The air cargo industry is flying headlong into its strongest ever peak season as booming e-commerce demand will combine with online shopping promotions this fall and rising volume of more traditional air freight, executives told a conference here.
But at the same time, the industry was facing a worsening supply-demand imbalance that would place severe constraints on available capacity and add pricing pressure to already elevated rate levels.
“Brace for impact,” was the blunt warning to shippers and forwarders from Peter Scholten, CCO of freighter operator Air One Aviation, at the EU Cross-Border E-Commerce Forum at Liege Airport in Belgium Tuesday. “We are heading for the highest peak seasons in history.”
The global air cargo market has seen eight straight months of double-digit growth as of August, with a 14% increase in demand and only 7% capacity growth over that period, Ryan Keyrouse, CEO of market intelligence consultancy Rotate, told the forum.
With volume this year expected to rise 11% to 12% year over year, he estimated volume would grow a further 2% to 7% in 2025, with the high demand taking the air freight industry deep into “unchartered territory.”
“If e-commerce growth continues aggressively, we are going to be in an unprecedented state,” Keyrouse said. “The highest two-year growth average we’ve had in recent decades.”
While the demand has enabled freighter operators to benefit from rising rate levels, the robust market growth is being constrained by a lack of capacity.
Data reported by rate benchmarking platform Xeneta show load factors on Asia-North America flights are at 87%, with both Asia-Europe and Asia-Middle East flights at 86%, which is effectively full for headhaul routes.
Aircraft are also flying at their peak utilization, with Rotate data for August showing global freighter fleets operating at up to 15 hours a day, just below pandemic flying times. Keyrouse said this meant any relief was “not going to come from load factors and it’s not going to come from fleet utilization.”
The index of outbound routes from Hong Kong edged up a further 0.2% this week, led by higher rates to North America that took the year over year gain to 21.1%, according to the Baltic Air Index. Outbound Shanghai rates edged down 1.8% week over week, but the rate is up 30% compared with last year.
Forwarders protecting ‘bread and butter’ customers
Richard Broekman, CCO and head of sustainability at freighter operator Atlas Air, said he did not believe shippers were prepared for the significant supply-demand imbalance that lay ahead.
“The peak is going to be very strong and driven by a real lack of capacity and a lot of delays of deliveries of new freighters that were supposed to be flying already but are just not there yet,” Broekman told the forum.
Forwarders are already scrambling to lock in enough capacity for their customers through the fourth quarter, which is becoming increasingly difficult as e-commerce swallows up much of the available space out of Asia.
Asok Kumar, head of global air freight at forwarder DB Schenker, noted that as significant as the e-commerce volume is, it is not something that benefitted global forwarders and typically represented single-digit percentages of their annual tonnage.
Kumar noted global e-commerce in 2022 was about 1.5 million tons of the total air freight market of 22 million tons. The estimate for 2025 is that e-commerce will be 5.2 million tons of a market that will be 27 million tons, showing that most of the growth is from e-commerce rather than the traditional air freight market.
“We have our regular bread and butter customers that are very concerned about this trend, and we need to know how we cater to the entire air freight industry that needs support,” Kumar told the forum.
“Normal demand in the market for the phones, the AI enabled devices, the technology, automotive movements, for example,” he added. “We have commitments to our existing customers that we need to protect, and we will do that.”
Stefan Krikken, head of global air freight at DSV, said aside from during COVID-19, the market “has never been as constrained, as difficult as it is right now,” in his 15 years in the business.
”COVID was on a different level, but I think the peak that we’re heading into is going to be unprecedented,” he told the forum.
“Going into the peak season we will also have the e-commerce days — be it Black Friday or Singles Day,” Krikken said. “There are several of these events that will really drive the e-commerce boom.”
Source: https://www.joc.com/article/brace-for-impact-warning-as-air-cargo-heads-into-historic-peak-season-5725527
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