The Fallback Option Just Got a Lot More Expensive

When ocean freight becomes unreliable, air cargo absorbs the overflow. When air freight capacity contracts and fuel costs double at the same time, there is no fallback left.

Global air cargo rates reached their highest level of 2026 in late March, hitting $2.98 per kilogram despite flat demand, as surging jet fuel prices replaced capacity shortages as the primary driver of pricing. Since the outbreak of conflict involving Iran in late February, fuel prices have more than doubled. That shift matters because it changes the nature of the problem. Capacity constraints ease as airlines restore routes and adjust networks. Fuel cost increases do not reverse quickly. They are structural until the underlying energy market stabilizes, and there is no clear timeline for that.

What this means for companies using air freight as a buffer

The conventional logic in supply chain management is that air freight is expensive but available when ocean routes are disrupted. That logic assumes air capacity is accessible and that fuel surcharges, while painful, are manageable against the cost of a production line stoppage or a missed retail window. Both assumptions are under pressure simultaneously right now.

Capacity from the Middle East and South Asia region recovered somewhat in late March but remained 33% below levels recorded a year earlier. Global air freight volumes were down 6% year on year, with the steepest declines in the Middle East and Africa. For companies routing time-critical shipments through Gulf hubs, including electronics components from Asia, pharmaceutical ingredients from India, or automotive parts connecting Asian suppliers to European plants, the combination of reduced capacity and elevated rates is compressing the window in which air freight remains a viable cost decision.

The cost is moving in one direction across the board

Jet fuel averaged $195 a barrel in late March according to IATA data, more than double the level from a year earlier. Airlines are passing that cost through directly. For industrial shippers moving components, assemblies, or finished goods on air freight, the landed cost calculation has shifted materially in a matter of weeks. Budget models built on 2025 fuel assumptions are already wrong.

What makes this particularly difficult to plan around is that air freight was already expensive before the Iran conflict began, having never fully returned to pre-pandemic pricing norms. The current environment stacks a fuel cost shock on top of a baseline that was already elevated. Companies that built air freight flexibility into their logistics strategy as a cost-of-doing-business assumption are now revisiting that math under very different conditions.

Unlike past crises such as the Red Sea disruptions where air freight stepped in to support weakened ocean supply chains, this situation is different because the conflict is directly affecting airlines and air cargo operations simultaneously. There is no unconstrained mode left absorbing the overflow. Every option is more expensive, less reliable, or both.