May marked a turning point in the global air cargo market. The Baltic Air Freight Index (BAI00) dropped 6.24% month-on-month (MoM), reflecting market stress that followed the United States scrapping its de minimis exemption and imposing steep tariffs on Chinese imports. While a mid-May tariff rollback helped ease the pressure, volatility has not eased. Rates dropped across major hubs: Frankfurt fell 10.44%, Shanghai Pudong dropped 6.38%, and Hong Kong fell 5.05%. Although tonnage bounced back briefly in week 20 after Golden Week and the trade pause, deeper issues remain, especially on China–US lanes.

Meanwhile, capacity trends are diverging. After early May saw nearly 50 freighters grounded and 40% of transpacific capacity withdrawn, week 20 saw a partial recovery, particularly on Asia–US and Asia–Europe lanes. Some of that has come back, especially on Asia–US and Asia–Europe routes, but operators are still moving cautiously. Instead of fully ramping back up, many are testing new lanes in Latin America, the Middle East, and within Asia to absorb parked capacity.

 

Key Drivers of Market Dynamics

Transpacific volatility and tariff reprieve: the US–China tariff fight escalated fast, reaching a peak of 145% before being dialed back to 30% in mid-May. The 90-day suspension helped spark a partial rebound in China–US air cargo, with volumes rising 19% week-on-week (WoW) by mid-month. Still, year-on-year (YoY) demand is down 27% and rates, while steady around $4/kg, have not recovered to pre-April levels.

1. Transpacific volatility and tariff reprieve: the US–China tariff fight escalated fast, reaching a peak of 145% before being dialed back to 30% in mid-May. The 90-day suspension helped spark a partial rebound in China–US air cargo, with volumes rising 19% week-on-week (WoW) by mid-month. Still, year-on-year (YoY) demand is down 27% and rates, while steady around $4/kg, have not recovered to pre-April levels.

2. Freighter repositioning still underway: as demand on the transpacific collapsed, carriers pulled widebody freighters from the skies, with nearly 50 aircraft grounded in early May. Some of that capacity is coming back online, but operations remain below April levels. Airlines like Atlas have started flying some routes again, particularly those into secondary Chinese cities and Latin America, helping to fill the gap, although not yet at full scale.

3. Spot market dominance: with long-term BSAs cancelled and demand proving erratic, the market is increasingly spot-driven. Older aircraft remain active, particularly 747-400Fs and MD-11Fs, sustained by short-term ACMI demand. Despite ageing fleets, conversion feedstock shortages and high component lead times (up to 35 weeks) continue to delay fleet renewal.

4. Front-loading and inventory distortions: retailers rushing to get goods in ahead of tariff hikes, combined with already high inventory levels, have thrown seasonal patterns off track. While May saw a bounce in tonnage from Asia Pacific, helped by Golden Week and US restocking, Cargo Facts Consulting expects Q2 growth to stay muted as consumer demand softens and inventories take time to clear.

 

Regional and Route-Specific Insights

Transpacific capacity retracts, then rebounds: China–US tonnage plummeted by over 25% YoY by mid-May, with freighter capacity down 40% at peak. However, by week 20, volumes seem to have recovered. Still, e-commerce demand remains muted, with much of the returned lift serving general cargo. Rates remain depressed compared to Q1, and most growth is inventory-driven.

Transpacific capacity retracts, then rebounds: China–US tonnage plummeted by over 25% YoY by mid-May, with freighter capacity down 40% at peak. However, by week 20, volumes seem to have recovered. Still, e-commerce demand remains muted, with much of the returned lift serving general cargo. Rates remain depressed compared to Q1, and most growth is inventory-driven.

Asia–Europe gains strength: China to Europe routes (BAI81, BAI31) held firmer than expected. Hong Kong–Europe rates inched up (+2% WoW in week 20), while Shanghai–Europe declined marginally (-5%). Volume surged 11% in May compared to the same period in 2024. The trade tension spillover into Europe remains a risk, but no EU tariffs materialised as of the end of May.

Europe–U.S. trade stabilises: After a sharp early-May decline (BAI20 down 10.44%), Frankfurt to North America rates stabilised, up 0.2% WoW by late May. Despite continued weakness, Europe is absorbing some redirected Asia capacity. However, infrastructure bottlenecks and uncertainty around potential EU tariffs (now delayed to 9 July) are tempering confidence.

Intra-Asia and LatAm fill void: With traditional long-haul corridors disrupted, intra-Asia and Latin America saw capacity boosts. Singapore, Vietnam, and Taiwan are benefiting from China+1 sourcing. LATAM–US volumes fell post–Mother’s Day, but freighter services continue to expand. Chinese carriers introduced air-air services via Hanoi to ease pressure on Vietnam–US lanes.

 

Freighter Market and Supply-Side Trends

Freighter supply constraints continue. While global capacity saw an increase in late May, a significant portion of this new lift represents redeployed rather than genuinely new aircraft. Feedstock for conversions remains limited, particularly for medium and large widebodies, leading to increased costs and extended delivery schedules.

Legacy freighters retain their indispensable role. Over 100 747- 400Fs and MD-11Fs continue to operate, addressing existing capacity gaps. Concurrently, 767Fs and A330Fs (including both OEM-produced and converted variants) maintain strong demand. Lease rates for mid-life assets remain stable, although yields are currently experiencing pressure.

As a result, airlines are reassessing their long-term fleet strategies. Boeing’s China backlog is encountering geopolitical headwinds, while OEM delivery delays (notably for the 777-8F and A350F types) are constraining growth. Given that 58% of new deliveries are projected to replace existing units, overall fleet growth remains limited.

As a result, airlines are reassessing their long-term fleet strategies. Boeing’s China backlog is encountering geopolitical headwinds, while OEM delivery delays (notably for the 777-8F and A350F types) are constraining growth. Given that 58% of new deliveries are projected to replace existing units, overall fleet growth remains limited.

 

2025 Q2 Outlook: Unstable Equilibrium

May started with a dip, but the second half of Q2 could see moderate demand gains due to tariff reprieves, restocking efforts, and the usual seasonal tech launches. Regardless, uncertainty is likely to remain. The transpacific route will stay volatile, with a shift from e-commerce to general cargo. Europe might see more goods coming in from Asia, while trade within regions and on less common routes (like India–Middle East or Latin America–Europe) becomes more important.

Cargo Facts Consulting remains cautious. While the global freighter fleet will keep growing, operators will still face challenges from mismatches in demand and supply, plus sudden policy changes. Staying agile, being flexible in the short term, and focusing on the secondary market will be key to getting through Q2.

About Cargo Facts Consulting

Founded in 1978, Cargo Facts Consulting (www.cargofactsconsulting.com) is a leading air cargo consultancy and data provider. Through our specialised services in digital innovation, strategic planning, and growth management and data solutions, Cargo Facts Consulting helps its clients navigate the complexities of the air logistics industry.

 

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