Christmas hasn’t come early for the global air cargo industry as volumes declined -8% year over year (y-o-y) in October and provided no current signals to indicate an upturn in 2023, as y-o-y demand fell for the eighth consecutive month, according to new weekly market data from industry analysts CLIVE Data Services, part of Xeneta.
The drop in demand, measured in chargeable weight, was also -3% below the pre-pandemic level in 2019.
Compared to last year’s levels, global air cargo capacity continued to recover in October but at a slower pace, and remained -7% below the pre-Covid 2019 level. This contributed to a more subdued ‘dynamic load factor,’ CLIVE’s measurement of airline performance based on both the volume and weight perspectives of cargo flown and available capacity. As falling demand meets rising capacity, load factors have been declining over the past 18 months. In October, the 61% dynamic load factor was -7% pts and -1% pts in comparison to 2021 and 2019 respectively.
October saw a second consecutive month of lower global airfreight spot rates - below last year’s level. The slight uptick in week three was mainly caused by the rise of special cargo freight rates, while general rates continued their downward trend.
“We are six weeks away from Christmas and there is no indication there will be a peak. Demand worsened in October over the -5% reduction we reported in September, but this is not likely to surprise the market given the global economic outlook - although it’s clear that rates remain at a higher level than some observers would have expected in the current conditions. Airfreight is certainly not currently suffering the decline of ocean, where Xeneta has recorded rate drops of 60%-70% in the last nine months. Ocean freight is responding to the market conditions much faster than air is and normalising quickly from a rates point of view. The outlook for air cargo remains uncertain. We don’t see pressure on capacity, and we don’t see an increase in rates,” said Niall van de Wouw, chief airfreight officer at Xeneta.
Looking ahead, he expects more challenges and uncertainties for the air cargo market over the next 12 months. “If you take the broader perspective, I see very few signals that would support an increase in general airfreight in 2023 – be that because people have higher personal bills or because people are spending more on services relative to goods. It is also fair to assume that even if consumers in Europe and North America were to buy exactly the same amount of goods in 2023 as in 2022, which is unlikely, then a higher portion of the transportation in support of that, whether it’s the finished products or the hard materials to make those products, is likely to move by ocean as a response to the higher reliability returning on the sea. Airfreight received a boost in the last two years because of the incredible mess on the ocean side, but shippers are now likely to feel more comfortable moving back to ocean from a reliability point of view. With all these factors combined, I don’t see where a lot of general freight growth demand drivers will come from.”
On the supply side, the opposite is true, says Van de Wouw. “People are becoming more comfortable about flying again and routes are opening up, leading to a rise in belly capacity, and the freighters being ordered and cargo conversions will also be coming to the market. The only development I can see that would slow down the decline in rates is supply on the ground. If airlines and cargo handling companies continue to struggle to hire people and remain short-staffed, then the bottlenecks will create upward pressure on rates because it will be difficult to get your goods through the value chain.”
