Air carriers are facing increasingly complex market conditions: spot rates are declining amid rising fuel prices, geopolitical shifts, and selective capacity allocation.

Rate and Index Trends

The Baltic Air Freight Index fell by 3.1% for the week ending July 20, driven by lower export prices from Asia and Europe. The largest drops were recorded on routes from Hong Kong (down 6.3%), Frankfurt (down 5.2%), Shanghai (down 1.1%), and Singapore (down 0.6%).

Despite this, the index remains 17% higher than last year: Shanghai is up 23.9%, Chicago up 29.7%, and Singapore up 29.8%. This indicates a gradual market cooling after a strong first half of the year, rather than a major downturn.

According to the TAC Index for mid-July, rates on key Asia-Europe and Asia-USA routes have declined. China-Europe rates dropped 5.8% for the week, China-USA by 3.9%, Hong Kong-Europe by 4.8%, and Hong Kong-USA by 3.6%. Vietnam saw the sharpest declines: rates to Europe fell by 8.8%, and to the USA by 13.3%.

Regional Differences

Not all markets are moving in the same direction. India remains stable: rates to Europe have barely changed, while India-USA rates rose by 6.5%. Europe-USA rates increased by 7.1% for the week, and Europe-UAE also saw modest growth, remaining nearly double last year’s level due to geopolitical impacts on certain market segments.

Capacity and Its Distribution

According to Rotate, global cargo capacity grew by just 1% for the week ending July 23, indicating more selective resource allocation by airlines. The largest capacity reductions occurred on routes linked to the Middle East, including Hong Kong-Dubai, Dubai-Liège, Hong Kong-Bahrain, and Bahrain-Liège, reflecting ongoing regional instability.

Available cargo space still varies significantly by route. Bottlenecks at airports and airspace restrictions caused by Middle East tensions have limited capacity on several routes, forcing airlines to adjust flight paths and redeploy aircraft.

For shippers, having enough capacity with the right service level on specific routes at the right time is more important than the global average. Early booking and route flexibility remain effective safeguards against capacity shortages and sudden price spikes.

Capacity Adjustments and New Routes

Airlines continue to reallocate capacity. This week, Etihad Cargo announced a second weekly freighter flight to Paris Charles de Gaulle in response to sustained demand for pharmaceuticals, perishables, and specialized cargo. Cathay Pacific postponed the resumption of its Riyadh freighter service due to the worsening crisis in Iran.

Chinese carriers such as China Airlines, EVA Air, China Cargo Airlines, and SF Airlines increased cargo activity over the week. Europe and North America also showed moderate growth.

Rising Costs and Investment in Development

Airlines are facing rising costs. Cathay Pacific announced an increase in fuel surcharges on cargo from August 1 following a sharp rise in jet fuel prices. According to the IATA jet fuel monitor, the average global price of aviation fuel rose by 17.6% for the week ending July 17, reaching $149.40 per barrel.

Despite short-term challenges, the annual Farnborough Airshow demonstrated confidence in long-term prospects. MSC Air Cargo ordered five Boeing 777-8 freighters, and Alaska Airlines confirmed plans to nearly double its cargo fleet next year by adding four converted 737-800s.

DSV expanded its specialized air network with a new regular Rockford-Incheon flight, with Chennai set to join later this year. In Latin America, Azul announced four new A321 passenger-to-freighter conversions to expand regional operations, while UAE-based SolitAir received approval from the UK regulator and is preparing for international growth.

Weekly Summary

This week’s events show the industry is balancing competing factors. Spot rates are falling on some routes, fuel costs are rising again, and airlines are reallocating capacity amid ongoing geopolitical impacts on route planning.

Nevertheless, carriers continue to order freighters, launch new routes, and invest in long-term growth, reflecting sustained strong demand for air cargo despite an increasingly unstable operating environment.