Air freight capacity continues to take off while rates are on a downtrend as more flights resume operations providing more belly hold space for cargo.
Ocean and air freight rate benchmarking and market intelligence platform, Xeneta said its latest analysis showed “marked fluctuations” in air freight rates and dynamic load factors between Western Europe and the US, as an increased appetite for travel drives cargo capacity to new heights for 2022.
The Oslo-based Xeneta in addition to dynamic load factor data from airlines, capacity surged by 21% between mid-March and the end of April.
Capacity back to pre-pandemic levels
It noted that with high passenger demand for the transatlantic corridor, and new summer schedules rolling out, capacity in April was actually higher than pre-pandemic, currently sitting above 2019 levels.
“The aviation industry is obviously keen to put an extremely challenging period behind them and get back to normal… even if it is a new normal. So, this healthy passenger demand is a very welcome development, helping drive strong capacity growth between week 12 and today,” said Niall van de Wouw, Xeneta's chief air officer.
“Of course, you ‘can’t have your cake and eat it, meaning freight rates are impacted by having more ‘bellies’ to fill. Especially when the volume and weight of cargo have dropped between mid-March and the end of week 17 (by 1.4% and 6% respectively),” he added.
van de Wouw pointed out that this has led the westbound dynamic load factor to drop to its lowest levels since the beginning of January – although week 17’s 67% was an improvement on the 63% recorded the week before (which also helped rates climb a little).
He noted that the eastbound transatlantic load factor has also fallen to its lowest level since the start of the year, now sitting at 57%.
Softer short, long-term rates expected
In terms of rates, van de Wouw said prices have been impacted by the growing capacity in the air cargo market.
“Our shipper community informs us that spot prices have been impacted by added capacity, with an average short-term rate of US$4.1 per kg from Europe to the US. That’s around US$1.7 per kg below the average for the long-term contracts signed across the last three months (approx. US$5.9 per kg). On the backhaul the rates are substantially lower, with spot prices of US$1.5 per kg against long-term contracts of US$2.3kg,” the Xeneta chief air officer further said.
“It’s early days for May, but our market intelligence so far points towards a softening of both short- and long-term rates in the next couple of weeks. I’d advise all parties looking to negotiate to stay informed of the very latest weekly developments to get the optimal value for their businesses in a fast-changing marketplace,” he added.