News / Sudden spike belies 'boring' transatlantic airfreight market

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On the face of it, transatlantic air trade between Europe and North America has been pretty steady – trade and tariff changes do not appear to have significantly impacted the lane.  

But recently, there has been a double-digit uptick on some destinations, in capacity – and rates. 

In the year so far, widebody and freighter capacity from Europe has risen 2%, year on year, while capacity fell 1% on North America to Europe, according to Rotate’s capacity database. 

As one UK-based transatlantic-focused forwarder put it, “it’s all rather boring and inane”. 

But if you drill down, there are some interesting spikes – and not in volatile US trade. US to Europe capacity fell 1% this year, while it was up 2% the other way. The real movement is between Canada and Europe. 

Last month, capacity from Canada to Europe jumped 14% month on month; Europe to Canada was up 16%. But it’s not all carriers: Air Canada and Air France-KLM added double-digit capacity, IAG stayed flat, while Lufthansa cut capacity by 4%. Athens, Edinburgh, Gatwick and Charles de Gaulle all saw heightened capacity – double or triple-digit growth – on Canada routes.

But as the capacity includes widebody passenger aircraft, it could simply be related to the holiday season, with Canadians looking for destinations outside the US. 

As Xeneta’s airfreight chief, Niall van de Wouw, said: “Canadians are avoiding the US like the plague; so perhaps more of them are flying to Europe for their holidays?” 

Rotate agreed: “We believe it’s mostly an increase in belly capacity due to the ramp up in holiday related schedules.”

Xeneta said it had not seen a rate rise, which could link the growth to cargo, and also cited 50% load factors, which raised doubt over cargo demand. However, Freightos Terminal shows a recent, and sharp, uptick in spot rates at the top of the range of rates.  

Rates between Canada and the UK saw a sudden spike at the end of June, according to the FAX, with the top range of spot prices nearly doubling to 7 July. Rates between France and Canada began to rise a week earlier, with the top rate hitting $6.85 per kg on 7 July.

Relations between Canada and the EU, as well as the UK, have strengthened in recent months as the US revealed itself to be an unsupportive and inconsistent trade partner, pushing other nations together. Last month the EU and Canada struck a security and defence partnership; while Canada ratified the UK’s membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and the pair launched a task force to extend their free-trade agreement. 

And an announcement this week, while not an airfreight partnership, shows corporate ties between the UK and Canada getting stronger: UK forwarder Davies Turner and Canada’s Manitoulin Global Forwarding announced a partnership to grow ocean freight services between the two countries. 

“It follows Canada’s agreement to ratify Britain’s accession to the CPTPP, which could lead to a surge in trade between the two nations and increased demand for freight and logistics services,” noted Davies Turner. 

Meanwhile Ireland, which exports pharmaceuticals to the US, which could be tariffed at 200%, has also seen an uptick in rates to the US since May, sharpening in July.

Data company Aevean also said today that year on year in April and May, Italy had exported by air 36% more to the US than a year earlier, with a focus on bags and shoes; the US imported by air an additional 49% from France (bags and pharma), while Norway had increased fish exports to the US by 57%. year on year.

Aside from these recent bumps, in general the transatlantic has been steady, with rates trending down as the summer season started, and with it ample belly capacity. 

The UK forwarder added: “Transatlantic is not great. Capacity is open and rates fairly stable, with a bit of reduction on spot pricing for larger movements – but certainly no collapse.  

“However rates are always imbalanced compared to the other main long-haul trade routes, especially in summer, simply due to the amount of flights and capacity on the summer schedules. It’s also the traditional ‘slack season’ now, so that has an impact. There is less cargo in the market.” 

He added: “There is certainly no fake spike due to the Trump effect being seen, although that’s not had a huge impact on Europe anyway in reality.” 

The forwarder suggested that airfreight rates may soften further.

“Ocean freight is having a torrid time, and rates are dropping there and softening rapidly – so this will undoubtedly be seen at some stage in air freight also.” 

While another forwarder suggested the transatlantic would improve for carriers and forwarders as capacity declined at the end of the summer season, there have been some doubts over whether air cargo will see a significant peak this year. But Virgin Atlantic, which is of course heavily exposed to North America, said it was optimistic for the second half. 

Mark Faulkner, head of cargo commercial, told The Loadstar: “We are optimistic about the outlook for the second half, having seen periods of strength throughout the summer. We are always talking to our customers and early conversations ahead of peak season further support this view.”