Air cargo market grapples with long-term capacity challenges

The air freight market is entering a critical phase of sustained constraints, driven by rising demand, limited aircraft availability, and evolving regulatory pressures.

Short-term demand is bolstered by year-end inventory replenishment, with long-term challenges, including production delays and emissions regulations, expected to intensify capacity shortages and maintain elevated rates.

Rising rates signal robust demand
Despite a quieter-than-expected peak season, air freight rates continue to climb steadily across major trade routes. In October, spot rates out of Asia showed significant increases, with Hong Kong rising over 8% month-on-month and more than 10% year-on-year.

Shanghai posted even stronger growth, with rates up over 12% month-on-month and 22% year-on-year. Other key markets, including Vietnam, India, and Thailand, have also experienced sustained rate hikes, reflecting strong export demand and constrained capacity.

While the lack of significant rate spikes during peak season suggests some stability, the steady upward trend underscores the enduring supply-demand imbalance. With businesses restocking inventories ahead of major holidays, the short-term outlook remains positive, but structural issues are likely to dominate the market in the coming years.

Long-term shortages to intensify
The capacity crunch in air freight is expected to persist well into the decade. Production delays for new freighter aircraft, including Airbus’s A350 freighter and Boeing’s 777-8 freighter, have pushed delivery timelines further into the future. The first A350 freighter is now anticipated in late 2026, and uncertainties continue to surround the production schedule for the 777-8 freighter.

Aircraft conversion programmes, another critical source of capacity, are also facing bottlenecks due to limited feedstock availability. Adding to these challenges, new emissions regulations from the International Civil Aviation Organization (ICAO), set to take effect in 2028, will restrict the production of certain aircraft types, exacerbating the capacity shortage.

As competition for available freighter space intensifies, shippers are likely to face sustained rate volatility, particularly on high-demand routes between Asia, Europe, and North America.

China’s role in air cargo growth
China’s position as a global manufacturing powerhouse and its burgeoning eCommerce sector will play a pivotal role in shaping the future of air freight. Despite geopolitical tensions, the country’s need to expand its domestic freighter fleet—particularly in the wide-body category—will be critical to competing with foreign operators for dominance in the local market.

According to Airbus, China will account for nearly 30% of the 2,470 new and converted freighters entering the global fleet between 2024 and 2043. Chinese carriers alone are expected to operate 690 of these aircraft, underscoring the nation’s strategic importance in the sector.

Navigating these challenges requires proactive planning and reliable partnerships. We secure long-term agreements with our primary carriers, ensuring guaranteed space and dependable solutions for all scenarios.

No matter your cargo type, size, or requirements, we offer highly competitive rate and service options tailored to your needs. For expert advice and personalised support, EMAIL Colin Redman today to perfect your air freight strategy.