Air Freight Rates Soar between India and Europe as Shippers Flock to Airways

The air cargo market from India to Europe has seen a significant increase in volumes this year, largely due to rising demand for apparel exports from India and Sri Lanka. This surge coincided with disruptions in ocean freight services in the Red Sea region, leading many shippers to switch to air transportation.

According to the latest Xeneta report, this rise in air cargo volumes resulted in a 40% increase in overall demand for air cargo for the week ending February 25th compared to the weekly average of 2019. Although volumes have slightly decreased since then, they remained 24% higher than the 2019 weekly average by the week ending March 24th.
Despite stable cargo capacity, the load factor from India to Europe reached 87% by the week ending March 24th, its highest level since April 2022. This increased load factor has disrupted the traditional relationship between weight breaks, leading to higher rates per kg for larger cargo volumes. Presently, the India-to-Europe air freight sector favours sellers, as evidenced by the high rates set by airlines. For instance, the average spot rate reached USD 3.50 per kg by the week ending March 24th, marking a 158% increase from early December rates before the Red Sea conflict.

The recent increase in airline-sell rates has also affected air shipper rates, though to a lesser extent. Shipper rates rose by 7% compared to three months earlier, significantly lower than the 152% increase in airline-sell rates during the same period.

The Red Sea conflict has severely disrupted ocean freight container services between India and Europe, leading to a surge in ocean containerized spot rates. Despite a slight decrease since February, ocean spot rates remain considerably higher than pre-crisis levels, indicating ongoing challenges in the ocean freight sector.

The slight decline in air cargo demand since February could be attributed to ocean freight shippers adapting to longer transit times in their supply chains. However, the situation remains uncertain, and some shippers may continue to opt for air freight for urgent cargo.

Economic indicators, along with the Red Sea conflict, suggest underlying demand growth, particularly in India’s production and export orders, which could further boost air cargo demand. Despite the upcoming launch of summer schedules by European airlines, it is anticipated that India-to-Europe air cargo rates will remain high in the foreseeable future. Given the unpredictability of global events, it is essential to monitor both ocean and air freight markets vigilantly to strengthen supply chain resilience and optimize costs.