The air cargo peak season, which began late last year, has now extended through the first half of 2024. With demand consistently outpacing global supply, this trend shows no signs of changing.
June saw a 13% year-over-year increase in cargo volumes, measured in chargeable weight, while capacity growth was minimal at just 3% compared to June 2023, according to rate benchmarking platform Xeneta.
This supply-demand imbalance is driving up prices, cautions Niall van der Wouw, Xeneta’s chief air freight officer. He warns shippers to brace for higher costs in the fourth quarter. “The global market is steady at this level, but this is likely the calm before the storm in terms of air freight rates,” van de Wouw said in a market update, indicating that peak season surcharges are expected by the end of August.
“We expect lower demand growth year over year in the second half of 2024 due to a strong Q4 2023 comparison. However, if you haven’t secured your Q4 capacity yet, you could be in for a tough time,” he added. “Many Asian markets are predicted to experience a hot Q4 for air cargo.”
On specific routes, June saw the largest spot rate increases from Southeast Asia to Europe and the US, rising 14% from May to $3.65 per kilogram and $5.32 per kilogram, respectively. Northeast Asia to Europe and the US also saw average pricing increases of 5% and 4%, respectively.
Strong, Steady Growth
Two main factors are fueling the air freight market’s growth: sustained e-commerce demand in the US and Europe, and a modal shift from ocean shipping due to Red Sea disruptions caused by Houthi militant attacks, which force urgent cargo into the air.
“It doesn’t take much cargo moving from container shipping to fill a freighter or the belly space of a passenger plane,” explained Glyn Hughes, director general of The International Air Cargo Association, to the Journal of Commerce.
Global air cargo volume has recorded its sixth consecutive month of double-digit year-over-year growth in June, a trend expected to continue through July and August due to weak comparisons from last year.
Netherlands-based air cargo analyst WorldACD reported an 18% year-over-year increase in air freight tonnage from Asia-Pacific origins in the second quarter, following a 20% growth in the first quarter.
“Global air freight demand and rates remain elevated year over year, driven by e-commerce demand and mode-switching due to the Red Sea crisis,” noted global consultancy AlixPartners in a June supply chain report. If peak season demand in the fourth quarter matches the first half, the air freight industry is poised for double-digit growth in 2024.
A Delicate Balance
However, capacity is not increasing as quickly as demand, particularly on trans-Pacific routes, where passenger flights have not returned to pre-pandemic levels, limiting below-deck cargo space. Shippers are also competing for space with large Chinese e-commerce platforms.
Transport Intelligence analyst Thomas Cullen noted the China-US route’s “strange trajectory,” with passenger flight frequencies still well below 2019 levels. “By 2024, the US was the 13th largest origin/destination for Chinese flights, down from 6th in 2019,” Cullen wrote.
Cullen partially attributed the capacity shortfall to US government policy. Earlier this year, US airlines urged the Biden administration not to grant greater access to Chinese airlines, citing “existing harmful anti-competitive policies.”
While the US approved an increase in China’s weekly round-trip flights from 35 to 50 from March 31, this is still far below the 150 weekly round trips allowed before early 2020 restrictions.
Amid market turbulence and potential for an air cargo rate surge in Q4, van de Wouw said shippers from Asia are leaning towards six-month or longer contracts to avoid extreme rate fluctuations during peak season.
“With ocean shipping chaos, increased manufacturing activities, and fear of missing out, everyone is considering a mix of short- and long-term contracts,” he noted. “But regardless, shipping goods from Asia Pacific will cost significantly more come September.”