Overview of market conditions

July brought a degree of stabilisation to the global air cargo market, although volatility remained just beneath the surface as trade dynamics continued to shift and tariff deadlines approached. The Baltic Air Freight Index (BAI00) rose 1.57% month over month (MoM), suggesting a tentative recovery after a flat June. However, trends varied by region: London Heathrow and Frankfurt saw strong outbound gains, while Shanghai slipped slightly. A late-month bounce in China–US volumes following Typhoon Wipha helped offset broader softness, but the outlook remains highly uncertain with US de minimis and tariff changes approaching.

Even with the typical summer slowdown, rate differences widened. Hong Kong to North America (BAI32) rose 2.31%, while Shanghai to Europe (BAI81) declined by 2.37%. Overall demand from Asia-Pacific remained robust, driven by steady e-commerce flows from Southeast Asia. Still, uncertainty around trade policy and shifting capacity continues to cloud the Q3 picture.

 

Four key drivers of market dynamics

1. Tariff deadlines drive rush and hesitation
Shippers faced a dual challenge in July: rushing to beat the 1 August US tariff deadline while navigating an unclear policy environment. Export activity surged out of Vietnam, Thailand, and Malaysia, all of which are facing new tariffs of 19–36%. The upcoming repeal of the de minimis exemption on 29 August added further pressure, particularly for Chinese e-commerce exports. Spot rates on Asia–US lanes stayed around $5/kg but remain well below earlier highs. Many shippers have already front-loaded volumes, which could prevent peak-season growth.

2. Freighter redeployment accelerates
Freighter operators continued to shift capacity away from the Trans-Pacific, reallocating lift to Southeast Asia, Europe, and Latin America. According to CFC’s most recent analysis, Trans-Pacific large and medium widebody capacity dropped by around 15% in July. Asia–Europe lanes absorbed much of the slack, with capacity up 18% MoM. US-bound lift out of Latin America also increased, while inbound flows from China remained below pre-April levels. For now, freighter strategies remain tactical and subject to rapid change as trade rules evolve.

3. Spot market dominance grows

Spot pricing continued to dominate Asia–US routes, accounting for more than 70% of volumes in July. The gap between contract and spot rates widened further, complicating pricing strategies. London Heathrow outbound (BAI40) surged 11.14%, while Chicago (BAI50) fell 5.13%. Rates from Singapore to Southeast Asia (BAI63) dropped 4.29% amid congestion and volume shifts to other hubs. The market remains sensitive to political uncertainty, trade friction, and weather disruptions.

Spot pricing continued to dominate Asia–US routes, accounting for more than 70% of volumes in July. The gap between contract and spot rates widened further, complicating pricing strategies. London Heathrow outbound (BAI40) surged 11.14%, while Chicago (BAI50) fell 5.13%. Rates from Singapore to Southeast Asia (BAI63) dropped 4.29% amid congestion and volume shifts to other hubs. The market remains sensitive to political uncertainty, trade friction, and weather disruptions.

4. Supply constraints deepen as feedstock dries up
Freighter capacity growth continues to be limited by aircraft availability. Demand for 777-300ER conversions remains strong, but passenger carriers are holding onto their aircraft longer, delaying feedstock release. Although IAI and Mammoth have both advanced test flights, certification delays and high costs are slowing progress. With 777F production ending in 2027 and the 777-8F pushed to 2028, meaningful net fleet growth will remain limited for several years.

 

Regional and route-specific insights

Asia–North America: Pre-tariff rush drives late-month rebound
After a mid-month pause caused by Typhoon Wipha, China and Hong Kong–US  volumes rebounded, with Hong Kong–North America (BAI32) up 2.31% and Shanghai–US (BAI84) up 0.93%. Despite the recovery, demand remains well below March levels. Southeast Asia–US routes were especially tight in the final weeks of July, with Vietnam, Thailand, and Malaysia experiencing capacity crunches.

Asia–Europe: Capacity up, rates under pressure
Rates from Shanghai to Europe (BAI81) fell 2.37% MoM, while Hong Kong to Europe (BAI31) edged up 0.73%. Tonnages from China remained strong, supported by e-commerce flows and some capacity reallocation from Trans-Pacific lanes. However, pricing has come under pressure as more lift entered the market. Disruptions in Taiwan and the Philippines due to summer weather further affected schedules.

Europe–North America: Heathrow leads the charge
London Heathrow continued its upward trend, with rates to the United States (BAI44) jumping 18.61% MoM. Frankfurt–US(BAI24) rose 6.7% and the broader Frankfurt index (BAI20) increased by 5.05%. However, some of Heathrow’s gains moderated toward the end of the month, pointing to ongoing volatility as capacity realignments continue.

Intra-Asia, Latin America, and South Asia: Flows reshape under pressure
Intra-Asia networks remain congested, especially around Singapore, where outbound rates (BAI60) dropped 4.25%. Transhipment from Vietnam and the Philippines surged as shippers raced to meet the 1 August tariff deadline. Latin America–US volumes held firm, with Mexico City and Miami continuing to see steady demand. India also gained traction, particularly on US-bound lanes, as sourcing patterns continue to shift.

 

Freighter market and supply-side trends

Conversion programs move forward but not fast enough

IAI, Mammoth, and KMC continue to push ahead with 777 conversion programmes, but lack of feedstock, high engine and passenger lease rates and high conversion costs remain the main obstacles. IAI is close to FAA approval, with five aircraft already converted for AerCap and Kalitta. Mammoth has launched test flights for its 777-200LRMF prototype, which is also approaching final certification. Even so, timelines remain uncertain and capital requirements are rising.

IAI, Mammoth, and KMC continue to push ahead with 777 conversion programmes, but lack of feedstock, high engine and passenger lease rates and high conversion costs remain the main obstacles. IAI is close to FAA approval, with five aircraft already converted for AerCap and Kalitta. Mammoth has launched test flights for its 777-200LRMF prototype, which is also approaching final certification. Even so, timelines remain uncertain, and capital requirements are rising.

OEM deliveries increase but don’t ease constraints
Boeing delivered 16 777Fs in the first six months of 2025, more than the 13 delivered in all of 2024. 767-300F deliveries continue, although no new orders have been recorded for 2025. The delayed entry of the 777-8F and slow A350F ramp-up mean the current orderbook will not translate into meaningful capacity expansion for several years.

Q3 outlook: Post-rush uncertainty ahead

While July ended on firmer ground, the air freight market remains fragile. The expiration of the 1 August tariff extension and the future 29 August de minimis repeal will likely reshape demand patterns again. Some softness is expected in the weeks ahead as front-loaded volumes clear the system. Shifting regulations and a constrained freighter aircraft supply all add to the market uncertainty. Cargo Facts Consulting expects further rate swings in August, particularly out of Southeast Asia. Longer term, how the market adjusts to new trade lanes and tighter capacity will define the trajectory into peak season.

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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