Topic of the week: Air Cargo Fuel Surcharges Diverge Sharply Amid Jet Fuel Spike
Air cargo fuel surcharges (FSCs) rose sharply in late March following a surge in jet fuel prices, but carrier responses have varied significantly, highlighting growing pricing divergence across the market.
Data from Hong Kong shows that through January and February, FSCs moved largely in line with fuel trends, with major carriers clustered in a narrow range. By February, long haul surcharges had eased to around HK$3.7 to HK$3.8 per kg across airlines including Cathay Cargo, Lufthansa Cargo, Japan Airlines, and China Airlines.
This relative stability continued into early March, with most carriers maintaining FSCs between HK$3 and HK$4 per kg.
However, from 20 March, the market shifted abruptly. Cathay Cargo increased its long haul FSC from HK$3.2 per kg to HK$12.9 per kg, while other carriers showed minimal adjustment. Lufthansa Cargo and Atlas Air remained within the HK$3 to HK$4 range, and Japan Airlines and China Airlines implemented only modest increases.
As a result, long haul FSCs in the same market diverged dramatically, ranging from approximately HK$3 per kg to nearly HK$13 per kg within days.
The move follows a sharp rise in jet fuel prices. According to IATA data, global average jet fuel prices climbed from $95.95 per barrel in late February to $197.00 per barrel by 20 March, driven by higher crude prices and elevated refining margins.
Despite this, the scale of surcharge increases has not been consistent with underlying fuel cost movements, raising questions around FSC setting mechanisms.
Market participants note that pricing responses vary widely between carriers. While fuel costs remain a primary driver, the relationship between cost increases and surcharge adjustments is not always transparent, particularly for customers facing sudden increases on previously contracted shipments.
The divergence also reflects broader shifts in airline fuel risk management. Over recent years, many carriers, particularly in the US, have reduced or exited fuel hedging programmes, increasing exposure to spot fuel price volatility. Others, including European and some Asian airlines, continue to hedge a significant portion of near term fuel consumption.
Cathay Cargo indicated that its hedging programme covers approximately 30 percent of the crude oil component and excludes refining margins, limiting its ability to offset recent price increases.
Current data suggests that FSCs are functioning not only as cost recovery mechanisms but also as flexible pricing tools. In stable market conditions, surcharge levels tend to converge across carriers. However, in periods of volatility, pricing strategies diverge sharply, reflecting differing cost structures, hedging positions, and commercial approaches.
With energy markets remaining volatile and airline risk strategies increasingly fragmented, further variation in fuel surcharge application is expected.
For shippers, the key challenge is no longer just tracking fuel prices, but anticipating how individual carriers will translate cost pressures into pricing.
