Has the Air Cargo Market Reached a New Level of Rates Stability?

The global air cargo market has reached a new level of maturity, enabling airlines and freight forwarders to maintain stable rates even with high demand for air cargo services and ongoing supply chain disruptions. In the past, robust demand for air cargo in the fourth quarter usually led to skyrocketing spot rates, but this year’s approach is different. With new strategies, stronger relationships between shippers, forwarders, and airlines, and a focus on sustainable rate management, the market is keeping rates balanced while still meeting the high demand.

According to Xeneta, a key air freight market analyst, the air cargo industry has become more prepared for the fourth-quarter rush. Earlier this year, Xeneta encouraged shippers and forwarders to lock in air cargo capacity early to avoid peak season price surges. In recent recommendations, they advised delaying 2025 air cargo tenders until after the fourth-quarter peak, emphasizing that airlines, forwarders, and shippers have forged more reliable relationships.

“There is a maturity in the market,” said Niall van de Wouw, Xeneta’s Chief Airfreight Officer. “Airlines are better prepared, and there are clearer guidelines between shippers, forwarders, and airlines. This is good for relationships—and for consumers.” Although rates are still high compared to last year, they haven’t spiked wildly. The focus is shifting toward stability, balancing rates with demand, and ensuring healthy, mutually beneficial partnerships.

Key Indicators of a Balanced Air Cargo Market

Recent air cargo data from Xeneta highlights an 11% increase in global air cargo volumes this October, with spot rates up by 19% year-over-year. While spot rates peaked in August and September at a 25% year-on-year increase, growth slowed in October. Global air cargo spot rates averaged $2.68 per kg, slightly below the seasonal high. This reflects a maturing market where rate momentum is steadying compared to previous years.

This balance is largely due to the supply-demand gap in the air cargo industry. Demand grew by 11% in chargeable weight, while global cargo capacity only rose by 2% year-over-year. This shortage pushed the dynamic load factor—a measure of capacity utilization that Xeneta calculates based on volume and weight—up by four percentage points, hitting 63% in October.

With a 2024 growth forecast of 1-2% as of October 2023, this year’s demand growth in air cargo services has already exceeded expectations. Even if there’s a slowdown in November and December, the air freight market is on track for robust double-digit growth.

Air Cargo Market Trends in Key Trade Lanes

An analysis of air cargo trade lanes shows how these changes are affecting different regions. The Europe-to-North America corridor saw the largest month-on-month volume growth, with an 11% increase. The return leg saw a 10% rise, driven by shippers and freight forwarders seeking to avoid potential delays from the recent dockworker strike on the US East and Gulf Coasts. Although the strike was quickly resolved, its impact on air cargo volumes peaked in mid-October.

In the high-traffic Northeast Asia–North America air cargo route, spot rates remained stable month-over-month. This follows a surge in September due to weather disruptions and China’s Golden Week holiday. The Northeast Asia–Europe corridor similarly experienced flat rates, with added freighter capacity balancing out disruptions caused by canceled passenger flights.

In other regions, adjusted air cargo capacity allocations are having an impact. Spot rates between South America and Europe increased by single or double digits month-over-month, while rates from Middle East and Central Asia to Europe dropped 3%, helped by easing civil unrest in Bangladesh and improved weather conditions.

Looking Ahead: The Role of Indexing in Long-Term Air Cargo Contracts

Looking toward the future, van de Wouw highlighted that air cargo contract indexing could be the next big step for the market. By using a neutral, third-party index to adjust rates within contracts, shippers and forwarders could benefit from greater stability and predictability in their long-term air cargo contracts. “Indexing will benefit all parties and create confidence to enter long-term contracts. It is a natural next step in a market that is clearly seeing greater balance from better preparedness,” he explained.

As the air cargo industry continues to mature, with a focus on stable rates, preparedness, and long-term relationships, it appears well-positioned to navigate future challenges effectively and sustainably.

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