Be careful what you wish for…

Two recent news items caught my eye. The first was a Journal of Commerce piece quoting The Drewry Air Freight Price Index for April. Drewry, a UK-based shipping consultancy, tracks ex-Shanghai air freight rates, and their index showed an 18.4% month-over-month jump from March to April. Rates are still not quite as high as they were in December 2009, but the April figures represent a high point for 2010, and a 64% increase over April 2009.

The second item was a report appearing in various Asian media saying shippers and forwarders in the region were calling on airlines to increase capacity by bringing parked freighters back into service because air freight rates had risen between 30% and 50% this year.

Whatever the number – whether rates are up 20% or 30%, or even 50% over what they were a year ago – it has to be remembered that a year ago carriers were losing money with every shipment they carried. It is understandable that shippers want to pay less to move their goods, but if they got their wish and rates did return to year-ago levels, there would soon not be an air freight industry. Where would they be then?

There has to be a balance. Carriers have to have sufficient profit to make staying in business worthwhile, but rates must be low enough that shippers can actually afford to ship by air. There will never be a perfect equilibrium, but to wish for rates to return to an unsustainably low level is foolish.