Less demand and lower rates at end of 2022 but glass still “half full” for air cargo

The “glass is very much still half full” for air cargo at the start of 2023, according to the latest analysis by CLIVE Data Services, which is part of Xeneta.

The analyst said a “turbulent” 2022 for the global air cargo market ended in December “with a ‘win/win’ outcome for airlines, forwarders and shippers”. That’s because chargeable weight fell eight per cent on a year ago and while the general air freight spot rate registered its largest year-on-year decline of 35 per cent, overall average rates remained 75 per cent above the pre-covid level.

The drop in global air cargo volumes represented the tenth consecutive month of lower demand, down 13 per cent compared to 2019, at a time when available air freight capacity continued to restore above last year’s level.

Capacity in December 2022 recovered to 93 per cent of the 2019 level. CLIVE’s ‘dynamic load factor’, which measures the volume and weight perspectives of cargo flown and capacity available, declined seven percentage points year-over-year to 57 per cent, and was five percentage points below the figure for December 2019.

Click to enlarge. 

“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,” stated Xeneta’s chief airfreight officer Niall van de Wouw.

“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 per cent higher than pre-Covid. That indicates the glass is very much still half full.

“If, in January 2020, you had asked airline executives if they’d like to see air freight rates across the Atlantic or from Asia Pacific 75 per cent 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.”

Air freight spot rates on top volume corridors declined more sharply in December, according to the analysis. Outbound Asia Pacific spot rates have been falling for eight consecutive months, with spot rates from Asia Pacific to North America of US$5.38 per kg for the final month of the year down 13 per cent since October. This represented a 58 per cent decline on a year ago but remained 87 per cent above the 2019 level.

On the Asia Pacific to Europe corridor, the average December spot rate dropped 10 per cent compared to October to US$4.67 per kg, down 46 per cent year-on-year but remaining 92 per cent above the pre-pandemic level.

CLIVE Data Services noted that reducing winter flight schedules contributed to some resilience to this year’s market headwinds on the Europe to North America corridor. December’s air freight spot rate stood at US$3.25 per kg, up seven per cent over the October level. Replicating the market trends on the other main lanes, this rate was down 46 per cent versus a year ago but still 80 per cent up on 2019.

Click to enlarge.

Van de Wouw noted that there had been a “surprisingly strong” start for the air cargo market in January 2022, with the earlier Chinese New Year likely to have an impact.

“The air cargo industry remains in a very unpredictable state given world events. We don’t see 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,” he said.

“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 per cent fall in ocean rates in the past 8-9 months. The fact that the air freight 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 air freight 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.”

Sign In

Lost your password?