Air Rates Enter Peak 26% Above Last Year as Asia-Europe Volumes Run 16% Lower

The Analysis

Spread the map out and start at Hong Kong, because that one airport is the whole story told twice. Eastbound, a box of consumer electronics or fast fashion gets trucked in from the Pearl River Delta, screened, built up onto a pallet, and loaded for the long haul to the US, just in time for Black Friday and Cyber Monday shelves. Westbound, a pallet bound for Europe gets loaded onto a freighter heading the other way. Same apron, same cold morning, two completely different books of business. The global Baltic Air Freight Index rose 4.7 percent in the week to 19 October, above the peaks of the previous two years, with rates about 26 percent higher year on year and jet fuel up roughly 114 percent. That single 26 percent is the number everyone quoted, and it is the number that will mislead you.

Here is the lane split the headline flattened. Asia-Pacific volumes to the US rose 14 percent year on year in October with rates 41 percent higher, and Hong Kong to the US volumes jumped 27 percent week on week after Golden Week. Asia-Pacific to Europe ran 16 percent lower year on year in mid-October, Hong Kong down 32 percent, yet rates were still 25 percent higher. Global capacity ticked up 2 percent in mid-October. One peak season, two roads, two entirely different sets of books, and I have walked both of them.

Set the scene properly before you trust any single index. Air freight is not one market, it is a bundle of lanes that happen to share aircraft and airports, and a lane is a road with its own traffic. The Asia-Pacific to US road and the Asia-Pacific to Europe road leave from many of the same origin nodes, Hong Kong, Shanghai, Incheon, Taipei, and they could not be behaving more differently right now. The week to 19 October the Baltic index climbed 4.7 percent and cleared the peaks of the previous two peak seasons, which sounds like one big wave lifting every boat. It is not one wave. It is a strong eastbound current and a slack westbound current being averaged into a single number, and the averaging is exactly where an importer or exporter starts making expensive mistakes.

Pull out the hard numbers and lay them in two columns. Global rates about 26 percent above last year. Jet fuel roughly 114 percent above last year. On the US lane, volumes up 14 percent year on year in October and rates 41 percent higher, with Hong Kong to the US jumping 27 percent week on week after Golden Week. On the Europe lane, volumes 16 percent lower year on year in mid-October, Hong Kong down 32 percent, and rates nevertheless 25 percent higher. Global capacity up 2 percent in mid-October. One plain sentence underneath all of it: the rates are up on both roads, but on one road the cargo is fighting for space and on the other the space is fighting for cargo. The headline wrote rates up, volumes down as if it were a paradox. It is not a paradox once you stop treating two roads as one.

Why now, and what upstream is pushing. Several things at once, and they push the two roads in opposite directions. Jet fuel up roughly 114 percent year on year is the cost floor under every lane, and peak season is when carriers stop absorbing it and start passing it through, so that number explains why even the weak Europe lane cannot discount. Golden Week then dumped a backlog: factories in the Pearl River Delta went quiet for the holiday and came back with product that had to move at once, which is exactly the Hong Kong to US 27 percent week-on-week jump.

Underneath that sits real US demand, Black Friday, Cyber Monday, Christmas restocking, which is the 14 percent volume gain. On the Europe side there is no comparable demand pulse, so volumes sit 16 percent lower with Hong Kong off 32 percent. And the 2 percent of capacity that came back in mid-October did not spread evenly; capacity follows yield, so it drifted toward the lane paying 41 percent more, leaving the Europe lane looser still. The 4.7 percent weekly index gain is mostly the eastbound road pulling the average up.

Work out who eats what. An exporter shipping Asia-Pacific to the US with a shelf date in November is in a seller's market: volumes up 14 percent, rates up 41 percent, and the Golden Week surge means the scramble is for space, not for a better price. You cannot negotiate that 41 percent away this month, you can only secure a slot. An exporter on the Asia-Pacific to Europe lane is in almost the opposite position, volumes down 16 percent and Hong Kong down 32 percent mean the bellies and freighters are not full, yet the quote still carries 25 percent over last year. That 25 percent is being held up by fuel and by carriers protecting yield, not by cargo pressing against capacity, which means there is room to push on it. High-value, launch-dated, promotion-tied cargo gets squeezed on the US road. Low-value, storable, patient cargo finds the Europe road surprisingly friendly. Same peak season, opposite leverage depending on which road your pallet rolls down.

Then there is Hong Kong itself, and this is where the node view earns its keep. Do not think of Hong Kong as one point on a map, think of it as one ferry landing with two boats tied to it. The boat heading east, to the US, is jammed, volumes up 27 percent in a single week after the holiday, pallets stacked, build-up slots scarce, trucks queued at the terminal. The boat heading west, to Europe, is half empty, Hong Kong down 32 percent. Same cargo terminal, same screeners, same apron, two books of business that do not talk to each other. Don't underestimate a node like that. I have walked this line, and the classic mistake at a shared gateway is assuming congestion is a property of the airport; it is a property of the direction, and if you route by airport instead of by lane you will book the wrong capacity at the wrong price.

