Air Freight Outlook: No End in Sight for Air Freight Demand

  • Maritime congestion, regional quarantines, demand spikes, reduced belly hold capacity, and other factors are keeping air freight prices high and causing delays ahead of the Black Friday and Christmas retail shopping season.
  • Air freight forwarders offer an expensive lifeline to shippers, while navigating costly handling and pickup operations as traffic flow at major airports remains slow due to COVID-19 conditions.
  • At European airports, staff shortages are keeping freighters on the ground for hours, while others are having to fly before they are fully loaded.
  • China’s airfreight is nearing crisis conditions due to new Covid-19 outbreaks, and the government’s response, as Chinese carriers suspend service and ground handling forces either quit or undergo extensive quarantine times.
  • TLDR: it could get ugly, but carriers that can move freight will make a killing.

26 AUGUST 2021 — News Brief

There’s no end in sight for air freight demand, setting the stage for record rates and delayed shipments this August and September as the once reliable (and expensive) alternative to ocean freight struggles to absorb a massive overflow of freight from other modes.

Adding further pressure on the air freight market, low sales-to-inventory ratios, increased e-commerce demand, and ongoing capacity shortages due to low passenger demand will extend past this fall’s peak season, creating headaches for retail shippers ahead of Black Friday and Christmas.

The Baltic Air Freight Index had recently published an article stating that global rates are remarkably higher compared to pre-pandemic levels.

Below is what prices in the first half of 2021 vs. 2018 and 2019 look like:

  • Frankfurt to North America rates are up 72%
  • Hong Kong and Shanghai rates to Europe are up 62% and 64%, respectively
  • Hong Kong and Shanghai rates to North America are up 117% and 110%

The air cargo peak season generally begins around October and November, when exports from China start to pick up pace. However, this year, there is a consensus that it could start as early as September, with importers making a rush to ensure that their holiday inventories arrive on time.

Moreover, the random regional lockdowns occurring to tackle the COVID-19 outbreaks at critical export locations like China are impacting factory output and the flow of volumes to airports.

No-tolerance COVID-19 regulations at Chinese airports recently prompted the ground staff to quit in large numbers, triggering the cancellation of numerous flights and thereby acting as another catalyst in the increase of freight rates.

2021 08 26 Air Freight chart

Similar to dynamics experienced at the beginning of the pandemic, we’re seeing incremental pressure on passenger belly space given burgeoning commercial flight cancellations and extended lockdown measures beginning to take hold globally. That, coupled with near-record-high Consumer Confidence readings and still-positive (>50) global PMI readings (suggestive of robust global demand for goods), creates an imbalanced supply/demand environment that should persist in the near-to-medium terms and is likely to be felt most acutely in global ocean shipping markets.

Andy Reed

Corporate Strategy Associate, project44