News / Air cargo in new balancing act as rates ease and fuel costs climb

Photo: © Grzegorz Tuszyński

Air cargo carriers are facing an increasingly challenging market, with spot rates beginning to cool, but amid surging fuel prices, geopolitical disruption, and selective capacity deployment. 

The latest Baltic Air Freight Index fell 3.1% in the week to 20 July, led by weaker outbound pricing from Asia and Europe. Hong Kong outbound recorded the steepest decline, down 6.3% week on week, while Frankfurt fell 5.2%, Shanghai slipped 1.1%, and Singapore eased 0.6%. 

Nevertheless, the index is still 17% higher than a year ago overall, with Shanghai up 23.9%, Chicago +29.7% and Singapore +29.8%, suggesting the market is cooling from the exceptionally strong first half, rather than entering a widespread downturn. 

TAC Index lane data to mid-July shows softer pricing across many of the key Asia-Europe and Asia-US tradelanes. China-Europe rates fell 5.8% week on week, China-US slipped 3.9%, Hong Kong-Europe declined 4.8%, and Hong Kong-US eased 3.6%. Vietnam recorded some of the sharpest falls, with rates to Europe down 8.8% and to the US down 13.3%. 

But not every market is moving in the same direction. India continues to outperform, with Europe-bound rates broadly unchanged while India-US rose 6.5%.

Europe-US also bucked the wider trend, rising 7.1% week on week, while Europe-UAE edged higher and remains almost double its level of a year ago, as geopolitics distorts parts of the market. 

Capacity data paints an equally mixed picture. According to Rotate, global freighter capacity increased just 1% week on week to 23 July, suggesting airlines are becoming increasingly selective about where to deploy it. 

Some of the sharpest reductions were on Middle East-linked routes, including Hong Kong-Dubai, Dubai-Liège, Hong Kong-Bahrain, and Bahrain-Liège, reflecting continuing regional instability. 

Forwarder Forto said: “Despite increased global capacity, available cargo space continued to vary considerably by route. Airport bottlenecks and airspace restrictions, resulting from tensions in the Middle East, limited capacity on some routes, forcing airlines to reroute services and reallocate aircraft.” 

Christopher Braun, Forto’s director freight, added: “The modest increase in global capacity should not obscure the fact that cargo space remains very unevenly distributed. 

“For shippers, the global average is less important than whether sufficient capacity with the required service level is available on the specific tradelane they need, at the right time. Early bookings and flexible routing remain the best protection against capacity shortages and sudden price spikes.” 

Airlines are shifting capacity: Etihad Cargo this week announced a second weekly freighter service to Paris Charles de Gaulle, citing continued demand for pharmaceuticals, perishables, and specialist cargo, while Cathay Pacific postponed the planned resumption of its Riyadh freighter service, as the Iran crisis deepens. 

Chinese airlines were among the week’s biggest capacity gainers, with China Airlines, EVA Air, China Cargo Airlines, and SF Airlines all increasing freighter activity, while Europe and North America also recorded modest gains. 

At the same time, airlines are facing renewed cost pressures. Cathay Pacific announced higher cargo fuel surcharges from 1 August after jet fuel prices surged. The latest IATA jet fuel monitor, covering the week ending 17 July, showed the global average jet fuel price jumped 17.6% week on week, to $149.40 per barrel.  

Despite short-term headwinds, the annual Farnborough International Airshow demonstrated continued confidence in the longer-term outlook. MSC Air Cargo placed an order for five 777-8 freighters, while Alaska Airlines confirmed plans to effectively double its dedicated freighter fleet capacity next year with four additional 737-800 converted freighters. 

Elsewhere, DSV expanded its dedicated air network with a new scheduled Rockford-Incheon freighter service, with Chennai due to follow later this year. In Latin America, Azul announced four more A321 passenger-to-freighter conversions to expand its regional services, while UAE-based SolitAir secured UK regulatory approval as it prepares to grow internationally. 

The week’s developments suggest an industry balancing competing forces. Spot rates are easing from elevated levels on some tradelanes, fuel costs are rising again, and airlines are redeploying capacity as geopolitical tensions continue to influence network planning.  

But carriers are still ordering freighters, opening routes, and investing in long-term growth, suggesting that demand for air cargo will remain strong, despite the increasingly volatile operating environment.