Air freight prices surging in a “perfect storm”

AJ Gonzalez | August 31, 2020

Flexport Blog, MarketPlace, Sabri Ben-AchourMar 24, 2020

The price of air freight internationally is on the rise and commercial passenger airlines are trying to keep up with the demand for air freight.

“Along the London-to-U.S. lanes, [up] 128%, and along the Frankfurt-to-U.S. lane, a 109% increase over the last week,” said Peter Stallion, a freight derivatives broker at FIS. If you wanted to charter your own cargo jet, you used to be able to do it for $250,000 dollars. Now? It costs more than a $1 million. One way.

“The prices have surged because the capacity on passenger airlines is no longer running,” Stallion said.

On a lot of international flights, passenger jets are carrying cargo, too. Usually, 80% of transatlantic cargo travels this way, but those passenger flights have all but evaporated. At the same time, demand has ramped up; for example, for medical supplies.

Calling this moment a “perfect storm,” Neel Jones Shah, executive vice president for Flexport, an industrial shipping company, said passenger airlines are taking advantage of surging prices and adapting.

“Most of the major airlines around the globe are all offering what they call ‘mini freighters,’” Shah said.

Loading up passenger planes with cargo is not an easy thing to do, physically or economically. Samuel Engel, senior vice president at ICF in the aviation consulting group, described air freight as “directional.” There’s a lot more air freight that comes into the U.S. from China, for example, than the other way around.

“What you’re asking is to use half of the plane, largely in one direction, to cover the costs or profit that would have been covered by the whole plane in both directions,” Engel said. “That’s a tall ask.”

For now, though, prices are high enough for that to work.

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