Global air cargo market demand dips by 8% in October

According to new weekly market data from industry analysts CLIVE Data Services, part of Xeneta, the global air cargo industry's volumes decreased -8% year on year in October and presented no current signs to predict an upturn in 2023, as year on year demand fell for the eighth consecutive month.

In 2019, demand fell -3% below pre-pandemic levels, measured in chargeable weight.

Global air cargo capacity continued to rebound in October, although at a slower rate, and remained -7% below than pre-covid 2019 levels. This resulted in a more muted 'dynamic loadfactor,' CLIVE's measurement of airline performance based on both the volume and weight of cargo transported as well as available capacity. Load factors have been declining over the last 18 months as falling demand meets rising capacity. In October, the 61% dynamic loadfactor was -7% and -1% points lower than in 2021 and 2019.

Global airfreight spot prices fell below last year's level for the second month in a row in October. The slight increase in week 3 was mostly due to an increase in special cargo freight rates, while normal prices continued to fall.

"We are six weeks away from Christmas and there is no indication there will be a peak. Demand worsened in October over the -5% reduction we reported in September, but this is not likely to surprise the market given the global economic outlook, although it's clear that rates remain at a higher level than some observers would have expected in the current conditions. Airfreight is certainly not currently suffering the decline of the ocean, where Xeneta has recorded rate drops of 60%-70% in the last nine months. Ocean freight is responding to the market conditions much faster than air is and normalising quickly from a rates point of view. The outlook for air cargo remains uncertain. We don't see a pressure on capacity, and we don't see an increase in rates," said Niall van de Wouw, Chief Airfreight Officer at Xeneta.

Looking ahead, he expects more challenges and uncertainties for the air cargo market over the next 12 months.

"If you take the broader perspective, I see very few signals that would support an increase in general airfreight in 2023 – be that because people have higher personal bills or because people are spending more on services relatively to goods. It is also fair to assume that even if consumers in Europe and North America were to buy exactly the same amount of goods in 2023 as in 2022, which is unlikely, then a higher portion of the transportation in support of that, whether it's the finished products or the hard materials to make those products, is likely to move by the ocean as a response of the higher reliability returning on the sea. Airfreight received a boost in the last two years because of the incredible mess on the ocean side, but shippers are now likely to feel more comfortable moving back to the ocean from a reliability point of view. With all these factors combined, I don't see where a lot of general freight growth demand drivers will come from.

"On the supply side, the opposite is true. People are becoming more comfortable about flying again and routes are opening up, leading to a rise in belly capacity, and the freighters being ordered and cargo conversions will also be coming to the market. The only development I can see that would slow down the decline in rates is supply on the ground. If airlines and cargo handling companies continue to struggle to hire people and remain short-staffed, then the bottlenecks will create an upward pressure on rates because it will be difficult to get your goods through the value chain."

In October, airfreight prices on key volume corridors from Asia to Europe and Asia to the US continued to decline, with overall rates falling more significantly on incoming US corridor routes than on inbound Europe. This is due to increased expenses for EU routes as a result of Russian airspace restrictions and decreased expenditure by US customers.

In October, Europe-US airfreight spot rates were USD 3.11 per kg, down 27% from the 2021 level, while Asia-Europe spot rates were USD 5.09 per kg, down 25% year on year. Asia to the United States had the steepest drop of the three leading volume routes, with the average spot pricing falling 45% from October last year to USD 5.87 per kg.

In comparison, the Latin America-US corridor was more resilient to market pressures, despite an 11% drop in airfreight spot rates to USD 1.38 per kg in October.

Shippers, however, may not be seeing long-term gains from falling airfreight rates right away, Niall van de Wouw says: "There is a lot of uncertainty, so this is not a period where shippers will get an 'attractive' deal for the next year or two years, they will get lower rates for the next one to two quarters, but who knows what will happen beyond that."