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.
Posts tagged as “E-Commerce”
The Australian international air cargo market generated about 1.15m tonnes in the last 12 months, with inbound accounting for almost 60% of this. If recent growth in inbound cross border e-commerce traffic continues then the market could grow by almost 5% per year for the next five years. Exports could grow by as much as 4% if volumes recover to the 2018 peak levels. Without this we would expect lower growth rates for both imports and exports of around 1% per year. This article discusses long-term Australian air cargo market trends our latest forecast for inbound and outbound air cargo between 2025 and 2030.
Global trade is (again) in a phase of major disruption. Yet the commentary around the most recent quarterly company announcements shows that while engaging in tactics, businesses are failing to develop long term strategies. Yet much of what is happening should not come as a surprise and is consistent with longer term trends that have emerged over the last 10 years or so. Focusing on the air logistics business, this article examines the strategic choices that companies need to make to remain competitive.
International air cargo growth continues to be highly reliant on cross border e-commerce traffic originating from China. We estimate that about 35% of international air cargo currently consists of express small package and cross border e-commerce consolidations – up from about 26% five years ago. Future air cargo growth expectations continue to ride on cross-border e-commerce rather than traditional global supply chain traffic. We forecast international air cargo growth of between 2.8% and 5.5% for the next five years. This article discusses growth drivers and downside risks.
The US domestic air cargo market today is about as big as it was in early 2017 – despite a boom in e-commerce. After growing at about 3.7% per year between 2012 and 2021, flown traffic has dropped by almost 20% since early 2022. The bad news is that we may see more declines in the next 18 months. The good news is that declines are likely to be more moderate. This article looks at the outlook for the US air cargo market and discusses what it means for the demand for air capacity.
Australia’s economy is 12% larger today than it was in 2018. Yet Australian air cargo imports are about 8% below October 2018 peak and about 15-20% below the long-term trend. Exports are 25% below the March 2019 peak. Meanwhile, container volumes are about 6% higher. The share of total non-bulk trade has generally hovered around 30% of total trade but dropped to 26% in the most recent 12 months. However, since mid-2023, both air cargo import and export traffic have been improving. E-commerce and more capacity could lead to a recovery of inbound and a resumption of lost Chinese demand in a recovery of exports. This article discusses the outlook for Australian air cargo.
Low value trade accounts for about 2.5% of Chinese export trade value. Much of this is cross border e-commerce traffic and has grown by 37% in 2023 and 32% so far this year. This has been good for long haul airfreight, may not be sustainable in the long run unless platforms continue to subsidize shipping costs. This article provides an assessment based on Chinese customs statistics which contrary to US or European statistics provide information on low value trade.
Despite a strong start for the air cargo business in the first quarter of this year, the underlying economic fundamentals point to more subdued growth for the remainder of the year. Compared to our last forecast prepared just under three months ago, we expect global air cargo growth for 2024 to be slightly lower - 8.9% vs 9.9%. Much of this is due to a slight downgrade of economic growth and trade projections, as well as a diminishing boost from cross border e-commerce volumes. Full year growth for 2024 will still be dependent on the recovery of manufacturing and small package volumes staying strong.
The e-commerce fuelled boom in US domestic air traffic appears to be over. This could have profound implications for the domestic air express business and the need for aircraft capacity in a market that is home to 43% of the world’s freighter fleet. Historically, there has been a strong correlation between growth in online shopping, overall economic growth and traffic moving through US domestic air express, e-commerce and general cargo networks. However, since late 2022 this relationship seems to have broken down – the market declined by 11% when the underlying fundamentals should have led to moderate growth in 2023 and acceleration in 2024.This article digs deeper into the data and provides an explanation as to what is happening.
International air express, air freight and containerised ocean freight do not always move in sync – even though growth in all three is correlated to changes in economic activity. Part of this is due to how quickly each responds to changes in the inventory cycle or relative price differences, but also the underlying industry segments and customer profile that driven each segment. Consumer demand has performed better (or less worse) than manufacturing activity and as such containerised shipping and express have performed better than general airfreight. Air cargo traffic – which consists of a mix of express, cross border e-commerce and general air freight – has been strong, primarily because of e-commerce.