Cathay, EVA Lift Air Cargo Fuel Surcharges From August 1 as Jet Fuel Jumps 35%

The Analysis

August 1. The fuel surcharge went up and the freight rate did not. That is the whole story, and it is exactly the kind of story that costs people money, because nobody reads the second line on the invoice. Jet fuel went from 119.13 dollars a barrel early in the month to 160.06 dollars on the 24 July average. That is 40.93 dollars, or 34.4 percent, and the release rounds it to roughly 35. Cathay Pacific put its cargo fuel surcharge up 50 to 55 percent across long, medium and short haul. EVA Air put long haul up 20 percent the same day. ANA and JAL are following. Korean Air cut again, third month running.

Now the part that did not move. China to North America spot is 6.36 dollars a kilo. China to Europe is 5.03. Freightos has the U.S. to China lane easing from 6.56 to 5.72, which is 84 cents a kilo, or 12.8 percent, in the wrong direction for anybody who was budgeting a rally. The base rate is soft. The surcharge is not soft, because the surcharge is not a market price. It is a formula with a fuel index on one side and a date on the other, and it moved on the first of the month whether or not anybody renegotiated anything.

So the invoice that lands in the second week of August looks cheaper than July and carries a bigger fuel line. That is the trap. I work in hours and minutes, so here is the short version: before you release another booking, get the fuel number as its own line with an effective date, work out what it is per kilo on your chargeable weight, and check it against one other carrier on the same lane. Fifteen minutes. It is the only fifteen minutes this month that pays for itself on every shipment you move.

Start with the fuel, because it is the input everybody else is reacting to. The benchmark averaged 119.13 dollars a barrel early in July and 160.06 dollars on the 24 July assessment. That is 40.93 dollars of movement, and 40.93 over 119.13 is 34.4 percent, which is where the roughly 35 percent in the release comes from. Nothing in that number is negotiable by you. What is negotiable is how much of it lands on your invoice, and that depends entirely on a formula you have probably never read.

Then look at the timing, because the timing is where the surprise lives. The assessment closed on 24 July. The surcharges took effect on 1 August. That is about a week of lag between the number being measured and the number you pay, which means the August surcharge was built on a July average that did not include most of August. If fuel sits where it was on the 24th through the rest of the month, the next reset is calculated on a higher average than this one. So the September number is not automatically lower. People assume it is. Write the date down.

What the airlines did with it is the interesting part, because they did not do the same thing. Cathay Pacific raised cargo fuel surcharges by 50 to 55 percent, and it did it across long, medium and short haul, all three bands at once. EVA Air raised long haul by 20 percent on the same date. ANA and JAL are following, and the release does not give their numbers, so I am not going to put a number next to their names. Korean Air went the other way and cut, for the third month in a row. Same fuel, same week, three directions.

That is not three views of one market. That is three formulas. One airline passes through a bigger share, one passes through a smaller share, one is working off a longer averaging window or a different base, and one of them is currently producing a number that goes down while the others go up. The fuel price is the same number for all of them. What differs is the machinery between the barrel and your invoice. So the airline you pick now changes your landed cost in a way it did not in July, and if you have been booking on habit, habit just got expensive.

Here is the algebra, and then I will put a number in it. Call your July long haul fuel line F dollars per kilo. Cathay's new line is somewhere between 1.50F and 1.55F. EVA's new long haul line is 1.20F. The gap between them is 0.30F to 0.35F per kilo, and if their July lines were the same, Cathay's new number sits 25 to 29 percent above EVA's. Run that against your own tariff: whatever F is on your July invoice, multiply it by 0.30 and you have the per-kilo difference you are choosing between when you pick an airline this month.

Now a worked shipment, and I am going to state every assumption out loud so you can swap in your own. Assume a 500 kilo chargeable shipment, China to North America. Assume the base spot rate is 6.36 dollars a kilo, which is the number in the release. Assume the July fuel line was 0.40 dollars a kilo. That last one is yours to replace; pull it off a July invoice. I do not have it and I am not going to guess in print. Freight is 500 times 6.36, which is 3,180 dollars. July fuel was 500 times 0.40, which is 200. All-in, 3,380.

Under the new Cathay numbers, the fuel line goes to 0.60 to 0.62 a kilo, so the surcharge becomes 300 to 310 dollars, up 100 to 110. All-in goes to 3,480 to 3,490, which is about 3.0 percent more than the July invoice. Read those two numbers next to each other: a headline that says plus 50 percent produces a plus 3 percent invoice. Because the surcharge is a small slice of the total, a big percentage move on a small line is a small move on the bill. That is why it slips past review.

