Air cargo demand growth trails capacity growth

Growth in global air cargo volumes came to a standstill in June and, for the first time in nearly two years, demand growth has fallen behind capacity growth. Air cargo volumes grew 1% year over year in June, while May saw 6% YoY growth, according to data released today by ocean and airfreight rate analytics platform Xeneta. Meanwhile, June capacity grew 2% YoY, the same as in May. [caption id="attachment_57290068" align="aligncenter" width="840"] (Courtesy/Xeneta)[/caption] Dynamic load factor, at 56%, fell 2 percentage points YoY, marking the first decrease in more than a year. For the second month in a row, spot rates fell 4% YoY. However, spot rates are measured in U.S. currency, which has depreciated significantly in the past six months. The U.S. dollar has depreciated by more than 10% this year, the largest weakening in the first half of the year since 1973, according to the ICE U.S. Dollar Index. “What that means is that the actual decline in terms of freight rates is more significant than what is showing here,” Wenwen Zhang, lead for airfreight development and analyses at Xeneta, said in a webinar today. “So, likely the real impact will be [down] more into the high single digits than [down by 4%].” Declining YoY freight rates also reflect market uncertainty and nervousness, as well as falling fuel rates, Zhang said. May jet fuel prices dropped 18.8% YoY and 4.3% month over month, IATA reported this week. Jet fuel spot prices in the United States in May fell YoY for the eleventh consecutive month , according to the U.S. Energy Information Administration. However, fuel prices have been increasing in the past week due to the ongoing conflict in the Middle East , Zhang said. Shifting trade lanes Load factors on multiple trade corridors are down YoY. The Middle East and central Asia-to-North America corridor has fallen 16 percentage points YoY, the sharpest decline. [caption id="attachment_57290067" align="aligncenter" width="837"] (Courtesy/Xeneta)[/caption] The dynamic load factor from Asia Pacific to North America is down 2 percentage points YoY to 82%. “With the tariff war , we can clearly see that outbound Asia volume to the U.S. has been considerably declining compared to a year ago,” Zhang said. “Also, the e-commerce volume [has been] diminishing.” The dynamic load factor from Asia Pacific to Europe was 84% in June. “I can't recall when the load factors across the Pacific were lower than from Asia Pacific to Europe,” Xeneta Chief Airfreight Officer Niall van de Wouw said in the webinar. TIACA Director General Glyn Hughes agreed, saying, “The fact that the load factor to Europe has held up despite that significant increase in capacity, that's a very strong indication of a shift in supply chains. There's a strong shift.” Airfreight rates are also being driven down by increased confidence in sea freight, as companies have adjusted operations to avoid the harmful effects of the ongoing Houthi attacks against ships in the Red Sea . U.S. tariffs The ninety-day reprieve on reciprocal tariffs against dozens of nations will end July 9. The Trump administration levied a 10% flat tariff on imports from every country April 5 and had planned to institute reciprocal tariffs against individual countries April 9, before issuing the reprieve for every country except China . The Trump administration used those ninety days to enter negotiations with each country and has struck deals with the United Kingdom and Vietnam. [caption id="attachment_57290069" align="aligncenter" width="827"] (Courtesy/Xeneta)[/caption] Data in the graph above further shows that trade patterns are shifting, Zhang said. In the past few months, e-commerce shipments from China to Europe have soared, while e-commerce shipments from China to the U.S. have plummeted. “With the U.S. de minimis ban on and off and on again, we can clearly see that it has had a profound impact on the e-commerce exports from China to the U.S., which declined by nearly 50% in May,” Zhang said. Van de Wouw said, “This is a shift of a billion U.S. dollar revenue, and therefore also fulfillment. Instead of across the Pacific, [they] fly westbound to Europe. That's remarkable, considering also that it might be just a few companies responsible for this in just a few weeks' time.” Cargo Facts Symposium, the quintessential event for stakeholders and key leaders in the global freighter and air cargo industries, will take place Oct. 22-24 at the Grand Hyatt in Nashville . Learn more and register today to take advantage of the early-bird rate.

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