Disruption helps reduce sea/air cost gap

Global Air Cargo Market Poised for Double-Digit Growth Amid Surging Demand and Regional Disruptions"

The global air cargo market is set for double-digit volume growth this year, following a 12% year-on-year surge in demand in May, as per the latest analysis by Xeneta. Despite the conservative and low single-digit industry growth forecasts made at the end of last year, expectations have been significantly raised due to the extraordinary regional demand for cargo capacity during the first six months of 2024. According to Xeneta’s Chief Airfreight Officer, Niall van de Wouw, the global air cargo spot rate rose 9% year-on-year (y-o-y) in May, reaching $2.58 per kilogram.

"In terms of growth data, analysts sometimes say 'once is an incident, twice is a coincidence, and three times is a pattern'. In the world of air cargo, an undeniable pattern is emerging. We can’t use the word ‘surprising’ anymore. When we take a midterm view of the market, with these kinds of numbers, we may be on track for double-digit growth for the year. It is now a possible scenario," van de Wouw stated.

Data from the International Air Transport Association (IATA) also supports this optimistic outlook. In its latest analysis, IATA reported growth trajectories exceeding 19% in the Middle East South Asia (Mesa) and Asia Pacific markets. IATA's figures for Africa, Europe, Central South America (CSA), and North America confirmed growth across all regions in the airfreight sector for the first half of 2024, with increases of 8%, 7%, 5%, and 2% respectively.

Additionally, WorldACD Market Data, an airfreight aggregator service, corroborated these findings with its data showing an 11% year-on-year increase in airfreight for the second quarter of the year. According to van de Wouw, the airfreight market has adapted well to the increase in capacity provided by airlines. He highlighted the continuing disruptions in the Red Sea region, which have positively impacted the airfreight sector. This disruption has led to a remarkable 110% increase in the air cargo spot rate on the Middle East and Central Asia to Europe corridor.

Van de Wouw explained that companies' perceptions of the market largely depend on the regions in which they operate. For instance, spot rates from North America to China have dropped by 32%, while the Transatlantic market has also experienced declines in freight rates in both the front and backhaul lanes. Despite these regional variances, the overall outlook for the airfreight market remains positive for the remaining months of the year. Hopes are high for another year of substantial end-of-year volumes.

The ongoing crisis in the Red Sea is expected to continue influencing the market. Van de Wouw noted that the persistent port congestion and broader disruptions are helping to reduce the cost gap for shippers or forwarders considering a shift to air cargo. This scenario, combined with the increased capacity and robust demand, suggests a strong finish to the year for the airfreight industry.

Looking at the broader picture, the surge in demand for air cargo is being driven by several factors. The shift in consumer behavior towards e-commerce, expedited by the COVID-19 pandemic, has led to increased reliance on air cargo for timely delivery of goods. Additionally, disruptions in ocean freight, including port congestion and delays, have prompted many businesses to opt for airfreight as a more reliable alternative.

Moreover, the geopolitical landscape has also played a significant role. The disruptions in the Red Sea, coupled with ongoing trade tensions and shifts in global trade routes, have further emphasized the importance of air cargo in maintaining supply chain resilience. As businesses seek to mitigate risks and ensure continuity, the airfreight sector has become a critical component of global logistics.

Technological advancements and innovations in the air cargo industry have also contributed to its growth. Enhanced tracking systems, improved logistics management, and increased automation are enabling more efficient and reliable air cargo operations. These advancements are helping to meet the growing demand and address the challenges posed by increased volumes.

Furthermore, environmental considerations are becoming increasingly important in the air cargo industry. Airlines and logistics providers are investing in more fuel-efficient aircraft, sustainable practices, and carbon offset initiatives to reduce the environmental impact of airfreight. This focus on sustainability is not only meeting regulatory requirements but also aligning with the growing expectations of environmentally conscious consumers and businesses.

As we move forward, the air cargo market is likely to continue experiencing dynamic growth. The combination of strong demand, increased capacity, technological advancements, and evolving market conditions will shape the future of the industry. While challenges such as regional disparities and geopolitical uncertainties remain, the overall trajectory for the air cargo market appears promising.

In conclusion, the global air cargo market is on a robust growth path, with double-digit volume growth becoming a realistic scenario for the year. The remarkable demand for cargo capacity, driven by regional needs, disruptions in other freight modes, and technological advancements, is propelling the industry forward. As businesses navigate the complexities of the global supply chain, air cargo will continue to play a vital role in ensuring the timely and efficient movement of goods across the world.