Under the EVA number, long haul fuel goes to 0.48 a kilo, so the surcharge is 240 dollars, up 40. All-in is 3,420. The difference between the two airlines on the same 500 kilos is 60 to 70 dollars. Ten shipments a month and you are looking at 600 to 700 dollars. Forty shipments a month and it is 2,400 to 2,800. Nobody writes a business case for 70 dollars. Everybody writes one for 2,800, and it is the same decision repeated.

Now compare it to what would have happened if the fuel move had hit the base rate instead. Thirty-five percent on 6.36 is 8.59 dollars a kilo, or 4,294 dollars on 500 kilos, which is 1,114 dollars more than July. That did not happen. You got roughly 100 dollars of a 1,114 dollar pass-through, and it arrived on the line nobody negotiates. Hold onto that, because it is the reason this whole thing is easy to miss: the scary number never showed up, so nobody opened the tariff.

And there is a second thing hiding the increase. If your lane is the one Freightos tracks, the base rate went the other way: 6.56 down to 5.72, which is 84 cents a kilo, or 12.8 percent. July freight on 500 kilos was 3,280, plus 200 of fuel, so 3,480. August freight at 5.72 is 2,860, plus 300 of fuel, so 3,160. The invoice is 320 dollars lighter, down 9.2 percent. Your freight got cheaper, your fuel line got bigger, and the total went down. That is precisely why the fuel line survives every review it is ever subjected to. It is also why the September reset will arrive with nobody watching.

Let me scale that up once, because 100 dollars on one shipment does not move anybody. Assume you move 20 tonnes a month on China to North America, which is 20,000 kilos. At 0.20 a kilo of increase, the fuel line goes up 4,000 dollars a month. If you are on the lane Freightos tracks, the base rate fell 0.84 a kilo, which is 16,800 dollars of freight saving on the same 20 tonnes. Net, you are 12,800 better off, and the only reason nobody sees the 4,000 is that it is sitting inside a 16,800 improvement. Now take the freight easing away, because it will not last for ever, and that 4,000 is the whole increase. It was always going to be there. This month the soft market paid for it.

So who actually pays it, and when. The surcharge sits on a tariff, not in the rate you negotiated, and it resets monthly. A rate agreement that says all-in 6.36 may or may not include fuel, and the two words that decide it are in the contract, not in the email. Go and read them. On prepaid terms it is the shipper's bill; on collect terms it is the consignee's. If you are the buyer on collect, this is your money and you had no hand in setting it.

The date question is the one that bites. The effective date is 1 August, but the date that triggers the surcharge on your invoice is something you have to confirm: booking date, or AWB execution date. Get it in writing from your forwarder. It takes two minutes on the phone and it settles every dispute for the rest of the quarter. If you can tender before close of business on 31 July and the tariff flips on 1 August, the difference on 500 kilos at 0.20 a kilo is 100 dollars. That is a same-day decision worth 100 dollars, and you only get to make it before cut-off. If the choice is between chasing a hundred-dollar date question and getting the shipment out of the door, get the shipment out and settle the paperwork later. Once the truck leaves the dock, the argument is over and the number is what it is.

Here is what the first of the month looks like from where I stand. A booking released at 16:00 on 31 July and the same booking released at 09:00 on 1 August are not the same booking any more, even though the cartons have not changed and the cut-off has not moved. On 500 kilos the gap is 100 dollars. Multiply that by every booking your team released in the last two days of July without checking, and you have a number nobody budgeted and nobody can explain, because it does not appear in any rate increase notice anywhere. It is in the calendar. That is why the trigger-date confirmation matters more than the percentage does.

Build a routine around it, ten minutes per booking. Four questions, every time. What is the fuel surcharge per kilo? What is the effective date? Does it ride on chargeable weight or gross weight? And is it inside the all-in number you just quoted me or outside it? Get all four answered before you release the booking, not after the invoice. If the quote comes back with fuel as per carrier tariff, that is not a quote. That is an estimate with one side left open, and you are the side that is open.

Get 24 hours of validity on the all-in while you are at it. Fuel tariffs reset monthly and airline notices land at short notice, so a quote that is good for a week is a quote that is good until something changes, and something has already changed. Then price the top three lanes across two carriers. The gap you are hunting is 0.10 dollars a kilo or more. On a 0.40 base, 50 to 55 percent against 20 percent works out to 0.12 to 0.14, so if you are seeing less than 0.10 you are probably comparing two airlines with different starting lines, and you should check both baselines again before you believe the comparison.

