News / Tight capacity and rates surge could mean you must 'pay to play' in airfreight as strike continues

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Airlines and forwarders will be asking if the potential short-term financial gains from today’s increased market volatility are worth jeopardising customer relations.

Releasing its September rates report two days into the largest strike to hit US east and Gulf coast ports in close to half a century, Xeneta notes that last month was the first this year in which airfreight did not experience a double-digit volume bounce.

And chief airfreight officer at Xeneta Niall van de Wouw said: “September is already old news. October is a whole new ballgame.

“We could see rates rise very quickly on some trades, because of FOMO (fear of missing out) as cargo capacity leaves the market for the winter, US dockers go on strike and conflict is escalating in the Middle East, potentially bringing further Red Sea disruption for ocean freight.”

While not hitting double digits, the 9% demand bounce in September – against a strong year-on-year comparison – is indicative of the strength in the present market.

Persistently strong ecommerce demand, the ocean-to-air shift brought about by disrupted box shipping, strikes, Red Sea crisis, typhoons and the rush ahead of China’s Golden Week holiday, which began yesterday, were cited as behind the strong market.

Xeneta noted that, against the backdrop of strong demand, supply grew at its slowest rate this year, up only 3% year on year, as airlines begin their winter flight schedule adjustments.

For shippers, those adjustments could be coming at the worst possible time, with suggestions that in response to low passenger demand, carriers could see their capacity across the Atlantic reduce by as much as 20%.

“The rules that have been agreed mean there’s less room for the temptation of large rate increases during a hot peak,” continued Mr van de Wouw.

“But we do see a piece of the market where you’ve got to ‘pay to play’, and that could become a potential ‘wild west. Shippers or forwarders may end up caught in that due to unforeseen demand, and it could be an expensive game.”

Should the US strike persist – some have suggested into next year, or run for a week or two – US-Europe routes may see a rates surge.

Metro Shipping has estimated that each strike day produces five to 10 days of cargo build-up, making airfreight ever more attractive to shippers looking to avoid the disruption this will bring.

“This shift will put additional pressure on an already-strained air freight market, with capacity tightening and rates rising,” Metro said in a customer update.

“Rates on routes from Asia to the US and Europe have already risen, robust demand for ecommerce and traditional cargo lifted load factors to almost 90% in September, with demand expected to strengthen further ahead of Black Friday and Cyber Monday.”

Nor is the trend limited to just those routings, Metro points to it mirroring the situation across key Asian markets, amid both strong demand and disruption caused by typhoons kin the region.

The forwarder noted that “massive ecommerce volumes” from Asia were already tying up 150 freighters every day, which has the potential to leave conventional shippers, particularly those in automotive and in retail, struggling to secure much-needed capacity.

Mr van de Wouw added: “I have huge respect for the people who, on a day-to-day basis, are trying to make sense of these challenges and keep the world moving in an efficient manner.

“How much more can the market take, particularly with so little visibility going forward? Reports suggest supply chains could take four to six weeks to recover from just a one-week US port strike, which takes us into November, the busiest month of the year for air cargo.

“It’s a difficult situation. Covid was worse, but this is an accumulation of many events and things can change very quickly. FOMO is a powerful force,” he said.

Without the strike, Xeneta’s analysis indicates that load factors would likely sit below 65%, even accounting for the removal of the surplus summer capacity, but in these “tough conditions”, Mr van de Wouw suggested the market could see a tripling of rates for those goods that “absolutely need to be shipped” during the strike.