Air cargo rates surge 30% in April, but easing is expected soon

Global air cargo spot rates hiked 30% year-on-year in April to $3.34 per kg, marking the highest since October 2022. However, as capacity gradually returns on routes disrupted by the Middle East conflict, pricing pressures are expected to ease, with market fundamentals beginning to reassert control, according to analysts at Xeneta.

The surge in spot rates in April, along with an 18% rise in longer-term contract rates, has revived concerns among shippers, recalling the pandemic period when limited capacity sent freight costs soaring.

However, the comparison is not exact. Unlike the global disruption seen during COVID-19, current capacity constraints are largely regional. A more pressing issue is fuel costs, with crack spreads, the difference between crude oil and jet fuel prices, now exceeding pandemic highs, creating added pressure for carriers.

Despite these challenges, there are early signs of easing. Niall van de Wouw, Chief Airfreight Officer of Xeneta noted that “the worst may be behind us,” as rate increases begin to stabilise, even on the routes most affected by the conflict.

He continued, ‘This is all logical because the spike in airfreight rates was driven by a supply issue from the start. Now that capacity is coming back, rates will come down, but not as quickly as they went up. Ultimately, market fundamentals will prevail. Global cargo capacity has largely recovered to pre-shock levels, and the jet fuel shortage, though reportedly spreading, has yet to grip long-haul intercontinental routes at scale. If those conditions hold, spot rates should ease in the weeks ahead and deliver some reprieve for shippers who have grown accustomed to unwelcome surprises.’

As shippers seek to lock in the capacity they need for the second half of the year at fair and reasonable rates, he urges them to gain clearer visibility into how forwarders are moving their cargo and to be wary of the growing number of surcharges being introduced, driven largely by escalating jet fuel prices.

Van de Wouw mentioned that Intercontinental airfreight routes are the last to be cut, while domestic flights may be reduced, but cancelling long-haul flights over fuel shortages would signal a far more serious issue.

The war in the Middle East continued to distort air freight rates across key corridors in April. Spot rates from Europe to the Middle East climbed to $3.60 per kg by late April, up 108% from pre-conflict levels, the steepest increase across all corridors. South Asia followed a similar trend, with rates to the Middle East and Europe roughly doubling, while prices to North America rose 70% to $6.94 per kg.

Southeast Asia experienced more moderate increases, with spot rates rising 43% to the Middle East and 61% to Europe, while North America-bound prices were up 33%.

Northeast Asia lagged, with outbound rates hitting new highs across key routes but posting smaller percentage gains. This slower uptick likely reflects the delayed pass-through of jet fuel surcharges, which tend to follow actual fuel price movements with a lag after spot prices peaked in early April.

Rates from Europe to North America dropped 17% to $2.57 per kg, making it the only major corridor to see a decline. Even with demand growing 2% in April, the pressures facing airlines, forwarders, and shippers are unlikely to ease completely once tensions in the Middle East subside.

The year-on-year decline in e-commerce shipment volumes from China is a matter of consideration. Even though some of them may have shifted to air freight volumes, Van de Wouw believes that the air freight demand for B2C e-commerce seems to have halted. He said, ‘Overall, we do think we have seen the peak for global air freight rates, and we expect them to go down on more lanes, but, based on recent experience, there will undoubtedly be an underlying concern about what’s next in terms of trade disruption.’