Air Cargo FFAs and index-linked airfreight cleared for take-off


Freight Investor Services (FIS), the global leader in freight and commodity derivatives, is bringing its expertise in financial risk management to the airfreight market with the launch of Air Cargo FFAs.

The London-based brokerage has partnered with The Air Cargo Index (TAC Index) to offer airlines, forwarders and end users the means to flexibly price air cargo contracts and to hedge their exposure using cleared financial futures contracts.

The air cargo freight market is undergoing a transformation; growing rapidly, with volumes expected to more than double in the next 20 years, it also faces threats from new entrants challenging established business models and promising new levels of transparency using tools that threaten long-standing relationships.

“At FIS we have a track record of developing new commodity and logistics markets and helping our clients manage their transportation and logistics risks and improve their margins,” says FIS head of strategy Michael Gaylard. “Our aim is to support change in the industry that allows airlines and forwarders to more accurately forecast their revenue when selling and buying air cargo.”

Using the market-neutral TAC Index, FIS will publish a forward price curve, helping market participants with forward planning and budgeting, allowing them to better forecast expenditure and manage budgets effectively while also gaining more flexibility.

Buyers and sellers of cargo space will be able to improve price discovery on physical fixed rate contracts, strike index-linked floating block space agreements and use Air Cargo FFAs to lock in prices.

In order to generate the maximum liquidity in this emerging market, FIS has developed a series of geographically-focussed baskets to represent the most popular routes. Currently available baskets include the six biggest routes on Asia-Europe and Asia-US, generated on a volume-weighted basis set on an historical basis and priced against weekly index publication.