Persistence of high India to Europe air cargo rates expected

The India-to-Europe air cargo market has seen a significant surge in volumes this year, mainly driven by increased demand for apparel exports from India and Sri Lanka. This rise coincided with disruptions in ocean freight services in the Red Sea region, prompting some shippers to switch to air transportation.

According to the latest Xeneta report, this increase in air cargo volumes led to a 40% rise in overall air cargo demand in the week ending 25 February compared to the 2019 weekly average. Though volumes have slightly decreased since then, they remained 24% above the 2019 weekly average by the week ending 24 March.

With cargo capacity remaining stable, the dynamic load factor from India to Europe reached 87% by the week ending 24 March, its highest level since April 2022. This increasing load factor has affected the traditional relationship between weight breaks, with larger cargo volumes being charged at higher rates per kg than smaller volumes.

Seller’s market

The current market conditions have turned India to Europe air freight into a seller’s market, as seen in the soaring rates sold by airlines. For instance, the average spot rate stood at USD 3.50 per kg by the week ending 24 March, a 158% increase from early December rates before the Red Sea conflict.

The recent spike in airline-sell rates has also affected air shipper rates, albeit to a lesser extent. While shipper rates have increased by 7% compared to three months earlier, this rise pales in comparison to the 152% increase in airline-sell rates during the same period.

The conflict in the Red Sea region has significantly impacted ocean freight container services between India and Europe, leading to a surge in ocean containerized spot rates. Despite a slight decrease since February, ocean spot rates remain substantially higher than pre-crisis levels, indicating ongoing challenges in the ocean freight sector.

The slight dip in air cargo demand since February could be attributed to ocean freight shippers adjusting to longer transit times in their supply chains. However, the situation remains uncertain, and some shippers may continue to opt for air freight for urgent cargo.

Economic indicators

In addition to the Red Sea conflict, recent economic indicators suggest underlying demand growth, particularly in India’s production and export orders, which could further drive up air cargo demand.

Despite the upcoming launch of summer schedules by airlines in Europe, India-to-Europe air cargo rates are expected to remain elevated in the near term. Given the unpredictability of global events, monitoring both ocean and air freight markets is crucial for building resilience in supply chains and optimizing costs.