Transportation & Logistics Analysis

Air freight: the recovery phase continues

July 10 2024

BAROMETER. Global air cargo traffic has been on an upward trajectory for the past 6 months, with a further year-on-year increase of 14.7% in May. The fall in freight rates is slowing down.

1/ The evolution of supply and demand

  • Traffic for May 2024

In May, global air cargo traffic grew 14.7% year-on-year and 5.3% month-on-month to about 21.9 billion tonne-kilometres, according to figures from the International Air Transport Association (IATA). On a seasonally adjusted basis, monthly growth was 3.1%. According to IATA, the sector has benefited from the growth of global trade, the rise of e-commerce in particular and the stress on capacity in maritime transport generated by the attacks on ships by the Houthi rebels in the Red Sea.

Cumulatively at the end of May, air cargo volumes were up 13.2% compared to the same period in 2023 and 3.1% above 2022, says IATA. Based on this data, the cumulative traffic for the first 5 months of the year can be estimated at 108.2 billion tonne-kilometres.


* CTK: cargo tonne-kilometres - Data source: IATA.

  • Capacity

In addition to the growth in demand, another factor favourable to airlines is confirmed: capacity is growing at a slower rate than the volumes to be transported, for the third consecutive month. The increase in overall supply in May amounted to 6.7% year-on-year and 4.1% month-on-month, raising capacity to a level of about 51.4 billion tonne-kilometres.

This differential between the growth of supply and that of capacity allows a further improvement in the load factor. It stood at 44.6%, up 0.5 points compared to April 2024 and up 3.1 points compared to May 2023. Internationally, the load factor surpassed the 50% threshold for the first time since June 2023, coming in at 50.3%. As in the previous month, the improvement in this ratio in May 2024 benefits companies in all regions, with the exception of African companies.

2/ Price trends

Despite demand currently growing faster than supply, there is no market tension for access to capacity on most corridors. Airlines have greatly increased the available supply in the belly hold of passenger aircraft for several months, responding to the recovery of this activity after the Covid pandemic, and this is still enough to absorb the demand.

Given the current balance, freight rates are mostly on a downward trend, both month-on-month and year-on-year. The Asia-Europe corridor is, however, an exception, as freight rates increased by 13% year-on-year after already growing by 3.1% in April. This particularity is explained by the persistent disruption of maritime transport in the Red Sea, which can lead to delays in air freight, at least for certain types of products. This is all the more true as the price differential is decreasing between the two modes, even if it remains significant, given the sharp increase in sea freight rates.


Source: Upply Freight Index

2/ Evolution by zone

The Africa-Asia and Middle East-Europe corridors took the top spots for growth in May, with growth of 40.6% and 33.8% respectively. The latter probably also benefited from the disruptions in the Red Sea, which breathed new life into sea-air solutions. The Asia-Middle East corridor also posted a significant growth of 18.6%. We have seen that airlines in the Middle East have also benefited from this situation, with a much higher increase in their traffic than that of capacity.

The evolution of the Asia-Europe corridor, the world's second largest market in volume terms, is also attracting attention with an increase of 20.4%, while the world's largest market, namely Asia-North America, has to make do with an increase of 12%. Here again, this contrast reflects an increased interest in air freight probably linked more to tensions in the Red Sea than to an economic upsurge. The performance of airlines in Asia and Europe also illustrates the dynamics of this market. Finally, the North America-Europe corridor recorded an increase of 8.9% in May year-on-year. A more modest growth, but IATA points out that this is nevertheless the best result since the middle of 2022.

3/ Concerns about the resurgence of trade tensions

The growth recorded in May was helped by a slight improvement of certain economic ratios. The industrial production index showed a slight increase of 0.5% in May on a month-on-month basis, and a growth of 2.7% on a year-on-year basis. Global merchandise trade is also on a healthy trajectory, with respective increases of 1.5% and 1.8% month-on-month and year-on-year in April, according to the latest available figures. The manufacturing production PMI and the index of new export orders, leading indicators of global air freight demand, also show a favourable outlook, although some regions of the world, such as Europe and Japan, are showing "contraction signals", says IATA. On the inflation front too, the situation is somewhat mixed, rising to 3.3% in the United States in May. On the other hand, the EU and Japan are seeing an improvement, with a further decline in the rate of inflation. As for China, it recorded a very modest increase in prices of 0.3%, but which mainly reflects "the weakness of domestic demand, due to a high rate of unemployment, low-income growth and a crisis in the real estate sector", underlines IATA.

Another warning sign: the increase in trade tensions. IATA cites in particular the increase in restrictions on cross-border trade between China and the United States, which could affect air cargo demand on the Asia-North America corridor. But in a more structural way, we are moving towards a more rigorous trade policy vis-à-vis China from the United States, but also now from Europe. The introduction of provisional countervailing duties on imports of battery-powered vehicles from China, announced by the European Commission on 4 July, marks a new stage in the evolution of trade. The air cargo industry is undoubtedly coming out of the slump it suffered in 2023, but significant challenges await it.

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Graduated from the Superior School of Journalism in Lille, Anne spent most of her career in the international trade and logistics press, before joining Upply.
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