2023: Another challenging year for the air cargo industry

The global airline industry is expecting a return to profitability this year due to increasing travel demand. Passenger traffic is reaching pre-pandemic levels across most markets after the industry recorded a loss of $9.7 billion in 2022, according to Bloomberg.

Airfreight revenues last year outperformed in domestic and international markets, demonstrating the resilience of the air cargo industry. Cargo accounted for around 27% of airline total revenues in 2022, according to IATA’s latest reports. Since the second quarter of 2022, airfreight demand has fallen short of the extraordinary performance of 2021, but has remained close to 2019 levels. Freight volumes, revenues and load factors this year are expected to continue to decline. In addition, yields will also fall after three consecutive years of growth — 53% in 2020, 24% in 2021 and 7% in 2022 according to IATA.

Numerous variables could impact cargo profits in 2023: high oil prices, slow global economic growth, rising inflation, the war in Ukraine, and China’s COVID restrictions.

Figure 1 illustrates global risks in the airfreight industry and the likelihood of each taking place. Figure 1 – 2023 Air Cargo Global Risk Outlook

2023 airfreight outlook Airfreight rates will remain elevated due to limited passenger aircraft belly capacity, the Russia-Ukraine war and the recovery of the market in China. Cargo carriers are likely to continue to impose surcharges to offset volatile fuel costs and the increase in long-haul belly capacity will coincide with the arrival of conversion and freighter orders placed during the peak of the pandemic. Capacity is not likely to be a concern in the first half of the year due to high inventory levels, but the airfreight market is expected to recover once stock declines. Overall, capacity is estimated to remain relatively unchanged due to changes in individual trade lanes. Freight forwarders remain concerned about the availability of capacity in the trans-Pacific trade lane. Supply chain disruptions, travel restrictions, inflation, interest rates, a slowing global economy and fears of a recession will be key factors impacting the industry during the first half of the year. The cost of air cargo since 2021 has been significantly more competitive than the price of maritime cargo. Cargo yields will remain profitable in 2023 while the relative pricing advantage of air cargo versus maritime is shrinking. E-commerce will remain a source of growth for air cargo operators in 2023. The pandemic brought a structural upward movement in e-commerce and this is not likely to slow in the near term. The air cargo industry is structurally on solid footing and we expect to see demand pick up in the second half of the year.

2023: Another challenging year for the air cargo industry

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