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Supply chains: Air freight increasing amid ongoing shipping issues, Seko Logistics chief growth officer explains

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Seko Logistics Chief Growth Officer Brian Bourke joins Yahoo Finance Live to discuss increased volatility and global supply chain disruptions within the business of freight forwarding and the outlook for charter flight growth amid looming geopolitical tensions.

Video Transcript

KARINA MITCHELL: In a world where one-day delivery is considered on time, getting those goods into stores is becoming more expensive to do by the month, suggesting shoppers will find little relief from high inflation. For more on this, let's turn to our next guest, Brian Bourke, SEKO Logistics chief growth officer, along with our very own Yahoo Finance's Dani Romero. Dani, take it away.

DANI ROMERO: Thanks so much. And thank you so much, Brian, for joining us. Let's dive in to supply chain. So SEKO Logistics is a freight forwarding company. What are the advantages for businesses to work with a freight forwarder?

BRIAN BOURKE: Yeah, thanks again for having me. The advantages of working with the freight forwarder is all about capacity. We provide optionality for shippers that are looking to both import and export products all around the world. Optionality has been so critical during these past two years due to disruption in the global supply chain. We've seen increased volatility, uncertainty, complexity, and ambiguity, which makes it very difficult to navigate which ports to send your product through, when to switch from ocean to air, when to expedite. It's been a challenge. What freight forwarders do is we provide optionality and choices that can create the best solutions for keeping cargo moving around the world.

DANI ROMERO: And to that point, Brian, we've heard from businesses small and large that they continue to deal with the supply chain disruptions. Will this year be, once again, the year of air cargo freights-- flights, I'm sorry. Charter flights.

BRIAN BOURKE: Absolutely, 2022 is going to be a continuation, unfortunately, of much of the congestion and supply chain issues that we saw last year. So airfreight and air cargo are going to remain to be very important levers for companies looking to keep their products moving, to keep the products on the shelves, or ready to order in warehouses for e-commerce. This is going to be a critical, critical year, where we're also seeing the rise in an increased number of air charters.

For example, at SEKO Logistics, we did about 70 charters in the year 2020. And the year 2021, we increased that to almost 400. And we expect to do 20% to 30% more this year, finding capacity for our clients. So these range anywhere between e-commerce, pharmaceuticals, defense, anything even including flowers for Valentine's Day. These are the products that are moving the airfreight.

And a lot of times, especially with consumer electronics, we're seeing that ocean is not really an option with the delays, not just at the ports on the West Coast, but now we're seeing congestion increase in the ports on the East Coast. And so typically this is a time of a lull period where cargo-- not as much cargo supposed to be moving internationally, especially on the import side. But that's not providing much relief for the congestion that we're seeing. So air cargo remains an important tool or weapon for companies that are looking to keep product moving in their supply chain.

DANI ROMERO: Yeah, and Brian, I wanted to shift gears a little bit in regards to the-- with the Russian-Ukraine tensions looming. What will be the impacts on air cargo demand, capacity, and rates?

BRIAN BOURKE: Well, they won't be good because anytime you have geopolitical tension, it does create a lot of-- it actually takes up a lot of demand for a lot of these air charters that exist, so when you're talking about defense goods that can be moved around the world.

But the impacts that it has to the prices for oil and gas, that also has a negative impact on rates because you do see a lot of more activity from the oil and gas sector as well that would be taking advantage of elevated rate levels to continue and expand their exploration of additional wells and drilling capacity throughout their network. So it has a double whammy effect on really increasing rates throughout the world. And with that, there's a number of other geopolitical implications and labor implications that we're looking at here around the world that could have negative impacts.

The one green shoot that we're seeing, obviously, is the sharp reduction in cases around the world, especially in the United States. So we're a little bit more optimistic on the return of passenger capacity on the international side, starting in the spring of this year. Unfortunately, will not be anywhere near enough to keep up with the increased demand for air cargo, but that is one green shoot that we see as a positive sign that eventually, we will return to normal.

But that normal of the same amount of capacity of belly space on passenger flights, as we're seeing cargo flights, meaning pre-pandemic levels, we may not see that until the year 2024 or beyond. So it may be a drop in the bucket, but it's at least a green shoot that we're seeing that may alleviate some of the pressure. But there's enough issues out there in the global supply chains, from congestion to geopolitical issues to potential labor action that may negate any of that additional capacity that we may be seeing introduced in April and May of this year.

DANI ROMERO: And Brian, really quick, just to wrap this up, why is it that businesses like Amazon are looking to ramp up its charter operations?

BRIAN BOURKE: Well, they're certainly not the only ones. There's a number of companies in the fashion apparel space and the pharmaceutical space that have looked to control their own destiny as much as possible, controlling their own capacity. It's really all about capacity. When the pandemic started, we have to remember that 60% of global air cargo flew on the belly of passenger aircraft, especially on the international side.

So when the pandemic started, and 95% of all international flights were simply grounded-- and this was not just for a day or a week or months. This was well over a year that we saw reduced capacity of significant levels and proportions. It had an immediate impact on companies finding available capacity because after March of 2020, when a lot of these flights were grounded, by the summer of 2020, we started to see that increase in demand, especially for e-commerce.

And as we all know, that increase in demand has not let up at all. We may not see the year over year growth levels that we saw, but they're certainly continuing to grow. And so companies in any space that are looking to find dedicated, secure capacity, whether that's through themselves chartering their own aircraft or whether they're working through a freight forwarder, we're going to see more of that this year because it's all about capacity. And capacity challenges are going to remain in the year 2022.

DANI ROMERO: And thank you so much, Brian, for all of that information. I'm going to toss it back to Karina.

KARINA MITCHELL: OK, great conversation, guys. Thank you so much, Brian Bourke, SEKO Logistics chief growth officer, along with our very own Dani Romero.