Today’s blog comes from Cargo Facts‘ European Editor, Alex Lennane. It is excerpted from the “European Perspective” column that will appear in the June issue of Cargo Facts. Those of you who do not already subscribe to the the monthly printed Cargo Facts newsletter, and its companion the weekly emailed Cargo Facts Update, can click here for more information.
Air freight carriers have cut main-deck capacity between Europe and Asia but this has failed to increase rates.
European carriers are slashing capacity to Asia in a bid to stem losses and tighten rates. Air France-KLM revealed that it is implementing “capacity discipline” with “overcapacity particularly true concerning Asia.” Some services are said to have been cut altogether from Hong Kong, where rates have been “tough” for some time, according to IAG Cargo’s MD Steve Gunning.
Nikolas Dombrowski, Product Director Airfreight for Geodis Wilson in Germany confirmed that “some carriers have reduced their freighter frequencies, but at the same time new belly capacity is coming into the market. Not on all, but on many trades capacity is still not an issue and in particular from Hong Kong and Shanghai rates are still at a very low level.”
Rates out of Europe, where Germany continues to enjoy a strong export market to Asia, are stable. “Demand ex-Europe to Asia is constantly high, but surprisingly airlines are still not able to significantly increase their rates after reducing capacity.”
Dombrowski explains that despite tightened capacity, the market remains “extremely competitive” and that it’s not yet “tight enough to get rate adjustments through”.
Exports from the UK, meanwhile, have “definitely tailed off” reports a UK forwarder. “The market will be all about capacity rather than volumes,” he says. “Retail is down significantly, and no one is replenishing stock by air. Maybe in the last quarter, something will happen. Or perhaps this is the new norm.”
Industry predictions that the market will pick up in the second half seem unlikely to come to fruition, although the market has stabilized. Carriers are said to have redeployed aircraft to Brazil, which has put downward pressure on rates on those trade lanes to Europe.
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