In recent weeks, the Bangladesh air cargo sector has faced significant disruptions due to political instability and widespread protests. While the situation is beginning to improve, delays and elevated costs continue to impact shipments from Dhaka and other hub Airport.
Political landscape
The recent turmoil in Bangladesh, culminating in a coup d’état and subsequent government change, has had a profound effect on the country’s logistics and air cargo industry. Protests, initially sparked by dissatisfaction with a job quota system for government positions, quickly escalated into a broader anti-government movement. The unrest led to severe disruptions in freight operations, with reports of cargo taking up to 10 days to be exported to key markets such as the US and Europe.
The unrest reached its peak when the government implemented drastic measures, including internet shutdowns and road blockades, to quell the protests. These actions, while aimed at restoring order, further exacerbated the logistical challenges faced by the air cargo sector.
According to Maruf Khan, the Chief Operating Officer of Bengal Airlift’s freight division, the situation has shown signs of improvement over the past week. Origin processing times at Dhaka Airport have decreased to approximately five days, down from the peak of ten days during the height of the protests. However, congestion remains a significant issue, with around 200 trucks currently waiting at the airport for cargo clearance.
The situation at the seaport has also improved, with cargo waiting times reduced to approximately three and a half days for feeder vessel operations. Despite these improvements, the backlog continues to strain the logistics network, affecting both air and sea freight operations.
Escalation of rates
The disruptions have led to a significant spike in airfreight rates. Data from WorldACD reveals that average spot rates from Dhaka have surged to US$4.87 per kilogram for the week ending August 4, nearly three times higher than the rates recorded a year earlier. Rates for shipments to Europe have reportedly reached around US$6 per kilogram, while those to the US have climbed to US$8.50 per kilogram.
This sharp increase in rates is a direct consequence of the limited flight options and the need for alternative routing options. With flights from Dhaka being restricted, companies have turned to indirect routes, including air-air products via Colombo, Singapore, Malé, and Dubai, as well as road-air routes via Delhi and sea-air routes through Colombo and Dubai.
Supply chain situation
Ongoing disruptions have forced companies to adapt quickly to the challenging environment. The reliance on alternative routing options reflects the flexibility and resilience required to navigate the current logistics landscape. However, these alternatives often come with their own set of challenges, including longer transit times and higher costs.
The backlog at Dhaka Airport and the seaport has created a bottleneck in the supply chain, affecting various industries that rely on timely delivery of goods. The increased airfreight rates are likely to have a ripple effect on global supply chains, potentially leading to higher costs for consumers and businesses worldwide.
The political situation in Bangladesh remains fluid. The resignation and subsequent flight of Prime Minister Sheikh Hasina and the installation of an interim government have brought some stability to the country. However, the long-term impact on the air cargo sector and the broader economy will depend on the new government’s ability to address the underlying issues that led to the unrest.
The interim government’s approach to stabilise the political environment and restore normalcy will be crucial in determining the future trajectory of the air cargo sector. Efforts to resolve the backlog and improve logistical efficiency will be essential for mitigating the impact of the recent disruptions.
