Ceasefire provides short-term relief for air freight sector

The recent ceasefire between the USA and Iran could lead to a short-term relief in the air freight sector. However, analysts from Xeneta estimate that a complete return to pre-conflict capacities and prices will take another one to two months.

Following the conflict, there were significant restrictions in the airspace over the Persian Gulf, which forced many airlines to ground their aircraft and reduced capacities on key freight corridors. This resulted in a drastic increase in freight rates, particularly on routes from Southeast Asia to Europe and from South Asia to Europe.

Niall van de Wouw, Chief Airfreight Officer of Xeneta, explains: “This has been a supply issue from the start. Once airlines begin to increase flights through the airspace of the Middle East, the pressure on existing capacity will decrease, leading to a drop in rates.”

The return of air freight capacities on these corridors could benefit shippers who continue to face significant disruptions in maritime supply chains, whose recovery could take considerably longer.

According to data from Xeneta, spot prices for air freight rose by 105% on the route from South Asia to Europe in the week ending April 5. Rates from Europe to the Middle East also increased by 87%, from South Asia to the Middle East by 84%, from South Asia to North America by 82%, and from Southeast Asia to Europe by 72%.

Falling jet fuel prices could exert additional pressure on freight rates. However, van de Wouw warns that rates will not fall as quickly as they rose, and a complete return to service levels prior to the conflict is expected to take one to two months.

“Even when it is deemed safe to fly, rebuilding the infrastructure takes time. Customers need to find you again and build trust. Insurance companies may continue to advise against flying through these Middle Eastern hubs despite the ceasefire,” says van de Wouw.

Airlines will not rush to lower rates, as the ceasefire is only temporary and the geopolitical situation remains uncertain. Shippers will also not make quick decisions about route changes based on a fragile two-week ceasefire, especially after Iran closed the Strait of Hormuz again just hours after the announcement of the agreement.

Van de Wouw emphasizes that passenger confidence is a crucial variable for the recovery of air freight in the corridors of the Middle East. “Gulf carriers like Emirates and Qatar Airways operate some of the world’s most important air freight networks, but these networks rely on passenger revenues. If tourists‘ confidence in Middle Eastern destinations takes time to recover – even after the ceasefire – airlines may operate their routes below sustainable passenger load factors and reduce network capacity accordingly,” he explains.

The question of whether airlines will maintain their routes or reduce their networks based on demand is critical for the short-term recovery of air freight.

www.xeneta.com