Air freight hits 3-year low, passenger demand adds needless capacity

THE plunge in air freight rates is being driven by a continued contraction in global demand" and is not helped by a robust passenger market that adds surplus bellyhold capacity, says Drewry's Airfreight Price Index.

The monthly index averages rates across the westbound Asia-North America and westbound Asia-Europe trades using the November 2008 average as the 100 level benchmarking point.

"Air freight remains a buyer's market," said Drewry freight rate research Manager Martin Dixon. "We expect rates to remain weak for the remainder of the year, but there will likely be some recovery in the fourth quarter."

Air freight traffic remained largely flat through 2011 and has been declining since, falling to its lowest level in nearly three years, said the shipping consultants report.

"It is dependent on high value, time-critical products which have suffered as cash-strapped Western consumers have tightened their belts as the economic outlook has darkened," said the report.

The index hit 109.8 in March, the 2012 peak, driven by Apple's new iPhone launch. That short-lived boost was undermined by timid pricing. In June, the index fell 18 per cent, its lowest point since August 2009 during the global economic downturn.

Cargo overcapacity has also been aggravated by the availability of bellyhold cargo space brought about by a robust passenger market, which offset reductions in all-cargo freighter space, said Drewry analysts.

"Both Asia-North America and Asia-Europe trades have experienced similar degrees of rate erosion. There is some variation between specific airport-to-airport routes but the rate of pricing erosion has been consistent across the two main trades, said Drewry freight rate research manager Martin Dixon.