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Air rates increase as ‘Preighters’ leave the market
Air freight rates from China are rising over the last two weeks, due to falling capacity as passenger-freighters are forced out of the market, due to unviable commercial return.
Yield is just one of the reasons. The PAX carriers are also impacted by weak, if not nonexistent passenger demand, rising PPE requirements and an increase in general cargo in other regions are also influencing the market.
Medium-term expectations predict that demand, particularly in technology and eCommerce, and capacity is rising, also due to strong global PPE demand.
Market indices are notoriously poor at reporting rates accurately, but they do a good job in tracking trends and movements.
The latest figures for last week, show air freight rates from China to the EU up 6.17% and Hong Kong to the EU up 3.29%.
North America to Latin America is one of the few tradelanes to show an improvement in cargo capacity. Transpacific cargo capacity declined (both ways) for the first time since early May.
And there have been more announcements on the supply side, as airlines release schedules and raise the number of passenger flights. Emirates, for example, expands its destinations to 63 in August.
Passenger load factors on the long-haul wide body routes that take the lion’s share of global cargo, remain low, highlighted by the closure of London Heathrow’s Terminal 4 until 2021.
And few expect passenger traffic to come back soon, which keeps the market very attractive to freighter operators because with so many wide-bodies parked, there is no sign of belly-hold capacity returning.
Although worldwide cargo volumes, year on year, contracted by more than 18% in H1 20, revenue increased by almost 21%, thanks to the capacity shortage from mid-March.
The average rate of transporting one kg by air rose by 48% worldwide; the increase was largest from Asia Pacific (+76%) and smallest from Latin America (+10%).
The transport of PPE-goods did not come cheap, air cargo charges from China rose by an 136% compared with the first half of 2019.