The headline catching attention – congestion and its impacts on demand, price, transit, and urgency has shifted over from the container market into the airfreight market. This is a bit of a half-truth given congestion in ocean freight still remains extremely problematic. However, the opening up of travel corridors last month saw airlines such as Southwest Airlines ditching standard cargo bookings in favour of Next-Flight Guaranteed (NFG) shipments. In Heathrow, congestion sees cargo being left on the tarmac and anecdotally spiking spot prices, even with the increased capacity available from more passenger flying. Despite this, BAI Europe-North America prices have remained characteristically flat, beyond a bit of noise in the rates, BAI44 LHR to USA ticking up $0.01/KG only after climbing $0.62/kg in 22 November.

Asia to Europe saw rates starting to come off following a second peak within 4 months through November – BAI81 PVG to Europe slipping back $0.53/KG or 6.73% since 15 November as demand passed through from substantial Sea-Air conversions causes the rates to pull back.

Asia to Europe saw rates starting to come off following a second peak within 4 months through November – BAI81 PVG to Europe slipping back $0.53/KG or 6.73% since 15 November as demand passed through from substantial Sea-Air conversions causes the rates to pull back. However, this physical market picture is by no means as straightforward. Charters continue to dominate these routes, with volatility and costs resulting in the breaking of fixed-price contracts on the Asia outbound trades. Cathay Pacific is even moving to implement General Rate Increases (GRIs) on BSA capacity, borrowing an often unpopular market mechanism from the container freight sector.

And with the prevalence and development of the new Omicron variant of COVID,,the potential rapid spread of this variant has shut down open travel corridors. This has sunk the price of oil as forward consumption of Jet Kerosene goes down as airlines pull back on flying, with Brent Crude February 2022 futures slipping -14.13% since 27 October. All of this paints a convoluted picture for the 2022 market, with oil prices slipping, capacity potentially dropping back once again and a lot riding on the development of the new COVID variant.

 

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.