Air freight peak season highs still remain unlikely as end October volumes fell again – the eighth consecutive month of decline, according to Xeneta-owned CLIVE Data Services.
Air cargo volumes declined by 8% year-on-year in October. The drop in demand, measured in chargeable weight, was also 3% below the pre-pandemic level in 2019.
"Christmas didn't come early for the global air cargo industry as volumes declined -8% year-over-year in October and provided no current signals to indicate an upturn in 2023, as year-over-year demand fell for the eighth consecutive month," CLIVE said in its new weekly market data.
Meanwhile, it added that compared to last year's levels, global air cargo capacity continued to recover in October but at a slower pace and remained 7% below the pre-covid 2019 level.
CLIVE said this contributed to a more subdued 'dynamic loadfactor' — its measurement of airline performance based on both the volume and weight perspectives of cargo flown and available capacity.
"As falling demand meets rising capacity, load factors have been declining over the past 18 months," the air freight data analysts noted.
No indication of air cargo peak season
In October, the 61% dynamic load factor was down 7% pts and 1% pts in comparison to 2021 and 2019 respectively.
October also saw a second consecutive month of lower global airfreight spot rates below last year's level.
"We are six weeks away from Christmas and there is no indication there will be a peak. Demand worsened in October over the -5% reduction we reported in September, but this is not likely to surprise the market given the global economic outlook, although it's clear that rates remain at a higher level than some observers would have expected in the current conditions," said
said Niall van de Wouw, chief airfreight officer at Xeneta.
van de Wouw noted, however, that airfreight is "certainly not currently suffering the decline of the ocean," where Xeneta has recorded rate drops of 60%-70% in the last nine months.
The Xeneta executive added that ocean freight is responding to the market conditions much faster than air is and normalising quickly from a rates point of view.
"The outlook for air cargo remains uncertain. We don't see pressure on capacity, and we don't see an increase in rates," van de Wouw said.
More challenges for the air cargo industry
Looking ahead, the Xeneta chief airfreight officer said he expects more challenges and uncertainties for the air cargo market over the next 12 months.
"If you take the broader perspective, I see very few signals that would support an increase in general airfreight in 2023 – be that because people have higher personal bills or because people are spending more on services relative to goods."
Even if consumers make the same purchases in 2023, van de Wouw explained that it is "like;y" that these goods will move by the ocean as a response to the higher reliability returning on the sea.
van de Wouw said 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 the ocean from a reliability point of view.
"With all these factors combined, I don't see where a lot of general freight growth demand drivers will come from," he added.
He noted that in contrast, rising belly capacity and freighters coming to the market means a boost in capacity.
"The only development I can see that would slow down the decline in rates is supply on the ground," van de Wouw said. "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."
Airfreight rates on top volume corridors from Asia to Europe and Asia to the US continued to fall in October, while general rates fell more substantially on inbound US corridor routes than inbound Europe. This is attributed to added costs for EU routes, due to the closure of Russian airspace and lower spending by US consumers.
"Shippers, however, may not be seeing long-term gains from falling airfreight rates right away," van de Wouw said.
"There is a lot of uncertainty, so this is not a period where shippers will get an 'attractive' deal for the next year or two years, they will get lower rates for the next one to two quarters," he added.