Holiday season shopping season sees air freight rates going northwards

The coronavirus-induced COVID-19 pandemic is boosting up air freight rates as we head into peak Christmas shopping season. The pandemic, which caused a sharp fall in passenger flights, in tandem with rising demand for e-commerce has set the stage for a reduced capacity for air freights, thus lending support for an increase in air freight rates.

Dedicated air freighters have increased the number of flying hours to make up for the shortfall in passenger belly space, as a result of which quite a few airlines are running “ghost flights” – without passengers – tapping into the attractive cargo rates. Despite this, according to experts, there is a big gap between capacity and demand, which continues to remain mismatched.

“There is a 20% gap on the capacity front,” said Marco Bloemen, cargo advisory lead at Accenture’s Seabury Consulting, comparing capacity to last year.

“Flights are very full on most freight lanes.”

He went on to add, limited capacity at higher price point will mean, more expensive technology and fashion items would receive higher priority for air shipment compared to lower value items.

Last week, Deutsche Post’s DHL Express stated, it expects a significant rise in online shopping and shipping volumes during peak holiday shopping season, with shipment quantity levels being more than 50% above last year’s levels.

With high demand on trans-Pacific routes, major Asian airlines are also benefiting from strong cargo demand, although this does not sufficiently offset revenues from lost passengers.

Last month, Hong Kong’s Cathay Pacific Airways Ltd stated, it was operating at peak season levels, and has stepped up services on trans-Pacific routes and has added cargo-only passenger flights to meet strong demand.

The rise in demand has resulted in a renewed surge in air freight rates, which incidentally peaked in April and May, when passenger capacity bottomed out and there was unprecedented demand for masks and other protective gear. “Although off their respective peaks, freight rates across all major routes remain significantly above historical levels, a trend we believe has staying power as passenger airline belly capacity remains largely out of the market,” said Helane Becker, an analyst at Cowen in a note to clients.

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