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The Current State of Airfreight in North America

The Current State of Airfreight in North America

In the fast-paced world of logistics and supply chain management, the North American airfreight industry is navigating a series of ups and downs, presenting both challenges and faint rays of hope.

While the recent headlines may have you believing in a resurgence with a 1.5% growth in air cargo traffic in August, the reality is a bit more sobering. This apparent growth is largely linked to seasonal patterns, rather than a profound shift in demand. The market, as a whole, has not experienced a substantial departure from the sluggish scene witnessed in 2022, and significant growth is likely still a year away.

September brought with it the slowest growth in cargo capacity over the past year, mostly due to passenger airlines scaling back flights, while capacity remains around 10% higher compared to the previous year. Regional variations also play a significant role, with the Asia-Pacific region heavily relying on freighters due to the slow recovery of passenger flights, particularly in China. Consequently, this can lead to misleading capacity figures.

As for rate fluctuations, the 2% increase in airfreight rates in September can be attributed to supply shrinking rather than a surge in demand. On a broader scale, global airfreight rates still linger around 30% lower than a year ago, despite yields staying roughly 25% higher than the pre-COVID era. Meanwhile, changing consumer behaviors and economic uncertainties have added further complexity to the mix. With concerns about a potential U.S. economic downturn and consumers tightening their belts, the anticipation of a traditional shipping peak in the holiday season isn’t all that rosy.

In response to these market dynamics, more shippers are committing to long-term freight contracts to provide rate stability. This shift, however, has consequences of its own, especially as spot rates trend upwards. The outlook for this year’s peak shipping season remains hazy, given the unpredictability of the economy. Amid a global economic landscape marked by inflation and geopolitical tensions, the impact on the airfreight industry is tangible. The decrease in seaborne imports affects airfreight, with airlines serving as the last resort for commodities that don’t require special handling. Industry experts predict a slow climb for the airfreight sector, with significant growth not expected until the third quarter of 2024. In a nutshell, the North American airfreight industry presents a complex tapestry of ups and downs, demanding adaptability and resilience from stakeholders as they look toward a more stable and optimistic future.

(Source: FreightWaves)