Air Freight rates brace for turbulence as Middle East conflict threatens capacity

The leading price reporting agency for the sector, the global Baltic Air Freight Index (BAI00) drifted lower by -1.6% in the week ending March 2, leaving it down -1.3% year-over-year, according to the latest data from the TAC Index. However, market experts warn that these figures primarily reflect conditions prior to the recent conflict.

With large-scale regional flight cancellations already underway, industry watchers anticipate capacity constraints and subsequent rate spikes in the coming weeks.

Rates on the busiest lanes out of China were slightly lower week-over-week to both Europe and the US, though they remained comfortably ahead of last year's figures. The index for outbound routes from Hong Kong (BAI30) fell by -7.8% for the week, pushing it -6.9% lower year-over-year, despite a late-week spike in spot rates driven by events in Iran and the Gulf.

Conversely, outbound Shanghai (BAI80) proved more resilient, edging up +0.3% week-over-week and maintaining a robust +8.8% year-over-year lead. Elsewhere in the region, rates generally rose on routes to Europe from Seoul, Taiwan, Bangkok, and Vietnam, but fell on routes to the US.

India proved an exception, with rates rising to both Europe and the US, accompanied by a sharp spike in daily spot rates following the weekend's geopolitical events.

India proved an exception, with rates rising to both Europe and the US, accompanied by a sharp spike in daily spot rates following the weekend's geopolitical events.

European markets experienced a noticeable rebound in activity, characterized by rising rates on the busiest long-haul lanes to North America, the UAE, Brazil, and Japan. The index of outbound routes from Frankfurt (BAI20) recovered from the previous week’s drop with a +4.5% gain, though it still remains -7.2% lower year-over-year.

London Heathrow (BAI40) also bounced back strongly, surging +8.0% for the week and extending its impressive year-over-year growth to +19.9%. Despite these gains on major routes, rates out of Europe were lower on several other lanes, including those bound for Australia, China, Mexico, and South Africa.

Out of North America, rates trended mostly higher toward Europe, South America, and China. However, the major Midwestern hub of Chicago (BAI50) continued to struggle significantly. The index dropped another -3.3% week-over-week, leaving it languishing at a steep -24.7% deficit compared to the same period last year.

Additionally, rates from Mexico to Europe declined over the week, pushing them into negative territory on a year-over-year basis.