News #116 - Air cargo dodges trade woes in May but the outlook remains difficult

13.06.2025

Recent data from industry analysts and consultants reveals that air cargo demand demonstrated resilience in May despite ongoing trade challenges. However, market conditions remain fragile as declining sentiment and rate pressures persist.

Demand and Capacity Trends

According to the latest figures from Xeneta, airfreight demand in May rose by 6% year-on-year, while capacity declined by 2%. Despite these shifts, the dynamic load factor held steady at 57%, underscoring the continued volatility in global trade and economic conditions.

Conversely, the average global airfreight rate for May experienced its first decline since April of last year, dropping 4% year-on-year to $2.44 per kilogram.

Impact of Trade Tariff Reductions

The demand uptick coincided with the temporary suspension of the US–China tariff war on May 14, which included a significant reduction in US duties from 145% to 30%. Tariffs on e-commerce goods were also reduced to 54% or a flat fee of $100 per parcel for commercial airline shipments.

Niall van de Wouw, Chief Airfreight Officer at Xeneta, attributed much of May’s demand increase to “emergency” shipments driven by the trade détente rather than robust underlying market demand.

Market Sentiment and Rate Trends

The drop in airfreight rates can be attributed to waning market sentiment and lower fuel prices, which are currently around 20% lower than last year. Van de Wouw noted:

“Market fundamentals are holding up, but the drop in rates is likely a reflection of declining sentiment and concerns, particularly among airlines, over what will happen once more stability returns to international trade.”

He further emphasized the short-term nature of this demand surge:

“This climate is reducing trade overall, but airfreight is benefiting temporarily from increased emergency shipments. However, this trend is unlikely to last.”

Shippers Favor Speed Amid Policy Uncertainty

Airfreight’s speed compared to ocean shipping has provided an advantage for shippers looking to move goods quickly amid trade policy fluctuations. Container shipping’s longer lead times make it less agile in responding to sudden changes in trade conditions.

Van de Wouw warned of the potential impact of long-term tariff agreements:

“While current conditions favor airfreight on certain lanes, the eventual resolution of tariff disputes may not promote trade overall, potentially hampering airfreight demand.”

Rate Volatility and Spot Market Trends

Xeneta reported a 14% surge in spot market rates from China to the US by the week ending June 1, reaching $4.31 per kilogram, up from their low point in mid-May. Despite this, seasonal rates on this lane continue to trend downward from their early-April peak.

Potential Demand Surge Post-Tariff Reduction

Looking ahead, Xeneta suggests another surge in airfreight demand could emerge when the tariff reduction expires on July 9 for most countries and August 13 for China. Rising prices in ocean shipping could also signal an impending shift in air cargo demand.

Van de Wouw concluded:

“The sentiment observed in May might foreshadow weaker market fundamentals, with reduced demand, falling rates, and lower load factors. However, the airfreight market will weather this period of uncertainty. Professionals must maintain resilience and prioritize long-term relationships during these challenging times.”