2023 State of Logistics: Air Cargo

The Air Cargo market continues to hit air pockets and some turbulence as it flies out of spring and into the summer months. According analysts, this is the result of ongoing factors pressing on the global economy, which continues to decelerate due to tightening global financial conditions, high levels of global debt, and supply chain problems including those linked to the war in Ukraine

“If you listen to earnings calls, you’ll hear shippers pushing back on expectations of a big inventory replenishment later in the year,” says Niall van de Wouw, chief airfreight officer at data provider Xeneta. “So, these are really tough times for air cargo.”

Data from the International Air Transport Association (IATA) finds that air cargo had a volatile first quarter. In March, overall demand slipped back below pre-pandemic levels. “Most of the indicators for the fundamental drivers of air cargo demand are weak or weakening,” reports Willie Walsh, IATA’s director general.

Global demand, measured in cargo tonne-kilometers (CTKs), fell 7.7% in March 2023 compared to March 2022 (-8.1% for international operations), says IATA. This was a slight improvement over the previous February’s performance (-9.4%) and half the rate of annual decline seen in January and December (-16.8% and -15.6% respectively).

IATA questions if this is a potentially modest start of an improving market or the upside of market volatility. The association also found that capacity (measured in available cargo tonne-kilometers or ACTK) was up 9.9% compared to March 2022. The strong uptick, it says, is reflected in the addition of belly capacity due to the continuing recovery of passenger service.

However, IATA reports that Asia-Pacific airlines saw their air cargo volumes decrease by 7.3% in March 2023 compared to the same month in 2022. The drop in demand suggests that air cargo traffic in the region has not yet stabilized following China’s reopening in January. Available capacity in the region increased by 23.6% compared to March 2022, as more belly capacity came online from the passenger side of the business.

CLIVE Data Services, part of Xeneta, reports that April saw a -4% drop in demand. It estimates that recovery could be as late as October given the flood of summer bellyhold capacity passenger airlines have been adding on major lanes.

More belly capacity in April resulted in lower loadfactors and rates versus March

The routes between North America and Europe especially are up. CLIVE finds that capacity is up 26% for April compared to March 2023. However, its data showed a 10% decrease in load factor across the North Atlantic to 57% in April, compared to the 67% level recorded to major North American airports in March.

“This is a market that will test companies,” says van de Wouw. “If you look at Europe-North America, what other industries see supply increase from one month to the next by 26%, very much outside of their control. This is a tremendous jump in capacity and, consequently, we saw a corresponding -12% fall in spot rates on these routes.

For the long run, air cargo markets are predicted to climb handsomely from $123.90 billion in 2022 to $175.24 billion by 2028, says Insight Partners. The latest Boeing World Air Cargo Forecast reports that the world’s freight fleet is expected to double in size over the next 20 years on the back of average annual cargo traffic growth of 4.1%.