Overview of market conditions

August extended the summer slowdown in global air cargo, with pricing easing on most lanes despite tactical redeployments of freighter capacity. The Baltic Air Freight Index (BAI00) slipped 0.47% month-over-month (MoM), reflecting seasonal softness and tariff uncertainty. Regional trends diverged, with Hong Kong outbound (BAI30) gaining slightly on stronger flows to North America, while Shanghai outbound (BAI80) slipped.

In Europe, London Heathrow outbound (BAI40) weakened sharply, while Frankfurt (BAI20) held steadier with mixed results. Despite muted volumes, rate spreads widened. Hong Kong–North America (BAI32) rose 3.5% as Hong Kong–Europe (BAI31) fell nearly 3%. Meanwhile, Shanghai–North America (BAI82) edged higher while Europe (BAI81) weakened, and Heathrow’s transatlantic lanes recorded double-digit declines, underscoring how sharply pricing shifts with freighter redeployments.

 

Four key drivers of market dynamics

1. Tariffs and de minimis reset reshape flows
The Trump administration’s decision to end the de minimis exemption on 29 August disrupted small parcel e-commerce, forcing postal operators across Europe and Asia to pause shipments. This increased a broader rebalancing trend as sourcing shifted further toward Southeast Asia, with Vietnam, Thailand, and Malaysia continuing to pick up volumes previously concentrated in China. Short-term resilience was seen on Hong Kong–US lanes, where rates climbed above $5/kg, but the policy shift adds uncertainty to peak-season demand.

2. Freighter redeployment accelerates
Large and medium widebody operators kept shifting lift away from the transpacific, where capacity dropped by more than 12% in August, and toward Asia–Europe and Latin America–US lanes. The move supported steadier pricing out of Frankfurt to the US (BAI24), even as Frankfurt–China (BAI25) fell. Hong Kong–North America (BAI32) benefited from additional freighters, while US-bound flows from Latin America continued to grow, supporting Miami and Chicago. These tactical redeployments underscore how carriers are managing exposure to tariff-affected markets while chasing stronger yields somewhere else.

3. Spot market remains dominant

Spot pricing maintained its dominance, covering well over two-thirds of Asia–US traffic. The widening gap between contract and spot rates kept forwarders cautious, particularly on China–US lanes where volatility continues.

Spot pricing maintained its dominance, covering well over two-thirds of Asia–US traffic. The widening gap between contract and spot rates kept forwarders cautious, particularly on China–US lanes where volatility continues. Heathrow outbound (BAI40) declined 5.7% MoM, with double-digit falls on North America lanes (BAI42, BAI44), while Chicago outbound (BAI50) improved nearly 3%, helped by stronger transatlantic performance (BAI51). Singapore outbound (BAI60) rose modestly, although intra-Asia lanes (BAI63) remained under pressure.

4. Aircraft supply remains the binding constraint
Freighter fleet growth is still capped by aircraft availability and slow certification timelines. Passenger carriers continue to hold onto 777-300ERs, delaying feedstock for conversion. Although demand remains strong, conversion slots are expensive and scarce. Against these conditions, a major milestone arrived in September as Israel Aerospace Industries (IAI) secured FAA and CAAI certification for its 777-300ERSF program, clearing AerCap to deliver the first units to Kalitta Air. While this unlocks long-awaited capacity, the pace of deliveries will be gradual. With 777F production ending in 2027 and the 777-8F delayed to 2028, meaningful net growth in the large widebody segment remains limited.

 

Regional and route-specific insights

Asia–North America: Hong Kong outperforms

Hong Kong–North America (BAI32) rose 3.5% in August, with Hong Kong–US (BAI34) climbing 4.1%. Shanghai to North America (BAI82) edged higher, but Shanghai–US (BAI84) slipped slightly. Despite these improvements, year-on-year (YoY) rates remain well below 2024 levels, reflecting both weaker e-commerce out of China and continued sourcing diversification to other regions in Asia.

Hong Kong–North America (BAI32) rose 3.5% in August, with Hong Kong–US (BAI34) climbing 4.1%. Shanghai to North America (BAI82) edged higher, but Shanghai–US (BAI84) slipped slightly. Despite these improvements, year-on-year (YoY) rates remain well below 2024 levels, reflecting both weaker e-commerce out of China and continued sourcing diversification to other regions in Asia.

Asia–Europe: Rates under pressure
Shanghai–Europe (BAI81) fell 2.9% MoM, while Hong Kong–Europe (BAI31) also slipped. Added freighter lift into Europe kept pricing soft, even as tonnages remained steady. Southeast Asian exports to Europe continue to build momentum, but overall yields remain fragile under the weight of additional supply.

Europe–North America: Heathrow weakens, Frankfurt steadies
London Heathrow outbound (BAI40) declined 5.7% in August, with sharp falls to North America (BAI42 -12.3%, BAI44 -7.5%). Frankfurt outbound (BAI20) was steadier, slipping just 1.5%, with gains to the US (BAI24 +1.2%) offset by a sharp decline to China (BAI25 -8.5%). Seasonal belly capacity reductions further complicated rate dynamics across the Atlantic.

Intra-Asia and Latin America: Mixed results
Hong Kong–Southeast Asia (BAI33) dropped more than 10% in August, reflecting congestion and modal shifts, while Singapore–Southeast Asia (BAI63) edged higher. Latin America–US flows remained resilient, with perishables demand and tariff-driven re-sourcing supporting steady utilisation into Miami and Chicago. Brazil–US traffic was disrupted by the sudden 50% tariff imposed in early August, but overall Latin America maintained momentum.

 

Freighter market and supply-side trends

Conversion programs advance, slowly
IAI’s 777-300ERSF certification marks a crucial step in addressing widebody capacity shortages, with AerCap and Kalitta Air set to take the first deliveries. Mammoth continues test flights on its 777-200LRMF, but certification remains pending, and feedstock availability is still a challenge. High capital costs and engine lease rates are delaying broader fleet expansion.

OEM deliveries steady but insufficient

Boeing delivered 16 new 777Fs in the first half of 2025, surpassing the 13 for all of 2024, but these numbers fall far short of bridging supply gaps. With the 777-8F delayed and the A350F ramp-up slow, net fleet growth will remain constrained through the end of this decade. Operators are increasingly forced to operate older freighters longer, raising costs and limiting network flexibility.

Boeing delivered 16 new 777Fs in the first half of 2025, surpassing the 13 for all of 2024, but these numbers fall far short of bridging supply gaps. With the 777-8F delayed and the A350F ramp-up slow, net fleet growth will remain constrained through the end of this decade. Operators are increasingly forced to operate older freighters longer, raising costs and limiting network flexibility.

 

Q3 outlook: constrained supply, volatile rates

With the de minimis repeal now in effect and the US–China tariff truce set to expire in November, demand patterns remain highly uncertain. Tactical redeployments will continue to shape capacity, while constrained fleet growth keeps the market vulnerable to even modest demand surges. Cargo Facts Consulting expects further volatility in September, particularly on Asia–US lanes, as carriers and shippers adjust to new trade rules. Longer term, the pace of new conversion deliveries, led by IAI’s 777-300ERSF, will determine how quickly structural constraints on freighter supply begin to ease.

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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