Another year is underway with Covid storm clouds causing disruption to supply and demand in logistics, with manpower shortages resulting in difficulties at international airports.  Despite the continued disruption, rates have decreased from the high levels seen in December.

The BAI index average of 4,095 for the month of January was a decrease of 17% on December but +47% versus 2021 and 171% increase over the same period in 2020.  

The BAI index average of 4,095 for the month of January was a decrease of 17% on December but +47% versus 2021 and 171% increase over the same period in 2020.  Only two of the 17 lane indices saw an increase over December, flows to Southeast Asia from Singapore and London.

The differences by market in the air freight indices are detailed below.

CN/HK Markets

China and Hong Kong markets both saw declines versus December at 27% and 17% respectively.  Both continued to show strong gains versus last year at +54% and 70% and exceptional growth versus 2020 (200% and 199%).  Shanghai’s capacity continued to be constrained due to covid restrictions.

  • The indices (BAI31 & BAI81) to Europe saw similar results month on month with China -24% whilst Hong Kong was -17%. 
  • Both markets saw strong declines to North America with HKG -14% versus December levels whilst PVG was -27%.
  • Hong Kong to Southeast Asia (BAI33) rates declined by 7% versus December.

US Market

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

  • ORD – EUR (BAI51) was only down 1% versus last month, down 3% versus 2021 and +80% versus 2020.
  • ORD – SEA (BAI53) was down 12% versus December, 62% higher than last year and 39% growth versus 2020.

EUR Markets

The European markets continued to see mixed performance in January by lane whilst overall both were negative versus last month, FRA was -11% whilst LHR had a much smaller decline at -2%.

  • FRA – US (BAI24) was -12% versus December, 6% on last year, and +168% versus 2020. 
  • FRA – SEA (BAI23) was -4% over last month and 51% versus 2021 whilst FRA – China (BAI25) was -16% and +77%.
  • LHR – US (BAI44) was -8% versus December, up 4% versus 2021, and up a huge 351% versus 2020.
  • LHR – SEA (BAI43) saw +6% improvement month on month and was up 53% on 2021.

SEA Market

SIN to SEA (BAI63) continued its erratic behaviour with January’s average level up by 14% versus last month, 13% on 2021 and 108% versus 2020.

Against expectations, rates have fallen significantly in the period up to Chinese New Year despite air freight backlogs from December and inventories being restocked.  

In summary, the air freight index started the year up 47% on the previous year’s equivalent period but down on the December peak.   Against expectations, rates have fallen significantly in the period up to Chinese New Year despite air freight backlogs from December and inventories being restocked.  With the Omicron variant not being as severe as originally expected, travel restrictions are being relaxed although demand for international passenger flights is expected to be subdued throughout 2022.  Air freight rates are expected to stay at levels significantly above pre-pandemic levels for some time whilst supply and demand continues to be impacted by the impact of the virus.

 

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.