Coronavirus, capacity and US air freight rates


The Ti Dashboard records the US air freight rates index from the US Bureau of Labor Statistics. The impact of the Coronavirus on US air freight rates can be seen on the dashboard charts below, the unprecedented spikes in the first few months of 2020 demonstrate how drastically the cost of air freight rose and continues to do so. The issue of capacity has been the root cause of rocketing rates mainly because of the halt in passenger travel whilst initially demand remained steady. Cargo compartments of passenger flights typically carry 55% of all goods sent by air but in April cargo capacity declined by 42.0% year-on-year, according to IATA, putting significant pressure on the cost of trade.

The first chart shows the US outbound air freight index and is relatively uneventful up until the obvious peak. The USA-Asia line has fluctuated considerably more than the other two in the last four to five years, likely attributable to trade tensions. The main feature is the enormous increase at the point the Coronavirus pandemic hits the world. As expected, the highest point represents USA-Asia rates. In February, the index reached 227.3, 59.0% higher than the month before and 61.8% higher than the same month in 2019. Cargo capacity slumped and export orders collapsed as Asian countries began lockdown and prohibited air travel, causing rates to soar around the world. The freight forwarder, Agility, commented, China’s outbound air cargo capacity was down 39.0% in February compared to last year as a result of the passenger flight cuts.












Source: BLS/Ti Dashboard

However, in March, just as the virus began affecting the US, rates to Asia fell (152.2). The Asia Pacific region began to restart around the same time the US and Europe began lockdowns. The lack of demand from Asia led to the rates dropping. Yet, from March to April there was a continued rise for Europe as well as overall but a plateau has now formed from April to May.

Unlike outbound, the inbound rates took until April to spike but have continued on an upward trajectory. As mentioned before, the pandemic started impacting the US later, by March capacity was already cut by 22.7% year-on-year and rates were 32.7% higher than February as the lack of capacity intensified due to passenger flight cancellations across the world. By May, a shipper had to pay around CNY70 ($9.87) to send 1kg from Shanghai to the US or Europe, more than four times the pre-Coronavirus rate.












Source: BLS/Ti Dashboard

This is only telling a part of a much wider story regarding prices and the cost to the air freight industry and for global trade more broadly, in the time of Coronavirus. What is already clear is the huge increase in rates shows the flaw in the industry of its reliance on bellyhold cargo.

Source: Transport Intelligence, June 18, 2020

Author: Holly Stewart