Role reversal: Backhaul Middle East-Europe air cargo rates rally

There has been a reversal of traditions across fronthaul and backhaul air freight corridors between the Middle East and Europe since the start of the year. This has been driven by significant developments on the Middle East to Europe air cargo trade – usually considered to be a backhaul route, according to the latest update from Xeneta.

"In the week ending April 21, the average spot rate on this trade hit $1.86 per kg. This is a 39 percent increase since a market low at the beginning of 2024 and the highest rates have been since early April 2023."

A series of geopolitical events have been pushing air cargo spot rates up from the Middle East to Europe. "Disruption to ocean supply chains following the escalation of conflict in the Red Sea region last December has seen shippers switch to air freight in order to meet strict delivery timelines with urgent shipments out of Northeast, Southeast and South Asia transiting via hubs in the Middle East.

"Shippers have also switched to a hybrid sea-air supply chain. Goods being exported from Asia arrive in the Arabian Gulf via ocean at ports including Jebel Ali before being flown out of Dubai Airport for onward transportation to Europe."

The recent escalation of conflicts in the Middle East between Iran and Israel has also impacted the air freight market, the update added. "This includes the seizure of the MSC Aries container ship by Iranian forces near the Strait of Hormuz (a vital waterway for sea-air services) and drone attacks against Israel which caused airspace closures across the region.

"The above events – as well as last week’s heavy rainfall which brought disruption at Dubai Airport – have contributed to a narrowing in the gap between the average spot rate (valid up to one month) and seasonal rate (valid for more than one month) from the Middle East to Europe. At the start of 2024, the spot rate was 42 cents below the seasonal rate but by the week ending April 21, it was just 15 cents adrift."

Europe to Middle East fronthaul remains more stable
In contrast to the dramatic developments on the backhaul, the fronthaul trade from Europe to the Middle East has been relatively stable.

"The average spot rate on the fronthaul was $1.68 per kg in the week ending April 21, which represents a slight dip of two percent since the start of the year. It is also below the level in the same period in 2023."

The eastbound fronthaul is less impacted by the shift to sea-air services due to the Red Sea conflict. So, the spot rate has continued to stay below the seasonal rate, maintaining an average gap of 36 cents since the start of the year, the update added.

Trade volume imbalance remains
While the market has seen a reversal of traditions in terms of rates, there remains a significant gap between the fronthaul and backhaul in terms of volumes, Xeneta said in its update.

"Air cargo volumes on westbound routes are about one-third of the level transported on eastbound trades. Only in the final week of March did volumes from the Middle East to Europe briefly reach 50 percent of the level seen on the fronthaul from Europe to the Middle East before quickly falling back to 28 percent in the week ending April 21."

Looking ahead
If a de-escalation of risk does occur in the Middle East, it is likely a softening of air cargo spot rates will follow. Closely monitoring regional air cargo demand trends may offer insights into the direction of air freight rates in a volatile market, and help businesses be better prepared for the upcoming year-end peak season, the update added.