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What The Expectations, Trends & Conditions Of Air Freight in 2023

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What The Expectations, Trends & Conditions Of Air Freight in 2023

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  1. What The Trends & Conditions Of Air Freight in 2023 As Francis Bacon once said the folly of one man is the fortune of another. At least for the air carriers, this has been the truth. During the pandemic months, air carriers experienced a spike in demand, and thus the price and yields. This spike was a direct result of the ocean routes congestion due to Covid restrictions. With more than 95% of the global supply chain covered by ocean freight, air freight acts like the tail end of a giant. A mere blip in ocean freight logistics means a spike in air freight trends. However, there are other factors too. Condition of Air Freight in April 2023 The start of 2023 saw a recovery of the capacity and several factors that can impact the air freight rates. The air freight capacity recovered to almost the pre-pandemic levels with just a 2% gap in Jan 2023 from 2019 Global schedule reliability for ocean shipping continues to rise through the Q1 of 2023 Global Manufacturing PMI remains below 50 but is expected to recover on the cues of global economic recovery. China has already entered the bullish phase here. The declining air freight demand registered the slowest decline after 13 months, stoking hopes of stability

  2. The longer-term contracts between shippers and freight forwarders have been increasing, pointing to stabilizing markets for air freight Overall, almost all indicators that point to something are pointing toward the recovery of the air freight market. However, the recovery is yet to arrive for prices. Despite the recovery of cargo capacity (belly), demand is yet to pick up for the freighters, and a few factors may still point to a bumpy road ahead. 2023 Trends in Demand Factors High Inflation: Xeneta reported that most forwarders and shippers expect global inflation to hit the demand for goods. High consumer inflation in the US and EU regions can affect the demand for goods. Thus, air freight demand may see a decline. Low Economic Growth: On the other hand, IMF projections paint a slightly different picture. IMF projects that global economic recovery will remain subpar during 2023 and 24, easing the inflation woes. However, the decline in inflation rates may not be as rapid as expected due to: An unstable financial sector Global geopolitical crisis (Russia-Ukraine war) Improving Ocean Schedule Reliability: In the meantime, ocean schedule reliability continues to improve. Thus, high CPI and rebounding ocean schedule reliability will continue to pressure the air freight rates in 2023. Geo-Political Stresses: Global conflicts have been almost continuous for the post-WW period. However, major conflicts like the Russia-Ukraine war have been few and far between. The economic sanctions on Russia and a no-fly zone over the conflict area have pushed the air freight costs up. With no short-term relief in sight, the war is expected to keep up the air freight rates in 2023. 2023 Trends in Supply Factors Seasonal Capacity Built-up: Seasonal passenger aircraft for the summer may also contribute to excess capacity for belly cargo space. That is if the airlines prepare for the additional air traffic demand during the summer. Jet-Fuel Prices: After hitting the peak of $4.6 in April last year, jet fuel prices have continued declining. So, this should relieve the air freighters on the cost front. Covid Restrictions: This is unlikely, however, since much of the Asian economies are still under Covid restrictions to some extent. IMF expects Asian countries to eliminate the pandemic restrictions only by 2025. New & Converted Freighters: Airlines have been placing orders for new cargo and passenger aircraft by the end of 2022. Carriers and shippers have been investing in capacity building continuously following a long-term outlook.

  3. Air Freight Expectations for 2023 Overall, global economic conditions, geo-political issues, and fuel prices are the primary factors affecting air cargo yield in 2023. Given the recovery in capacity with the tumultuous recovery in the demand outlook, the air freight rates are expected to remain low for the year. However, emerging economies like India, China, and middle eastern countries can drive the next phase of air cargo demand. These are also the regions expected to experience higher economic growth in 2023.

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