Landscape of Today's Air Cargo Sector

The Air Transport Association (IATA) stated that there was a 2.7 per cent  increase in the demand for air cargo globally in January 2022 compared to the same month the previous year

FREMONT, CA: Many shippers anticipated a return to some form of normality in the air cargo markets in 2022 after a turbulent and tough 2020 and 2021. However, 2022 has so far provided shippers and service providers with several persistent difficulties. The Air Transport Association (IATA) states that the demand for air cargo worldwide increased by 2.7 per cent in January 2022 compared to the same month last year. Overall, demand is still down 8.9 per cent from pre-COVID levels; however, CLIVE Data Services notes that capacity is also down 5.4 per cent from pre-COVID levels, which is causing rate rises and more volatility.

IATA describes the January growth as "below expectations" and projects an industry growth rate of 4.9 per cent in 2022, which will be "more typical." It is encouraging to witness growth trends returning to normal levels, but shippers should be aware that there are still many atypical market drivers at play. Numerous factors are at play, some of which are well-known but difficult to predict such as the ongoing COVID effects, while others such as the conflict in Ukraine, U.S. inflation, and consumer spending are brand-new "wild cards" that shippers must manage to ensure the uninterrupted flow of their products to market.

The effects of COVID are still being felt in the market. Although the pandemic has subsided in the US, it is still present in other countries, causing continued supply chain disruptions. Due to a staffing shortage, logistics operations are stumbling to a halt as a result of the lockdown's restrictions on local public transportation. Trucking and aviation cargo rates are therefore anticipated to increase while the lockdown is in place.

Another residual effect of COVID is that fewer international passenger flights meant fewer cargo flights. IATA states that pre-COVID-19 levels of passenger demand have been significantly surpassed. International traffic fell by 62.4 per cent in January 2022 versus January 2019, while domestic traffic fell by 26.5 per cent. Passenger airlines rushed to fill the vacuum, and when belly space was not available, some shippers chose flight charters.

The airline cargo business is currently plagued by uncertainties due to Russia's invasion of Ukraine. Even though only 0.6 per cent of global cargo goes to, from, or within Russia, the psychological impact of the start of the biggest armed conflict to hit the European continent since World War II cannot be overstated, frightening customers and shippers alike. The Russian invasion of Ukraine has raised air freight prices in the short term. To circumvent prohibited Russian airspace, air cargo operators are being forced to reroute their aircraft along longer Asian routes. Jet fuel prices are at their highest levels since September 2008, which has a knock-on impact and raises ocean transport expenses as well.

Air freight carriers are not the only ones experiencing the effects of high petroleum costs; consumers throughout the world are also feeling the pinch, and there are signs that this is starting to translate into a slowdown in consumer spending. March's lower-than-anticipated truckload volumes could be a sign of an impending general market collapse. As supply exceeds demand, slower consumer spending can ultimately result in lower air freight rates as well. Shippers are forced to pay more, at least for the foreseeable future, to deliver their goods to a consumer audience whose desire for spending may be fading, as rates always decline more slowly than they climb.

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