The airfreight market remains characteristically unpredictable with fundamental reference points (primarily available capacity, idled capacity, and cargo supply) proving to add some confusion. In terms of capacity – the ‘headline’ at least, comes from Maersk idling aircraft in its newly expanded air cargo arm in line with its integrator ambitions. However, beyond the headlines, a better benchmark can be found with aircraft lessor Atlas Air – trimming its forecast from the boom years of 2021 after one of the best periods in history for the freighter market in air cargo. Block hours flown by lessors usually provide a good indicator as to how much capacity is online and flying versus aircraft actually available to the market. This sharp drop-off in demand and hours flown is the red flag for the air cargo market pushing into 2023, a market that could have been quite easily derived from the woes in the container freight market. 

Block hours flown by lessors usually provide a good indicator as to how much capacity is online and flying versus aircraft actually available to the market. This sharp drop-off in demand and hours flown is the red flag for the air cargo market pushing into 2023, a market that could have been quite easily derived from the woes in the container freight market. 

Another factor I have often discussed is the return of passenger travel. Much of this is now in full swing, IATA plotting passenger demand continuing through December 2022 and into 2023 RPKs rising 64.4% in 2022 versus 2021 with plenty of room to grow, with 2022 full-year traffic at 68.5% of 2019 pre-pandemic levels. The re-opening of China and its impact on international travel can’t be underestimated, with the flow of passengers from China into Europe and North America bringing with it a rush of belly capacity.

Whilst air freight rates have generally been trending down, month-by-month volatility remains high and the rate outlook remains far more balanced. This is especially in comparison to container freight which has (for lack of a more subtle explanation) been straight up and then straight back down.

Despite this, short-term freight rates according to BAI have tightened up, showing a bit of resistance against quite a bearish backdrop. The notion of a ‘return-to-normal’ is bucked by a relatively buoyant general freight market price that is 47.78% higher than the same time in March 2019 (BAI). Whilst air freight rates have generally been trending down, month-by-month volatility remains high and the rate outlook remains far more balanced. This is especially in comparison to container freight which has (for lack of a more subtle explanation) been straight up and then straight back down. Long-term projections for the ocean market also have to contest with entry into the EU ETS carbon trading scheme and a shift into lower-carbon or zero-carbon fuels. The airfreight market has had to cope with the indirect costs of ETS for years already, with the prevalence of expensive sustainable aviation fuel still relatively low but rising. This acts to support freight rates as moving cargo becomes more expensive from a fuels standpoint.

About Peter Stallion, Head of Air and Containers, Freight Investor Services

Peter Stallion heads up the Air and Container Freight desks at FFA brokerage Freight Investor Services. He started his career in air freight chartering, and has a passion for emerging risk management markets and the logistics industry.