Disruption to supply chains has continued throughout August with manpower shortages and related congestion at China and US ports driving increased sea freight costs and continued short-term modal shift to airfreight. Demand continues to be strong as economies recover and restrictions are eased with airline passenger operations ramping up so that belly hold capacity is increasing on many lanes but cargo-only opportunities are reduced.

The index finished the month at 3,529, which is the highest level of the year and the highest the index has been since May last year.  This final week level is +49% versus the equivalent week in 2020 and 142% versus 2019.

The BAI monthly average increased by 7% in August over July and was up 37% versus 2020 and 117% versus 2019.  The index finished the month at 3,529, which is the highest level of the year and the highest the index has been since May last year.  This final week level is +49% versus the equivalent week in 2020 and 142% versus 2019.  14 of the 17 trade lane indexes strengthened through the end of August with flows ex Heathrow and Frankfurt to the US showing declines.

The differences by market in the airfreight indices are detailed below.

CN/HK Markets

  • Both the China and Hong Kong markets saw an improvement in August over July of 7% and 13% respectively and both continued to show gains of ~50% versus last year. All the trade lanes from these markets were positive over July.
  • Both indices (BAI31 & BAI81) to Europe saw month-on-month improvements, 2% and 10% respectively, with the PVG market particularly strong. 
  • This difference by market was also reflected on flows to North America with HKG +7% versus July levels whilst PVG was double this +14%.
  • Hong Kong to Southeast Asia (BAI33) continued its recovery since the 4% decline seen in May with August +11% versus July.

US Market

The market ex Chicago saw contrasting performance to Southeast Asia and Europe.

  • ORD – EUR (BAI51) was down 4% versus last month and down 9% versus 2020.  However, the latest index was still positive versus 2019 by 70%.
  • ORD – SEA (BAI53) was up 10% versus July and 26% higher than last year with a modest 14% growth versus 2019.

EUR Markets

The European market continued to see a mixed performance by lane.

  • FRA – US (BAI24) was negative versus July and last year at -4% and -2% respectively. 
  • FRA – SEA (BAI23) was up by 9% over July and 3% versus 2020 whilst FRA – China (BAI25) was +5% and +20%.
  • LHR – US (BAI44) was down a modest 1% versus July, up 46% versus 2020 and, up a huge 400% versus 2019.
  • LHR – SEA (BAI43) was up 7% on July and 30% versus 2020.

SEA Market

SIN to SEA (BAI63) fell for the third month running but at half the rate of the two previous months at -2% and was flat on last year. The latest level was still up by 104% versus 2019.

In summary, air freight prices strengthened in most markets and overall, the index was at its highest level since the week ending May 25th, 2020.  Prices continue to be strong versus last year and pre-pandemic levels. This is driven by the demand and supply imbalance and is expected to continue as we move into the traditional peak period for air freight.

 

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.