Need for air freight decreased - Redlines Group

Need for air freight decreased

Need for air freight decreased

Some of the causes would be the increasing reliability in maritime freight and the lower level of consumption of goods.

In January and February 2022, the volume of air cargo was high, with a cumulative year-on-year growth of 4% compared to the previous year (2021), but this situation decreased from mid-April to October 2022, where a negative growth of the volume was observed, according to the Xeneta report. Prior to the pandemic, belly capacity (passenger aircraft warehouse) was 55-60% of the market (the rest was cargo capacity), which was eliminated at the start of the pandemic due to a drop of 80%. By October 2022, a gradual recovery was observed and the carrying capacity began to decrease. The ongoing Ukrainian war also slowed the recovery of belly capacity in 2022. 

The load factor peaked in April 2021, in October it underwent a recovery but was still below the previous average of the pandemic. Despite this, the air freight rates did not follow this load factor, with a delay of up to 9 months. By January 2022, a downward trend was observed, with a second peak in April 2022 because of the war between Russia and Ukraine, and by October 2022, it was still double compared to before the pandemic.

These high rates had among their causes the belly capacity factor (due to its delay in returning to the market) and the factor of the vertiginous increase in the price of jet fuel. 

The US market began to return to pre-pandemic capacity in late October 2022, unlike the Asia-Pacific market. When analyzing inland freight rates to Europe from Africa, North America and Latin America in 2022, in the short and long term, these were around 50-60% compared to pre-pandemic years. As of November 2022, these prices have doubled. It should be noted that the Asia-Pacific region was the most affected (as indicated above, the Russo-Ukrainian war and the consequent closure of Russian airspace). 

By 2023, according to Niall van de Wouw, director of air cargo for Xeneta, the majority of customers in a survey agreed that they see European and US consumers spending less on goods in 2023. Given this reduction in consumer spending, it will be observed a decreased in air freight due to the increase in the cost of living and also because people will prefer to spend more on services than on goods. 

A third factor is the increasing reliability in shipping. During the pandemic, more shipments were made by air due to the unreliability of the shipping lines and the increase in blank sailings, so with 97% of the volumes moved by ocean and 3% by air, and even if a small percentage of the maritime traffic spills over into air traffic, represents a considerable impact, reducing the need for air transport. 

Niall also mentioned that shippers are looking to reduce their carbon footprint and are willing to accept additional delivery times by choosing ocean freight over air. 

Finally, in terms of demand, it is likely that this year it will be less than in 2022. He added that it is important to monitor surface transport modes to detect unknown events that could nevertheless boost this demand, but he foresees moderate growth. 

January 30, 2023
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