Air Cargo Market Set for Double-Digit Growth in 2024 Despite Year-End Challenges
The global air cargo market is poised to achieve an unexpected double-digit demand growth of +11% in 2024, despite facing zero growth in November and December. According to the latest data from Xeneta, October saw a remarkable increase in spot rates, which rose by +19% year-on-year, showcasing the growing maturity and equilibrium between air cargo capacity buyers and sellers.
Initially forecasted for a modest growth of +1-2% for the entirety of 2024, the air cargo industry has managed to navigate through a year filled with unforeseen disruptions. Niall van de Wouw, Chief Airfreight Officer at Xeneta, emphasized that the industry has demonstrated resilience and adaptability, stating, "The frequency and diversity of challenges faced by the air cargo sector in 2024 could have led to chaos, but the industry has effectively navigated these hurdles. This reflects the extensive preparation and flexibility within the sector."
Despite a slight slowdown in growth momentum from +25% in September, October's global air cargo spot rate averaged USD 2.68 per kg, remaining close to the peak season highs of 2023. The year-on-year growth in spot rates was bolstered by a sustained double-digit increase in global demand, measured in chargeable weight, while cargo capacity supply only rose by 2% year-on-year.
This imbalance between supply and demand resulted in a dynamic load factor increase of 4 percentage points, reaching 63% in October. The dynamic load factor is a critical metric used by Xeneta to assess capacity utilization based on the volume and weight of cargo transported relative to available capacity.
Examining specific corridors, the Europe to North America route experienced the largest month-on-month volume increase of +11%. The return leg also saw a +10% increase as shippers and forwarders took proactive measures to mitigate the impact of a three-day strike by dockworkers at U.S. East Coast and Gulf Coast ports. However, the resolution of this industrial action led to a decrease in its positive impact on air cargo volumes after peaking in the week ending October 20.
As airlines adjusted their cargo capacity in anticipation of winter schedules, air cargo rates in this corridor are expected to continue rising. Capacity typically shifts towards corridors that generate higher revenues, resulting in a more balanced air cargo supply and demand.
In contrast, spot rates from Northeast Asia to North America, a key fronthaul corridor, remained relatively stable month-on-month, partly due to a cooling effect following a September surge caused by extreme weather disruptions and China’s Golden Week holidays.
Similarly, the Northeast Asia to Europe market showed little change compared to the previous month. Despite several canceled passenger flights between Europe and China due to uncompetitive routing, air cargo capacity increased due to a rise in freighter capacity, leading to a decline in backhaul spot rates both month-on-month and year-on-year.
The shift of capacity from the Americas to Asia also resulted in freight rate increases in secondary corridors, with spot rates from South America to Europe and back rising significantly.
Conversely, spot rates from the Middle East & Central Asia to Europe decreased by -3% month-on-month, influenced by the easing of civil unrest in Bangladesh and reduced weather disruptions.
Van de Wouw noted, "The air cargo market is witnessing an enhanced ability among shippers, freight forwarders, and airlines to manage disruptions and handle volumes without significant fluctuations in rates. This maturity in the market is beneficial for all stakeholders."
He further explained that the improved preparedness of airlines and clearer agreements between shippers and forwarders are fostering better relationships, ultimately benefiting consumers. While rates remain elevated compared to last year, the industry is not experiencing extreme fluctuations despite robust demand and rising load factors.
Looking ahead, van de Wouw predicts that air cargo demand is securely on track for double-digit growth in 2024, asserting that even the anticipated zero growth in the final months of the year will not derail this trajectory. He also highlighted the potential for indexing rates between shippers and forwarders through a neutral third-party source as the next step in market maturity, which would enhance confidence in long-term contracts and further stabilize the market.