Impact of COVID-19 on air freight

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The Victorian Government is working closely with the  Australian Government and the food and fibre sector to help exporters restore global supply chains and keep
vital international air freight links with key trading partners open in an environment of severely constrained air freight capacity due to COVID-19.

Victoria’s food and fibre exporters depend on air freight to get products to market which otherwise cannot be transported by sea freight due to perishability and time constraints. Exports were hit particularly hard following international and domestic border closures due to COVID-19. Prior to the pandemic, approximately 80 per cent of Australian air cargo was carried in the belly hold of passenger flights. Given the near complete shutdown of passenger movements to and from Australia, air freight exporters face significant challenges in terms of access to markets, increased shipping costs, and international border closures.

In April 2020, the Commonwealth announced $110 million in funding to establish the International Freight Assistance Mechanism (IFAM) as part of the $1 billion Relief and Recovery Fund. IFAM’s initial purpose was to keep high-value, time sensitive and perishable agriculture exports flowing while prioritising the import of medical
supplies and other essential items to deal with the pandemic. A further $241.9 million in funding was announced in July 2020, at which point export criteria was broadened to cover non-food items that were in the national interest. A third tranche of $317.1 million in funding was announced in October 2020 as part of the
Commonwealth’s 2020-21 Budget which brought total IFAM funding to $669 million. This package is intended to support exports through to June 2021.

Global Victoria, within the Department of Jobs, Precincts and Regions worked closely with the Australian Trade and Investment Commission (Austrade) on behalf of food and fibre exporters to quantify air freight needs and ensure IFAM support aligned with the seasonality and harvest of products. A significant portion of exports under IFAM come from Victoria, including lamb, horticulture, dairy, beef and seafood. The proportion of Victorian exports is particularly strong due to the peak harvest season
aligning with overseas demand during Chinese New Year, Lunar New Year, Eid and Ramadan.

Air freight routes supported through IFAM include key Asian markets such as China, Hong Kong, Singapore, South Korea and Japan, as well as the Middle East and North America. Whilst some food and fibre exporters have shifted their modes of transportation towards sea freight where possible, IFAM has been successful in driving down air freight shipping costs. Despite the changes as a result of COVID-19, food and fibre exporters have shown resilience in dealing with increased volatility in air freight prices. At this stage, it looks as if air freight prices are unlikely to recover to pre-pandemic levels for some years to come.

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