Global air cargo market rides out turbulent 2022

The global air cargo market finished a turbulent year in December with a mix of trends that offered a “win/win” outcome for airlines, forwarders, and shippers alike, according to an analysis by Clive Data Services, a unit of the ocean and air freight rate analytics provider Xeneta.

Air freight carriers were whipsawed by pandemic conditions in 2020 and 2021, with many flights canceled as passengers were either barred or spooked by covid travel bans. Those grounded planes took a large portion of freight capacity off the market since many carriers pack cargo into the belly holds of passenger flights. And in turn, that scarcity drove shipping rates to sky-high levels for remaining freight shipments.

As travel patterns began to revert to historic norms, rates for air cargo fell steeply in 2022, easing the rate crunch for shippers as demand slumped from pandemic- and holiday-period peaks. For December 2022, the sector reported that its chargeable weight fell by 8% compared to the prior year, the 10th consecutive month of lower demand. And while the overall (on a global basis) average spot rate in December declined 35% year-on-year, it remained 75% above the pre-Covid level, Clive said.

Clive reported that the 8% fall in global air cargo volumes represented the tenth consecutive month of lower demand, down 13% compared to 2019 at a time when available airfreight capacity continued to restore above last year’s level. Capacity in December 2022 recovered to 93% of the 2019 level.

“It would be easy to take a pessimistic view of the global air cargo market’s downturn, but this would ignore where it has come from. There is little use comparing it to the same time last year because then we had no Ukraine conflict, no high energy prices, no soaring interest rates, nor the impact of the subsequent cost-of-living pressures. So, based on the global environment we see right now, airlines are still achieving rates 75% higher than pre-Covid. That indicates the glass is very much still half full,” Niall van de Wouw, Chief Airfreight Officer at Xeneta, said in a release. “If, in January 2020, you had asked airline executives if they’d like to see airfreight rates across the Atlantic or from Asia Pacific 75% higher, we would have heard a unanimous ‘yes’. The difference now is that there’s less pressure if you’re a shipper, even though you’re still paying more. In terms of the long-term sustainability of the air cargo supply chain, this will help.”

Despite that optimistic assessment, the air freight landscape for 2023 remains uncertain. After a surprisingly strong start for the air cargo market in January 2022, this new year will likely be impacted by the earlier Chinese New Year and growing concerns of rising Covid levels which, in China, is already impacting some factory production, Clive said.

“We don’t see [air cargo] demand recovering quickly because of what is happening around the world, but we do expect to see supply continuing to come back into the market. This, of course, will put further pressure on load factors and rates. So, we struggle to see where the tailwinds will come from, but looking at the broader perspective, we still see a very efficient air cargo market, especially when compared to the 70-80% fall in ocean rates in the past 8-9 months,” van de Wouw said. “The fact that the airfreight domain is more competitive and more fragmented on the supply side meant rates didn’t go as crazy as we saw with ocean container prices, so the decline, now airfreight volumes are lower, is more gradual. Air cargo is much stronger than it was pre-Covid, but the current direction of the market means there is some degree of good news for everyone.”