News / Peak season nervousness as air freight volumes start to decline

© Andrii Yalanskyi

Air freight volumes fell on one transatlantic route last week, suggesting airlines are in for a tough fourth quarter, if current demand analysis is correct. 

It’s a confusing time for carriers and forwarders alike in air freight. This year’s persistently soft market shows little sign of rebound, and there are few signs of a strong peak on the way.  

Last week saw volume declines of 5-10% on Europe to North America, the first week-on-week fall after five consecutive weeks of growth. Nevertheless, weekly volumes remain 5-10% higher than at the end of August. 

North America to Europe was roughly flat last week over the previous week, and volumes are at much the same level as they were coming into September. 

Golden Week, last week’s Chinese holiday, saw volumes out of China fall between 25% and 30%, week on week, “an expected fall,” said one analyst. 

“Confusion sets in on entry into Q4, as to whether carriers should be boosting or dumping prices,” said Peter Stallion, of Freight Investor Services (FIS). “China to Europe starts its late climb, with prices at around 11.5% below 2018. 

“In simple terms, there don’t appear to be too many surprises on the horizon for the China to Europe tradelane that could cause price surges. However, the market still can’t gauge the shape of the Q4 peak period.  

“Conversely, China to US is uncharacteristically flat, a trend that is somewhat dangerous, given that an increase in transpacific volumes will violently affect the air freight rate.” 

He said carriers would suffer.

“Asset owners such as carriers will be the ones to lose out the most in Q4 this year, given the deficit in revenue they are already carrying over from Q2 and Q3.” 

Meanwhile, the forward curve, as set out by FIS, suggests a mild rise in air freight rates for Asia-US in November, followed by a swift decline, while the “peak” comes later for Asia-Europe. 

However, Mr Stallion put a caveat on the forward curve.

“Rate spikes are generally in line with how prices and time-to-market has historically worked for air freight goods. A lot of our chart data is freight forwarders weighing their opinion, which is typically derived from what has already happened rather than what will happen.” 

For charter brokers and European carriers, a no-deal Brexit might be the only hope for a decent fourth quarter – but whether that happens is still anyone’s guess.