Air freight market in 2023
The global air freight market is facing a myriad of challenges in 2023. With high inflation impacting many trading nations, demand and therefore, volumes, remain subdued and with any significant economic recovery not anticipated before the 3rd quarter, volumes are expected to remain flat, which present a significant opportunity for time-sensitive shippers!
With low demand and high inventory levels, air freight volumes have been trending downwards since the first half of last year and while the capacity situation continues to change, rates remain above pre-COVID levels on many routes, despite recent declines.
Falling sea freight volumes have contributed to rates softening, congestion clearing and some vessel schedule recovery, which has encouraged shippers who moved to air freight during the worst of the pandemic driven supply chain disruption, to move back to ocean shipping.
Looking ahead, IATA has predicted a 4.3% decline in air cargo volumes in 2023, with yields for carriers expected to decline by around 22%.
Inventory levels will need to replenish to meet demand, when it returns, but with recession likely, economists do not see that happening until the second quarter for many retailers.
The continuing conflict in Ukraine is a drag on the global economy and consumer confidence and there are uncertainties around China’s re-opening which will depress demand.
The approach of Chinese New Year (CNY) failed to trigger the surge in demand, that normally comes ahead of factory closures and it is likely that re-opening will have a limited impact on the market this year.
Even with rates from Asia to Europe and North America declining, global average airfreight rates remain around about 35-50% above pre-Covid levels, which suggests that carriers will remain financially stable and the eCommerce sector continues to bloom, with over a fifth retail goods purchased online and large chunk of that flying.
Securing air freight capacity has been our biggest challenge over the last couple of years, but the weaker demand and returning passenger flight belly-capacity means that there is no issue now on most routes.
The start of the summer holiday schedule in the second quarter will add even more capacity and there are expectations that freighter fleets will grow on a few routes. This is in addition to the sea/air capacity we can access via Dubai and Singapore (when they are economically attractive).
If economies recover quickly and consumer confidence returns, demand for air cargo capacity will increase, which could quickly lead to capacity constraints and higher prices, but we are ready to adapt changing market conditions and explore different solutions, such as alternative services, alternative routes and cross-border solutions.
Strategically located by London’s Heathrow airport, we have access to the widest choice of air freight carriers, with services into and out of any UK airport. EMAIL our managing director, Colin Redman, directly to discuss our air freight solutions for time-sensitive, urgent and valuable cargoes.