Air cargo capacity exceeds pre-pandemic levels

Air cargo capacity exceeded pre-pandemic levels in the second quarter of 2023 for the first time in three years, IATA reported today in its Q2 market report. IATA, like many analysts , carriers and freight forwarders , attributes the increase in capacity, measured in available cargo tonne kilometers (ACTKs), to the restoration of bellyhold availability as passenger travel skyrockets following the cessation of pandemic restrictions. Q2 capacity was at 264.7 billion ACTKs, up 9.9% year over year. [caption id="attachment_57137934" align="alignnone" width="1024"] (Photo/IATA)[/caption] “Total international capacity (dedicated freighters and belly capacity) continued to trend towards their pre-pandemic 50-50 balanced shares over Q2 2023,” the IATA report stated. “Also, notably, there were no passenger freighters (also known as preighters) scheduled in Q2 globally for the first time in two and a half years, after these having played an essential role during the pandemic.” [caption id="attachment_57137935" align="alignnone" width="1024"] (Photo/IATA)[/caption] Air cargo demand, measured in CTKs, has fallen and IATA predicts that annual growth in world merchandise trade is likely to slow to 1.7% in 2023, from 2.7% in 2022. Annual growth in world merchandise trade peaked for the past decade in 2021 at 9.4%. This slowdown “has already manifested itself in the year-on-year contractions seen over the Q2 2023 period,” IATA reported. Nevertheless, e-commerce volumes continue to increase, and demand is rising in sectors like automobile, technology and health care, according to DHL Global Forwarding ’s Air Freight State of the Industry report released this week. Industry air cargo load factors (CLFs) in Q2 fell compared with the previous quarter, “reflecting the strong growth in cargo capacity coupled with falling demand,” according to the IATA report. Among the major trade lanes, the Asia Pacific-Europe and the North America-Asia Pacific markets saw CLFs well above the industry average load factors of 48.6%, standing at 66.9% and 64.2% in June, respectively. In comparison, CLFs on the within-Asia trade lane continued to decline from first-quarter levels, falling to 50.4% in June. [caption id="attachment_57137936" align="alignnone" width="1024"] (Photo/IATA)[/caption] Airfreight rates fall The ongoing abundance of capacity amid weak demand has led global airfreight rates to continue their downward trend throughout the year. Rates continued to drift lower in the week ending Aug. 28, according to the latest data from TAC Index . The overall Baltic Air Freight Index slipped another 1.8% week over week, taking its fall over 12 months to 45.9% YoY. [caption id="attachment_57137933" align="alignnone" width="550"] (Photo/TAC Index)[/caption] “With jet fuel prices rising sharply in the past month, continuing weak cargo rates will be piling further pressure on operators of dedicated freighters — especially those with older, less fuel-efficient planes — in what some see as a ‘survival of the fittest’ test,” the TAC Index report stated. The global average jet fuel price for the week ending Aug. 25 increased 2.9% WoW, standing at $126.37 for a barrel of crude oil. Nevertheless, TAC Index noted that strong e-commerce business out of southern China kept rates edging up from that region, with the index for outbound Hong Kong International Airport (HKG) up 1.7% WoW, with gains on rates to Europe and North America, as well as intra-Asia. Its YoY fall is 40.5%. Rates out of Shanghai Pudong International Airport (PVG) rose 0.2% WoW — boosted by higher rates to Europe — but are down 46.9% YoY, according to TAC Index. Rates from Europe continued to weaken, with outbound Frankfurt Airport (FRA) falling 4% WoW to take its YoY drop to 44%, and London Heathrow Airport (LHR) falling 5.9% WoW to take its YoY drop to 55.9% — despite higher rates to North America from both locations. “Despite a sharp drop from Chicago WoW, rates from the U.S. overall were higher to all major markets, including to South America as well as to Europe and China,” TAC Index reported. “Rates were also higher out of Vietnam and from India to Europe, with the firmer tone on intra-Asia e-commerce also showing out of Singapore, which gained 6.4% WoW to leave its YoY decline at 48.3%.” Airlines face tough cargo environment Airlines in North America saw a challenging start to Q2, with annual international demand, measured in CTKs, declining 12.4% in April, according to the IATA report. However, by the end of Q2 in June, the annual contraction narrowed to 3.3%. Similarly, airlines in Europe saw an annual decline of 7.9% in international CTKs in April but closed Q2 on an improved 3% contraction. “The traffic fluctuations seen by the airlines in these two regions were largely driven by the ups and downs of CTKs on the Europe-North America trade lane in the second quarter,” the IATA report stated. “In comparison, the performance of Asia Pacific airlines regressed in Q2, with traffic contractions deepening from -3.5% YoY in April to -7.2% in June, reflecting the softening demand for international cargo in the within-Asia market.” Latin American airlines joined counterparts in North America and Africa in surpassing January 2020 international CTKs in Q2, and airlines in the Middle East outperformed their January 2020 international CTK levels in June, according to IATA figures. In contrast, international CTKs for airlines in Europe remained 9% below the January 2020 level in June. Airlines in Asia Pacific performed slightly better but still registered international CTKs 5% below the January 2020 level. At the industry level, international CTKs in June were 2% lower than in January 2020. IATA’s most recent business confidence survey of airlines’ heads of cargo reflected the challenging situation in the air cargo industry. “Fifty-six percent of respondents stated that there was a deterioration in air cargo operations over Q2, while only 16% claimed an improvement,” the IATA report stated. “As for future expectations, only 24% of respondents expect an improvement in cargo operations over the next 12 months, while 52% would expect no significant change over this period.” [caption id="attachment_57137937" align="alignnone" width="1024"] (Photo/IATA)[/caption] Join Air Cargo Next for its second annual Air Cargo Tech Summit on Sept. 18-19 in Brussels, sponsored by Unisys and Brussels Airport and featuring a fireside chat with Brian Hodges, managing director, American Airlines Cargo. For more details and to register, click here .

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