Put clocks on it. The first squeeze already happened in the week right after Golden Week, that is the Hong Kong to US 27 percent week-on-week jump, so if you were waiting to book eastbound space you are already late. The 19 October week with the index up 4.7 percent is the second step. The tightest window on the transpacific road is the first two weeks of November, ahead of Black Friday and Cyber Monday, and spot space gets harder the closer you get, not easier. The Europe number is a mid-October snapshot, down 16 percent, and if that trend holds the further into the quarter you go the more leverage you have on that 25 percent, though the 114 percent fuel floor puts a hard bottom under how far it can fall. The 2 percent capacity shift landed in mid-October too, so the next fortnight's tightness or slack on each road is already largely decided by where that capacity was pointed. Lead time here is measured in booking windows of days, not weeks.

Here is the thing the coverage missed and the thing that will actually move your number. Every story led with the 26 percent and the index clearing two-year peaks, which reads as air freight is tight everywhere, book now, pay up. That is the single most expensive misreading available this month, because 26 percent is an average of two roads whose rate increases come from completely different places. On the US road the 41 percent is demand-pulled: volumes up 14 percent, cargo physically pressing on finite space, carriers passing through fuel plus a scarcity premium, and there is nothing to negotiate, only a slot to lock.

On the Europe road the 25 percent is cost-pushed and yield-defended: volumes down 16 percent and Hong Kong down 32 percent prove the space is there, and a rate that holds up while cargo falls is a rate being propped up by the 114 percent fuel floor and by carriers withdrawing or redirecting capacity, not by a single extra pallet of demand. So the 26 percent is not a temperature, it is two temperatures averaged, and if you walk into both carrier conversations quoting one global benchmark you will do exactly the wrong thing on both: you will under-lock the road you should be grabbing and over-pay the road you should be pushing. This is the part that never made a headline and it is the whole ballgame for an importer or exporter.

And the second half of the same blind spot is that 2 percent capacity line. The reporting drops it as a footnote, capacity recovered a little in mid-October. A footnote is not where it belongs. Capacity follows yield, so almost all of that 2 percent went where the money was, onto the road paying 41 percent more, which means the US road got a little relief on equipment while the Europe road got relatively looser still because the lift that might have served it was pulled east. Hong Kong down 32 percent is not just weak demand, it is weak demand next to capacity being siphoned off to the neighbouring road.

So the two numbers people quote separately, the 2 percent capacity and the Europe volume drop, are actually the same event seen from two ends of the same ferry landing. The press wrote capacity up, volumes down as two neutral facts. On the ground it is one movement of lift from a slack road to a tight road, and it tells you precisely which road has slack to sell you and which one does not. To put it plainly, it is a road problem: not air freight is expensive, but which of these two roads are you actually standing on.

There is a third layer to the missed point, and it is about time, not price. Jet fuel up 114 percent is a cost floor under both roads, but only the road with volume growth can pass a cost floor straight through to the shipper, which is why the US road shows 41 percent and the Europe road only 25 percent. A rate increase backed by demand and by cost tends to stick through the peak; a rate increase backed mostly by cost and by carriers holding the line tends to soften the moment anyone big enough asks for a volume commitment. That difference is exactly what decides whether you sign a long-term 2027 contract now or wait, and whether you lock a block-space agreement on the US road this week while keeping the Europe road on spot and negotiable. Treat both roads as one peak season surcharge and you will lock the wrong one at the wrong time.

Now flip it, because a conclusion that cannot reverse is not worth much. If jet fuel retreats from that 114 percent, the Europe 25 percent is the first thing to give way, because it is mostly cost-propped, while the US 41 percent holds on the strength of real demand. If the US peak disappoints, if the restocking was pulled forward and the shelves are already full, then the 14 percent volume and the 41 percent rate come down together and today's slot scramble turns into tomorrow's negotiation, and anyone who locked expensive space early wears it.

If carriers keep pointing the 2 percent of recovered capacity at the transpacific road, the Europe road gets looser and the US booking window gets tighter at the same time. And the sharpest reversal of all: take the 26 percent at face value as everything is tight, go lock a pricey Europe contract and drag your feet on the US slot, then discover the Europe space was empty all along. Same facts, opposite correct action, and the variable that flips it is whether you read the index as one road or two.

Do the arithmetic on a real, explicitly hypothetical book. Say you are an exporter moving 30 tonnes a month from Asia-Pacific to the US and 30 tonnes a month from Asia-Pacific to Europe, and say that last year both lanes cost you 100 units of freight budget per tonne, where 100 is an index baseline I am setting for the arithmetic, not a market quote, because the release gives no absolute rate and I will not invent one. Both of those are assumptions stated out loud. On the US road the rate is 41 percent higher, so that 100 becomes 141, and volumes up 14 percent mean your 30 tonnes are now about 34 tonnes, so you are paying more per tonne on more tonnes, roughly 141 against 34 where last year was 100 against 30.

