Air cargo rates are rising as capacity becomes harder to use

Air cargo markets are not behaving normally. Global tonnages are falling. Capacity is beginning to return on some routes. Yet pricing remains elevated, with spot rates holding well above pre-conflict levels.

On the surface, this looks like a tight market. In practice, it is something different.

What we are seeing is not a simple imbalance between supply and demand. It is a system where supply, demand and cost are no longer moving together. The Iran conflict has acted as a trigger, but the outcome is being shaped by how the air cargo network actually operates. Routes have shifted. Fuel availability has tightened. Capacity is being deployed selectively rather than evenly.

The result is a market that is harder to read and harder to operate within. Conditions are no longer set at a global level. They are determined corridor by corridor, aircraft by aircraft, and increasingly, flight by flight.

To understand what is happening, it is necessary to separate what is driving demand, what is happening to supply, and why rates are responding the way they are.

Demand is softer than the pricing suggests

At first glance, rising rates suggest a strengthening market. The underlying data tells a different story.

Global air cargo tonnages have declined in recent weeks, even as pricing has continued to climb. This divergence is the first signal that demand is not the primary driver of current market conditions.

Airport-level data reinforces the point. At major European hubs, volumes linked to the Middle East have dropped sharply since the escalation of conflict. Flows into and out of the region have fallen by as much as 40 to 50 percent year on year in some cases, reflecting both reduced connectivity and weaker corridor-specific demand.

At the same time, other trade lanes are holding up or expanding. Traffic between Europe and the Far East has increased. Africa and Latin America flows have shown growth. Even where total volumes have softened month-to-month, the broader quarterly picture remains relatively stable.

This is not the pattern of a market experiencing a broad demand shock. It is the pattern of demand being redistributed across the network.

Demand has shifted corridors, not disappeared

The key change is where demand is moving, not whether it exists.

Historically, a significant share of air cargo between Europe, Asia and Africa has relied on Middle Eastern hubs for consolidation and onward routing. As those hubs have been disrupted, flows that would normally transit through the Gulf are being rerouted or replaced by more direct services.

In practical terms, that means:

• fewer shipments moving through traditional hub-and-spoke structures
• more direct routing between origin and destination regions
• a partial shift in volumes towards alternative corridors

Some demand is lost in the process. Longer routes increase costs and transit times, which can suppress marginal shipments. But much of it is simply moving elsewhere.

Why this matters for how the market behaves

This distinction is important because it changes how the market should be interpreted.

If demand were broadly strengthening, rising rates would reflect increased willingness to pay across the board. That is not what is happening here. Instead, pricing is rising in a context where demand is uneven and increasingly tied to specific corridors.

For operators, this creates a more complex environment. Volume forecasts become less reliable because they depend on routing decisions as much as underlying demand. Performance varies significantly by lane, rather than by overall market conditions.

From a system perspective, this is the first sign of distortion.

The market is not tightening because demand is surging. It is becoming harder to serve because demand and network structure are no longer aligned.

Supply is constrained, rerouted, and increasingly selective

If demand explains why the market feels uneven, supply explains why it feels tight.

The defining feature of the current air cargo market is not that capacity has disappeared. It is that capacity has become harder to deploy, less efficient to operate, and more selective in where it is used.

What looks like a shortage is, in reality, a loss of effective capacity.

Airspace disruption is reducing usable capacity

The most immediate impact of the Iran conflict has been on airspace.

Closures and restrictions across parts of the Middle East have forced airlines to reroute flights, often adding one to three hours to journey times on key intercontinental corridors. At the same time, capacity on some routes has dropped sharply, with seat capacity between the US and Middle East down by close to 60 percent since the escalation began.

These changes have a direct operational effect.

Longer routes increase fuel burn. Higher fuel requirements reduce payload. Reduced payload lowers the amount of cargo that can be carried per flight.

The aircraft is still flying. The capacity still exists on paper. But the amount of freight that can actually be moved has fallen.

This is another layer of distortion. Capacity is not removed. It is degraded.

Network disruption is breaking hub efficiency

Air cargo networks rely heavily on consolidation.

Middle Eastern hubs have historically played a central role in connecting flows between Europe, Asia and Africa. When those hubs become less accessible or less reliable, the impact is not limited to the region itself. It affects how cargo is routed globally.

Recent data from European airports shows a sharp decline in Middle East volumes, but a partial offset from increased traffic on other lanes. Flows that would normally transit through the Gulf are being pushed onto direct routes or alternative hubs.

This shift comes at a cost.

Hub-and-spoke systems are efficient because they concentrate volume and maximise aircraft utilisation. Removing or weakening a hub forces the network into less efficient patterns. Aircraft operate on lower volume routes. Load factors become less predictable. Scheduling becomes more complex.

Even where total capacity is maintained, its usefulness declines.

Fuel availability is becoming a structural constraint

Beyond routing, another supply-side pressure is emerging. Fuel is no longer just a cost input. It is becoming a limiting factor in operations.

Europe is particularly exposed. The region relies heavily on jet fuel imports linked to Middle Eastern supply chains. As disruption has tightened availability, inventories have fallen towards critical thresholds, raising the risk of rationing and, in extreme cases, flight cancellations.

This introduces a different kind of constraint.

When fuel prices rise within normal supply and demand conditions, costs tend to pass through into rates. When fuel availability tightens, the constraint becomes physical. Airlines cannot simply pay more to maintain operations. They must adjust schedules, prioritise routes, or reduce flying.

This shifts the system from a price-driven market to one where availability begins to dictate behaviour.

High costs are filtering capacity out of the market

At the same time, rising fuel prices are changing the economics of air cargo operations.

