Jet fuel fears recede, but air cargo settles into a higher-cost era

The air freight market appears to be moving out of its acute crisis phase, with capacity recovering and fears of a near-term jet fuel shortage receding, although rates remain far above pre-conflict levels and tradelanes continue to shift.

The global Baltic Air Freight Index fell 4.9% in the week to 18 May, although it remained 30.4% higher year on year. TAC said the fall followed a short-term drop in jet fuel prices, by about 10% in early May, though prices remain roughly 80% higher than a year ago.

Freightos data points to the same trend: the panic phase has passed, but pricing has not normalised. Its global air index has continued to trend well above pre-crisis levels, while the Southern Asia-Europe lane, which was around $2.40/kg before the conflict, surged above $5/kg in April and has since eased only partially, settling around the low-to-mid $4/kg range by 20 May.

Global trade patterns were continuing to shift, with more production moving into South-east Asia and India. The shift is being reinforced by the nature of cargo demand.

Pricing remains historically high, with Heathrow outbound rates, for example, still more than 40% above last year. The market is, therefore, not returning to normal so much as adapting to a new environment. Refineries in Europe, the US, and West Africa have shifted output towards aviation fuel, while airlines have rerouted networks, cut weaker services and concentrated capacity on higher-yield corridors.

Source: theloadstar.com