Air freight volumes and rates continue to drop ahead of the holidays

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diving letter:

  • According to Clive Data Services, the peak season is likely to bypass the air cargo market entirely after air cargo demand fell for the eighth straight month in October.
  • Volumes fell 8% year-on-year in October and levels remain 3% lower than 2019, Clive said Nov. 2. Spot rates fell 20% year over year in October, but are still 94% higher than 2019.
  • “We are six weeks away from Christmas and there is no indication that there will be a peak,” said Niall van de Wouw, chief airfreight officer at Clive parent company Xeneta, in a statement.

Dive insight:

This year’s dodgy winter peak has yet to get underway as the air cargo market continues to face slacking conditions with no sign of a turnaround, Clive said.

Although macroeconomic factors such as inflation and low export orders continue to affect overall air transport activity, van de Wouw noted that a recovery in sea capacity will continue to affect air freight demand as more shippers return to sea transport.

“Air freight has received a boost over the last two years due to the incredible mess on the ocean side, but shippers are now probably more comfortable going back to the ocean for reliability reasons,” he said. “Given these factors, I don’t see where many of the demand drivers for overall freight growth will come from.”

Airlines and freight forwarders reported weaker air demand in Q3. Total air volume in DSV’s Air & Sea division fell 10% year over year in the third quarter, and CEO Jens Bjørn Andersen said in a conference call that sea and air volumes could deteriorate by as much as 15% over the next year.

Clive reported that air cargo capacity in October rose 3% year-on-year and fell 7% compared to 2019 levels. Meanwhile, dynamic load factors, which compare cargo flown to available capacity, were up 61% in October subdued, down 7 percentage points year-on-year and 1 percentage point below 2019 levels.

Spot rates, which continue to fall as capacity exceeds demand, fell 45% yoy on the Asia-US trade route, the sharpest decline among the top three volume corridors. Spot rates between Europe and the US fell 27% year-on-year, while interest rates between Asia and Europe fell 25% year-on-year. According to Clive, spot rates from Latin America to the US fell 11% year-on-year in October.

Despite the declines, the aviation market remains uncertain and shippers may not see long-term gains from falling air fares, according to van de Wouw. The local labor supply would be the only development that could slow down the rate decline.

“If airlines and cargo handlers continue to struggle to hire staff and remain under staff shortages, the shortages will create upward pressure on rates as it will be difficult to get your goods through the value chain,” he said.

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