Transatlantic capacity withdrawal set to drive up rates
29 / 08 / 2024
Photo: Jaromir Chalabala/ Shutterstock
The transatlantic airfreight lane will have much less capacity from September due to the winter season and shifting of capacity to the Asia-Europe trade lane.
Demand is expected to remain the same on Europe-US and US-Europe routes because there aren’t any major drivers for change in the US and Europe and the economic conditions are stable, Flexport reported during its European Market Update webinar on August 27.
But while demand will likely be the same as last year’s winter season there is anticipated to be “much less capacity on the market”, said Milena Milenkovic, regional airfreight manager, Benelux, Flexport. And this will drive rates up, she added.
Typically, the winter season, which starts in October, sees carriers decrease their capacity on the transatlantic trade. However this year, extra capacity will also be moved from the LATAM region and US-Europe into the Asia Pacific-Europe trade lane.
In July, Qatar Airways and Air France KLM Martinair Cargo announced they were moving freighter flights from the Latam market to capitalise on demand and rate spikes in Asia Pacific.
Less capacity means the potential for more fragility in the market. Any disruptions, such as geopolitical events might result in backlogs or spikes in the market, noted Milenkovic.
“The top carriers that are changing their freighter capacity from US to Asia is something that can change the cards on the market.”
She warned that shippers should look to lock in rates with forwarders before the beginning of the winter season contract.
Looking at transatlantic rates, Milenkovic stated that while rates on the e-commerce fuelled Asia-Europe lane during the summer season have remained stable and on the higher side, rates on the transatlantic trade are following seasonal trends.
“On the transatlantic lane it looks like we are having again the seasonality like we had before 2020,” she said.
Figures from TAC Index show that in July rates from Frankfurt to North America were down 9.9% year on year to $1.92 per kg.
However, prices have been picking up in August and are now in line with the year-ago figure at about $2.20 per kg.
Overall in the global market, e-commerce and high tech – which will see new product launches in line with the peak season – are propelling demand in the air cargo market, alongside the usual seasonal commodities.
This is largely down to increased airfreight demand due to Red Sea crisis ocean disruption and because there is reduced capacity towards some of the Middle Eastern countries, reflected Milenkovic.
The fourth quarter peak is expected to be strong with a “very high spot market with most of the existing capacity reserved by e-commerce”.
Global air cargo capacity on the other hand increased just 2% in July.
“This is very far from what has been forecasted. Until the end of the year this is what it’s going to stay,” said Milenkovic.
One of the reasons is because there are delays in the aircraft supply chain. Milenkovic explained: “The reason for this is there was a certain number of widebody aircraft that was ordered and was supposed to be delivered in 2024.”
