UAE businesses rush to book cargo shipments as fuel surcharge drops

Dubai: UAE businesses and consumers are taking advantage of recent fuel price dips to send shipments into and out of the country.

Emirates Skycargo will reduce its fuel surcharge if prices continue their downward trajectory. The cargo operator, like other airlines, adjusts its fuel surcharge according to a Fuel Surcharge Index.

The Index, which is based on the average price of aviation fuel in five key spot markets, has reached 216 points. Currently, the freight operator charges 39 cents per kg (Dh1.43) as fuel surcharge for short-haul routes, 65 cents (Dh2.4) for medium-haul and 91 cents (Dh3.34) for long-haul.

If the Index stays below 200 for the next two weeks, the fuel surcharge will be as follows: 36 cents per kg 9 (Dh1.32) for short-haul routes, 60 cents (Dh2.20) for medium-haul and 84 cents (Dh3.1) for long-haul.

Etihad Airways confirmed a reduction in its fuel surcharge, without disclosing any further details. “Like other airlines, Etihad has partially offset the high cost of fuel with a fuel surcharge, and recently announced a reduction in this charge,” said a spokesperson.

Air cargo rates, which move in tandem with fuel prices, dropped in recent weeks as crude oil stays around $100 a barrel. “As soon as the fuel surcharge gets impacted, we check the trade lanes and immediately inform our customers, so they can plan ahead,” said Meer Shabbir Ali, head of ATS Travels’ cargo division.

The world’s biggest package delivery firm United Parcel Service (UPS) slashed its fuel surcharge to 33 per cent in August, from 40 per cent in July. This rate has been steady for a full month now, which means things are getting slightly better,” said Kenneth Dsouza, CEO of Store2Door Cargo.

“But there is a lot more room for improvement as the surcharge used to be just 19 per cent before the Russia-Ukraine conflict. When it comes to personal cargo, people are not taking unnecessary items to avoid paying extra – commercial operations are carrying on as usual.”

Restructuring

“Firms have restructured their shipping methods because clients have certain cost limitations,” said Ali. “They are constantly negotiating the rates with airlines and shippers – the movement of goods has to be completely re-evaluated.”

Despite the current macro conditions, 2022 could be a bumper year for all kinds of freight operators, especially with the FIFA World Cup coming up.

It is all dependent on where crude oil will be in the coming months. Brokerages and research firms have estimated that the commodity could be anywhere between $65 and $115 by 2022-end, depending on broader economic conditions.

“Hopefully, it will keep coming down, unless there’s some major escalation,” said Dsouza.