In a surprising turn for the global air cargo industry, this year's peak season has failed to deliver the strong rebound typically seen in previous years. Despite urgent demand and tight air capacity constraints, shipping prices have remained stable rather than spiking as expected. This phenomenon raises questions about the underlying supply chain dynamics and market decisions shaping the sector.
Balanced Supply and Demand
The unusual stability during the air cargo peak season stems from consistently high supply and demand throughout the year, reducing the traditional seasonal fluctuations. Many shippers made advance plans to address anticipated market changes, including ongoing ocean freight constraints, potential U.S. West Coast dockworker strikes in autumn, and well-publicized e-commerce platform capacity allocation issues.
Load factors consequently rose 4 percentage points to 63% in October. Although the peak season isn't over, early signs of slowing demand have emerged. Data from Xeneta and Susquehanna Financial Group shows demand growth in the second week of November was just 4% year-over-year, compared to robust growth of 12% and 11% in the first three quarters.
Spot Market Trends
Global average spot rates remain 20% higher year-over-year, though the growth rate has slowed from 25% in September. On key routes like Southeast Asia to North America, rates have declined sequentially. Hong Kong rates fell 2%, while Shanghai rates dropped 6% over two consecutive weeks.
At the International Air Transport Association's trade show, Stanislas Brun of DB Schenker noted, "The peak season is pretty much over, with little market movement," while Ashok Kumar echoed similar sentiments, observing that while the season remained busy, it lacked exceptional activity.
Early Peak Season Conclusion
Kuehne+Nagel suggested that shippers' early ordering strategies may have brought forward the peak season's conclusion. CEO Stefan Paul projected modest fourth-quarter volume growth in the low single digits for both air and ocean freight, falling short of earlier optimistic forecasts.
Regional Variations and Carrier Performance
Despite overall market stabilization, certain airlines continue to benefit from strong consumer demand for low-cost Chinese goods. E-commerce platforms like TEMU and SHEIN require substantial air capacity for their direct shipping services. Market monitoring shows exceptionally high load factors for freighter flights departing mainland China and Hong Kong.
These factors contributed to strong third-quarter results for carriers including Air Canada, Korean Air, and Japan Airlines, with Air Canada reporting 18% revenue growth. DHL Express also saw an 8.5% rebound in air cargo volumes, primarily driven by Asian trade lanes.
Capacity Constraints and Fleet Dynamics
Kathy Liu, Dimerco Express Group's VP of Global Sales and Marketing, highlighted tight intra-Asia capacity, with most airlines prioritizing long-haul freight for higher yields. Notably, Cargo Facts Consulting reported just 1% growth in main deck freighter capacity between August and September, despite strong demand. Only 150 new freighters are expected to enter service this year—a significant drop from 258 in 2022—due to supply chain inefficiencies and regulatory compliance issues.
Meanwhile, accelerated retirements of older aircraft like MD-11s and Boeing 747-400s (over 40 this year) are exacerbating capacity constraints. Regional market conditions vary considerably, with global spot booking rates recently exceeding $3/kg. Reduced transatlantic passenger flights have driven up Europe-to-Americas rates, with Nordic-to-North America prices jumping 50% in the week ending November 17.
Future Outlook
Xeneta data shows current Nordic-to-North America spot rates at $2.64/kg, surpassing the December 2022 peak of $2.45/kg. Europe-to-South America non-contract rates surged 36% over two weeks to $5.88/kg, primarily due to congestion at São Paulo's airport. Industry executives widely expect strong air cargo market conditions to persist through Q1 2025.
Key developments to watch include technical contract negotiations between U.S. East Coast port operators and dockworkers' unions. Failure to reach agreement by January 15 could trigger strikes, potentially diverting urgent shipments to air cargo. However, slowing global manufacturing activity may limit air freight growth, particularly affecting export orders. November's PMI data shows the first year-over-year decline, with Germany re-entering recession and broader European economic weakness.
As the air cargo industry navigates this complex landscape, adaptability will prove crucial. The ability to identify opportunities and address challenges in this competitive environment will ultimately determine carriers' long-term success and market positioning.
