WorldACD: Air Freight Rates Skyrocket Despite Global Volume Decline

Source: Asian Aviation

Global air freight rates continue to maintain strong upward momentum, despite a decline in volume caused by the Easter holidays and the gradual return of belly capacity to the Gulf market.

According to the latest weekly figures from WorldACD Market Data, the average global spot rate increased by an additional +3% in Week 15 (April 6 to 12), reaching $3.76/kg. This figure is +37% higher than the same period last year and up over +40% compared to late February—the time when the US and Israel commenced military strikes targeting Iran.

Regional Freight Rate Dynamics

The strongest week-on-week (WoW) increase was recorded from North American origins, climbing by +6% to average $2.73/kg (up +52% year-over-year, YoY). The African region also saw a +4% increase, reaching $2.95/kg (up +62% YoY). Meanwhile, rates from the Asia-Pacific region edged up by +2%, averaging $4.95/kg (up +24% YoY).

Specifically in the Middle East & South Asia (MESA) region, average rates in Week 15 saw a slight downward adjustment (-1% WoW) to $4.81/kg. However, this rate remains a staggering +66% higher than the same period last year, amid severe ongoing capacity disruptions to and from the region despite efforts to re-establish services and seek alternative routes.

The Paradox Between Demand and Freight Rates

On the demand side, global air cargo volumes dropped by a further -6% in Week 15, following a -3% decline in the previous week. This puts total global volume -8% lower than the corresponding week last year.

The steepest drop in chargeable weight originated from Europe (-15%), tied to national holidays surrounding Easter. Additionally, other regions recorded notable declines: Africa (-7%), Asia-Pacific (-3%), MESA (-3%), and North America (-2%).

Capacity and Pressure from the Ocean Freight Supply Chain

Global air freight capacity expanded by +1% WoW, led by a +7% recovery in capacity from the MESA region. Although global capacity has moved closer to last year's levels, capacity from MESA remains approximately -20% lower YoY.

Notably, despite the capacity shortfall, volume from MESA over the last two weeks (Weeks 14 and 15) still registered a slight +5% YoY increase. This reflects the increased utilization of dedicated freighters and exceptionally high demand from this region, where ocean freight is simultaneously grappling with severe capacity constraints, delays, and backlogs.

In the MESA to Europe segment:

●    Capacity from South Asia has recovered to -5% compared to pre-war levels.

●    Volume from MESA to Europe rose by +3% YoY, driven by a surge in traffic from Bangladesh.

●    Average rates skyrocketed by +89% YoY, reaching $4.53/kg. Within this, India increased by +77%, Bangladesh by +94%, and Sri Lanka by +71%.

Market Outlook: Fragile and Challenging

The two-week ceasefire agreement this month between Washington and Tehran has kindled hopes for a long-term resolution to the conflict; however, the truce remains highly fragile.

Most experts warn that inflationary pressures and elevated fuel costs are likely to persist. Concerns over potential shortages and soaring jet fuel prices could trigger flight cancellations and push air freight rates even higher in the coming weeks if the current crisis is not comprehensively resolved soon.

Furthermore, belly capacity through the Middle East will require time to fully recover, and container shipping lines do not expect ocean freight flows to return to pre-conflict norms anytime soon. This indicates that air freight rates are likely to remain elevated for the foreseeable future.

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Source: Phaata.com (According to Asian Aviation)

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