State of Logistics 2024: Air Cargo

Global air cargo rates reached new heights in April due to the continuing disruptions to ocean freight services in the Red Sea and the improving—albeit slowly—global economy.

The impact of air cargo’s “black swan” event—conflict in the Red Sea disrupting ocean freight services—showed signs of easing in April, but volume growth still registered the fourth straight month of +11% increases in global air freight demand, according to analysis by Xeneta.

Market analysts attribute the heighted demand to e-commerce, which is taking up much airfreight capacity. U.S. consumers are still feeling the impact of persistent inflation and high interest rates and, therefore, seek cheaper products that are sold via cross-border e-commerce platforms that utilize airfreight.

Shippers, especially in the business-to-consumer (B2C) category, are turning to airfreight because ocean services have become unreliable, experts from Xeneta and The International Air Cargo Association (TIACA) note. “It’s making the rest of the capacity quite tight, and that’s where you’re getting to see the increase in rates,” they say.

Despite present hurdles to global trade, experts at Xeneta surmise that 2024 may herald the start of a new economic growth cycle for the global air cargo industry, although volatile B2C e-commerce volumes, coupled with unpredictable geopolitical events and consequential ocean liner response, make shippers and forwarders uncomfortable when it comes to long-term agreements.

For example, Xeneta’s March data showed freight forwarders continued to purchase a larger share of volumes on the spot market as they kept their options open pending an anticipated cooling down of the Red Sea disruption—and to benefit from the traditionally more imbalanced demand/supply ratio caused by the influx of airline belly capacity at the start of summer schedules.

In the first quarter of 2024, the share of volumes in the spot market accounted for 43% of the total market—compared to 31% in the corresponding pre-pandemic era—as expectations of a “normalization” of the cargo market prompted freight forwarders to take short-term risks in the spot market in the hope of longer-term gains.

Air cargo spot rate rose year-on-year for the rst time since August 2022

Global air cargo demand, supply, load factor and freight rate developments

Similarly, in the first quarter of 2024, more shippers pivoted away from longer-term global air cargo contracts to short-term capacity commitments, with three-month contracts accounting for 41% of all newly negotiated contracts in this quarter, up 18 percentage points from the previous quarter. The preference for six-month contracts declined 23 percentage points versus the previous quarter.

Meanwhile, in April, year-on-year growth of the global air cargo spot rate turned positive for the first time since August 2022, rising 5% due to a combination of Middle East conflicts and strong e-commerce demand, Xeneta reports. As a result, the average global spot rate rose to $2.59 per kg, its highest level this year.

However, Xeneta warns that the April year-on-year growth in global spot rate should be viewed in the context of a weak market in April 2023.

“In absolute terms, the levels of demand and supply growth are what we expect to see in April after what was a typically strong month of March at the end the first quarter,” says Niall van de Wouw, Xeneta’s chief airfreight officer. “April may well represent an interlude to a
quieter period for the airfreight market,”