As the uncertainty surrounding the Red Sea keeps the majority of container shipping companies out of the waterway, air freight demand saw its strongest annual growth in two years.
According to the International Air Transport Association (IATA), air cargo demand in December soared 10.8 percent above 2022 levels, reaching 22.8 billion air cargo tonne kilometers (CTKs). International air cargo demand bumped up at an even higher 11.5 percent clip.
Global air capacity for the month was 13.6 percent above 2022 levels, to 49.8 billion available cargo tonne kilometers (ACTKs). The jump was largely due to the expansion of international passenger belly capacity, with international capacity increasing 14.1 percent.
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Although the year-over-year rise in demand is substantial, it’s only just starting to correlate with the extended transit times at sea.
The association called the rise in both air cargo demand and rates for November and December “modest.” When comparing data for the week ending Nov. 4, 2023—ahead of the first major Houthi missile attack in the Red Sea—and the week ending Dec. 9, 2023, global air cargo demand had jumped just 1 percent. Yields increased 5 percent.
Willie Walsh, director general of the IATA, said in a statement that a similar month-over-month spike is expected for January as the Red Sea disruptions intensify.
Another air freight indicator, the Baltic Air Freight Index (BAI), may be previewing a sign of things to come. The BAI said that rates across more than 20 air trade lanes grew 6.4 percent week over week on Monday.
Air freight rates out of Shanghai rose 8.8 percent week over week, according to the BAI, while the rates out of Hong Kong increased 5.9 percent and rates out of Singapore jumped 4.1 percent.
The situation at sea is causing more companies are securing more space to move goods via air freight, especially as they aim to fly them out before February’s Lunar New Year when all factories in China close for two weeks.
“While not all cargo is suitable for air transport, it is a vital option for some of the most urgent shipments in extraordinary circumstances. And that is critical to the continuity of the global economy,” said Walsh.
According to weekly analysis from air cargo intelligence firm WorldACD on Thursday, freight forwarders continue to report anecdotally that certain cargo owners are switching some Asia-Europe cargo from sea to either air or a sea-air hybrid.
“Some forwarders say that in anticipation of ocean-to-air conversions, they are blocking additional air capacity on core trade lanes to help customers keep their freight moving,” the WorldACD report said. “Others note that the window for booking air freight ahead of Lunar New Year is closing and the next two-to-three weeks could be challenging, with the expectation of ‘bunched’ container ships arriving en masse at the main European ports, potentially triggering port delays, driver shortages and cargo build-ups at warehouses, driving further traffic towards air cargo.”
With shippers already having to contend with escalating ocean freight rates due to the mass rerouting of vessels away from the Red Sea, they will have to mull over a decision that would likely be even more expensive.
Air cargo accounts for more than 35 percent of global trade by value, but less than 1 percent of world trade by volume, according to the IATA.
As far as full-year numbers go, the IATA calculated that air cargo demand was down 1.9 percent compared to 2022 CTKs, thanks to the December push. When it comes to capacity levels, 2023 concluded with an 11.3 percent increase in total air cargo capacity compared to the year prior.
However, air cargo demand still falls behind pre-pandemic levels, with total air cargo traffic remaining 3.6 percent below 2019 CTK totals. Conversely, air cargo capacity is up 5.7 percent compared to the pre-pandemic year.
“Despite political and economic challenges, 2023 saw air cargo markets regain ground lost in 2022 after the extraordinary Covid peak in 2021,” said Walsh. “Although full-year demand was shy of pre-Covid levels by 3.6 percent, the significant strengthening in the last quarter is a sign that markets are stabilizing towards more normal demand patterns. That puts the industry on very solid ground for success in 2024. But with continued, and in some cases intensifying, instability in geopolitics and economic forces, little should be taken for granted in the months ahead.”
