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2024 air freight reports suggest...

2024 air freight reports suggest no return to pandemic highs, though Red Sea crisis could change the picture
Photo: Trans.INFO

2024 air freight reports suggest no return to pandemic highs, though Red Sea crisis could change the picture

The golden years for air freight operators almost certainly appear to be over. Although problems with the availability of ar freight capacity are a thing of the past, demand has decreased significantly. The problems of maritime transport due to the Red Sea crisis nonetheless mean there is some hope that things could change.

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Michał Pakulniewicz

Michał Pakulniewicz

06.01.2024

The golden years for air freight operators almost certainly appear to be over. Although problems with the availability of ar freight capacity are a thing of the past, demand has decreased significantly. The problems of maritime transport due to the Red Sea crisis nonetheless mean there is some hope that things could change.

2024 air freight reports suggest no return to pandemic highs, though Red Sea crisis could change the picture
Photo: Trans.INFO

According to IATA (International Air Transport Association) forecasts, air freight revenues are expected to reach USD 111 billion in 2024.

This represents a decline of 17% compared to 2023. Estimates of the result for last year amount to approximately USD 134 billion. It is is also a clear year-on-year decline – by as much as one third compared to 2022. Moreover, the result is below that from 2021 (as much as USD 210 billion).

In 2021-22, the aviation segment saw extremely high rates. The pandemic brought high demand for consumer goods (and, in the case of air transport, also medical and pharmaceutical goods). The simultaneous grounding of passenger transport (responsible for the majority of air freight space) led to a drastic increase in rates and, therefore, in the revenues of air operators.

Despite the expected decline in sector revenues in 2024, air freight revenues are still expected to be higher than in pre-pandemic 2019, when they amounted to USD 101 billion. According to IATA estimates, the global volume estimated for 2023 is expected to be 58 million tonnes. This year we are expected to see an increase to 61 million tonnes.

The latest real data confirms this trend. According to official IATA figures, in October 2023, global demand measured in kargo tkm (tonne-kilometers) increased by 3.8% every year. The available transport capacity measured in cargo tkm is also growing much more dynamically than demand – it was 13.1% higher in October than a year earlier. This is due to the return to normal passenger transport operations.

Asia on the up as western markets stagnate

Transport capacity increased the most in Asia (by as much as 30%) and the Middle East (by 15%) – i.e. in the regions that saw the greatest increase in demand. However, in Europe and North America, capacity also increased by 7% and 2.4% respectively.

“A rebound in demand, stronger profits and increased trade are all good signs. But demand is still below pre-pandemic levels, and we have many uncertainties about the direction of the global economy, which means our optimism must be cautious,” said Willie Walsh, Director General of IATA.

In terms of demand, global growth was primarily driven by greater demand in the Asia-Pacific and Middle East markets. The former was responsible for over 32% of global demand, and grew by 7.6% in October year-on-year.

The Middle East market (representing 13% of the global pie) enjoyed an increase in demand of almost 11%. Representatives of the sector operating in Europe and North America were nonetheless less optimistic. The demand for air freight in Europe increased by barely 1% yea-on-year and in North American continent there was a decline of 1.8%.

Is demand awakening?

Regarding the current situation, data from DHL’s  monthly aviation market review gives a similar picture. Transport capacity in December 2023 in the aviation sector increased by 10% compared to the year before.

This is mainly thanks to an almost 17% rise in the cargo space available on passenger planes. Demand was 3% higher year-on-year in the last month of 2023. It is important that this was the first month of the entire year in which there was a clear increase in transport demand.

Until September, demand had showed a downward trend year-on-year. In October it was 1% higher, while in November it was at the same level as the year before.

December, according to DHL data, also saw a month-on-month increase in rates by 8%. However, compared to the previous year it was still 18% less, which explains the data quoted by IATA regarding the revenues of cargo air operators.

As for 2024, DHL expects that during the year the available transport capacity will be greater than demand, which will continue to be suppressed by the economic slowdown. A significant increase in volumes can be expected in January and early February ahead of the Chinese New Year. However, in the rest of the year (especially in the first half), it is difficult to count on a significant increase in demand.

Stabilisation on the horizon

In turn, experts from the consulting company Xeneta claim in their Air Freight Outlook 2004 report that in 2024, after several crazy, volatile years, some stabilisation can be expected.

“The sudden drop in rates that we observed at the beginning of the year [2023] has calmed down in recent months. The market seems to have a new baseline from which I expect classic seasonality to emerge,” said Niall van den Wouw, chief airfreight officer at Xeneta.

He added, however, that this seasonality would be subdued. According to Xeneta, the demand for air transport in 2023 was 8% lower than before the pandemic. In 2024, the company expects demand to increase by 1-2%, while increasing the available “capacity” by 2-4%.

Prophetic words

These were Xeneta’s estimates at the end of November. However, the words of the company’s chief expert regarding the potential future turned out to be prophetic.

Van de Wouw added in the report that the situation in sea transport is very important for the situation in air freight.

“97% of goods in containers are transported by sea. If the marine segment something it will get mixed up, even in a small way, there will always be an opportunity to make money in air freight. If we experience a black swan again in 2024, we will have to fasten our seat belts before another year of roller coaster riding,” van de Wouw wrote in the November report.

Lasting since mid-December last year, attacks by Yemeni Houthi fighters on ships sailing towards the Mediterranean Sea and the Suez Canal resulted in a significant extension of delivery times to European ports (by 7-10 days).

Maritime rates have also increased. A prolonged situation like this will increase demand for air freight (although it must be remembered that not everything can be transported by plane) and will lead to a further increase in rates. All the more so because the available transport space in aviation is incomparably smaller than in ocean or rail transport, and therefore carriers will be able to dictate prices.

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