Air freight rates halved over the year as Covid premium fades

Air freight rates halved over the year as Covid premium fades [Photo by HanJoo-hyung]

Korean carriers are posting smaller revenue from their air cargo operations as rates have fallen on concerns of a global recession, while the semiconductor and home appliance industries are benefiting from a drop in logistics costs.

Air freight fares between Hong Kong and North America have continued to fall since December, when the fare topped $12.72 (16,000 won) per kilogram. Recently, fees on that route dropped to $6.5, according to industry sources on Monday, failing to continue an upward trend when they saw $9.69 in May, after falling to $8.18 in March. Air cargo rates for those routes are considered to be proxies for global fares.

Air freight carriers enjoyed a premium during Covid as air freight volumes surged in 2021 when consumer demand surged from earlier. However, air cargo volume and rates took a hit as the pandemic became endemic and inflationary concerns led to interest rate hikes globally.

Recent airline sales data reflect such trends in recent years. Over the first three quarters of last year, air freight revenue at Korean Air Lines Co. accounted for 60 percent of its entire revenues, topping 6.17 trillion won, surpassing sales from its passenger business.

In the fourth quarter, the airline saw a 29 percent year-on-year fall in freight revenue to 1.54 trillion, while seeing a 339 percent year-on-year increase in passenger revenues during the same period, to 1.66 trillion won.

“Lower demand amid a global economic slowdown and the recovery in belly cargo supplies were negative factors on freight fares, which is the biggest reason for the fall in revenues,” the airline said.

Asiana Airlines Inc. also saw more than half of its revenue from its freight operations in the first three quarters of last year, accounting for 54 percent from 20 percent in 2018. However, fourth-quarter freight revenue will likely hover under 50 percent of overall sales. Asiana is scheduled to announce its fourth-quarter earnings on Feb. 16.