The last four years has seen the Air Freight market really take off. We saw demand significantly rise in 2016 and this strength in the market continued into 2017. The first quarter of 2017 has been one of the strongest in many years with demand from Asia both transpacific and to and from Europe being highest. The strong market this year has resulted in a rise in prices overall as well as volatility from week to week. These ups and downs make it a hard industry to negotiate and rate differences can feel incomprehensible.
Air Freight Rate Turbulence
In January we experienced exceptional demand in the lead up to Chinese New Year. Market volumes only slightly slowed down over the Chinese holiday period. Demand dropped back in February and March which in turn caused airfreight rates to fall, but only slightly. We finally saw a reasonable reduction in rates at the start of April – typical for this time of year.
The shipment by shipment turbulence is driven by fluctuation in volumes of air freight traffic as well as shipping-specific factors such as the size and weight and how urgently a delivery is required.
Other Factors Driving Rate Rises
- Union disputes within the UK’s largest handling agent and the rise in the cost of fuel has resulted in increases of around 5-10{1b1b9ce846acca1f39def03dae003274ac5660c9b015842d7bf5d85a3bcad6d8} applied to handling rates for air freight imports to all major UK airports.
- The rise in fuel costs has resulted in the return of fuel surcharge in March on all deliveries made from major UK airports. Most hauliers were no longer able to absorb the additional cost.
- Hauliers operating at London Heathrow have struggled to cope with huge demand and volumes in 2017, particularly during busy periods. Fluctuating volumes in 2016 has resulted in hesitation with hauliers to expand their fleets creating shortages at peak times. In turn, haulier costs rise, giving availability to the highest bidder.
In order to counter these issues PFE now routes most large shipments via Stansted airport. Stansted’s ground handling operation is better suited to handling spikes in volume than other major UK airports. We make use of our own European transport network to ensure there is always a vehicle available to collect your shipment even during busy periods.
Outlook
Look at previous years, we would expect both volumes and rates to increase from May onwards. However, the impact of Brexit has created uncertainty in UK Retail market, the influence of this is still unclear. Not only that but factors affecting the exchange rate, such as Brexit finally going ahead and an imminent Election, means that it is extremely difficult to predict which way the currency markets will go.
As always we will keep you updated as the year progresses on any further market changes.
Image Accreditation: “B767F†by Bernal Saborio via flickr / CC Sharealike-2.0. Image resized from original.
