Picture credit: Xeneta
Demand was up 11% in October and spot rates by 19%, which means 2024 will end much higher than last year even if November and December register no growth.
The strong performance shows market maturity, says Niall van de Wouw, Chief Airfreight Officer of Xeneta, who says lessons learned and applied by shippers, freight forwarders and airlines show the industry at its best.
He says, “The frequency and diversity of ‘storms’ coming the way of the air cargo industry in 2024 mean this year could have been quite messy, but the industry has found a way to navigate these challenges. This shows the prep work has paid off as well as the flexibility shown in the industry. We see more emphasis on maintaining relationships than squeezing every last dime of revenue.”
Global air cargo spot rates averaged $2.68 per kg in October, close to 2023’s peak season high.
The growth was down from 25% in September due to the high comparison base in October 2023.
Capacity increased 2% compared to demand rising 11%, which pushed up the dynamic load factor by four percentage points to 63%.
Europe to America saw the largest growth in demand, up 11% and 10% on the return leg as shippers and forwarders took precautionary measures to lessen the impact of the three-day dockworkers strike at US East Coast and Gulf Coast ports.
The impact had ebbed away after peaking in the week ending 20 October as the industrial action was resolved quicker than expected.
Rates are likely to keep rising as airlines reduce capacity to mark the start of their winter schedules.
Capacity is shifting to corridors with higher revenue, which caused spot rates from northeast Asia to North America to stay relatively flat month-on-month, in part due to the cooling down after a September boost caused by extreme weather disruption and China’s Golden Week holidays.
Spot rates from northeast Asia to Europe were relatively flat despite several cancelled passenger flights between Europe and China due to uncompetitive routings as freighter capacity was increased.
Van de Wouw says there is maturity in the market stemming from airlines being better prepared and clearer rules in place between shippers and forwarders, and forwarders and airlines.
He says, “This is good for relationships – and good for consumers. Rates are still elevated versus a year ago, but despite strong demand, rising load factor, and only a modest increase in supply, they are not going crazy. Lessons have been learned and people are looking for healthy, reasonable rates on both sides.”
The next level of market maturity is indexing between shippers and forwarders using a neutral third-party source to adjust rates during contracts.
Van de Wouw says, “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.”