India-Europe Air Freight Rates Soar as Shippers Flock to Airways

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The India-to-Europe air cargo market has experienced a notable uptick in volumes this year, largely fueled by escalating demand for apparel exports from India and Sri Lanka. This surge coincided with disturbances in ocean freight services in the Red Sea region, prompting several shippers to transition to air transportation.

According to the latest findings from the Xeneta report, this upswing in air cargo volumes resulted in a 40% increase in overall air cargo demand for the week ending 25th February compared to the weekly average of 2019. Although volumes have tapered slightly since then, they remained 24% higher than the 2019 weekly average by the week concluding on 24th March.

Despite stable cargo capacity, the dynamic load factor from India to Europe soared to 87% by the week ending 24th March, marking its highest level since April 2022. This escalating load factor has disrupted the conventional relationship between weight breaks, leading to higher rates per kg for larger cargo volumes.

Present market conditions have transformed the India-to-Europe air freight sector into a seller’s market, evident in the steep rates set by airlines. For example, the average spot rate reached USD 3.50 per kg by the week ending 24th March, marking a 158% surge from early December rates prior to the Red Sea conflict.

The recent surge in airline-sell rates has also impacted air shipper rates, albeit to a lesser degree. While shipper rates 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 Red Sea conflict has significantly disrupted ocean freight container services between India and Europe, resulting in a spike in ocean containerized spot rates. Despite a slight decline since February, ocean spot rates remain substantially higher than pre-crisis levels, signaling persistent challenges in the ocean freight sector.

The slight downturn 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, coupled with the Red Sea conflict, suggest underlying demand growth, particularly in India’s production and export orders, which could further bolster air cargo demand.

Despite the forthcoming launch of summer schedules by European airlines, India-to-Europe air cargo rates are anticipated to remain elevated in the foreseeable future. Given the unpredictability of global events, vigilance in monitoring both ocean and air freight markets is essential for fortifying resilience in supply chains and optimizing costs.

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