Check the weight basis too, because it is the quietest multiplier on the sheet. Confirm whether the surcharge rides on chargeable weight or gross weight. A bulky shipment that weighs 300 kilos and bills at 480 kilos chargeable has 180 kilos of difference in it, and at 0.60 a kilo that is 108 dollars on a single shipment. Plug your own dim factor in and run it on your five bulkiest SKUs. This is the kind of thing that never shows up as a problem, because nobody compares the two weights on the same line.

Then ask whether there is a minimum fuel charge per AWB. If there is, five 100 kilo shipments pay five minimums and one 500 kilo shipment pays one. Test it once this month rather than assuming either way: price the same 500 kilos both ways on the same day, same lane, same carrier, and look at the two numbers side by side. Ten minutes. If the consolidated version is cheaper, consolidate. If it is not, you have learned something about your own tariff that you can use all year.

The next reset is the part people forget, so put it in the calendar now. First of August was this one. First of September is the next one, and it will be built on the August average, not the July one. Set a reminder for 28 August and re-baseline the fuel line within 24 hours of the new tariff landing. Between now and then, track one number once a week: the fuel benchmark, with 160.06 from 24 July as your reference. If the August average comes in below that, the September reset goes down. If it comes in above, it goes up. One number, once a week, five minutes.

Korean Air cutting for a third consecutive month is the clearest evidence that the formula is not the fuel price. Same barrel, opposite direction. So do not budget off the fuel price and do not budget off the percentage in the headline. Budget off the tariff, which is the only one of the three that appears on your invoice. If somebody on your team is forecasting off jet fuel, they are forecasting the wrong line, and they will be wrong by whatever the pass-through happens to be that month.

Where the surprises actually land is the back end, and this is where I spend my day. The invoice arrives after the flight, sometimes two or three weeks later. By then the surcharge has been applied, and either you have paid it or your consignee has disputed it against a quote that said all-in. The classic version: your quote to the customer was all-in, your invoice from the airline has a fuel line that moved on the first of the month, and the difference sits in your margin for a month before anybody finds it. You cannot fix that at the invoice stage. You fix it at the quote stage, by writing the fuel line separately with an effective date and a reset clause on it.

So here is the week, in hours. Today, pull three July invoices and write the fuel line per kilo at the top of one page. Ten minutes, and you now have F. Before your next booking release, ask the four questions. This week, price your top three lanes across two carriers and write the gap down. By 15 August, have the trigger-date confirmation in writing from your forwarder. On 28 August, diarise the September reset. By 5 September, get the clause into the rate agreement: fuel reviewed monthly against the published tariff, with a written notice period and a cap.

Give it an owner and a clock. Whoever releases the booking owns the four questions, and they have fifteen minutes to get all four answered before the release goes out; if the answers are not back, the booking waits rather than going out with a blank on it. Whoever owns the rate agreement gets the clause conversation, and their deadline is 5 September. Whoever owns the budget gets the reset reminder, on 28 August, and they have 24 hours from the tariff landing. Three names, three clocks, one page on the wall. Most surcharge surprises are not pricing failures. They are ownership failures, and an ownership failure is fixed by putting a name next to a date.

Six ways this goes wrong, and I have watched most of them. An all-in rate that quietly excludes fuel. A monthly surcharge reset running against a quarterly budget somebody set in June. A prepaid and collect mismatch between what you sold and what you bought. Chargeable weight where you assumed gross. A minimum per AWB you never asked about. And the assumption that every airline moved the same way, when the release says 50 to 55 percent at one, 20 percent at another, and a cut at a third. Any one of those is survivable. Two of them in the same month is a bad quarter.

One more thing about the clause, because it is the only thing here that fixes the problem permanently rather than for a month. Ask for fuel to be reviewed monthly against the published tariff, with notice given in writing before it changes, and with a cap expressed as a percentage of base freight. A cap at 15 percent of base freight on a 6.36 rate is about 0.95 dollars a kilo, which is far above where these lines sit today, so you are not asking for much; you are asking to be told before it moves. Carriers agree to notice periods more readily than they agree to caps, and the notice is the part that saves you. You can live with an increase you saw coming. You cannot plan around one you found on an invoice three weeks later.

The freight market is soft and the fuel line is not, and both of those are true on the same invoice at the same time. The one that hurts you is always the one nobody put in the rate sheet. Get the number before you release the booking, while you still have a cut-off to work against and a second carrier to call. Once the boxes are on the aircraft, the only thing still available to you is an argument, and arguments have never moved a single kilo of freight.

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— By Nadia Pryce