On the Europe road the rate is 25 percent higher, so 100 becomes 125, but volumes down 16 percent mean your 30 tonnes are only about 25 tonnes, so you are paying 125 a tonne on less cargo, and the only reason that rate holds is the 114 percent fuel floor plus carriers defending yield. The gap that matters is not the 16 percentage points between 41 and 25; it is that one road has both volume and cost behind its price and the other has cost and very little volume, which is your leverage. The Hong Kong to US 27 percent week-on-week jump is not a price signal at all, it is a space signal, pallets queuing for build-up slots, so the honest thing to budget is booking lead days, not a rate. What I can compute from the release is the budget index, the tonnage, and the days; a dollar rate I cannot, so I am leaving it out.

On the US road the alternatives are mostly about nodes and time, not about haggling. Hong Kong is jammed, so one option is to shift the uplift to a neighbouring Asia-Pacific gateway with more freighter or belly frequency, but you pay for it in inland trucking to the new node, extra handling, and a thinner schedule that may not have daily departures, and the Golden Week backlog is regional, not just a Hong Kong problem, so do not assume the next airport is empty. Sea-air and expedited ocean are the mode switch people reach for, but a Black Friday shelf date does not survive the extra transit days, so that is a real option only for the patient tail of the booking.

The practical move on this road is simpler and less glamorous: book the build-up slot a week earlier, lock a block-space agreement for the first two weeks of November, and stop trying to talk the 41 percent down. Changing a tire mid-journey costs you the journey; on a tight road the win is leaving on time, not finding a cheaper tire.

On the Europe road the alternatives run the other way. Do not scramble for space that the 16 percent volume drop and the Hong Kong 32 percent drop say is sitting there; take those numbers into the rate conversation and push on the 25 percent. But watch the trap on the far side: because jet fuel is up 114 percent and carriers are protecting yield, this is not a rate about to collapse, so do not hold out for a crash and let the booking drift until a real deadline is on you.

There is a mode switch worth having in the back of your mind on this same corridor, the overland rail bridge from China to Europe, which is a different road with a different book altogether, and when the sky is defending a price and the ground has capacity, it is worth at least pricing as a comparison. The point is not that you should move everything to rail; it is that on a slack road you have choices, and on the tight road you mostly have a clock.

The traps are all variations of one mistake, treating the index as your quote and the globe as one road. The Baltic index is a directional composite, not the all-in number on your invoice, which still carries fuel surcharge, peak surcharge, screening, terminal and ground handling on top, so budgeting off 26 percent will overstate the Europe road and understate the US road at the very moment you need the split to be right. Locking a pricey long-term Europe contract because rates are up 26 percent everywhere is the classic own goal this month. So is carrying last year's habit of grinding the transpacific rate down into a peak where the constraint is a pallet position, not a price. And quoting a global average to two carriers in two meetings is how you end up having secured neither the slot nor the discount.

What falls out of all this is plain, and it is less about clever hedging than about refusing to let one number stand in for two roads. Asia-Pacific to US bookings with a November shelf date: lock build-up slots and a block-space agreement for the first two weeks of November now, in the week after the 19 October index reading, and stop negotiating the rate. Asia-Pacific to Europe bookings: keep them on spot or short commitment, take the 16 percent and 32 percent volume figures into the rate review this week, and set a walk-away floor tied to the fuel cost rather than hoping for a collapse.

Have the forwarder report, by 24 October, which of the 2 percent recovered capacity landed on each of your two lanes, because that single fact decides your leverage on both. Put a name on it: the air freight lead owns a lane-by-lane rate and space review by 24 October, with a hard trigger of booking the US November block-space agreement that week and holding the Europe road to spot. Anything vaguer than two separate decisions with one owner and a date is just using the 26 percent again.

Both roads are still open, and that is worth saying out loud. Nothing here is a closed lane. The US road is crowded and expensive and will clear after the peak; the Europe road is quiet and overpriced relative to its cargo and will stay negotiable while fuel holds its floor. On a year view the 114 percent fuel number is the thing that does not go away quickly, and it is why neither road returns to last year's numbers soon. But a peak season is not a year view, it is a handful of booking windows, and you cannot fly forty pallets of sell-through stock on the assumption that air freight is up 26 percent.

To put it plainly, it is a road problem: one road to grab, one road to push, and the whole job is knowing which one your pallet is on. Don't underestimate that node at Hong Kong, east and west out of the same apron, two different worlds. I have walked this line, and this peak, like every other, is won by reading the road and not the average.

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— By Ömer Kaya