Intercontinental air cargo capacity is likely to remain constrained for the next five years. That is partly due to insufficient new belly capacity entering the market but also delayed entry into service of all new-build and passenger-to-freighter conversion programs. If demand proves to be resilient, rates and profits are likely to remain above their historical average. That is good news for those who have aircraft deliveries locked in, but all others seeking to expand will have to wait or utilise less efficient or suboptimal equipment. This article discusses the outlook for air cargo capacity and demand through to 2030.
Posts tagged as “air cargo”
Shein’s recent IPO prospectus is instructive in many ways. It confirms that cross border e-commerce is not such a great business. Other platforms such as Temu, AliExpress and Amazon can afford to either lose or make very little money from their international operations thanks to large profitable domestic and cloud computing businesses. Changes in the customs treatment of low value direct shipments from China are already leading to fundamental changes the way cross border fulfilment functions. Lastly, it shows how precarious the relationship is between the global air logistics industry and a segment that accounts for almost one fifth of intercontinental airfreight. Time to start thinking about the future.
2025 looks to close with international air cargo traffic growth of somewhere between 3.5% - 3.8%. That is around the low end of we were predicting at the beginning of the year, but much higher than our revised outlook compiled in April. For next year we are predicting a range of 1.8% to 5.5%. Average annual growth through to 2030 could range between 2.7% and 4.7%. Much of the future trajectory is contingent on continued growth in cross border e-commerce volumes. Industry profits will depend on the delicate interplay between demand, capacity, yields and costs. This article takes stock of the current year and discusses some of the factors that will shape international air cargo the coming years.
International air cargo growth at European airports is tracking at about 3% so far this year. But that number hides some big differences in growth between the traditional top cargo hubs and a lot of more freighter focused airports across the continent. While the top 10 airports still account for about 66% of international cargo volumes there has been a shift underway.
The 777-200F sets the standard in terms of long-haul freighter operating economics. With around 300 units have delivered since 2009, it is now the most popular large widebody freighter. Market level prices for new units have fluctuated between $148m and $175m a unit, but transaction level pricing is not public. Based on a mix of customs, order and delivery data, we have estimated actual delivered prices over a 25-year period. We find that differences of US$27-28 million between the lowest and highest price during the same reference period are typical. This article discusses our findings and the reasons for some of these differences.
An increasing share of international air cargo and most of the industry’s growth expectations are riding on the movement of low value cross border e-commerce items, mainly out of China. The five major platforms have massively increased cross border volumes over the past 3 years and while the transpacific has copped a beating over the past months, growth to Europe and some other markets has more than made up for that. However, e-commerce companies consistently lose or make very little money on this business. That is a problem that the air cargo industry needs to think about. This article looks at the international operations of Alibaba, Amazon, eBay, Pinduoduo, Shein with a focus on the financial performance, geographical scope and implications for the air cargo business.
Overall intercontinental cargo capacity is likely to remain constrained for the next five years. The large widebody freighter fleet is only likely to increase by about 1.6% annually through to 2030. This is lower than the 20-year average of about 2.7%. Passenger widebody delivery activity is also running at historically low rates. Depending on how the different demand scenarios unfold yields and profits could remain elevated. That is also good news for freighter aircraft values. This article discusses the reasons why capacity will remain tight, but also which companies are likely to feel the pain first if there is in fact a downturn in demand.
Many passenger airlines are not getting the full potential out of their cargo businesses – particularly those that do not operate freighters. For these carriers cargo accounts for about 3% of total revenues, but ranges anywhere from next to nothing to as much as 10%. Some of this is due to hard factors like geographical footprint or type of capacity, but distribution network and the level of cargo expertise is also a key point of difference. Adding freighters can grow the cargo division’s contribution to company results but needs to be considered carefully as it can add a whole new level of risk.
Air cargo is generally not a good business. At least for airlines who take most of the long-term capacity risk. In the last five year the business went from dull to awesome. Many companies made more profit in the last five years than in their entire history. The first half of this year was pretty good and companies continue to naively believe that everything will be ok. We take the view the ice age may be just around the corner. Or at least go back to being dull. This article looks at the different Eras in the life of air cargo and outlines some scenarios that could unfold over the next years.
International air cargo is highly reliant on global supply chains and cross border e-commerce traffic. Both look like they will take a beating in 2025. In January we were still expecting growth of between 3.5% and 7.4% but our latest forecast foresees a range of between -0.1% and +0.7%. This is driven a weaker economic outlook globally as well the potential loss of about one third of transpacific air cargo volumes due to US de-minimis rule changes.