Aircraft that are viable under normal conditions can quickly become uneconomic when fuel costs rise and routing becomes less efficient. This is already visible in fleet decisions. Lufthansa, for example, has withdrawn A321 freighters from service as part of broader network adjustments accelerated by current conditions.

There is also growing pressure on older, less fuel-efficient aircraft. Models such as the 747-400F, which play a significant role in long-haul cargo, are particularly exposed. As operating costs rise, these aircraft move to the margin of viability.

This matters because marginal capacity is often what absorbs volatility in the system. When that capacity exits, the market loses flexibility.

Capacity is being redeployed, not restored

Where capacity is available, it is not being spread evenly across the network.

Airlines are prioritising routes that offer stronger yields or more reliable operations. Some Gulf capacity is returning, with hubs such as Doha rebuilding freighter and bellyhold networks. But this recovery is selective and does not fully restore previous connectivity.

The result is a patchwork system.

Some corridors see capacity return relatively quickly. Others remain constrained. Operators are not rebuilding the network as it was. They are reshaping it around new risk and cost conditions.

From available capacity to effective capacity

Taken together, these pressures explain why the market feels so tight.

• Longer routes reduce payload
• Disrupted hubs reduce efficiency
• Fuel constraints limit operations
• High costs remove marginal aircraft
• Capacity is concentrated on specific lanes

The system still has capacity. But less of it is usable in the way it was before.

This is the shift from nominal capacity to effective capacity.

It is also where the market begins to behave differently. When capacity becomes less reliable, less flexible, and more selective, pricing no longer reflects simple supply and demand. It reflects how difficult it is to move goods through the system at all.

Rates are rising because the system is misaligned

If demand is uneven and supply is degraded, pricing is where those pressures converge.

Air cargo rates have risen sharply in recent weeks. Spot prices are up week-on-week, materially higher year-on-year, and significantly above pre-conflict levels. What makes this notable is that the increase has occurred alongside falling global tonnages.

In a conventional market, weaker volumes would put downward pressure on pricing. That is not happening here.

The reason is that rates are no longer being set by aggregate supply and demand. They are being set by how difficult it is to move cargo through a disrupted system.

Pricing is being driven by cost and constraint

Several mechanisms are reinforcing upward pressure on rates.

First, effective capacity is lower. Longer routes and payload restrictions mean fewer tonnes can be moved per flight, even where schedules remain intact.

Second, operating costs have increased. Higher fuel prices and extended flight times raise the marginal cost of moving each unit of cargo.

Third, capacity is being allocated selectively. Airlines are prioritising routes that offer stronger yields or more predictable operations, which concentrates available lift on certain lanes and leaves others constrained.

Fourth, there are signs of modal shift. Disruption in ocean freight, particularly around the Middle East, is pushing some time-sensitive cargo into air, adding incremental pressure on already constrained corridors.

Individually, none of these factors fully explains current pricing. Together, they create a market where rates rise even as volumes soften.

This is not a demand-led market

It is important to be precise about what is driving pricing.

This is not a surge in willingness to pay. It is not a peak season dynamic. It is not a broad-based tightening of the market. It is a repricing of air cargo capacity under new operating conditions.

Rates are rising because:

• less capacity is effectively available
• more effort is required to deploy it
• operators are increasingly selective in how they use it

In that context, pricing becomes a signal of system stress rather than demand strength.

What this means for operators and supply chains

The practical implications of this shift are already visible.

1. The market is now corridor-specific

There is no coherent “air cargo market” in the current environment.

Conditions vary significantly by lane. Some corridors are relatively stable, with capacity returning and rates beginning to normalise. Others remain constrained, with limited lift and elevated pricing.

This makes market signals harder to interpret. A global rate index no longer provides a reliable view of operating conditions.

2. Planning assumptions are breaking down

Many of the assumptions that underpin air cargo planning are becoming less reliable.

Transit times are more variable as routes change. Capacity commitments are less certain as airlines adjust networks. Fuel availability is emerging as a potential operational constraint rather than a background cost.

This introduces a higher degree of uncertainty into planning cycles that are typically built around predictability.

3. Exposure is shifting faster than response

From a risk perspective, exposure is moving quickly across the network.

Corridors that were previously stable are becoming constrained. Others are absorbing displaced demand and capacity. The balance between exposure and controllability is shifting, often faster than organisations can respond.

This is particularly visible where supply chains rely on specific hubs or routings that are no longer reliable.

4. Decision latency becomes a cost driver

In this environment, the speed of decision-making matters.

When capacity is uneven and conditions change quickly, delays in routing, booking, or modal decisions translate directly into higher costs or missed delivery windows.

The risk is not only disruption. It is the inability to respond to it quickly enough.

Air cargo has become part of the disruption

The current situation in air cargo is not simply a reaction to geopolitical events. It is an example of how disruption propagates through a connected system.

The initial trigger is clear. Conflict in the Middle East has disrupted airspace, fuel flows, and key logistics hubs.

What follows is more complex.

Routes shift. Fuel availability tightens. Aircraft economics change. Capacity is redeployed. Demand moves across corridors. Pricing responds to all of these factors at once.

The system does not adjust smoothly. It becomes distorted.

Air cargo is often treated as a flexible release valve in supply chains. When disruption hits, it absorbs pressure. It provides speed and optionality.

In this case, it is absorbing pressure while also being constrained by it. That changes its role.

From flexibility to constraint

When routing, fuel and lift all move at the same time, the system loses its ability to clear efficiently.

Capacity is still there, but it is harder to access. Demand is still present, but it is harder to serve. Pricing rises, not because the market is strong, but because the system is under strain.

This is the shift from disruption as an event to disruption as a condition, embedded in how the air freight market operates.