The air freight industry continues to see strong load factors as demand continues in a constrained capacity market. There are growing concerns that capacity will continue to be limited for some time as passenger operations start to pick up, therefore reducing available belly hold capacity and opportunities for cargo only services.

The air freight industry continues to see strong load factors as strong demand continues in a constrained capacity market.  There are growing concerns that capacity will continue to be constrained for some time as passenger operations start to pick up reducing available belly hold capacity and opportunities for cargo only services.

The BAI decreased by 10% in June over the year to date high seen in May, with week-on-week reductions until the final week in June saw a modest improvement. 15 of the 17 trade lane indexes saw a reduction over May with only SIN to SEA showing good growth at 4% and LHR to SEA up a modest 0.3%.  The final week of June did see week on week gains for trade lanes.

Although the index was down on May it was still positive versus last year at +18% and versus 2019 by 88% reflecting strong demand and continuing constraints in capacity.

An early view of June 2021 Clive data suggests that demand was relatively flat in June over May and that the level of demand continues to differ by trade lane.  Dynamic load factors from Europe to New York and Chicago continue to be over 80%, driving stronger pricing levels compared to trade in the opposite direction where demand is not so strong. There continue to be differences by market in the air freight indices as can be seen below.

CN/HK Markets

Both the China and Hong Kong markets saw declines in June over May of 9% and 15% respectively.

  • Both indices (BAI-PVG01 & BAI-HKG01) to Europe saw similar declines of 9% and 8% versus May with steady declines through the month.
  • The largest declines for both markets versus May were to the US with BAI-PVG04 down 19% and BAI-HKG04 down 11%.
  • Hong Kong to Southeast Asia (BAI-HKG03) saw a more modest decline of 4% over May.

US Market

The market ex Chicago was down 5% on May continuing a steady decline since the year to date high seen in early March. 

  • ORD – EUR (BAI-ORD01) fell 3c to $1.61, a 1% reduction on May.
  • ORD – SEA (BAI-ORD03) fell 11c or 7% to $1.50.

EUR Markets

The European market continues to be volatile with average rates down ex Heathrow and Chicago for June by 6% and 8% respectively although both saw stronger levels in the second half of the month.

  • FRA – US (BAI-FRA04) at 3.78 was down 6% or 25c on May. 
  • FRA – SEA (BAI-FRA05) fell by 14% or 19c in June over May although it recovered 6c in the final week of June.
  • LHR – US (BAI-LHR04) at 5.22 was down 8% of 46c on May.
  • LHR – SEA (BAI-LHR03) was up a modest 0.3% on May to 1.81.

SEA Market

SIN to SEA (BAI-SIN03) was at 1.95 on average for June, a 4% increase on May levels.

In summary, the air freight market, although down on May, continues to be strong., Tand this is expected to continue as strong e-commerce activity remains, capacity is expected to tighten, and economic activity strengthens.

 

Gareth Sinclair, Advisor to the Board, TAC Index

Gareth started with British Airways Passenger Business in Financial & Commercial management roles almost 30 years ago. In 2007 he joined British Airways World Cargo, driving significant transformation in Pricing and Revenue Management systems. As Head of Revenue Management and Pricing for IAG Cargo, he introduced enhanced analytical capabilities, dynamic bid price vectors and the move towards dynamic pricing.