Air, Freight News, Sea

CrowdStrike fallout set to tighten freight rates – updated

[ July 22, 2024   //   Chris Lewis ]

The CrowdStrike failure that led to global IT outages across the world on 19 July could have a longer-term impact on the logistics industry, says an airfreight rates expert.

While news channels reported on 22 July that many of the computers and other devices that had been affected were now back online, Niall van de Wouw, Xeneta Chief Airfreight Officer warned: “Air supply chains are highly complex, so a global disruption of this scale could have a severe impact. Planes and cargo are not where they are supposed to be, and it will take days or even weeks to fully resolve.”

The IT failure, which affected Microsoft systems around the world has grounded or delayed  thousands of flights at the world’s largest air freight hubs in Europe, Asia, and North America.

Data from ocean and airfreight benchmarket Xeneta shows air cargo supply chains were already under pressure prior to the IT failure.

Global demand in June increased by +13% compared to the same month in 2023, continuing an upward trend seen throughout 2024 to date.

At the same time, air freight supply has increased by a much lesser +3% year-on-year.

The result is less available capacity in the market and increasing costs for shippers, with the global air cargo spot rate climbing +17% year-on-year in June to stand at US$2.62 per kg.

Van de Wouw said: “Shippers already had concerns about air freight capacity due to huge increases in demand in 2024, driven largely by the extraordinary growth in e-commerce goods being exported from China to Europe and the US.

“Available capacity in the market is already limited so airlines are going to struggle to move cargo tomorrow that should have been moved today.

“These incidents can take three times as long to resolve as the length of time they last, but that is very much dependent on the scale of the IT failure and the market conditions at the time it occurs.”

Van de Wouw believes it is another reminder of the vulnerability of the world’s supply chains.

He said: “We have seen in 2024 how vulnerable our global maritime supply chains are following the disruption caused by conflict in the Red Sea.

“Now we see vulnerabilities exposed in our air supply chains due to IT failure. We benefit greatly from technology and have grown dependent on it – but there is a price to pay when things go wrong.”

On 19 July, forwarding and logistics firm Woodland Group reported that shipping lines, customs system, and transport businesses had been affected impacted by the CrowdStike failure including the port of Felixstowe whose Destin8 Port Community System was unavailable.

Customs entries on airfreight and some airlines and handling agents are also affected. 

Visibility specialist Project44 reported that while most applications were quickly restored following a fix from CrowdStrike, the recovery for airlines is expected to be slower. Thousands of flights have been delayed or canceled, and airlines face a challenging task of rescheduling and managing cargo backlog.

The outages also coincided with a peak in ecommerce activity including back-to-school and Amazon Prime Day events.

Some port terminals, such as APM at the Port of Los Angeles, faced technical difficulties but problems have generally been resolved swiftly.

Rail transport encountered minor issues as well. Union Pacific reported varying levels of impact across its network, but freight movement has continued and the overall impact is expected to be minimal.

Tags: Xeneta