Ah, no, not quite

However, it comes with a price tag. Estimates by the World Bank suggest air freight is usually four to five times more expensive than road transport, and up to 16 times more than sea. This has typically meant only some products earn a plane ticket: certain fresh foods, time-sensitive documents, pharmaceuticals and cut flowers, for example.

Depends what you include as an expense. Air freight might take 5 days. Sea freight – even in good times – 45 days.

Say you had high value electronics. iPhones, say. $700 each, imagine. Cost of capital on $700 for 40 days is what? Further, it’s electronics, suffering a 1% per week (rough idea, you understand) depreciation rate.

Now, is air freight more expensive than sea or not? Tweak the numbers as you wish, but don’t forget to include that cost of capital plus depreciation.

Oh, Apple flies its iPhones. Funny that.

7 thoughts on “Ah, no, not quite”

  1. It’s all a matter of $/weight, isn’t it? The higher that value, the more logical it becomes to pay a premium to get that expensive stuff to where it needs to be as fast as possible.

    In the case of those iPhones.. easily hitting $2000/kg… So not surprising they fly the stuff.

  2. I would think for many goods its the ability to make the decision 6 weeks later that is key. If you know the dress in red sells yet the blue will end in the sale that later decision enhances profit and releases capital earlier

  3. Surely, it depends on the distance & the method of transport. Airfreight is much cheaper than trucking the equivalent from China to Europe overland. Sea shipping is economic for large amounts of goods on high demand trade routes. Drops off sharply for smaller ships to less visited destinations or those a long way from a port.

  4. There’s daily air shipments of fresh crabs from Billingsgate to China. If shipped by sea they’d have zero value on arrival

  5. @Pcar: Indeed. There’s also daily air freight of live razor clams (“spoots”) from all over Scotland, to China. In tanks of seawater. A pocket industry has grown up collecting them from small boats all around the coast.

    Isn’t the market a wonderful thing? Or, of course, a terrible thing, if you’re worried about environmental impacts.

  6. @Peter
    Thanks, didn’t know that. Razor clams are interesting. Used to find shells on beach when child, but never found a live one. Saw them alive in Billingsgate – weird ‘head’ sticking out of one end. Morrisons now selling frozen, in shell razor clams. Is taste & texture similar to mussels?

    I wonder if that’s related to China banning pig/pork imports from UK?

    Wee hint there to Timmy on pig farmers ‘crisis’ – not butchers; buyers at price farmer demands

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