News / Air freight rates expected to hit $10/kg – but Atlas keeps aircraft grounded

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Forwarders are anticipating ad hoc air freight rates of $10 per kg, as shippers become desperate to release goods from China with little or no belly capacity.

One Chinese forwarder said he expected a 777 or 747 aircraft to soon cost $1m, or $10 per kg, and spot rates have already increased twice in the past couple of days, by Rmb10 ($1.43) or more per kg to Europe.

“We do expect a possible third increase towards the weekend,” he added.

He said there were some charter possibilities, with carriers such as  SF Airlines, AirBridgeCargo and China Southern, but he said airlines would not hold the rate, and were quoting for each shipment on each flight, at a rate which could change before the cargo even got on the aircraft.

Despite having a shipment confirmed last week, overnight the forwarder was told to pay an additional Rmb6 per kg if he wanted it uplifted on schedule.

“We can only take cargo from those customers who understand the tricky situation that everything is beyond our control, basically.”

He added that airlines were looking for full chargeable weight and that volumetric cargo was “not a priority” for airlines.

One European forwarder added that rates today were already some $6 or $7 per kg: a “global phenomenon”.

He added: “Demand is through the roof. And supply is not increasing as carriers, if anything, are reducing further the scheduled passenger flights from Chinese gateways, especially in the north, around Beijing.

“The market is going very much one way – I reckon rates could hit $10 per kg by the end of the week.”

The news will have investors – and the market – asking why Atlas Air has not returned its four parked freighters to operations.

In its earnings call on 20 February, chief executive John Dietich said: “The demand has not been there for those aircraft, so we elected for the 747 converted freighters to be temporarily parked.”  In response to investor questions, he added that the lead time to get at least one aircraft back was as little as one week.

“It could range anywhere from a week to 45 days, depending on the status of the aircraft, depending on the status of the engines, when it’s due for certain maintenance. There is no single answer to that, but there are a couple of aircraft that we would hold out that could move pretty quickly back online if we need them, and probably the other two, a little bit more lead time in that 30 to 45-day time period.”

Atlas Air told The Loadstar it “had no comment at this time” on the freighters, but none of the four appears to have been brought back into operations, according to flight tracking websites. Pilots indicated on social media that Atlas did not have the crew to operate them, although this has not been confirmed.

It could, of course, be that bringing back the freighters will take too long, or be prohibitively expensive – although it could be argued that there could not possibly be a better time to return them to service.

The European forwarded noted that, while at the moment demand is “exceeding supply massively”, this could change.

“The market may slow if the world goes into isolation and people stop shopping. If there aren’t shoppers, then there isn’t demand, and supply becomes balanced.”

Intra-Asia sea freight, meanwhile, is “all OK”, with no issues on capacity or departures. The current demand for intra-Asian lanes is for manufacturing parts going to South-east Asia, but that is expected to cool through the month.