Air Cargo Slowly Recovers from Bottom, Set for Gradual Rebound

Air cargo volume declines have bottomed out but are expected to remain in the doldrums for a while yet.

Writing in the latest Baltic Exchange air cargo market newsletter, Bruce Chan, director and senior research analyst covering global logistics and future mobility at investment bank Stifel said that the company felt the market had now reached the bottom and there would be no further declines.

“We feel, based on our conversations with management teams — both public and private — and our channel checks with shippers, that we have seen the bottom,” he wrote.

“That bottom may be more of a flat hull than a V-shape. So, things are not likely to get much worse from a demand perspective, in our view.”

However, he cautioned that it was not likely that the market would bounce back either and that any peak season would be modest.

“While absolute freight levels probably will not be much to write home about, even a small holiday pickup would be an improvement on last year.

“We think that one of the key swing factors this year will be the level of confidence that retailers have in consumer demand, and whether they err towards caution in rebuilding stocks.

“The situation could change meaningfully as the year progresses, but even as we exit a challenging second quarter, we see green shoots with consumer confidence and inflation abatement, which could swing the balance in favor of a modest peak versus a muted one.”

Chan added that belly capacity was still being added to the market and there would be further expansion as the year progresses, particularly on the transpacific as passenger demand between the US and China continues to pick up.

With overcapacity expected to last into 2024, improvements in rates would need to be driven by a demand pick up, he said.

Meanwhile, TAC Index editor Neil Wilson was optimistic that there would be a slight bounce for the peak season.

“Market sources are increasingly optimistic some sort of uptick is indeed coming soon – based not least on major product launches that should stimulate demand by September,” he wrote.

“With air cargo capacity also being cut by various carriers from FedEx to JetOneX, this is also making players cautiously optimistic that there will be some sort of peak season spike in 2023 – unlike last year when the usual peak season simply failed to occur.

“This was partly because capacity had been increased so much following Covid, which some had perceived as a broader paradigm shift for the whole sector.

“Now capacity is being gradually reduced again, it seems logical to conclude ‘normalisation’ of the market should also lead to a more normal cycle, including peak season.”