Consultant’s Insight: Airfreight capacity shrinks ahead of peak season

With charters already booked between Asia and the United States, it's going to be a race for any remaining peak-season air capacity. [caption id="attachment_69752" align="alignright" width="228"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] Chinese-based e-commerce providers have snatched up charters in preparation for a peak season, shutting out retailers and manufacturers in need of inventory quickly, according to Kathy Liu , vice president of global sales and marketing for Dimerco Express Group . Liu and Brandon Fried , executive director of the Airforwarders Association , discussed the importance of freight forwarders in situations of tight capacity in the recent webinar , “Navigating the Q4 Capacity Crunch: Air Charter Solutions from China to the USA,” hosted by Dimerco. Liu and Fried emphasized the importance of good relationships between shippers and forwarders, which can be a benefit to shippers in times of tight capacity if a freight forwarder has booked excess space on a flight or chartered a plane for its customers. However, depending on the forwarder, such relationships may not even help. "Two-thirds of our volume, which we have secured, is already presold for the third and fourth quarter,” Kuehne+ Nagel Chief Executive Stefan Paul told analysts July 23. “We expect a good peak coming toward us from a sea and airfreight perspective during the fourth quarter this year." Meanwhile, DSV CEO Jens Lund told analysts on July 24, "I think there's still a lot of normal capacity in airlines in the market where we will be able to source volume." However, Kuehne+ Nagel and DSV differ because Kuehne+Nagel's Apex subsidiary moves e-commerce volumes, whereas DSV does not accept such volumes. "There are typically two areas where we are not very present: That would be in the perishables and the e-commerce market," Lund said. “Our addressable market is typically industrial companies, pharmaceutical companies, high tech, etc." The Red Sea crisis and concern over a potential labor strike at U.S. East and Gulf Coast ports are also sapping airfreight capacity. Shippers are shifting from ocean to air on specific trade lanes or, in some situations, using a combination of air and sea. An International Longshoremen's Association and United States Maritime Alliance contract negotiation deadline of Sept. 30 is also causing some shippers to shift volumes to U.S. West Coast ports while adding airfreight to contingency plans. Market capacity Global air cargo demand in the first six months of 2024 was 13.4% above H1 2023 levels and 4.3% above H1 2022 levels, according to the latest data released by IATA . Air cargo capacity, measured in available cargo tonne kilometers, increased by 9.4% year over year for the same period. Capacity grew primarily on international routes, driven by an increase in international bellyspace capacity, which recorded the 38th consecutive month of double-digit annual growth at 16.8% for June. In comparison, capacity on dedicated freighters rose by 4.1% year over year. " Maritime shipping constraints and a booming e-commerce sector are among the strongest growth drivers,” IATA Director General Willie Walsh said in a statement. “Air cargo looks to be on solid ground to continue its strong performance into the second half of 2024.” H2 outlook While more capacity continues to enter the air cargo market, shippers and forwarders are quickly buying it in anticipation of a busy second half of the year. However, it's coming at a higher price for shippers while benefiting forwarders. Most of the demand for air cargo appears to be from e-commerce providers. As of March, e-commerce accounts for 20% of the world's air cargo, according to IATA, which projects that figure will increase to 30% by 2027. Despite measures from the U.S. and other countries to curtail e-commerce volume that benefits from de minimis customs rules , the volume surge continues. But it is unclear how much longer this will continue. Manufacturing demand has remained fairly muted post-pandemic, but it will eventually pick up. When it does, we may see a shift away from air and ocean to trucking and rail in line with increased interest in sourcing from Canada, Mexico and within the U.S. In the meantime, buckle up. The second half of 2024 will be a busy one for air cargo.

Consultant’s Insight: Airfreight capacity shrinks ahead of peak season

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