The European emergence from Covid restrictions has been great for the European people. We are fast approaching the summer holiday season, the first ‘normal’ one for 3 years whereby holidaymakers from all over Europe will flock to airports, seaports and motorways to catch some long-forgotten sun or go away for a change of scene. The sudden influx of people in these locations can change the shape of logistics markets for the better and for the worse.
The increase in passenger flights can aid air freight rates, as the number of people going on holiday will rise, air cargo space will increase as more flights are put on by suppliers. This will mean that capacity drops, therefore the supply side of air cargo is less impacted, meaning rates are likely to come down slightly over the coming months. According to the INE, the Spanish national statistics organisation, the number of air passengers from the UK was up 233% in Q1 of 2022 compared to Q1 of 2021. This figure alone tells us the demand for holidays is a lot higher than it has been since the start of the pandemic. This can only mean good things for economies, both local and national, as more people are coming to spend money in the country. This also means businesses will be able to recoup some of the money they have missed out on over the past 3 years.
Additionally, this is likely to be the final summer British holidaymakers can travel to Europe visa-free. The timeline of Brexit regulations suggests that starting in 2023, any Briton between 18-70 travelling to an EU country for 90 days or less must purchase a visa. This is adding to the customs regulations brought in in January of 2022, which are to be followed by further regulations in 2023. All the signs point to a higher number of tourists in continental Europe in the summer months which, for economies which have suffered in the past 3 years is a good thing, surely? There is evidence to the contrary.
The European road freight market (ERFM) is one of the most volatile markets in the logistics industry, highly reactive to external events added to some of the worst supply-side market problems, the ERFM has had a tumultuous time. Its tough market conditions and high rates mean its projected growth of 4.9% in 2022 is somewhat of a surprise. The majority of the supply side issues come from driver shortages, with numbers in some countries such as the UK and Poland, still reaching around 100,000 drivers short. These shortages are driving costs up for hauliers and therefore rates are rising too.
A vastly important point for the ERFM when it comes to the summer months is that of congestion. Congestion impacts freight rates and costs as it has an ability to reduce capacity in the market, putting upward pressure on rates. It also reduces the earnings of carriers and hauliers – something that is more significant for smaller companies potentially struggling financially.
During the pandemic when there were stay at home orders, roads were clear and congestion wasn’t an issue for the market, resulting in a higher reliability, efficiency and asset utilisation. With the re-opening of countries, seasonal congestion is again becoming a problem; tourists flock to motorways in the summer months, costing companies time and money. Additionally, in countries such as France and Spain, trucks are banned from driving on certain days in order to avoid heavy tourist congestion on ‘changeover days’. Furthermore, with people able to move freely and the number of cars on the road going up, this too will add to the busyness of motorways. This also increased carbon emissions as well as acting as a ‘hidden’ cost for providers.
Congestion does not just come in the form of traffic on the roads. The road freight market is greatly affected by stationary containers at ports. The re-opening of economies coincided with a rapid increase in demand due to a return to ‘normality’, prompting ports to be overwhelmed with containers. Bottlenecks meant not only longer wait times for containers, but also for trucks waiting to carry shipments. The trucks waiting results in lost time and creates other problems through not transporting other shipments. If these trucks decide to return to the depot in order to fulfil other journeys, these too will cost due to potentially running empty journeys.
Congestion is a problem for the road freight market, reducing capacity and affecting the supply side of the market, leading demand to rise and subsequently rates and costs. This congestion is also majorly impacted by tourists, cars and coaches throughout the summer months. With busier roads once again likely throughout Europe, hauliers and trucks will have to be cautious with freight loads. This will counter the positive impacts that air tourism will have on the continental economy.
Source: Transport Intelligence, 9 June 2022
Author: Alex Bullard