Air freight rates rise amid uncertainty over capacity

• Global air freight rates rose last week, with the Baltic Air Freight Index (BAI00) up 2% week-on-week and down 3.7% year-on-year.

• The UPS MD-11 crash in Louisville grounded all MD-11 cargo planes at UPS, FedEx and Western Global, creating immediate uncertainty in global air cargo capacity, particularly on trans-Pacific routes.

• Travel rates to China showed mixed performance, falling to the US but rising to Europe, while the North Asian region saw increases to Australia, India and Mexico.

• Air freight rates in Hong Kong rose sharply, with a BAI30 plus increase of 3.7 percent year-on-year, and nearly returned to positive levels year-over-year.

Air freight rates rose again last week according to the latest data from TAC Index, the leading rate reporting agency in the air freight markets. Baltic international air freight (BAI00) calculated by TAC rose another 2% in the week ending November 10, leaving it just 3.7% lower than in the previous 12 months. Sources saw it as unusual for a period when the market is entering the peak season, although it was before the fatal crash of a UPS cargo plane in Louisville, all MD-11 cargo planes operated by FedEx and Western Global, as well as UPS. Sources indicated that this could have a significant impact on capacity in the coming days, especially on Pacific routes, where many MD-11 carriers operate, and could affect prices in the coming days.

Overall prices out of China were lower last week for the United States, although higher to Europe, as well as to many destinations outside North Asia, including Australia, India and Mexico in general. However, BAI’s spot rates actually rose further in the past week on the transpace from Hong Kong as well as on the Asia-Europe corridors. The composite index for departures from Hong Kong (BAI30) rose 3.7 percent on the week to leave it slightly lower at minus 2.0 percent on the year. Outbound flights from Shanghai (BAI80) were down 0.2 percent on the week and down 2.5 percent year-on-year. Elsewhere in Asia, interest rates rose again in Taiwan and Vietnam, although they were more mixed in Seoul and Bangkok, and stronger in corridors to Europe than the US, at least before the MD-11 crash. In contrast, outside India, interest rates in the US were higher for the week, but were slightly lower in Europe, although still very low on the year.

From Europe, prices on transatlantic routes to the United States rose again in the week, where a large number of MD-11 carriers also operate, as well as to Australia, India, Mexico and South Africa, although they fell again on corridors to China, Japan and Brazil. Frankfurt’s external road index (BAI20) fell again after recent gains, dropping -6.8 percent on the week, leaving it at -3.4 percent on the year. In contrast, London Heathrow Airport (BAI40) bounced back quickly from last week’s sharp decline, jumping more than fifteen percent on the week to put it back in positive territory to zero point one percent year-on-year.

Outside the US, price patterns were more mixed with gains on routes to Europe and South America, but then fell in China and South Korea. Chicago’s Outdoor Street Index (BAI50) rose 2.4 percent in the week, but fell to minus 6.8 percent on the year, still near its lowest point in recent years. Prices from Central America, Mexico to Europe are up again in the week, although still slightly lower than on the year.

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