Airfreight was a  mixed picture moving through June. Despite a draw down of cargo demand that has decimated the cost of container freight over the past two to three months, airfreight as priced on The Baltic Airfreight Index (BAI) benchmark has been surprisingly stable in comparison, particularly out from Asia into the US and Europe. Near-term support could be attributed to a consistently high fuel price (Northwest Europe Jet Kerosene CIF spot prices have flattened out at around $1,280/t after reaching a high of $1,459.75/t on 16th of June, carried up by spikes in Brent Crude).One of the key factors that has been damaging to available freight capacity has been severe problems in staffing and handling in European and North American airports. 

This is still well above 2019 settlement levels on equivalent months, with airfreight still very much spot-driven and a key money earner for beleaguered airlines. 2022 is on course for airfreights 2nd best year despite the softening of the market since the COVID policies have largely been repealed.

In terms of price action, throughout June we’ve seen most of the Asia outbound routes drop. However, this was not to the extent many would have expected off the post-COVID highs we saw in Q4 2021. BAI31 Hong Kong to Europe pulled back 2.34% to $6.26/kg between 06 June and 04 July, with BAI34 Hong Kong to USA shedding a bit more value during the same period, down 9.38% to $7.92/kg. This is still well above 2019 settlement levels on equivalent months, with airfreight still very much spot driven and a key money earner for beleaguered airlines. 2022 is on course for airfreights 2nd best year despite the softening of the market since the COVID policies have largely been repealed.

Out of Shanghai, we’ve seen prices remain equally flat. BAI81 Shanghai to Europe actually rebounded slightly with most of the movement happening on 4 July, up 3.31% to $7.48/kg, meanwhile BAI84 Shanghai to USA pulled back down -5.24% to $8,49/kg. Whilst these might seem like substantial moves, over the course of the past two months price changes have been somewhat erratic whereas monthly averages have been quite progressive, with a slight downward trend. Prices have certainly been tapering off – not boding well for the freighter market even with the destruction of available capacity following the blacklisting of AirbridgeCargo (and the subsequent draw down of CargoLogicAir and CargoLogic Germany), in line with widespread sanctions against Russia and Russian businesses. Moving forward, passenger freighters have seen far less prevalence (Etihad the latest airline to end mini-freighter operations to China), whilst the cyclical nature of air cargo had not really been a factor whilst the sector steamed through the 2020-2021 markets driven by COVID related demand and disruption.

With this in mind, there may be more than a few businesses loaded with risk should the airfreight bubble burst. Global leaders in air freight forwarding have jostled for ranking over the past year, whilst investment in freighters is nowhere near the level of investment in new equipment that we saw in the adjoined container freight markets. Additionally, the market remains volatile enough to prohibit the long-range forecasting required to keep the freighter business in any way predictable.

About Peter Stallion, Head of Air and Containers, Freight Investor Services

Peter Stallion heads up the Air and Container Freight desks at FFA brokerage Freight Investor Services. He started his career in air freight chartering, and has a passion for emerging risk management markets and the logistics industry.