There has been a big bounce back in air freight since the March slowdown. . Prices have strengthened, as demand outstripped capacity in several markets: some lanes recorded higher pricing levels even than those highs seen in 2020.  

The BAI increased by almost 17% in April over March. This was largely driven by China (HKG & PVG) with growth around 30%.

The BAI increased by almost 17% in April over March. This was largely driven by China (HKG & PVG) with growth around 30%. However LHR also saw an improvement on three  out of four indices. This improvement was at more modest levels (~3%), building on similar growth levels in March.  FRA, ORD and SIN origins all saw declines on March.  There continues to be a dynamic market environment as operational crewing and permits issues  impact some carrier operations. 

CLIVE data services volume figures for the first three weeks of April show volume up 84% versus the same period last year, at the height of the initial global lockdowns.  Comparing volumes to 2019 shows a small decline of 1% as load factors continue to be much higher than pre-Covid levels.

There are differences by market as can be seen below. The China and Hong Kong markets continue to lead the way in terms of price strength, whilst the US and Europe see a more volatile and mixed picture.

HKG – US (BAI-HKG04) is exceptionally strong with the highest rate of the year at USD8.65 compared to USD4.91 on 1 March and is approaching the highest level seen last year of $8.81 in May as market capacity is tight.  The price is up 29% on the same period last year and 153% on 2019.

CN/HK – US

April ended on the highest rate this year of USD8.56. This was +60% on the levels in March, with continuous week on week increases since 22 Feb.  Prices are up 8% on last year and 153% on 2019.

  • HKG – US (BAI-HKG04) is exceptionally strong with the highest rate of the year at USD8.65 compared to USD4.91 on 1 March and is approaching the highest level seen last year of $8.81 in May as market capacity is tight.  The price is up 29% on the same period last year and 153% on 2019.
  •  PVG – US (BAI-PVG-04) marginally improved on March levels, recording its highest price of the year, but is a long way short of the highest yield in 2020 seen in early May of $12.42.  The current price is down on last year by 7% but up on 2019 by 154%.

 

CN/HK – EUR

The latest USD rate of $4.89 is approaching the 2021 high of $4.96, after week-on-week improvements since 22 Feb,  but is down 31% on 2020 levels (+92% versus 2019).

  • Both indices (BAI-PVG01 & BAI-HKG01) to Europe show a similar picture with an improvement in April over March and recent week on week increases with HKG reaching the highest level this year at $5.01 but PVG 12% short of the high in mid-February at $4.77.

 

US – EUR

The USD rate finished the month at $1.74, a good week on week improvement after four weeks of decline from this year’s high of $2.13 on 22 March. 

  • ORD – EUR (BAI-ORD01) reflected this trend with a price of $1.69 down on March by 16% and last year’s highest level in the equivalent week by 40%, but was up on 2019 by 69%.

 

EUR – US

This market continues to be volatile with big variances on a slightly slowing downward trend since the beginning of the year.  LHR saw a positive performance in April versus March, whilst FRA was negative.

  • FRA – US (BAI-FRA04) at 3.95 is down 11% on March and down on 2020 by 3%.  It is still however up 105% on 2019 levels. 
  • LHR – US (BAI-LHR04) at 5.32 is up on March by 4% and up 30% on 2020 and a huge 311% on 2019 with an underlying upward trend since the end of June 2020.

In summary, the air freight market continues to be strong, particularly CN/HK to US, and may continue, at least in the short term, with demand strengthening as countries relax lockdowns and subdued passenger travel continues to impact capacity.  With the easing of Hong Kong quarantine rules for crew, Cathay Pacific are looking to restore their full market presence as soon as possible which may dampen pricing.

 

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.