Air Cargo Management

Headwinds or tailwinds

Glyn Hughes, TIACA
photo_camera Glyn Hughes, TIACA's director general

For Air Cargo Management, TIACA’s director general Glyn Hughes explains why, although air cargo market conditions are tough, he is optimistic about the coming months.

With the books now closed on a somewhat disappointing first half of 2023, we turn our attention to the final months of the year with hopes for improved air cargo market conditions.

But is that hope based on data-based expectations, or for an optimistic sudden shift in prevailing wind conditions from headwinds to tailwinds?

Unfortunately, it seems that headwinds will prevail for some time with more of the same on the horizon. In summary, current economic data points to continued high levels of inventory with suppressed demand coupled with continued excess capacity.

The March 2023 World Trade Organization (WTO) Trade Barometer reflects a 95.6 rating indicating ‘below trend’ overall trade performance. Within that there are some green shoots of optimism, even though the overall position indicates continued slowed economic performance.

The automotive trade index improved to 110 on the back of stronger auto sales in the USA and Europe.

On the less optimistic side, the raw materials and electronic components indices continue to reflect below trend numbers, indicating reduced industrial output is likely to continue.

Consequential to this, the air freight index reflects 93 which, whilst lower than the historical trend, is healthier than the container shipping index which stands at 89. This even more subdued picture for maritime demand is reflected in the significant drop in ocean rates, over 80 per cent reduction in the past 18 months, with container rates now similar to pre‑Covid levels.

Overall, the WTO is forecasting a 1.7 per cent increase in merchandise trade for the full year.

The International Monetary Fund (IMF) is projecting inflation to continue to ease as the year progresses but will remain significantly above global targets.


At the time of writing this article, passenger travel demand has shown significant growth entering the peak summer travel season, with summer schedules reflecting significant increases versus winter 2022/2023.

This has resulted in a surge of additional belly capacity returning to the market with the result of placing further downward pressure on yields. This situation is expected to continue for the remainder of the year although, with other actions being taken, the excess capacity situation may ease slightly. A significant amount of new cargo aircraft will enter service during 2023, and we can expect to see a constant flow of cargo conversions coming up for redelivery.

Whilst this represents a large amount of cargo capacity, it will be offset by many aircraft that are coming up for retirement or due to be withdrawn. For instance, FedEx and UPS are withdrawing/retiring their respective fleets of MD-11s, most of which will be replaced by more fuel efficient new 767 and 777 freighter deliveries.

The maritime sector will also be addressing excess capacity through capacity management actions. Whereas aircraft cannot fly slower, the maritime sector can employ slow steaming, the result of which will effectively take out 5-10 per cent of total capacity. The use of blank sailings will likely also continue. Both actions will add to overall transit times, impacting global supply chains. What’s more, Panama Canal restrictions due to shallow waters will expand to further impact the largest ships crossing the waterway.


Labour unrest when it comes to maritime port operations is another area which can cause supply chain disruptions but may have a positive impact on air cargo demand, as shown during previous periods of unrest, particularly evident eight years ago when 29 west coast USA ports were impacted by a strike. Crisis24, a risk management platform, tracks global port activity in terms of labour disputes and reports that cases of labour induced work restrictions in 2022 were four times the previous year with several possible situations impacting supply chains during the rest of 2023.


Cargo flows into Europe are expected to be disrupted as the Import Control System 2 (ICS2) becomes effective. The EU, which currently accounts for about 15 per cent of global trade, is implementing this new customs pre-arrival security and safety programme to support an integrated EU approach to reinforce customs risk management under the common risk management framework (CRMF). It will support effective risk-based customs controls whilst facilitating free flow of legitimate trade across the EU external borders. It represents the first line of defence in terms of protection of the EU internal market and the EU consumers.

ICS2 requires all air carriers, freight forwarders, express couriers and postal operators involved in the transportation of goods by air to or through the EU to provide a set of Entry Summary Declaration data on the goods, prior to their arrival at the EU external border.

Sadly, not all states have been able to support test programmes and some have not yet met their technical obligations. This will present a challenge as universal readiness is not assured.

To conclude

Air cargo continues to address numerous short-term challenges but is continuing to invest and focus on longer term solutions. Technology-based investments will enhance operational efficiency and the overall customer experience. Expanded capacity and product distribution platforms will enhance competition and ease access to capacity and global networks. The second half of 2023 will continue to provide difficult market conditions but with some optimism for improving fortunes towards the end of the year and heading into 2024.

This feature was first published in Air Cargo Management – August/September 2023. To read the magazine in full, click here.

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