Shipping disruption and e-commerce demand driving up airfreight rates

By Alex Lennane 03/04/2024

The start of the airline summer season this month is likely to hit airfreight rates with an increasing amount of belly capacity on passenger routes.  

But right now, despite the major tradelanes not seeing significant changes, there remain pockets of high volumes. 

Ex-India is still busy, say forwarders.  

“Space is still congested across all India origin airports, as well transhipment points,” said Ligi Logistics. 

“Space has been overbooked in hubs, as well as origins. Rates are also increasing day by day by all the carriers without any notice, and further, carriers have increased the rates for week 14. 

“Space is really critical to the US and EU; transit time for the US is six to seven days, and five to six days for EU, for standard transit.” 

Ligi added that the booking timeline was up to eight or nine days before handover to the carrier, unless for an express booking. 

“There is a severe backlog and congestion in Chennai, Mumbai, Delhi and Bengaluru, where off-loading is been badly delayed and minimum time for off-loading of truck is a minimum 36 to 44 hours.” 

Ligi added that Air France’s decision to cut Chennai from its summer schedule, plus Etihad’s cancellation of its Chennai freighter, had led to a capacity crunch out of the southern Indian city. 

According to Xeneta, the dynamic load factor from India to Europe hit 87% in the week ending 24 March, its highest level since April 2022. The company added that, interestingly, the rate weight break had also shifted.  

“Traditionally, larger cargo volumes (more weight) is charged at a cheaper per kg price than smaller volumes (less weight). However, in the week ending 24 March, the general cargo spot rate for +1,000kg reached $3.50/kg, above the spot rate for +500kg, which stood at $3.46. 

“The last time Xeneta observed this market condition was during the onset of the Covid-19 pandemic, when the air cargo market encountered a capacity squeeze.” 

It added that the average spot rate, of $3.50 per kg, was 158% higher than it was in early December, before the crisis in the Red Sea. 

However, it notes, these are the airline sell rates: shippers are trying to hold firm, and the shipper rate for +1,000kg was $2.56, up 7%, but nowhere near the airline sell rate rise of 152%. 

Xeneta explained: “Although shipper rates traditionally respond to airline-sell increases with some delay, the fact we have not seen rates increase to the level we would usually anticipate may be due to pushback from shippers during negotiations with service providers.” 

While Indian rates are thought to be high owing to garment exports, combined with the Red Sea challenges, Hong Kong appears more reliant on the e-commerce market. Sources in China told The Loadstar e-commerce sellers were starting to be concerned over both high freight rates and the threat of economic sanctions on their business. Nevertheless, e-commerce continues to prop up the air market out of Hong Kong. 

Hong Kong Air Cargo told CH Aviation this week it was planning to double its fleet to 15 aircraft by 2027, in part to capitalise on e-commerce.  

“Right now, the Chinese e-commerce platforms supply the most of cargo in the market. We are always talking to these platforms to see what their requirements are and provide the best solution for them,” said Hong Kong Air Cargo president Clifford Hung. The airline has also spread its wings outside Asia, with flights to Europe (Liege) and the Middle East, and has plans for the Americas. 

There is one more plentiful pocket of volume for airlines: South Africa handled record inbound volumes last week, up 29%. 

Forwarder association Saaff explained: “The current international air cargo industry points to some interesting dynamics in influencing South Africa’s trade landscape. Recent developments have underscored a delicate balance of several factors, notably the challenges stemming from the Red Sea region. These realities have reverberated across air cargo movements, notably impacting the country’s fruit exports, both inbound and outbound.  

“Unsurprisingly, port congestion in South Africa has yielded unexpectedly favourable outcomes in air cargo statistics.” 

Saaff added that there was “potential for surpassing 2019 volumes, contingent upon currency exchange rates and the post-election political landscape. 

“Globally, the air cargo market is experiencing rising rates, particularly from vital global regions such as the Asia Pacific and the Middle East and South Asia, driven by disruptions in container shipping and increased demand for cross-border e-commerce shipments.”