Sea or air transportation: which sector will play a decisive role in the development of Ukrainian logistics?

Dmytro Vystavnyy

Commercial Director of Lukro LTD

When choosing a suitable goods transportation mode arises, the question of time and money is often decisive. Should the shipment be delivered quickly or would the sender prefer to cut costs? Finding the best balance between sea and air transportation is not always easy. Both types have pros and cons. Which of the options will be decisive in the development of Ukrainian logistics?

Over the past three months, the cost of shipping has reached a five-year high. We are seeing a historical maximum in the cost of container shipments. Many experts believe that the jump in demand for goods due to the post-appearance recovery of the world economy is to be blamed. Even atypical product categories go online, which means that demand will continue to grow. Given this trend, in this case it would be worth paying attention to an alternative way – air transportation.

Dmitry Vystavnoy, one of the leaders of Lukro Ltd, considers air transportation to be a very promising sector. He started his career as a port forwarding agent in the documentation department of a large forwarding company specializing in the transshipment of grain and metal products. At a certain stage, Dmitry moved to another company, became the head of a branch in one of the major ports of «Big Odessa», gained experience in various areas of logistics – forwarding, transshipment, and shipping. Today he is one of the leaders of the company-expert in international logistics Lukro LTD, which in the field of container transportation took 3rd place in the nomination «Freight Forwarder of the Year – 2020».

The coronavirus pandemic has disrupted the familiar ties between manufacturers and consumers around the world and has brought major changes to the business of transport and logistics companies. Due to mandatory disinfection and other measures, many ports operate in a very limited mode. Substantial port delays and rising prices may lead the sender to choose the airline sector. But is the air transportation beneficial?

Of course, in the case of large and heavy loads, sea freight is often much cheaper. As the size of the cargo decreases, the difference between prices decreases, and sometimes even air freight becomes cheaper. When it comes to speed, despite everything, air travel is without doubt the fastest way to transport products over long distances. This type of transportation is especially convenient when delivery of goods is not possible in any other way. Quite often this happens due to the impossibility of transporting goods to the specified destination by other means of transport.

Talking about the competitive advantages of air transportation,  it is worth highlighting:

• online control (it is easy to track the location of the aircraft and the cargo inside it);

•  independence from the complexity of the geographical landscape (for example, if you need to transport goods to distant places);

• reliability and safety (it is difficult to steal at a height);

• guaranteed safety of dispatch (when transporting goods by air, the risk of damage, damage, complete loss is minimal);

• minimal customs control (no need to go through inspection in all states if the plane crosses their airspace).

Of the disadvantages, most often in the first place is the price. Air transportation is the most expensive type of cargo delivery. But there are various options for reducing the cost of services: transit movement of goods, storage and transportation of goods weighing from 1 kg and others.

It is worth saying that in Ukraine, according to the State Aviation Service, in 2020 the volume of cargo and mail traffic amounted to 88.3 thousand tons, against 92.6 thousand tons a year earlier (-4.64%). But at the same time already this year, from January to July, the indicator of air transportation of cargo and mail amounted to 44.9 thousand tons, against 42.8 thousand tons in the same period last year (+ 4,9%).  But in the field of maritime logistics, according to Lukro LTD  specialists, the decrease in the indicator of container traffic in Ukraine for the same period was 9%. If we analyze the end of the third quarter, the number of container traffic continued to fall in its indicators.

At the same time, the recently signed Agreement on a Common Aviation Space between Ukraine and the European Union will open up new opportunities for the sector. This includes high safety standards, new business opportunities, and an increase in the number of flights. The document provides for the creation of a joint aviation space between Ukraine and the EU, which will facilitate mutual access to the air transportation markets with equal competition conditions.

And although today most of the total volume of global merchandise trade is carried out by sea, by 2050 the demand for freight transport will triple, and the sea transport sector does not always keep up with the development of digital technologies and innovations. Therefore, it is assumed that over the next decade, the demand for air travel will increase, due to the increase in the intensity of international transport of goods and the growth of international trade in the online space.

Freight carriers are purchasing an increasing number of aircraft, which is expected to boost the growth of the industry. And the increase in the number of airports around the world will allow in the coming years to increase the volume of transported goods, which will have both macroeconomic consequences – the growth of companies, the creation of new jobs, the growth of customers, as well as the volume of services provided, and will cause changes in the macro-economy, and namely, an increase in tax revenues and, accordingly, budget revenues, restructuring in favor of the service sector, and, ultimately, an increase in the country’s GDP.

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