Aviation article(s)
December 7, 2021

The new Omicron variant of Covid-19 is expected to keep air cargo capacity tight — pushing rates at elevated levels, according to the latest Baltic Exchange analysis.


The coronavirus variant, which has spread to at least 38 countries, will restrict network capacity due to renewed safety protocols, infection rate and various country's response to Omicron, said investment bank Stifel senior analyst Bruce Chan in the market update.


"This and other new variants are likely going to delay a return to pre-pandemic international business travel (or international travel in general), which means that the complete return of belly capacity on those core lanes will also get pushed out," Chan said, warning that there was also some risk that belly capacity may never fully recover should there be permanent switch to hybrid in-person/virtual way of doing business.


"With renewed lockdowns in some countries and geographies, and with continued and not unreasonable public concern about viral spread, we believe the eventual transition of discretionary dollar spend away from goods and back to services may be elongated as well," he added.


"These factors should support persistently elevated airfreight rates, in our view, and any shippers that were looking for relief in the seasonal first quarter freight lull may not find it – at least to the extent that they expect."


The reports came as air freight rates continued its upward trend.


Baltic Exchange Airfreight Index (BAI) data showed that prices from Hong Kong to North America reached a new index record of US$12.41 per kg, compared with US$6.77 per kg in the same week last year and US$3.66 per kg in 2019 as airfreight rates continued to mount last week.


A new index record was also recorded from Hong Kong to Europe, which reached US$8.46 per kg compared with US$5.61 per kg seen during the same week last year and the US$3.27 per kg recorded in 2019.


The International Air Transport Association (IATA) warned last week against "knee-jerk" reaction to the Omnicron variant of Covid-19 from countries which has started implementing travel restrictions. 


Its director general Willie Walsh said this could impact cargo capacity should these restrictions further drag passenger demand.


Walsh noted that after two years of battling Covid-19, governments around the world would already have the "experience and tools" to make data-driven decisions rather than the "mostly knee-jerk reactions to restrict travel that we have seen to date."


"Restrictions will not stop the spread of Omicron," Walsh said. "Along with urgently reversing these policy mistakes, the focus of governments should be squarely on ensuring the integrity of supply chains and increasing the distribution of vaccines."

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