. working for one week, quarantining in a hotel for one week, and then quarantining at home for one week.

The suspension of operations at SAIS has resulted in some flights leaving PVG without cargo or being severely delayed due to limited manpower. Cargo handling times have reportedly been 2-3 times longer than average, also partly due to high turnover among staff due to the stricter quarantine rules.

Carriers respond by diverting or cancelling flights to PVG

Of the 22 airlines relying on SIAS services at PVG, 17 were operating out of the PACTL terminal and five were operating in the ETL terminal. The affected airlines will temporarily stop operating cargo-only passenger flights and freighters to PVG until further notice. Qatar Airways, Air Bridge Cargo, and Polar Air Cargo have diverted future shipments to either Guangzhou International Airport (CAN), Zhengzhou International Airport (CGO), and Shenzhen Bao’an International Airport (SZX). China Eastern Airlines and China Southern Airlines have announced cancellations on many of their U.S.-bound flights from PVG. Similarly, Etihad Airlines, Lufthansa Cargo, and American Airlines have all cancelled flights departing from the airport in recent days.

Delays expected to persist as shippers race to find alternative routes

Disruptions to cargo operations are expected to continue in the coming weeks as it remains unknown when flight schedules will normalize at PVG. Ongoing limited air cargo capacity will likely further increase spot rates that have already climbed by more than 6 percent month-over-month.

Customers are advised to use airlines still operating out of PVG, such as Cargolux, Nippon Cargo, ANA, Kalitta Air, and SF Express which are relying on unaffected ground handlers. Using trucking services to alternative gateways such as Hong Kong for onward flights into North America or Europe should also be considered. Freight forwarders have also turned to different forms of transportation such as shipping to Singapore via ocean and then flying from Singapore Changi Airport (SIN) to final destinations, all of which are likely to increase to transit times.

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