Has Air Cargo Falled Below the Market?

With only 96 days until Christmas (sorry), the peak season for e-commerce and cargo is just starting. Despite the times, many major wind Goods Operators are beginning to show signs that they are anticipating a collapse in demand, or at the very least, a flattening of the accelerated capacity requirements that characterizes the pandemic.


When many of the world’s airlines shut down their fleets in 2020, bellyhold cargo capacity disappeared overnight. Given that there was increasing demand pressure among people using e-commerce to shop, as retail stores remained closed, and people chose (or made) to stay at home.

simple video of the day

This fueled an unprecedented increase in the cost of air cargo, encouraging more carriers to enter the market, or to expand capacity, often by converting redundant passenger aircraft into makeshift box-haulers.

Seats were removed from passenger aircraft to provide space for cargo. Photo: Hi Fly

But times have changed again. With the return of passengers there has been a return to at least some of the baileyhold capacity that had disappeared in 2020. of IATA The most recent industry update noted that air cargo capacity in June and July was tracking close to pre-pandemic levels – good news, but only if demand equals capacity.


Has demand started declining?

According to Zeneta, the airfreight market declined 5% year-on-year in August and 4% lower than pre-pandemic levels. This resulted in a drop in shipping rates globally, something that has been a trend since late March. Global rates rose to an all-time high of 156 per cent from 2019 levels in January and are currently down +113%. It’s still high, but not that high.

The good news is that the drop in cargo rates is starting to slow. As shown by Zeneta’s graph below, August has seen a plateau in rates between Europe and North America, below those seen in 2020 and 2021, but still higher than typical 2019 rates is too much.

Data & Charts: Zeneta

Nevertheless, air cargo carriers are anticipating a muted fourth quarter of the year, due to a number of factors. Adding to the mix are the continuing disruption of supply chains, the global economic slowdown, the depletion of people’s resources, higher than average fuel prices and, of course, the ongoing war in Ukraine.

Airfreight operators start pulling back

Although peak season for air cargo is still ahead, some freight airlines have already started to slow down. as reported by freightwavesglobal retail giant heroine has dialed back its expansion somewhat, slowing its fleet growth and reducing the number of daily flights. As of March, its total flight activity was growing at an average month-on-month rate of 14.3%. From March to August, it grew only 3.8% monthly on average.

Amazon has pulled back on its growth trajectory since March this year. Photo: Amazon Air

Amazon, as a company, lost a whopping $3.8 billion in the first quarter of the year. This closed or halted the construction of a record number of warehouses — 44 in total, and 2.5 times more than was previously scheduled for closure, according to American Shipper. It is reportedly now rationalizing its air network with fewer warehouses for supplies.

fedex Express, the world’s largest air cargo airline, is also feeling the pinch. Its September trading update showed its first-quarter earnings fell well below expectations, revealing a revenue shortfall of nearly $500 million. The shipper has admitted to reducing flight frequencies and grounding some aircraft to save money, although it was reluctant to specify how many aircraft would be parked.

FedEx will park some of the planes, though it hasn’t said how many or for how long. Photo: FedEx

DHL The mid-August report said demand had moderated, but volumes remained stagnant after a steep fall in July. It further noted that improvements in sea freight operations had contributed to lower air cargo demand, but remained positive about the long-term prospects for the industry.

As reported by Loadstar, Kalitta Air has relocated its operations to a new base in Ecuador, a move believed to be driven by overcapacity in the Chilean market. It became the second airline after Solent Freight Services earlier this year to announce direct flights from Quito to Miami, both targeting the transport of perishable goods in the US.

UPS is bucking this trend and moving ahead with the expansion of its fleet. Photo: Boeing

UPS, on the other hand, is showing no such doubts in the airfreight industry. This gave Boeing a . tapped for Eight more Boeing 767 freighters in AugustTo take its fleet to 108 of the total aircraft.

still positive sign

Despite the relative drenching of air cargo, there are plenty of operators to get in on the action. global shipping giant Maersk is launching its air cargo operation, leased the Boeing 767 as a complement to its vast ocean freight operations. Vietnam eyeing its debut First freight airline, IPP Air CargoAnd India’s new cargo operator Kwikjet Hoping for the first flights before the end of the year. These are just a few examples where Air Cargo is still on the development path.

Kwikjet Airlines may start cargo operations in a few months. Photo: Kwikjet Airlines

While the long-term prospects remain to be seen, things have to be kept in perspective. Yes, rates are coming down, and demand is starting to ease, but compared to pre-pandemic times, air cargo is still in a very healthy state.

Still, the fourth quarter of 2022 comes with some strong headwinds, and a good deal of volatility that cargo carriers will need to weather. Issues such as reduced purchasing power through inflation, not to mention the ongoing high price of jet fuel, will continue to weigh down the airfreight market and reduce the potential for the airline’s profitability.

Hopefully, FedEx’s position is just a blip, and not a sign that the market is facing some major issues.

Source: zena, american shipper, freightwaves, cargono, loadstar

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