Air freight rates rise to pre-Covid level as fuel prices increase to new levels

AIR freight rates have returned to mid-March levels as jet fuel prices continue to rise, according to London's Loadstar

13 July 2020 - 19:00

AIR freight rates have returned to mid-March levels as jet fuel prices continue to rise, according to London's Loadstar.

Jet fuel prices rose over seven per cent last week, causing the demand and viability for cargo-only passenger aircraft services to double

The TAC index shows air freight rates from China to Europe, and the US sank by 10 per cent last week. Hong Kong sank by 16 per cent to the US and 15 per cent to Europe.

The charts demonstrate air freight rates are approaching pre-Covid numbers, as China to Europe is around the same rate it was in November of last year. China to US rates are approaching March prices, and look to continue to fall.

Transatlantic rates are significantly higher than last year's rates since it's unclear when passenger capacity will return to normal.

But fuel continues to rise. IATA's jet fuel monitor shows fuel has gone up 8.5 per cent in the last month. Despite this, fuel is still 43 per cent lower than it was a year ago.

The rates depend on carriers to increase passenger capacity, so they're not as reliant on expensive passenger freighters.

Meanwhile, European Aviation has plans to create 10 more A340s into cargo-only configuration this year to the three they already have.

Demand has fallen, and retail cargo isn't ready to be back in the air since shippers favor sea freight or rail when possible.

'There will be further demand when a suitable vaccine is approved for the fight against the Covid-19, which, hopefully, will be in the near future.' said Ram Menem, former chief of Emirates SkyCargo.

Air freight has made positive outcomes in e-commerce, but July tends to be slow for the mode, while sea freight is in peak season.

'The Atlantic routes present positive support, potentially linked to a low passenger load factor. Hong Kong to Europe and Hong Kong to the US routes have been impacted the most, the former falling 61 cents and the latter by 82 cents.

Shanghai to Europe and the US drop less than other routes, with only minor changes, of US$0.08 and $0.14, respectively.' said Freight Investor Services.

FIS expects a less steep drop in August from China to Europe, while prices remain flat until the fourth quarter with an expected rise. China to US is expected to have a similar path, but with a further small rise in the third quarter.

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