Dive Brief:
- Peak season is likely to bypass the air cargo market altogether after air freight demand fell for the eighth consecutive month in October, according to Clive Data Services.
- Volumes declined 8% YoY in October and levels remain 3% lower than in 2019, Clive said Nov. 2. Spot rates fell 20% YoY in October, but are still 94% higher than in 2019.
- “We are six weeks away from Christmas and there is no indication there will be a peak,” Niall van de Wouw, chief airfreight officer at Clive parent company Xeneta, said in a statement.
Dive Insight:
This year’s evasive winter peak has yet to kick into gear as the air freight market continues to face softening conditions with no sign of any turnaround, according to Clive.
Although macroeconomic factors like inflation and low export orders continue to impact overall air activity, van de Wouw noted a rebound in ocean capacity will further impact air cargo demand as more shippers return to maritime transport.
“Airfreight received a boost in the last two years because of the incredible mess on the ocean side, but shippers are now likely to feel more comfortable moving back to ocean from a reliability point of view,” he said. “With these factors combined, I don’t see where a lot of general freight growth demand drivers will come from.”
Carriers and freight forwarders have reported weakening air demand in Q3. Overall air volumes at DSV’s Air & Sea division declined 10% YoY in Q3, and CEO Jens Bjørn Andersen said in an earnings call that ocean and air volumes could deteriorate as much as 15% next year.
Clive reported October air freight capacity was up 3% YoY and down 7% compared with 2019 levels. Meanwhile, dynamic load factors, which compare cargo flown with available capacity, were subdued in October at 61%, down 7 percentage points YoY and 1 percentage point lower than 2019 levels.
Spot rates, which continue to fall as capacity outpaces demand, were down 45% YoY on the Asia-U.S. trade lane, the sharpest fall among the top three volume corridors. Europe-U.S. spot rates were down 27% YoY, while Asia-Europe rates fell 25% YoY. Spot rates from Latin America to the U.S. dipped 11% YoY in October, according to Clive.
Despite the declines, the air market remains uncertain and shippers may not see long-term gains from falling air rates, according to van de Wouw. Labor supply on the ground would be the only development that could slow the decline in rates.
“If airlines and cargo handling companies continue to struggle to hire people and remain short-staffed, then the bottlenecks will create an upward pressure on rates because it will be difficult to get your goods through the value chain,” he said.
